UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 10-K

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2014.2016.
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From __________ to __________
Commission File Number 1-97201-09720

PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware16-1434688
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, New York13413-4991
(Address of principal executive offices)(Zip Code)
 (315) 738-0600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each ClassName of Each Exchange on Which Registered
Common Stock, $.02 par valueNew York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐ No☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes☐No☒
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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PartIII of this Form 10‑K or any amendment to this Form 10‑K.☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large Accelerated Filer ☐Accelerated Filer ☐Non Accelerated Filer ☐Smaller reporting company ☒
 (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐ No☒
As of June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of voting and non-voting common stock held by non-affiliates of the registrant was approximately $42,195,733 based upon the closing price of the Company’s common stock.
The number of shares outstanding of registrant’s common stock, as of February 27, 2015 ─ 15,566,599 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement in connection with its 2015 annual meeting of stockholders are incorporated by reference into Part III.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-K
Item Number
Page
PART I
Item1.
Business
2
Item 1A.
Risk Factors
18
Item 1B.
Unresolved Staff Comments
24
Item 2.
Properties
24
Item 3.
Legal Proceedings
26
Item 4.
Mine Safety Disclosures
26
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
27
Item 6.
Selected Financial Data
27
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
45
Item 8.
Financial Statements and Supplementary Data
46
Item 9.
Changes in and Disagreements With Accounting and Financial Disclosure
46
Item 9A.
Controls and Procedures
46
PART III
Item 10.
Directors, Executive Officers and  Corporate Governance
49
Item 11.
Executive Compensation
49
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
49
Item 13.
Certain Relationships and Related Transactions, and Director Independence
49
Item 14.
Principal Accounting Fees and Services
49
PART IV
Item 15.
Exhibits, Financial Statement Schedules
50
89
Table of Contents
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.  Any statements in this document that do not describe historical facts are forward-looking statements.  Forward-looking statements in this document (including forward-looking statements regarding the continued health of segments of the hospitality industry, future information technology outsourcing opportunities, an expected increase or decrease in contract funding by the U.S. Government, the impact of current world events on our results of operations, the effects of inflation on our margins, and the effects of interest rate and foreign currency fluctuations on our results of operations) are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  When we use words such as “intend,” “anticipate,” “believe,” “estimate,” “plan,” “will,” or “expect”, we are making forward-looking statements.  We believe the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date hereof, but we cannot assure you these assumptions and expectations will prove to have been correct or we will take any action we presently may be planning.  We have disclosed certain important factors that could cause our actual future results to differ materially from our current expectation, including: a decline in the volume of purchases made by one or a group of our major customers; risks in technology development and commercialization; risks of downturns in economic conditions generally, and in the quick-service sector of the hospitality market specifically; risks associated with government contracts; risks associated with competition and competitive pricing pressures; and risks related to foreign operations.  Forward-looking statements made in connection with this report are necessarily qualified by these factors.  We are not undertaking to update or revise publicly any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise.
1
Table of Contents
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)

Delaware16-1434688
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

PAR Technology Park
8383 Seneca Turnpike
New Hartford, New York
13413-4991
(Address of principal executive offices)(Zip Code)

(315) 738-0600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

Title of Each ClassName of Each Exchange on Which Registered
Common Stock, $.02 par valueNew York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐ No ☒

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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large Accelerated Filer ☐Accelerated Filer ☐Non Accelerated Filer ☐Smaller reporting company ☒
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐  No ☒

The aggregate market value of the registrant’s common stock held by non-affiliates (computed by reference to the price at which the common stock was last sold) was $48,995,090 on June 30, 2016.

There were 15,771,345 shares of common stock outstanding as of March 28, 2017.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its 2017 Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K.
PAR Technology Corporation
Form 10-K
For the Fiscal Year Ended December 31, 2016

TABLE OF CONTENTS

Item Number
Page
PART I
Item 1.
Business
2
Item 1A.
Risk Factors
10
Item 1B.
Unresolved Staff Comments
15
Item 2.
Properties
15
Item 3.
Legal Proceedings
16
Item 4.
Mine Safety Disclosures
16
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
17
Item 6.
Selected Financial Data
17
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
17
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
28
Item 8.
Financial Statements and Supplementary Data
28
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
28
Item 9A.
Controls and Procedures
29
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
32
Item 11.
Executive Compensation
32
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
32
Item 13.
Certain Relationships and Related Transactions, and Director Independence
32
Item 14.
Principal Accountant Fees and Services
32
PART IV
Item 15.
Exhibits and Financial Statement Schedules
33
Item 16.
Form 10-K Summary
33
Signatures
65
Table of Contents
Forward Looking Statements

This Annual Report on Form 10-K (“Annual Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Private Litigation Reform Act of 1995. Forward-looking statements are not historical in nature, but rather are predictive of our future operations, financial condition, business strategies and prospects. Forward-looking statements are generally identified by words such as “anticipate”, “believe,” “belief,” “continue,” “could”, “expect,” “estimate,” “intend,” “may,” “opportunity,” “plan,” “should,” “will,” “would,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report, including in “Item 1A. Risk Factors”, “Item 7. Management’s Discussion and Analysis”, and “Item 9A. Controls and Procedures”. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

PART I

Item 1:
Business.

General.
PAR Technology Corporation, (“PAR” or the “Company”) has operations in two distinct business segments: Hospitality and Government.

PAR’s Hospitality business segment, representing approximately 62% of consolidated revenue,together with its subsidiaries, provides management technology solutions, including software, hardware, software and a rangerelated services, integral to the point-of-sale (“POS”) infrastructure and task management, information gathering, assimilation and communications services. We deliver our management technology solutions through two operating segments – our Restaurant/Retail segment and our Government segment. Information about our segment revenues, operating income, and identifiable assets (including certain information by geographic location) is set forth in Note 11 – Segment and Related Information - of support services,the Notes to businessesConsolidated Financial Statements (Part IV, Item 15 of this Annual Report).
In this Annual Report, the terms “PAR”, “the Company”, “we”, “us”, and organizations within“our” refer to PAR Technology Corporation and its consolidated subsidiaries, unless the global hospitality industry that includes restaurants, hotels, resorts, spascontext indicates otherwise.

“PAR”, “Brink POS”, “Surecheck”, “Pixelpoint”, “EverServ” and specialty retail outlets.  The Companyother trademarks of PAR’s appearing in this Annual Report belong to PAR. This Annual Report contains trade names and trademarks of other companies. Our use of such other companies’ trade names or trademarks is not intended to imply any endorsement or sponsorship by these companies of PAR, its products, or services.
Restaurant/Retail Segment:
Overview.
We derived approximately 65% of our total consolidated revenues from this segment in 2016.  PAR continues to be a leading provider of hospitality management technology systemssolutions to restaurants (the Quick Service, Fast Casual and Table Service categories)retail with over 50,00075,000 systems installed in over 110 countries.  In addition, the Company is expanding itscountries; and we continue to expand our business into the retail marketplace with PAR’sbig box retailers, grocery stores, and contract food safety and task management solution, SureCheck®. These technology solutions are marketed collectively through the Company’s Hospitality segment.  The Company’s Hospitality segment also provides guest-centric property management solutions to hotels, resorts, spas, casinos, and other hospitality properties, worldwide.organizations, primarily driven by our SureCheck solution.

PAR’s Government business segment, representing approximately 38% of consolidated revenue, provides a range of technical services for the U.S. Department of Defense (“DoD”) and federal agencies. This segment is dedicated to providing Intelligence, Surveillance and Reconnaissance (“ISR”) technology and services specializing in the development of advanced signal and image processing and management systems with a focus on geospatial intelligence, geographic information systems, and command and control applications. Additionally, this business provides mission critical telecommunications, satellite command and control, and information technology operations and maintenance services worldwide to the U.S. DoD.

Information concerning the Company’s industry segments for the two years ended December 31, 2014 is set forth in Note 11 “Segments and Related Information” in the Notes to the Consolidated Financial Statements.

PAR’s corporate headquarters are located at PAR Technology Park, 8383 Seneca Turnpike, New Hartford, NY 13413-4991, and our telephone number is (315) 738-0600.  We maintain significant facilities for our Hospitality segment in our New Hartford headquarters, as well as Boca Raton, FL, Boulder, CO, Las Vegas, NV, Shanghai, People’s Republic of China, Stowe, VT, Sydney, Australia, and Markham, Ontario. We maintain Hospitality sales offices worldwide.  The Company’s Government business is headquartered in Rome, NY.  Our Government business has employees worldwide in fulfillment of our contract-based support services.

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Table of Contents
The Company’s common stock is traded onWe provide our customers with management technology solutions that address their desire to offer seamless transactional experiences or product offerings to their customers, while enabling them to gather and use content management and business intelligence to complete the New York Stock Exchange undertransaction or to monitor the symbol “PAR”.  Through PAR’s website (our website address is http://www.partech.com), our Annual Report on Form 10-K, quarterly reports on Form 10-Q,quality and current reports on Form 8-K and amendments thereto are available to interested parties, freesafety of charge.  Information contained on our website is not part of this Annual Report on Form 10-K.their products.

Unless the context otherwise requires, the term  "PAR" or "Company" as used herein, means PAR Technology CorporationOur management technology solutions include our cloud and its wholly-owned subsidiaries.
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Table of Contents
Hospitality Segment

PAR’s solutions for the Restaurant market integrate on-premise software applications, hardware platforms, and related installation, technical, and lifecyclemaintenance support services.  PAR’sOur software offerings include front-of-store POS software applications, operations management software applications (known as back-office software), and enterprise software applications for content management and business intelligence.  Our hardware offerings for the Restaurant market include Point-of-Sale (“POS”)POS terminals, tablets, kitchen systems utilizing printers and/or video monitors, and a wide range of food safety monitoring and task management tools.  PAR’s softwarehardware.
Products and Services.  The products and services in the Restaurant/Retail segment include:
Cloud and On-Premise Software, including SaaS offerings for the Restaurant market include front-of-store POS software applications, operations management software applications (known as Back Office), and enterprise software applications for content management and business intelligence.:

As a leading provider
·Brink POS (“Brink”) – a point of sale (“POS”) cloud based software that scales for use by single and multi-unit operators with traditional and/or mobile platforms. Brink is a leading software solution for restaurants, particularly in the quick serve/fast casual restaurant categories. A cloud POS platform, Brink eliminates the need for the back-office server, and simplifies software version control and organizational updates. Brink provides and integrates to mobile/online ordering, loyalty, kitchen video systems, guest surveys, enterprise reporting, and mobile dashboards.  Brink is sold as a cloud software-as-a-Service (“SaaS”).

·PixelPoint - an integrated software solution, that includes a POS software application, a self-service ordering function, back-office management, and an enterprise level loyalty and gift card information sharing application.  The PixelPoint solution is primarily sold to independent table service and quick serve restaurants through channel partners.

·Surecheck – an IoT (Internet of Things) mobile software solution, that provides food safety monitoring and intelligent checklist management through a combination of a cloud enterprise application, a PDA-based mobile application, and a patented integrated temperature measuring device.

The Restaurant Market. Our software applications and hardware platforms are designed to be complete and integrated solutions for multi-unit and individual restaurants, franchisees, and enterprise customers in the Restaurant market, PAR has developed, long-term committed relationships with the industry’s three largest organizations, McDonald’s Corporation, Yum! Brands, Inc.dominant restaurant categories: fast casual (“FC”), quick serve (“QSR”), and the SUBWAY® franchiseestable service (“TSR”).  Each of Doctor’s Associates Inc.  McDonald’s®these restaurant categories has over 36,000 restaurants in more than 100 countries,distinct operating characteristics and PAR has been an approved provider of restaurant technology systemsservice delivery requirements that are managed by Brink and support servicesPixelPoint. Both Brink and PixelPoint allow customers to configure their organization since 1980.  Yum! Brands®, which includes Taco Bell®, KFC®, and Pizza Hut®, has been a PAR customer since 1983.  Yum! Brands has over 41,000 restaurants in more than 125 countries, and PAR continues to be a major supplier of in-store technology systems to concepts withinmeet their order entry, food preparation, inventory, and workforce management needs, while capturing real-time transaction data at each location and delivering valuable insight throughout the Yum! Brands portfolio.  enterprise.
The Company continuesRetail Market. The Surecheck solution offers food retail (grocery), food service, and food manufacturer customers with an effective way to expand their installed basemanage Hazard Analysis & Critical Control Points (“HACCP”) compliance; it automates the monitoring of hardware technologyquality risk factors (e.g., food temperature) while dramatically lowering the potential for human error. Surecheck records employee food preparation, handling and services with SUBWAY, which has more than 43,000 restaurants in over 110 countries.  Other significant hospitality chains for which PAR is the POS vendormanufacturing processes and tasks, while providing insight to abnormal checklist conditions and configurable automated alerts when tasks are behind schedule or out of choice include the Baskin-Robbins® unit of Dunkin' Brands Group, Inc.,  the Hardee’s®  and Carl’s Jr. ® units of CKE Restaurants, Inc., the Carnival Cruise Lines® unit of Carnival Corporation & plc  and franchisees of these organizations.

PAR has also developed an intelligent checklist solution for food safety measurement and task management automation marketed under the name SureCheck®. During the year, the Company continued to add new accounts utilizing its SureCheck product, incompliance. In addition to its existing customers, Wegmans Food Markets, Inc.food retail (grocery), with its 85 store locations,food service, and Wal-Mart Stores Inc.,  (including Sam’s Clubs),food manufacturing, Surecheck offers restaurant and its 5,000 domestic stores.  These customers have selected PAR as its vendor of choice for their food safetyretail operators a device to effectively capture and task management requirements.

In the Hotel market, PAR is a leading global provider of software solutions for a variety of property types including city-center hotels, destination spamonitor data to manage policy compliance and golf resorts, cruise ships,oversight, loss prevention, merchandising, and casino hotels.  High profile customers utilizing PAR’s solutions include The Old Course Hotel at St. Andrews, a unit of Kohler Company, Pebble Beach Resorts® of the Pebble Beach Company, and Gleneagles Hotel® unit of Diageo plc.  Large hotel chains utilizing one or more of PAR’s software solution offerings include Accor SA, Four Seasons Hotels Limited, the Fairmont® and Swissotel® units of FRHI Holdings Limited, Hilton Worldwide, Inc., Kempinski AG, Mandarin Oriental Hotel Group, Marriott International, Inc. and its Ritz-Carlton subsidiary, The Maybourne Group,  and Starwood Hotels & Resorts Worldwide, Inc.other audit functions.

4
Products

The Company markets its hardware, software and services as an integrated solution or unbundled, on an individual basis.  PAR’s hardware offerings, particularly its POS terminals, are highly regarded by the hospitality industry for their broad functionality, reliability, durability, and high quality.  The Company often sells hardware in combination with services, thereby delivering maximum system performance on a cost-effective basis.  PAR emphasizes the operational and economic value of a bundled, integrated solution, combining hardware, software and services, offering customers a comprehensive solution capable of enabling efficient restaurant operation, while also providing operational and marketing insights.

Hardware
 
The PARHardware.
Our EverServ® family of hardware POS platforms isare designed to reliably operate in harsh hospitality environments beassociated with food service. Our EverServ platforms are durable and highly functioning, scalable, and easily integrated - offering customers’customers competitive performance at a cost-conscious price. The Company’sPAR’s hardware platforms are compatible with popular third-party operating systems, support a distributed processing environment and are suitable for a broad range of use and functions within the markets served. PAR’s open architecture POS platforms are optimized to host the Company’s EverServour POS software applications, as well as mostmany third-party POS applications, and are compatible with manya variety of peripheral devices. PAR partnersWe partner with numerous vendors ofthat offer complementary in-store peripherals, from such as cash drawers, card readers, and printers to kitchen video systems, allowing the Companyus to providedeliver a completecompletely integrated solution integrated and delivered bythrough one vendor.

PAR currently offers a range
3
Our POS hardware platforms are designed with the intent to meet thecustomer needs of our customers,and exceed customer expectations regardless of the restaurant concept, the size of the organization or the complexity of its requirements.  PAR’s hardware terminalplatform offerings are primarily comprised of three POS product lines: EverServ 500 Series, EverServ 7000 Series, and EverServ 6000 Series.8000 Series.
 
·EverServ 500 Series - is built with the rugged durability PAR is known for and is a value platform for operators that require fewer features/functions. Its small ergonomic footprint is ideal for installations where space is at a premium. The EverServ 500’s solid design is quiet, offers low power consumption, and minimizes maintenance.
5
·EverServ 7000 Series - offers a combination of performance, style, ease of service, remote management, flexibility, and modularity. The EverServ 7000 is built to operate in harsh environments - grease and liquid spills - and endure high customer traffic and transaction activities. The high-performance architecture of the 7000 supports demanding applications and delivers the speed needed to improve customer throughput.

·EverServ 8000 Series – is designed and developed based on the latest technology platforms from Intel Corporation. The EverServ 8000 boasts a modern design and, while it is one of the smallest footprints available in the market, it offers the same operational durability as our EverServ 7000.
·EverServ tablets – PAR Tablet 5, PAR Tablet 8 and PAR Tablet 10 - are the latest in PAR’s series of enterprise-class mobile devices built for our customers. Consistent with our EverServ family, the EverServ tablets are designed to operate in harsh environments. Attributable to the Everseve tablets’ extended battery life, the rugged design of the EverServ tablets does not impact the level of “up time” enjoyed by customers, but it does extend the EverServ tablets’ life cycle.  Our EverServ mobility family of hardware platforms also include a variety of docking and charging stations, the ability to use magnetic cards and payment systems, hand and shoulder straps and holsters to support the variety of product applications.

Services.

We provide a complete portfolio of services to support technology needs before, during and after software and/or hardware deployments.  We offer installation, technical and break-fix support for our products through support services, license and/or subscription agreements with our customers. We also offer depot repair and overnight - Advanced Exchange - service. Through our training services, we offer complete application training to our customers’ in-store staff, and provide technical training to our customers’ information systems personnel.
In North America, we offer 24-hour help desk support from our diagnostic service center located in Boulder, Colorado, and on-site support through our field tech service network, which services the continental U.S., we offer similar support services to our customers outside of the U.S.
4
PAR’s hardware offering, the EverServ 500 platform,
The restaurant market is built with the same rugged durability PAR is known for but in a compact design that delivers the performancefragmented,  we support major corporations and reliabilitytheir franchisees, and businesses of their legacy offerings. Its small ergonomic footprint is ideal for installations where space is at a premium. The design offers a spill resistant, high-impact enclosure that is built to withstand harsh restaurant and retail conditions with continuous operation. The EverServ 500’s solid state design is quiet, offers low power consumption and minimizes maintenance.
The patented EverServ 7000 series is PAR’s flagship POS platform, designed to offer PAR’s ultimate combination of performance, style, ease of service, remote management, flexibility and modularity.  The EverServ 7000 series hardwareis built to perform in harsh environments enduring severe treatment and liquid spills. The high performance next-gen architecture of the series supports demanding applications and delivers the speed needed to improve customer throughput.
The patented EverServ 6000 platform has been PAR’s high performance, rugged and reliable POS terminal for the past several years and been deployed globally with the world’s largest restaurant chains. By design, the Everserv 6000 is simple to service, reducing down times and minimizing business interruption. The EverServ 6000 POS terminal leverages a common computing platform across multiple configurations to simplify IT operations, deployment and support, resulting in lower costs. In addition, its energy-saving features and rugged design contribute to a low total cost of ownership and a long product lifespan.
As a result of market changes and demand of mobile technologies within restaurants and additional hospitality environments, PAR introduced its series of tablets designed to withstand the harsh hospitality environment and deliver best performance, durability and highest level of UP time. The PAR Tablet 8 and PAR Tablet 10 are the latest in series of mobile devices built for the needs of its Hospitality customers, with a rugged design, extended battery life and a lengthy life cycle, providing the best ROI to customers.  PAR’s Mobility Family of hardware platforms include options such as differing docking and charging stations, the ability to use magnetic cards and payment systems, hand and shoulder straps and holsters to support the variety of product applications.

Lastly, with PAR’s growing presence within the Retail market, PAR developed its temperature measurement device to provide a complete technology solution supporting food safety compliance and task management automation.  The device can operate as a stand-alone hardware platform or as integrated solution with the Company’s Everserv SureCheck® offering. 

Software: Restaurant Market
PAR’s restaurant software offerings were designed to exceed the requirements of large and small operators, franchise and enterprise alike in the three dominant restaurant categories: Quick Serve Restaurants (“QSR”), Fast Casual Restaurants (“FC”), and Table Service Restaurants (“TSR”).  Each of these restaurant categories has distinct operating characteristics and service delivery requirements and each of  PAR’s EverServ software offerings, were designed to allow customers to configure their technology systems to meet their order entry, food preparation, inventory, and workforce management needs, while capturing pertinent POS and BOH transaction data at each location and delivering valuable insight throughout the enterprise.

PAR’s EverServ PixelPoint™ software solution is primarily sold to independent restaurants through channel partners.  This integrated software solution includes a point-of-sale software application, a wireless ordering capability, an on-line ordering feature, a self-service ordering function, an enterprise backoffice management function, and an enterprise level loyalty and gift card information sharing application.

On September 19, 2014, PAR acquired Brink Software, Inc., a fast emerging provider of cloud based point of sale (POS) software for restaurants.  The Brink POS software productis distinguished by its cloud based designed, with integrated features that include loyalty at its core, mobile online ordering, kitchen video system, guest surveys, enterprise reporting, mobile dashboard, and much more.

In addition to POS software, PAR offers a number of complementary restaurant applications for the enterprise customer.  EverServ Operations Reporting is a web-based enterprise reporting solution that consolidates data from all restaurant locations, and is offered either as an on-premises installation or through Software-as-a-Service (“SaaS”).  Designed for corporate, field, and site managers, this decision-making tool provides visibility into every restaurant location via a dashboard displaying customer-defined financials, sales analysis, marketing, inventory, and workforce variables.  EverServ Operations reporting was also designed to be capable of integrating with customers’ business applications such as financials, payroll, and supply-chain systems.  PAR also offers applications for forecasting, labor scheduling, and inventory management.

Software: Retail Market
The EverServ SureCheck software platform provides food safety monitoring and employee task management functionality through the combination of a cloud-based enterprise server application, a PDA-based mobile application and an integrated temperature measuring device.  This solution is effective for managing Hazard Analysis & Critical Control Points (“HACCP”) inspection programs for retail and food service organizations, and automates the monitoring of quality risk factors while dramatically lowering the potential for human error.  The SureCheck platform was also designed to help hospitality and retail operators efficiently complete and monitor the compliance of employee tasks while providing insight on abnormal checklist conditions, providing configurable, automated alerts when tasks are behind schedule or out of compliance.  The data captured through this solution is used to manage policy compliance and oversight, loss prevention, safety, merchandising, and other audits unique to the customer. 

Software: Hotel (including Resorts and Spas) Market

For the Hotel/Resort/Spa market, the Company’s guest-centric property management software provides a series of fully integrated modules that manage all aspects of the guest experience, as well as consolidating guest information and history across the operation into asizes, including single database.  PAR develops, sells and supports the SMS|Host® Hospitality Management System, a leading solution in the market for the luxury and resort market of the global hospitality industry.  PAR’s SMS|Host platform remains a market leader because of its robust guest-centric functionality, allowing hotel staff to coordinate, cross-sell, and deliver personalized guest services across all various services of large, complex resort operations.  The flexibility of the SMS|Host platform, with numerous seamlessly integrated, guest-centric modules, provides the tools the Company’s hotel customers need to personalize service, anticipate guest needs, and consistently exceed guest expectations.

The ATRIO® suite is a highly flexible, highly scalable cloud based software solution that significantly increases PAR’s addressable market to accelerate future revenue growth.  The ATRIO® platform of solutions, including property management, spa management and point of sale, was designed as a significant redefinition of the functionality and delivery of hospitality management software.

For the Spa market, PAR provides its SpaSoft® product, the industry’s leading Spa Management Application.  Nearly 75% of Forbes five-star spas in the world use SpaSoft to support their operations.  The Company designed SpaSoft to satisfy the unique needs of resort spas, day spas, and medi-spas.  SpaSoft’s unique booking engine, advanced resource inventory, yield management module, scheduling, management and reporting tools assist in the total management of sophisticated hotel/resort spas and day spas.  SpaSoft specifically addresses the needs of the spa industry, enabling spa staff to provide the individualized, impeccable guest service that their most important clients desire and expect.

Services

PAR offers customer support services to its Hospitality customers.  The Company believes itsstore operators. We believe our ability to offer directcomprehensive services including installation, maintenance, and technical support services are oneto a diverse set of its key differentiators withincustomers differentiates us from our competitors.
Using a suite of software applications, our experienced service organization provides customers with knowledge based diagnostic solutions to resolve customer service issues. Our service providers compile information about potential customer or product trends and opportunities, and provide this information to our remote service technicians, to assist them in diagnosing issues occurring at customer locations, in real-time; reducing the Restaurantneed for physical on-site service calls.  Our customer relationship management system allows our call center personnel to maintain customer profiles, including customer hardware and Hotel markets.  PAR workssoftware details, service history, and database of problem-resolutions, to maximize our service resolution effectiveness and customer satisfaction.

We work closely with itsour customers to identify and address the latest hospitalityrestaurant or retail technology requirements by creating interfaces to the latest innovations in operational equipment, including automated cookingEuropay, MasterCard and drink-dispensing devices, customer-activated terminalsVisa (EMV), digital, and order display unitsadditional solutions located inside and outside of the customer’s premises. PAR provides systems integration expertise to interface specialized components, such asincluding but not limited to video monitors, coin dispenserswireless networks, and non-volatile memory for journalizing transaction data,video surveillance, to meet requirements of international applications.its global customers.
Sales and Marketing

In the U.S., we market and sell our products through our dedicated sales teams, who directly interface with our tier 1 customers (owner and/or operator of 2,000 or more sites), tier 2 customers (owner and/or operator of 101-1,999 sites) and tier 3 customers (owner and/or operator of a 2 – 100 sites).  Our international sales teams also market and sell our products and services to tier 1 customers outside of the U.S., as well as local/regional customers, from our in-country offices.  We also use channel partners to market and sell our products and services both in the U.S. and internationally.
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We also market and sell our products through sales representatives, who enlist and support many well-regarded value-added resellers serving multi-unit operators, the independent restaurant category, and the non-foodservice markets such as retail, convenience, amusement parks, movie theaters, cruise lines, spas and other ticketing and entertainment venues.
PAR employs experienced individualshas developed and nurtured, long-term relationships with diverse hospitality backgroundsthree of the largest organizations in both the RestaurantRestaurant/Retail segment - McDonald’s Corporation, Yum! Brands, Inc., and Hotel markets.  the SUBWAY franchisees of Doctor’s Associates Inc. McDonald’s currently has approximately 36,000 restaurants in more than 100 countries; since 1980, PAR is an approved provider to McDonald’s and its franchisees of restaurant technology systems and support services. Yum! Brands, which includes Taco Bell, KFC, and Pizza Hut, currently has over 43,500 restaurants in more than 135 countries; PAR has been an approved supplier since 1983 and is a major supplier of in-store technology systems to concepts within the Yum! Brands portfolio. We continue to expand our hardware sales and related services to SUBWAY, which currently has more than 44,000 restaurants around the world. Other significant restaurant chains that use PAR POS products and related services include: the Baskin-Robbins unit of Dunkin’ Brands Group, Inc., the Hardee’s, and Carl’s Jr.  units of CKE Restaurants, Inc., Five Guys, Jack-in-the-Box, and franchisees of these organizations.
Throughout 2016, we continued to add new SureCheck customers to our existing customers - Wegmans Food Markets, Inc., which currently has approximately 92 store locations, and Wal-Mart Stores Inc., (including Sam’s Clubs), which currently has approximately 5,224 domestic and 6,300 international stores. Both Wegmans and Wal-Mart selected the SureCheck solution to food safety and task management requirements.
Competition

POS software and hardware offerings to the restaurant and retail markets is highly competitive. Most of our significant customers have several approved suppliers of software and/or hardware similar to one or more of our products. We compete directly with some product offerings from Oracle Corporation, NCR Corporation, and Panasonic Corporation among others. We compete on the basis of product delivery (cloud based software applications v. traditional), product design, features and functionality, quality and reliability, price, and customer service. Our competitive advantages include our integrated solutions offerings, including our cloud (SaaS delivery model) and on-premise software, ergonomic purpose-built hardware, advanced development capabilities, extensive domain knowledge and expertise, excellent product reliability, a customer dedicated direct sales force organization, and world class and responsive customer service and support.
The Company’s personnelmarkets that are the focus of SureCheck are immature and there are currently few competitors.  However, as the functionality and efficiencies of the SureCheck solution become more known and demonstrable, we will face competition in this product offering category as well.

Backlog

Product orders are generally of a short-term nature, and are usually confirmed and shipped in less than 6 months.

Research and Development

Continuous product research, innovation, and product development are an integral part of our business. We continuously evaluate customer needs, and new and relevant technologies, to enable us to develop innovative new products and adopt those that allow PARenhancements to provide significant improvements in customers’ day-to-day systems.  Fromour existing products to improve and/or add to their functionality, performance, operation, and integration capabilities; from hand-held wireless devices to advances in internet performance, the Company’s technical staffour professional services unit is available for consultation on a wide variety of topics including network infrastructures, system functionality, operating system platforms, and hardware expandability. In addition, the Company has secured strategic partnerships with third-party organizations to offer a variety of credit, debit and gift card payment options.

Installation and Training
Globally, PAR offers software configuration, installation, training, and integration services as a normal part of the software or equipment purchase agreement. PAR also offers complete application training for a site’s staff as well as technical instruction for customers’ information systems personnel.

Maintenance and Service
PAR offers a wide range of maintenance and support services as part of its total solution for the hospitality markets we serve. In North America, the Company provides comprehensive maintenance and installation services for its software, hardware and systems, as well as those of third parties, utilizing PAR-staffed, round-the-clock, central telephone customer support and diagnostic service centers in Boulder, CO, and Las Vegas, NV.  The Company also has direct service capabilities in Australia and Asia.

PAR maintains a field service network, consisting of over 100 locations, offering on-site service and repair, as well as depot repair and overnight unit replacements.

PAR’s service organization utilizes a suite of software applications that allows PAR to offer value to its customers through the utilization of its extensive and growing knowledge base to diagnose and resolve customer-service issues. This also enables PAR to compile the kind of in-depth information it needs to identify trends and opportunities.  If an issue arises with our products, PAR’s customer service management software allows a service technician to diagnose the problem remotely, thereby reducing in many cases the requirement for an on-site service call.  PAR’s service organization is further enabled by a sophisticated customer relationship management system that allows our call center personnel to maintain a profile on each customer’s background, hardware and software details, client service history, and a problem-resolution database.

Sales and Marketing
Within the Hospitality Segment, PAR has dedicated sales teams engaging directly with customers while also utilizing various types of partners through indirect selling channels targeting a variety of differing markets and customer segments.

With regard to the Restaurant market of its Hospitality segment, the Company employs a direct sales force concentrating on large chain, corporate customers and their franchisees globally.  In addition, sales efforts are directed toward franchisees of large chains for which the Company is not necessarily the corporate POS vendor. The Company’s international direct sales force markets to major customers with global locations as well as international chains without a presence in the United States.

The Company’s indirect sales channel enlists sales representatives, and value-added resellers serving the independent restaurant sector and non-foodservice markets such as retail, convenience, amusement parks, movie theaters, cruise lines, spas and other ticketing and entertainment venues.

Sales in the Hotel market of the Hospitality segment are coordinated by multiple sales groups.  The Domestic Sales Group targets independent, business class and luxury hotels, resorts and spas in North America and the Caribbean, while the International Sales Group targets independent hotels and resorts outside of the North America.  Additionally, the Major Accounts Sales Group works with high profile corporate and chain clients. Lastly, the Company’s Installed Accounts Sales Group works solely with clients who have already installed the SMS|Host product suite.

Competition

The markets in which the Company operates are highly competitive.  Important competitive variables in the hospitality market include functionality, reliability, quality, pricing, service and support. In the Restaurant market, PAR believes its competitive advantages include the focus on an integrated technology solution offering including cloud-based software, ruggedized hardware, advanced development capabilities, extensive domain knowledge and expertise, excellent product reliability, a direct sales force organization, world class support and quick service response.  In the Hotel market, PAR believes its competitive advantages include the extensive domain knowledge, long-standing industry leadership, cloud-based and guest-centric orientation of the software, and our high level of customer support. Most of our significant customers have approved several suppliers offering some form of sophisticated hospitality technology system similar to that of the Company.  Major competitors include Oracle Corporation, NCR Corporation and Panasonic Corporation.
Backlog
Due to the nature of the hospitality business, backlog is not significant at any point in time.  The Hospitality segment orders are generally of a short-term nature and are usually booked and shipped in less than 12 months.

Research and Development
The highly technical nature of the Company’s hospitality products requires a significant and continuous research and development effort.  Ongoing product research and quality development efforts are an integral part of all activities within the Company. Functional and technical enhancements are actively being made to our products to increase customer satisfaction and maintain the high caliber of PAR’s software.  Research and development expenses were approximately $16.0$11.6 million in 20142016 and $15.6$10.1 million in 2013.  The Company capitalizes2015. We capitalize certain software costs in accordance with Financial Accounting Standards Board (“FASB”)(FASB), Accounting Standards Codification (“ASC”) Topic No. 985. See Note 1 “Summary– Summary of Significant Accounting Policies” - of the Notes to the Consolidated Financial Statements included in Part(Part IV, Item 15 of this Annual Report) for further discussion.

Manufacturing and Suppliers
The Company sources and/or assembles most of its products from standard electronic components, fabricated parts such as printed circuit boards, and mechanical components.  Many assemblies and components are manufactured by third parties to the Company’s specifications.  PAR depends on outside suppliers for the continued availability of its assemblies and components.  Although most items are generally available from a number of different suppliers, PAR purchases certain final assemblies and components from single sources. Items purchased from single sources include certain POS devices, peripherals, custom molded and tooled components, and electronic assemblies and components. If such a supplier should cease to supply an item, PAR believes new sources could be found to provide the components. However, added cost and manufacturing delays could result and adversely affect the Company’s performance. The Company has not experienced significant delays of this nature in the past, but there can be no assurance that delays in delivery due to supply shortages will not occur in the future.

Intellectual Property
The Company owns or has rights to certain patents, copyrights and trademarks.  PAR relies upon non-disclosure agreements, license agreements and applicable domestic and foreign patent, copyright and trademark laws for protection of our intellectual property.  To the extent such protective measures are unsuccessful, or the Company needs to enter into protracted litigation to enforce such rights, the Company’s business could be adversely impacted.  Similarly, there is no assurance that the Company’s products will not become the subject of a third-party claim of infringement or misappropriation.  To the extent such claims result in costly litigation or force the Company to enter into royalty or license agreements, rather than enter into a prolonged dispute, our performance could be adversely impacted.  The Company also licenses certain third-party software with its products.  While PAR maintains strong relationships with its licensors, there is no assurance such relationships will continue or that the licenses will be continued under fees and terms acceptable to the Company.
Manufacturing and Suppliers

We assemble our ES 8000 series of hardware internally as well as source hardware products and hardware related components from third parties. Although we purchase most of the materials, supplies, product sub-assemblies and full assemblies for our internal assembling of products from several suppliers, we do rely on sole sources for certain of our assembly components and hardware products. As a result, we periodically review and evaluate potential risks of disruption to our supply chain operations in the event one or more supplier should fail to perform.
Government SegmentSegment:

PAR’s Government businesssegment provides a range of technicalsolutions and services for the U.S. Department of Defense (“DoD”) and federal agencies. This segmentIt is dedicated to serving focused on two principal offerings – Solutions and Services; and Mission Support.

Solutions and Services

Intelligence, Surveillance, and Reconnaissance (“ISR”) needs specializing.  We provide a variety of geospatial intelligence and situational awareness solutions for mobile and data center offerings. Our substantive, in depth expertise in these domains enable us to provide our government customers and large systems integrators with key technologies to support a variety of applications ranging from strategic enterprise systems to tactical in the developmentfield dismounted users.  Additionally, we have developed a number of solutions relative to these advanced signaltechnologies and image processingwe provide integration and management systemstraining support with a focus on geospatial intelligence, geographic information systems, and command and control applications. Additionally, this business provides mission critical telecommunications, satellite command and control, and information technology operations and maintenance services worldwiderespect to the U.S. DoD.these solutions.

The business is organized in two operating sectors that provide comprehensive service offerings across their customer base – Technical Services and ISR Solutions.

The Technical Services Sector includes three distinct lines of business: Telecommunications, Satellite Control, and Information Technology Services. The Telecommunication services include satellite and terrestrial communications operations and maintenance services, which operate the Global Information Grid (“GIG”) in support of the National Command Authority (President & Joint Chiefs of Staff) and Department of Defense. Additionally, PAR operates the U.S. Navy’s only Satellite Operations Center providing Tracking, Telemetry and Control of several spaced-based satellite communication constellations. Finally, the Company’s Technical Services Sector provides IT services ranging from advanced systems to basic help desk support. Moreover, approximately 50% of this Sector’s global footprint includes an international presence with major contracts in Africa, Greece, Italy, Sicily, Puerto Rico, the Northern Marianas Islands, and Australia. The Company has strong and enduring relationships with a diverse set of customers throughout the U.S. DoD and federal government. PAR’s track record delivering mission critical services to their government customers spans decades, and includes contracts that have continued 15 years or more. The Company works closely with its customers, with the vast majority of the Technical Services Sector employees co-located at customer sites. PAR’s strong relationships and on-site presence with customers enable the Company to develop deep customer and technical domain knowledge, and translate mission understanding into exemplary program execution and continued demand for its services.

The ISR Solutions Sector provides systems-engineeringengineering support and software-based solutions. Expertisesolutions to DoD research and development laboratories as well as operational commands. Our internal expertise ranges from theoretical and experimental studies to development and fielding of operational prototypes. PAR’scapabilities. Our employees are:

·experienced developers and subject-matter experts in DoD Full Motion Video (“FMV”);

·developers of geospatial and imagery data management, visualization, and exploitation solutions;

·major contributors to radar systems from inception to operational capabilities;

·developers of mobile computing applications for Android, iOS, and Windows; and

·developers of geospatial information system (“GIS”) solutions.
We are actively engaged in the development of mobility applications that support the needs of mobile teams with real-time situation awareness and subject-matter experts in DoD Full Motion Video (“FMV”) formats include MPEG-2, H.264, and standard/high definition (“SD/HD”) support; developers of geospatial and imagery data management, visualization, and exploitation solutions; major contributor to radar systems from inception to operational capabilities; developers and integrators of light weight Electro-Optical (“EO”), Infrared (“IR”), multi and hyperspectral sensor systems, and LiDAR; developers of certified systems employing multi and hyperspectral imaging to include target detection and cueing algorithms, IR search and track technology, and algorithms for camouflage detection and buried mines; and developers of Geospatial Information System (“GIS”)-based modeling solutions.distributed communications. ISR Solutions Sector has a strong legacy in the advanced research, development and productization of geospatial information assurance (“GIA”) technology involving steganography, steganalysis,steg analysis, digital watermarking, and image forensics. These enabling technologies have been used to provide increased protection and security of geospatial data.

PAR focuses its business in five service areas:

Intelligence, Surveillance, and Reconnaissance (“ISR”): The Companyalso provides a variety of geospatial intelligence solutions including full motion video, geospatial information assurance, raster imagery,scientific and light detection and ranging (“LiDAR”). In depth expertise in these domains provides government customers and large systems integrators with key technologies supporting a range of applications from strategic enterprise systemstechnical support to tactical individual users. Furthermore, PAR has developed a number of products relative to these advanced technologies and provides integration and training support.the U.S. Intelligence Community.

Systems Engineering & Evaluation:Evaluation The Company integrates. We integrate and tests Electro-Optical (“EO”), Infrared (“IR”), Radar, and multi/hyper-spectral sensor systems fortest a broad range of government and industry surveillance applications. PAR developed the Multi-mission Advanced Sensor System (“MASS”), which assists with counter-terrorism, first responder, environmental,research and drug enforcement applications. In addition, thedevelopment solutions. The Company designs and integrates radar sensor systems including experimentation, demonstration, and test support. We also provide scientific and technical engineering and analysis to intelligence community customers, as well as program management services for the acquisition, development, and deployment of advanced prototypes and quick reaction systems.

Mission Support

Satellite & Telecommunications ServicesSupport.: The Company provides We provide a wide range of technical and support services to sustain mission critical components of the DoD’s GlobalDepartment of Defense Information Grid (GIG)Network (DoDIN).  These services include continuous 24/7/365 operations, system enhancements and associated maintenance of very low frequency (“VLF”)(VLF), high frequency (“HF”)(HF) and very high frequency (“VHF”)(VHF) ground-based radio transmitter/receiver facilities. Additionally, the Company operates and maintains several extremely high frequency (“EHF”)(EHF) and super high frequency (“SHF”)(SHF) satellite communication earth terminals and teleport facilities. The DoD communications earth stations operated by the CompanyPAR is the primary communications infrastructure utilized by the National Command Authoritynational command authority and military services to exercise command and control of the nation’s air, land and naval forces and provide support to allied coalition forces.

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Space & Satellite Control Services:Support  The Company provides. We provide satellite operation, management, and maintenance services into support of Satellite Control Center Operations.satellite control center operations. Primary services include Satellite Telemetry Monitoring, Trackingsatellite telemetry monitoring, tracking and Command Support,command support, and Satellite Control in ordersatellite control to provide reliable space-based satellite services conducting Command, Control, Communications, Computers, Intelligence, Surveillancecommand, control, communications, computers, intelligence, surveillance, and Reconnaissancereconnaissance (C4ISR) Operations.  The Companyoperations. PAR delivers services in support of satellite Telemetry, Tracking, Controltelemetry, tracking, control, and Remote Terminal Operationsremote terminal operations from 7 locations worldwide.

Information Technology/Management technology/Systems Services: SupportThe Companyprovides Information Technology. We provide management technology services to the DoD and Federal Agencies.federal agencies. These services include Helpdesk Services, Systems Administration, Network Administration, Information Assurancehelpdesk services, systems administration, network administration, information assurance and Systems Security, Database Administration, Telephone Systems Management, Testingsystems security, database administration, telephone systems management, testing and Testbed Management, ITIL-Based Service Management,testbed management, and Tier 0 through Tier III support.ITIL-based service management.
 
Government ContractsTelecommunication services include satellite and terrestrial communications operations and maintenance services, which operate elements of the DoDIN to support the National Command Authority (President & Joint Chiefs of Staff), DoD and other government agencies.  The Company provides IT support services ranging from advanced systems management to help desk support—with more than 50% of its global footprint outside the continental U.S. with contracts in Europe, Africa, Australia, and U.S. commonwealths and territories in the Pacific and Caribbean.

The Company performsPAR has strong and enduring relationships with a diverse set of customers throughout the U.S. DoD and federal government, and our track record of delivering mission critical services to our government customers spans decades, and includes contracts continuing 15 years or more. We work for U.S. Government agencies under firm fixed-price, cost-plus-fixed-fee, and time-and-material contracts. Theclosely with our customers, with the vast majority of these contracts have a period of performance of oneour mission system employees co-located at customer sites. Our strong relationships and on-site presence with our customers enable PAR to five years. There are several risks associated with Government contracting. For instance, contracts may be reduced in size, scopedevelop substantive customer and value, as well as modified, delayed and/or cancelled depending upon the Government’s requests, budgets, policies and/or changes in regulations. Contracts can also be terminatedtechnical domain knowledge, and translate mission understanding into exemplary program execution and continued demand for the convenience of the Government at any time the Government believes that such termination would be in its best interests. In this circumstance, the Company is entitled to receive payments for its allowable costs and, in general, a proportionate share of its fee or profit for the work actually performed. The Company may also perform work prior to formal authorization or prior to adjustment of the contract price for increased work scope, change orders and other funding adjustments. In this situation, the Company is performing the work under our own risk and would be responsible for any costs incurred during this time. Additionally, the Defense Contract Audit Agency regularly audits the financial records of the Company. Such audits can result in adjustments to contract costs and fees. Audits have been completed through the Company’s fiscal year 2011 and have not resulted in any material adjustments.PAR’s services.

Marketing and Competition

Contracts are obtained principallyWe obtain contracts primarily through competitive proposals in response to solicitations from government organizations and prime contractors. In addition, the CompanyPAR sometimes obtains contracts by submitting unsolicited proposals. Although the Company believes it iswe believe we are well positioned in itsour business areas, competition for Governmentgovernment contracts is intense. Many of the Company’sour competitors are major corporations, or subsidiaries thereof, that are significantly larger and have substantially greater financial resources. The CompanyWe also competescompete with many smaller, economically disadvantaged companies, many of which are designated by the Governmentgovernment for preferential “set aside” treatment, that target particular segments of the government contract market. The principal competitive factors are past performance, the ability to perform the statement of work, price, technological capabilities, management capabilities and service. Many of the Company’s Departmentour department of Defensedefense customers are now migrating to low-price/technically acceptable procurements while leveraging commercial software standards, applications, and solutions.

Backlog

The value of existing Government contracts at December 31, 2014,2016, net of amounts relating to work performed to that date, was approximately $100.4$126.0 million, of which $53.9$36.4 million was funded. The value of existing Government contracts at December 31, 2013,2015, net of amounts relating to work performed to that date, was approximately $95.6$101.2 million, of which $40.9$48.4 million was funded. Funded amounts represent those amounts committed under contract by Government agencies and prime contractors.  The December 31, 20142016 Government contract backlog of $100.4$126.0 million represents firm, existing contracts.  Of this backlog amount, approximately $67.5$55.4 million is expected to be completed in calendar year 2015,2017, as funding is committed.
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EmployeesIntellectual Property and Other Rights

We develop a substantial amount of our products internally as original developments, discoveries and know-how or based on existing copyrighted works and/or patents issued or pending of PAR or third party licensors.  We have a number of U.S. and foreign patents and patents pending and trademarks, as well as copyrights that relate to internally developed software, various distinctive characteristics of our products, including certain attributes, functionality, and brand association and goodwill. In addition to our publicly available intellectual property, we possess competitive confidential information and trade secrets.  We protect our intellectual property and other proprietary information by actively pursuing U.S. and foreign patent and trademark protection of our proprietary product developments, discoveries and know-how and our brands and logos, and by entering into license agreements and non-disclosure and confidentiality agreements.

Employees

As of December 31, 2014, the Company had 1,2212016, we employed approximately 1,002 full-time employees, including approximately 63% of whom were engaged56% in the Company’s Hospitalityour Restaurant/Retail segment, 32% of whom were38% in theour Government segment and 5%(27% of whom were corporate employees.

Due to the highly technical nature of the Company’s business, the Company’s future can be significantly influenced by its ability to attract and retain its technical staff.  The Company believes it has and will be able to continue to fulfill its near-term needs for technical staff.

Approximately 10% of the Company’s employeeswhich are covered by collective bargaining agreements.  The Company considers its employee relationsagreements), and 6% who are corporate employees.  We consider our relationship with our employees to be good.
17Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website at www.partech.com “About Us - Investors, SEC Filings”, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). The information posted on or accessible through our website is not incorporated into this Annual Report on Form 10-K.
Item 1A
Item 1A:
Risk Factors.

The Company operates in a dynamic and rapidly changing environment involving numerousOur business is subject to certain risks and uncertainties, that are difficult to predict and manyeach of which are outside of the Company's control. In addition to the other information in this reportcould materially and the Company’s other filings the following section describes some, but not all, of the risks and uncertainties that could have a material adverse effect onadversely affect our business, financial condition, results of operations, cash flows and the markettrading price of our common stock.

Our yearly results of operations may fluctuate significantly due to the timing of our revenue recognition and our ability to accurately forecast sales, including subscription software sales and renewals.

Our revenues and other results of operations have fluctuated from quarter to quarter in the past and could continue to fluctuate in the future as our business model continues to evolve from hardware and related services to a management technology solutions provider, including offering and delivering our software as a service – SaaS.  As revenues from our cloud offerings increase, we may experience volatility in our reported revenues and operating results due to the differences in timing of revenue recognition between our SaaS offerings and our traditional on-premises software and hardware sales. The SaaS delivery model is subscription based; accordingly, SaaS revenues are generally recognized ratably over the life of the subscription. In contrast, revenue from our on-premises software and hardware sales is generally recognized in full at the time of delivery. Accordingly, the SaaS business model creates certain risks related to the timing of revenue recognition not associated with our traditional on-premises delivery model. A portion of our quarterly SaaS based revenue results from the recognition of deferred revenue relating to subscription agreements entered into during previous quarters. A decline in new or renewed subscriptions in any period may not be immediately reflected in our reported financial results for that period, but may result in a decline in our revenue in future quarters. If any of our assumptions about revenue from our SaaS business model prove incorrect, our actual results may vary materially from those anticipated, estimated or projected.
If our technical and maintenance support services are not satisfactory to our customers, they may not renew their services agreements or buy future products, which could adversely affect our future results of operations, financial condition, and cash flows.

Our business relies on our customers’ satisfaction with the technical and maintenance support services we provide to support our products. If we fail to provide technical and maintenance support services that are responsive, satisfy our customers’ expectations and resolve issues that they encounter with our products, then they may not purchase additional products or services from us in the future.
If we are unable to recruit and retain qualified employees, our business may be harmed.

Much of our future success depends on hiring qualified employees and the continued service of our senior management. Experienced personnel in the management technology industry are in high demand and competition for their talents is intense in the skill-set we require. Moreover, we believe that a critical contributor to our success is our corporate culture and values. We must not only successfully attract and retain qualified business, technical, product development and other employees that contribute to our business, we must attract and retain qualified employees who embrace and reflect our culture and values. Our failure to do so, could adversely affect our ability to innovate, to rapidly and effectively change and introduce new products, and to provide timely and effective installation, technical and maintenance support services, and our financial condition and results of operations may suffer.
The price of our common stock and could causemay be negatively impacted by factors that are unrelated to our actual results to differ materially from those expressed or implied in our forward-looking statements.operating performance.

Our future operating results are difficult to predict and are subject to fluctuations.
Our future operating results, including revenues, gross margins, operating expenses and net income (loss), have fluctuated on a quarterly and annual basis, are difficult to predict, and mayThe trading price of our common stock could be materially affectedimpacted by a number of factors, many of which are beyondoutside our control, including:control. Although our stock has been listed on NYSE for many years, trading in our stock does not generally occur in high volumes and the market for our stock cannot always be characterized as active. Thin trading in our stock may exaggerate fluctuations in the stock’s value, leading to price volatility in excess of that which would occur in a more active trading market. In addition, the stock market in general is subject to fluctuations that affect the share prices and trading volumes of many companies, and these broad market fluctuations could adversely affect the market price of our common stock. Factors that could affect our common stock price in the future include but are not necessarily limited to the following:

·the effects of adverse macroeconomic conditionsactual or anticipated fluctuations in the United States and international markets, especially in light of the continued challenges in global creditour operating results and financial markets;

·changes in customer demand for our products;

·the timing of our new product announcements or introductions, as well as those by our competitors;

·the ability to timely produce the products our customers seek to satisfy their technology requirements;

·the level of demand and purchase orders from our customers, and our ability to adjust to changes in demand and purchase order patterns;

·the ability of our third party suppliers, subcontractors and manufactures to supply us with sufficient quantities of high quality products or components, on a timely basis;

·the effectiveness of our efforts to reduce product costs and manage operating expenses;

·the ability to hire, retain and motivate qualified employees to meet the demands of our business;

·intellectual property disputes;

·potential significant litigation-related costs;

·costs related to compliance with increasing worldwide environmental and other regulations; and

·the effects of public health emergencies, natural disasters, security risk, terrorist activities, international conflicts and other events beyond our control.
·the dependency on business from major accounts which can, at will, reduce or eliminate on-going business
As a result of these and other factors, there can be no assurance that the Company will not experience significant fluctuations in future operating results on a quarterly or annual basis.  In addition, if our operating results do not meet the expectations of investors, the market price of our common stock may decline.

Our stock price has been volatile and may fluctuate in the future.
The trading price of our common stock has and may continue to fluctuate significantly.  Such fluctuations may be influenced by many factors, including:

·the volatility of the financial markets;

·uncertainty regarding the prospects of domestic and foreign economies;

·uncertainty regarding domestic and international political conditions, including tax policies;

·our performance and prospects;condition;

·the performance and prospects of our major customers;

·fluctuations in the trading volume of our common stock;

·the concentrated beneficial ownership of our common stock by our founder, Dr. John W. Sammon;

·actual or anticipated regulatory action against us;

·the lack of earnings guidance and securities analysts following us;

·investor perception of our companyus and the industryindustries in which we operate;

·the limited availability of earnings estimatesuncertainty regarding domestic and supporting research by investment analysts;

·the liquidity of the market for our common stock;international political conditions, including tax policies; and

·uncertainty regarding the concentrationprospects of beneficial ownership of our common stock by Dr. John W. Sammon, Directordomestic and Chairman Emeritus of PAR’s Board of Directors.foreign economies.

Public stock markets have recently experienced priceTwo customers account for a significant portion of our revenues. The loss of one of these customers, or a significant reduction, delay, or cancellation of purchases by one of these customers would materially adversely affect our business, financial condition, and trading volume volatility.  This volatility significantly affectedresults of operations.

Revenues from our Restaurant/Retail segment constituted 65% and 62% of our total consolidated revenues for 2016 and 2015, respectively; and, aggregate sales to our two largest customers, which include sales to these two customers’ respective franchisees - McDonald’s Corporation and Yum! Brands, Inc., which consists of the market pricesKentucky Fried Chicken, Taco Bell and Pizza Hut brands – constituted 25% (McDonald’s) and 11% (Yum!) and 19% (McDonald’s) and 10% (Yum!) of securitiestotal consolidated revenues for 2016 and 2015, respectively. There were no other customers that comprised greater than 10% of many technology companiesour total consolidated revenues during these years. A loss of McDonald’s or Yum! Brands as a customer, or a significant reduction, delay, or cancellation of orders by one of these customers would reduce our revenue and the return of such volatility could result in broad market fluctuations that couldoperating income and would materially and adversely affect the market price of our common stock for indefinite periods.  In addition, fluctuations in our stock price, volume of shares traded,business, operating results and changes in our trading multiples may make our stock attractive to certain categories of investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction.financial condition.

A decline in the volume of purchases made by any one of the company’s major customers would materially adversely affect our business.
A small number of related customers have historically accounted for a majority of the Company’s net revenues in any given fiscal period.  For each of the fiscal years ended December 31, 2014 and 2013, aggregate sales to our top two Hospitality segment customers, McDonald’s Corporation and Yum! Brands, Inc. amounted to 28% and 32% of total revenues, respectively.  Most of the Company’s customers are not obligated to provide us with any minimum level of future purchases or with binding forecasts of product purchases for any future period.  In addition, major customers may elect to delay or otherwise change the timing of orders in a manner that could adversely affect the Company’s quarterly and annual results of operations.  There can be no assurance our current customers will continue to place orders with us, or we will be able to obtain orders from new customers.
An inability to produce new products that keep pace with technological developments and changing market conditions could result in a loss of market share.
The products we sell are subject to rapid and continual changes in technology.  Our competitors offer products that have an increasingly wider range of features and capabilities.  We believe that in order to compete effectively, we must provide systems incorporating new technologies at competitive prices.  There can be no assurance we will be able to continue funding research and development at levels sufficient to enhance our current product offerings, or the Company will be able to develop and introduce on a timely basis, new products that keep pace with technological developments and emerging industry standards and address the evolving needs of customers.  There also can be no assurance we will not experience difficulties that will result in delaying or preventing the successful development, introduction and marketing of new products in our existing markets, or our new products and product enhancements will adequately meet the requirements of the marketplace or achieve any significant degree of market acceptance.  Likewise, there can be no assurance as to the acceptance of our products in new markets, nor can there be any assurance as to the success of our penetration of these markets, nor to the revenue or profit margins realized by the Company with respect to these products.  If any of our competitors were to introduce superior software products at competitive prices, or if our software products no longer meet the needs of the marketplace due to technological developments and emerging industry standards, our software products may no longer retain any significant market share.

We generate much of our revenue from the hospitality industry and therefore are subject to decreased revenues in the event of a downturn in that industry.

For the fiscal years ended December 31, 2014 and 2013, we derived 62% and 63%, respectively, of our total revenues from the hospitality industry, primarily the QSR market.  Consequently, our hospitality technology product sales are dependent in large part on the health of the hospitality industry, which in turn is dependent on the domestic and international economy, as well as factors such as consumer buying preferences and weather conditions.  Instabilities or downturns in the hospitality market could disproportionately impact our revenues, as clients may exit the industry or delay, cancel or reduce planned expenditures for our products.  Although we believe we can succeed in the quick service restaurant sector of the hospitality industry in a competitive environment, given the cyclical nature of that industry, there can be no assurance our profitability and growth will continue.
we face extensive competition in theour markets, in which we operate, and our failure to compete effectively could result in price reductions and/or decreased demand for our products and services.products.

Several competing suppliers
The markets for our POS software and hardware products are characterized by rapid technological advances, intense competition among existing and emerging competitors, evolving industry standards, emerging business, distribution and support models, disruptive technology developments, and frequent new product introductions.
While we think our POS software and hardware products offer hospitality management systems similar to ours.  Somecompetitive, innovative features and functionality, any one of these competitorsfactors could create downward pressure on pricing and gross margins and could adversely affect sales to our existing customers, as well as our ability to attract and sell to new customers. Our future success will depend on our ability to anticipate and identify changes in customer needs and/or relevant technologies and to rapidly and effectively change and improve our products in response, including changes in operating systems, application software and computer and communications hardware, with which our products interoperate or their performance and functionality are larger than PARotherwise affected. If we fail to anticipate and/or identify changes in customer needs and/or emerging relevant technological trends, our business, results of operations and have access to substantially greater financial and other resources and, consequently, may be able to obtain more favorable terms than we can for components and subassemblies incorporated into these hospitality technology products.  The rapid rate of technological changeconditions could suffer. Additionally, any delay in the Hospitality segment makes it likely we will face competition fromdevelopment, marketing, or launch of new products designed by companies not currently competing with us.  Theseor enhancements to our existing products could result in customer attrition or impede our ability to attract new products may have features not currently available from us.  We believecustomers, causing a decline in our revenue, earnings or stock price and weakening our competitive ability depends on our total solution offering, our experience in the industry, our product development and systems integration capability, our direct sales force and our customer service organization.  There is no assurance; however, we will be able to compete effectively in the hospitality technology market in the future.position.

Our Governmentgovernment contracting business has been focused on niche offerings, reflecting our expertise, primarily in the areas of Communications Systems Support, Intelligence, Surveillance and Reconnaissance, (ISR), Systems Engineeringsystems engineering & Evaluationevaluation, satellite and Information Systemstelecommunications services and management technology/systems services. Many of our competitors in the Government segment are larger and have substantially greater financial resources and broader capabilities in informationmanagement technology. We also compete with smaller companies, many of which are designated by the Governmentgovernment for preferential “set aside” treatment, that target particular segments of the government market and may have superior capabilities in a particular segment. These companies may be better positioned to obtain contracts through competitive proposals. Consequently, there are no assurances we will continue to win Governmentgovernment contracts as a directprime contractor or indirect subcontractor.

we may not be ablesubcontractor, and our failure to meet the unique operational, legaldo so, would reduce our revenue and operating income and could adversely affect our business, operating results and financial challenges that relate to our international operations, which may limit the growthcondition.
The consequence of our business.
For the fiscal years ended December 31, 2014, and 2013, our net revenues from sales outside the United States were 13% and 16%, respectively, of the Company’s total revenues.  We anticipate international sales will continue to account for a significant portion of sales.  We intend to continue to expand our operations outside the United States and to enter additional international markets, which will require significant management attention and financial resources.  Our operating results are subject to the risks inherent in international sales, including, but not limited to, regulatory requirements, political and economic changes and disruptions, geopolitical disputes and war, transportation delays, difficulties in staffing and managing foreign sales operations, and potentially adverse tax consequences.  In addition, fluctuations in exchange rates may render our products less competitive relative to local product offerings, orinternal investigations could result in foreign exchange losses, depending upon the currency in which we sell our products.  There can be no assurance these factors will not have a material adverse effect on our business and could subject us to regulatory scrutiny.

Under the oversight of our Audit Committee, in the first quarter of 2016, we conducted an internal investigation of our former chief financial officer’s unauthorized investment activities and, we are currently conducting an internal investigation to determine whether certain import/export and sales documentation activities at our China and Singapore offices were improper and in possible violation of  the U.S. Foreign Corrupt Practices Act, or FCPA, and other applicable laws, and certain of our policies, including our Code of Business Conduct and Ethics.
We voluntarily notified the SEC of our investigation (and our findings and conclusions) of our former chief financial officer; and, we have voluntarily notified the SEC and the U.S. Department of Justice, or DOJ, of our investigation of the activities concerning China and Singapore, and we are fully cooperating with these agencies. If the SEC, DOJ, or other governmental agencies (including foreign governmental agencies) were to determine that violations of certain laws or regulations occurred, then we could be exposed to a broad range of civil and criminal sanctions, including injunctive relief, disgorgement, fines, penalties, modifications to our business practices, including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee our future international sales and, consequently,compliance. While we are currently unable to predict what actions  the SEC, DOJ, or other governmental agencies (including foreign governmental agencies)  might take, or what the likely outcome of any such actions might be, or estimate the range of reasonably possible fines or penalties, such actions, fines and/or penalties could be material, resulting in a material adverse effect on our operating results.business, prospects, reputation, financial condition, liquidity, results of operations or cash flows. Even if an inquiry or investigation does not result in an adverse determination, our business, prospects, reputation, financial condition, liquidity, results of operations or cash flows could still be adversely impacted.
If we fail to correct the identified material weaknesses, and maintain appropriate internal controls, our business, results of operations and financial condition could be adversely affected.

As described in “Item 9A - Controls and Procedures” of this Annual Report during the third quarter of 2016, we identified material weaknesses in our internal control over financial reporting. We previously disclosed identified material weaknesses in our hiring and treasury procedures, which have been remedied. If we fail to correct our current material weaknesses; or, if we are unable to maintain appropriate internal controls in the future, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC could be adversely affected, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC. Any such consequence or other negative effect could adversely affect our business, results of operations and financial condition.

We are subject to risks associated with compliance with international laws and regulations which may harm our business

Although only 8% for 2016 and 14% for 2015 of our total consolidated revenues were derived from sales outside of the U.S., we have operations across the globe, and our international operations subject us to a variety of risks and challenges, including:

·compliance with foreign laws and regulations, including the FCPA, the U.K. Bribery Act of 2010, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our software and hardware in certain foreign markets, and the risks and costs of non-compliance with such laws and regulations, including fines, penalties, criminal sanctions against us, our officers or employees, prohibitions on the conduct of our business and damage to our reputation;

·increased risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements;

·reduced protection of our intellectual property rights in certain countries and practical difficulties and costs of enforcing rights abroad;

·compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes;

·uncertainty around a potential reverse or renegotiation of international trade agreements and partnerships under President Donald J. Trump’s administration;

·sales and customer service challenges associated with operating in different countries;

·difficulties in receiving payments from different geographies, including difficulties associated with currency fluctuations, payment cycles, transfer of funds or collecting accounts receivable, especially in emerging markets;

·variations in economic or political conditions between each country or region;

·economic uncertainty around the world and adverse effects arising from economic interdependencies across countries and regions;

·uncertainty around how the United Kingdom’s recent decision to exit the European Union (“Brexit”) will impact its access to the European Union Single Market, the related regulatory environment, the global economy, and the resulting impact on our business; and

·increased infrastructure and legal compliance costs.
 
we derive a
13
A portion of ourGovernment segment revenue is derived from u.s.U.S. government contracts, which contain provisions unique to public sector customers, including the u.s.U.S. government’s right to modify or terminate these contracts at any time.

For the fiscal years ended December 31, 2014In 2016 and 2013,2015 we derived 38%35% and 37%38%, respectively, of our total consolidated revenues from contracts to provide technical expertise to Governmentgovernment organizations and prime contractors.  In any given year, the majority of our Governmentgovernment contracting activity is associated with the U.S. Department of Defense. Contracts with the U.S. Governmentgovernment typically provide that such contracts are terminable, in fullwhole or in part, at the convenience of the U.S. Government.government. If the U.S. Government terminatedgovernment terminates a contract on this basis, we would be entitled to receive payment for our allowable costs and, in general, a proportionate share of our fee or profit for work actually performed. Most U.S. Governmentgovernment contracts are also subject to modification or termination in the event of changes in funding. As such, we may perform work prior to formal authorization, or the contract prices may be adjusted for changes in scope of work. Termination or modification of a substantial number of our U.S. Governmentgovernment contracts could have a material adverse effect on our business, financial condition, and results of operations.
In addition, the general uncertainty in U.S. defense total workforce policies (military, civilian and contract), procurement cycles and spending levels for the next several years may impact the performance of this business.  Specifically, the Company could experience reductions in revenue as a result of the U.S. Government in-sourcing its current service contracts or the Company could experience a reduction of funding due to U.S. Government sequester or other funding reductions.

We perform work for various U.S. Governmentgovernment agencies and departments pursuant to fixed-price, cost-plus fixed fee and time-and-material prime contracts and subcontracts. Approximately 53%55% of the revenue that werevenues derived from government contracts for the year ended December 31, 2014 came from2016, was based on fixed-price or time-and-material contracts.  Thetime-and- material contracts, and the balance (approximately 45% of the revenue that we derived from Government contracts in 2014 primarily came fromtotal government revenues) was based on cost-plus fixed fee contracts. Most of our contracts are for one-year to five-year terms.

While fixed-price contracts allow us to benefit from cost savings, they also expose us to the risk of cost overruns. If the initial estimates we use for calculating the contract price are incorrect, we can incur losses on those contracts. In addition, some of our governmental contracts have provisions relating to cost controls, and audit rights and if we fail to meet the terms specified in those contracts, then we may not realize theirthe full benefits.benefit of the contracts. Lower earnings caused by cost overruns would have an adverse effect on our financial results.

Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and for certain expenses. Under cost-plus fixed fee contracts, we are reimbursed for allowable costs and paid a fixed fee. However, ifIf our costs under either of these types of contractcontracts were to exceed the contract ceiling, or are not allowable under the provisions of the contract or applicable regulations, we may not be able to obtain reimbursementreimbursed for all100% of our associated costs.
If we are unable to control costs incurred in performing under each type of contract, such  Our inability to control our costs under either a time-and-materials contract or a cost-plus fixed fee contract could have a material adverse effect on our financial condition and operating results. Cost over-runs also may adversely affect our ability to sustain existing programs and obtain future contract awards.

23
a significantA portion of our total assets consists of goodwill and identifiable and intangible assets, which are subject to a periodic impairment analysis, and a significant impairment determination in any future period could have an adverse effect on our results of operations, even without a significant loss of our revenue or increase in cash expenses attributable to such period.

We haveOur goodwill and identifiable intangible assetswas approximately $11.1 million at December 31, 2014 totaling approximately $17.22016 and December 31, 2015, and our intangibles were $11.0 million at December 31, 2016 and $23.0$10.9 million respectively; resultingat December 31, 2015.  Identifiable intangible assets were, primarily froma result of business acquisitions and internally developed capitalized software. The Company testsWe test our goodwill and identifiable intangible assets for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We describe the impairment testing process and results of this testing more thoroughly herein in Item7 under the heading “Management’s“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies.” If we determine an impairment has occurred at any point in time, we will be required to reduce goodwill or identifiable intangible assets on our balance sheet.

Item 1B:
Unresolved Staff Comments

None. Additional information about our impairment testing is contained in Note 1 – Summary of Significant Accounting Policies - of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report).
 
Item 2: 
 Properties
14

The following are the principal facilities (by square footage) of the Company:
Location
Industry  Segment
Floor Area Principal Operations
Number of Sq. Ft.
New Hartford, NY
Hospitality
Government
Principal executive offices,
manufacturing, research and
development laboratories,
computing facilities
174,450
Rome, NYGovernmentResearch and development30,800
Stowe, VTHospitalitySales, service and research and development21,300
Sydney, AustraliaHospitalitySales and service14,400
Las Vegas, NVHospitalityService12,000
Boca Raton, FLHospitalityResearch and development11,470
Markham, OntarioHospitalityResearch and development11,100
Boulder, COHospitalityService10,700
The Company’s headquarters and principal business facility is located in New Hartford, NY, which is near Utica, in central New York State.

The Company owns its principal facility and adjacent space in New Hartford.  All of the other facilities are leased for varying terms.  Substantially all of the Company’s facilities are fully utilized, well maintained, and suitable for use.  The Company believes its present and planned facilities and equipment are adequate to service its current and immediately foreseeable business needs.
Item 1B.
Item 3: Unresolved Staff Comments.
Legal Proceedings

We do not have any unresolved comments from the SEC staff.

Item 2.
Properties.

Our corporate headquarters is located at PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York. We own our corporate headquarters – both the building and land. We lease all our other properties for varying terms. We believe our existing properties, both owned and leased, are in good condition and are suitable for the conduct of our business for the foreseeable future.

The Company is subjectfollowing table sets forth the location, the operating segment (if applicable) that uses and the use of each of our principal properties and each properties’ approximate square footage:

Location
Operating Segment
Use
Approximate Square Footage
New Hartford, NY
Corporate/
Restaurant / Retail
Corporate headquarters, assembly, research and development laboratories, sales, service, wellness, and computing facilities216,800
Rome, NYGovernmentResearch, product development, sales30,800
Sydney, AustraliaRestaurant / RetailSales and service14,400
Boca Raton, FLRestaurant / RetailResearch and product development11,470
Markham, OntarioRestaurant / RetailResearch and product development11,100
Boulder, CORestaurant / RetailService10,700

In addition to the properties identified above, we have leasehold interests in small office spaces located in San Diego, California (use: research, product development, sales and administration) and Shanghai, China; Singapore; Staines, United Kingdom; Dubai, United Arab Emirates; and Paris, France (use: sales and administration).
Item 3.
Legal Proceedings.

We are not currently a party to any material litigation.

See Note 10 – Contingencies - of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report) for information regarding legal proceedings which arisearising in the ordinary course of business.  Inour business, and a discussion about our current internal investigation into import/export and sales documentation activities at our China and Singapore offices, and the opinion of management,civil and criminal sanctions available to the ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations or cash flows of the Company.SEC, DOJ, and other governmental agencies (including foreign governmental agencies).

Item 4:
Item 4:  
Mine Safety Disclosures

Not Applicable.
PART II

Item 5: 
5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s Common Stock, par value $.02 per share, tradesOur common stock is listed on the New York Stock Exchange (NYSEunder the symbol - PAR)“PAR”. At December 31, 2014,On March 28, 2017, there were approximately 375 owners411 holders of record of the Company’s Common Stock, plus those owners whose stock certificates are held by brokers.

our common stock. The following table showssets forth, for the periods indicated, the high and low stocksales prices for the two years ended December 31, 2014our common stock as reported by the New York Stock Exchange:

 2014  2013  2016  2015 
Period
 Low  High  Low  High 
         High  Low  High  Low 
First Quarter $4.65  $5.50  $4.11  $5.10  $6.63  $5.04  $6.04  $4.03 
Second Quarter $4.12  $4.99  $3.85  $4.89  6.86  4.35  4.98  3.80 
Third Quarter $3.78  $5.24  $4.01  $5.27  5.52  4.83  5.29  4.11 
Fourth Quarter $4.28  $6.18  $4.83  $5.92  5.58  4.71  7.39  5.12 

The Company has notWe have never declared or paid cash dividends on its Common Stock, and its Board of Directors presently intends to continueour common stock. We currently intend to retain any future earnings for reinvestmentuse in growth opportunities.  Accordingly, it is anticipated nothe operation of our business and do not intend to declare or pay any cash dividends will be paid in the foreseeable future. Any further determination to pay dividends on our common stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors considers relevant.

Under our equity incentive plans, in consideration for grants of performance vesting restricted stock, recipients must pay PAR par value for each share granted; if the performance vesting requirements are not satisfied, PAR repurchases the forfeited shares at par value. In addition, employees may elect to have us withhold shares to satisfy minimum statutory federal, state and local tax withholding obligations arising from the vesting of restricted stock. When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld, which could be deemed a purchase of shares by us on the date of withholding.

Item 6.
Item 6:
Selected Financial Data.

Not Required.

Item 7.
Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements
This document contains “forward-looking statements” within the meaningThe following discussion and analysis of Section 27A of the Securities Act of 1933, as amended,our financial condition and Section 21E of the Securities Exchange Act of 1934.  Any statements in this document that do not describe historical facts are forward-looking statements.  Forward-looking statements in this document (including forward-looking statements regarding the continued health of segments of the hospitality industry, future information technology outsourcing opportunities, an expected increase or decrease in contract funding by the U.S. Government, the impact of current world events on our results of operations the effects of inflation onshould be read in conjunction with our margins,Consolidated Financial Statements and the effectsNotes thereto included under Part IV, Item 15 of interest rate and foreign currency fluctuations on our results of operations) are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  When we use words such as “intend,” “anticipate,” “believe,” “estimate,” “plan,” “will,” or “expect”, we are making forward-looking statements.  We believe the assumptions and expectations reflectedthis Annual Report.  See also, “Forward-Looking Statements” in such forward-looking statements are reasonable based on information available to us on the date hereof, but we cannot assure you these assumptions and expectations will prove to have been correct or we will take any action that we presently may be planning.  We have disclosed certain important factors that could cause our actual future results to differ materially from our current expectations, including: a decline in the volume of purchases made by one or a group of our major customers; risks in technology development and commercialization; risks of downturns in economic conditions generally, and in the quick-service sector of the hospitality market specifically; risks associated with government contracts; risks associated with competition and competitive pricing pressures; and risks related to foreign operations.  Forward-looking statements made in connection with this report are necessarily qualified by these factors.  We are not undertaking to update or revise publicly any forward-looking statements if we obtain new information or upon the occurrence of future events or otherwise.Annual Report.
 
Overview
 
PAR's
PAR’s management technology solutions for the HospitalityRestaurant/Retail segment featurefeatures cloud and on-premise software applications, hardware platforms, and related installation, technical, and maintenance support services tailored for the needs of restaurants hotels, resorts and spas, casinos, cruise lines, movie theatres, theme parks and retailers.  The Company'sOur Government segment provides technical expertise in the contract development of advanced systems and software solutions for the U.S. Department of Defense and other federal agencies, as well as informationmanagement technology and communications support services to the U.S. Department of Defense.

The Company'sOur products sold in the HospitalityRestaurant/Retail segment are utilized in a wide range of applications by thousands of customers. The Company facescustomers worldwide.  We face competition across all of its markets withincategories in the HospitalityRestaurant/Retail segment competingin which we compete based on the basis of product design, innovative features and functionality, quality and reliability, price, customer service, and delivery capability.  PAR's continuingOur strategy is to provide complete integrated management technology solutions, withsupported by industry leading customer service in the markets in which it participates. The Company conducts itsservice.  Our research and development efforts are focused on timely identifying changes in customer needs and/or relevant technologies, to createrapidly and effectively develop innovative technology offeringsnew products and enhancements to our existing products that meet and exceed customer requirementsrequirements.
Our strategy is to expand our Restaurant/Retail business by continuing to invest in our existing products - Brink and also have a high probability for broader market appeal and success.

The Company is focused on expanding its Hospitality businesses through its product investments and continuedSureCheck - including the development of itsenhancements to our existing software applications and hardware platforms and the development of new and innovative cloud based software applications. These products include its Brink POS software, with integrated features that include loyalty at its core, mobile online ordering, kitchen video system, guest surveys, enterprise reporting, mobile dashboard, and much more.  PAR’s strategy is also focused on the continued feature expansion and deployment of ATRIO®, its cloud-based software for the Hotel/Resort/Spa markets. In addition, the Company is investing in the enhancement of existing software applications and the development of the Company's SureCheck® solution for food safety and task management applications.  To support the growth of theseour products, the Company continueswe continue to expand itsour direct sales force and third-party distribution channels.channel partners.

Currently, PAR’s primary market is the quick serve restaurant category and hardware sales to tier 1 customers in that category. Our strategy continues to focus on growth of our software offerings, including our cloud software as a service (SaaS) and related hardware and support services, consistent with our strategy to expand our product offerings beyond restaurant and retail markets. As we implement our strategies, we continuously monitor the trends in the markets we currently operate and the markets we intend to operate in the future. We know POS hardware is becoming a commodity, as more POS devices (tablets, kiosks and bring your own device) are introduced, competition will increase, driven by pricing, scalability, functionality, and economies of scale, resulting in smaller margins. Our strategy acknowledges this trend, and we intend to grow our recurring revenues from software contracts, specifically SaaS, reducing the impact of this eventual commoditization of POS hardware.
The Quick Serve Restaurant (“QSR”) market, PAR's primary market, continues to perform wellstrategy for the majority of large, international companies. However, the Company has seen certain market conditions impact smaller specific QSR organizations, whose business is slowing due to the continued lack of consumer confidence in those regions.  These conditions could have a material adverse impact on the Company's estimates, specifically the fair value of its assets related to its legacy products. The Company continues to assess the alignment of its product and service offerings to support improved operational efficiency and profitability going forward.

The focus of the Company’sour PAR Government businesssegment is to expand its services and solutions business lines. Throughbuild on our sustained outstanding performance of existing service contracts, and investingcoupled with investments in enhancing itsenhanced business development capabilities, the Company is ablecapabilities. We believe we are well positioned to consistently win renewalrealize continued renewals of expiring contracts extendand extensions of existing contracts, and secure additional new business. With itsservice and solution contracts in expanded areas within the U.S. Department of Defense and other federal agencies. We believe our highly relevant technical competencies, intellectual property, and investmentinvestments in new technologies the Company providesprovide opportunities to offer systems integration, products, and highly-specialized service solutions to the U.S. Department of Defense and other federal/state agencies with systems integration, products and highly-specialized services.federal agencies.  The general uncertainty in U.S. defense total workforce policies (military, civilian, and contract), procurement cycles, and spending levels for the next several years may impactare factors we monitor as we develop and implement our business strategy for the performance of this business.PAR Government segment.

Results of Operations — 20142016 Compared to 20132015

The CompanyDuring the year ended December 31, 2015, we sold substantially all of the assets of our hotel/spa technology business operated under PAR Springer-Miller Systems, Inc. (“PSMS”).  See Note 2 – Divestiture and Discontinued Operations - of the Notes to Consolidated Financial Statements for further discussion, including the terms of the transaction.

We reported revenues of $233.6$229.7 million for the year ended December 31, 2014, a decrease of 3.2%2016, flat from the $241.4$229.0 million reported for the year ended December 31, 2013.  The Company’s net loss2015.  Revenues from continuing operationsour Restaurant/Retail segment of $149.3 million for the year ended December 31,2016, increased 5.8%, compared to $141.2 million reported for the year ended December 31, 2014 was $3,651,000 or $0.24 loss per share, compared to2015.  PAR’s Government segment reported revenues of $80.3 million for the year ended December 31, 2016, a decrease of 8.6% from $87.9 million reported for the year ended December 31, 2015. We reported net income from continuing operations of $569,000,$2.5 million or $0.04$0.16 per diluted share for the year ended December 31, 2016 versus $4.0 million or $0.26 per diluted share for the same period in 2013.  During 2013, the Company2015.  For 2016 and 2015, we reported a net loss from discontinued operations of $211,000,$0.7 million or $0.01$0.05 loss per share associated with its former Logistics Management business.  During 2014, PAR did not record any incomeversus a loss of $4.9 million or $0.32 loss from discontinued operations.  The Company’s net income for the year ended December 31, 2013 was $358,000, or $0.02 per diluted share.share, respectively.
 
Product revenues for the year ended December 31, 2014 were $87.2 million, a decrease from the $90.8 million recorded for the same period in 2013.  This decrease was primarily the result of decreased sales to certain major customers as large rollouts were completed in fiscal 2013. Partially offsetting this decrease was an increase in sales made through the Company’s worldwide dealer network as well as an increase in software sales, which have improved 23% year over year.

Service revenue primarily includes installation, software maintenance, training, 24 hour help desk support and various depot and on-site service options.  Customer service revenues were $58.7$100.3 million for the year ended December 31, 2014,2016, an increase of 6.2% from $94.4 million recorded in 2015. This increase was primarily driven by higher revenues generated from hardware attachments associated with Brink deployments and hardware sold to global tier 1 accounts. Offsetting the increase was a 4.6% decrease in revenues driven by our global channel partners.

Service revenues were $49.1 million for the year ended December 31, 2016, an increase of 5.0% from $61.5$46.8 million reported for the same period in 2013.  2015.  The decreaseincrease is mostlyattributable to the resultdiversification of a decline in field serviceour revenue as certain customers transitioned to alternative service support delivery models as wellbase, with higher recurring revenue from our software contracts; specifically, software sold as a decline in installationservice, SaaS, and other revenue consummate with lower product revenue.  This decline is partially offset by an increase associated with the Company's depot repair operation, resultingstreams generated from new contracts.post contract support (“PCS”) offerings.

Government contractContract revenues were $87.7$80.3 million for the year ended December 31, 2014,2016, compared to $87.9 million reported for the same period in 2015, a decrease of 1.5% when compared to the $89.0 million recorded in 2013.  This decrease is attributable to the completion of certain fixed price technical services contracts that were completed in 2013 and early 2014.  8.6%.  This decrease was partiallydriven by lower volume within our PMO services contracts, offset by an increase in value-added revenue from the Company’son our Intelligence, Surveillance, and Reconnaissance (“ISR”) systems integration contract.(ISR), contracts.

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Product margins for the year ended December 31, 20142016, were 31.8%26.2%, an increasea decrease from 31.4% in27.7% for the same period in 2013.  This increase was driven by a favorable2015.  Overall, product margin decreased primarily due to unfavorable product mix, resultingas a result of higher than anticipated project work from increasedtier 1 customers, and lower sales of higher margin perpetual software license revenue.licenses.

Customer serviceService margins were 31.1%27.4% for the year ended December 31, 2014, compared to 29%2016, a decrease from 27.5% recorded for the same period in 2013.  This2015.  The decrease was primarily due to an increase is associatedin costs to support our hardware support contracts, and $0.5 million was due to accelerated amortization related to discontinued development of a software module.  Offsetting these increases was a favorable product mix with a favorable mix in service offerings compared to 2013.higher content of software sold as SaaS  and other software related revenues.

Government contractContract margins were 6.1%8.1% for the year ended December 31, 2014, a decrease from the 7.2%2016, compared to 6.8% for the same period in 2013.  The most significant components of2015.  This increase was due to a more profitable contract costs in 2014 and 2013 were labor and fringe benefits. For 2014, labor and fringe benefits were $37.4 million, or 45% of contract costs, compared to $40.2 million or 51% of contract costs for the same period in 2013. This decrease in percentage is mostly attributable to the higher amount of material and subcontract revenues in 2014mix, associated with the Company's ISR systems integration contract with the U.S. Army. higher margin on value-added revenues.

Selling, general and administrative expenses were $31.4 million for the year ending December 31, 2016, compared to $27.3 million for the year ended December 31, 20142015.  The increase is primarily attributable to $1.5 million of expenses related to the investigation of our former chief financial officer’s unauthorized transfers of funds, $1.3 million of expenses related to our internal investigation of conduct at our China and Singapore offices, a write-off of $0.8 million relating to our human capital management system, and $0.6 million of expenses related to the implementation of the initial phase of our new enterprise resource system.
Research and development expenses were $37.3$11.6 million a decrease of 1.6% fromfor the $37.9year ended December 31, 2016, compared to $10.1 million recorded for the same period in 2013.  The decrease is attributable to the Company’s execution of cost reduction initiatives within its Hospitality operations.Partially offsetting the decrease were increases in expenses associated with the acquisition of Brink Software, equity based compensation expense and severance related expenses. 

Research and development expenses were $16.0 million for the year ended December 31, 2014, an increase of 2.6% from the $15.6 million recorded in 2013.2015.  This increase was primarily related to an increase in hardware development expenses associated with new product developments, as well as an increase inincreased software development expensescosts for products within the Restaurant/Retail segment, primarily R&D associated with the acquisition ofCompany’s Brink Software.and SureCheck software applications.

During 2014, the Companyyear ended December 31, 2016, we recorded $279,000$1.0 million of amortization expense associated with acquired identifiable intangible assets from thein connection with our acquisition of Brink, Software.  The Company did not record anywhich closed on September 18, 2014.  We recorded $1.0 million of amortization expense associated with acquired identifiable intangiblethese assets in 2013.

Other income, net, was $304,000 for the year ended December 31, 20142015.

Other income, net, was $1.3 million for the year ended December 31, 2016 compared to $506,000other expense, net of $0.8 million for the same period in 2013.  2015.  Other income/expense primarily includes fair value adjustments on contingent consideration, rental income, net of applicable expenses, foreign currency fair value adjustments, fair market value fluctuations of the Company'sour deferred compensation plan rentaland other non-operating income/expense.  The primary drivers of the increase in other income, strategic product development partnerships, and foreign currency fair value adjustments.  The income in 2014 is primarily duenet, relates to rental income. The income in 2013 was primarily due to incomea $1.1 million decrease of contingent consideration liability related to strategic product development partnerships withinour acquisition of Brink in the Company’s Hospitality businessthird quarter 2014 and lower market volatility within the Company’s deferred compensation plan.an insurance recovery of $0.8 million relating to our former chief financial officer’s unauthorized transfers of funds.

Interest expenseincome (expense), net, represents accreted increased from the note receivable related to the sale of PSMS and interest charged on the Company’sour short-term borrowings from banks and from long-term debt.  Interest expenseincome was $136,000$0.1 million for the year ended December 31, 2014,2016, as compared to $60,000an interest expense of $0.3 million for the same period in 2013.  2015.  This increase is associated with higherthe accreted interest income of $0.2 million related to the note receivable in connection with the sale of PSMS and lower interest expense as compared to 2015, which is due to lower outstanding borrowings in 2014 versus 2013.on the line of credit.

For the year ended December 31, 2014, the Company’s2016, our effective income tax rate was an expense of 78.0%31.4%, compared to a benefitan expense of 370%27.2% in 2013.2015.   The variances from the federal statutory rate for 20142016 were due to the mix of taxable income from the Company'sCompany’s domestic and foreign jurisdictions, and providing for income taxes on the repatriation of foreign earnings.  In 2014, the Company repatriated earnings through the payment of a $5.0 million dividend by its Chinese subsidiary to its domestic parent company, resulting in income tax expense of $2.2 million on those earnings.  The Company considers this a one-time repatriation to help finance the Brink acquisition and further earnings are considered permanently reinvested. The variance from the federal statutory rate in 2013 was due to a benefit of $410,000 received in connectionwhich is consistent with the American Taxpayer Relief Act of 2012 that was signed into lawvariance in January 2013.  The credit related to retroactive tax relief for certain tax law provisions that expired in 2012.  As the legislation was signed into law after the end of PAR's 2012 fiscal year, the retroactive effect of the bill is reflected in fiscal year 2013 tax provision. Excluding the retroactive application of this credit, the Company's effective federal rate is 175%.  The remaining variance from the federal statutory rate was due to the mix of taxable income generated by the Company's domestic and foreign operations as well as other tax credits and non-deductible expenses.2015.

Liquidity and Capital Resources

The Company’s primary sources of liquidity have been cash flow from operations and a line of credit with its bank.  Cash generated from operating activities offrom continuing operations was $6.3$11.4 million for the year ended December 31, 20142016, compared to cash usedgenerated of $2.8$2.6 million for the same period in 2013.2015.
 
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In 2014,For the year ended December 31, 2016, cash generated fromprovided by continuing operations was mostly$11.4 million, due to our operating results, plus the add backadd-back of non-cash charges and changes in working capital.  SignificantNet changes in operating assets and liabilities was $3.0 million primarily as a result of customer deposits, offset by an increase in inventory.  In 2015, cash provided by continuing operations was $2.6 million, cash was generated from our operating results plus the add-back of non-cash expenses and a reduction of inventory.  Offsetting significant operating cash flow components include cash used to procure inventory required for planned deployments in 2015, as well as cash used through an increase in receivables resulting from significant sales volume recorded late in fiscal year 2014.  Operating cash flow was generated by an increasea decrease in accounts payable and accrued expenses mainlyprimarily due to the timing of vendor payments associated with the aforementioned growth in inventory and other amounts owed to vendors.  Cash was also generated through the increasea decrease in customer deposits associated with the Company’s Hospitalityour Restaurant/Retail segment.  In 2013, cash was used in operations mostly due to the Company's change in working capital requirements, primarily associated with decreases in accrued expenses and accounts payable due to the timing of payments made to vendors, specifically for inventory purchases and payments associated with the Company's ISR contract with the U.S. Government. This was partially offset by the add back of non-cash charges.

Cash used in investing activities from continuing operations was $10.0$7.1 million for the year ended December 31, 20142016 versus $5.8$7.5 million provided by investing activities for the same period in 2013.year ended December 31, 2015.  In 2014, the first installment payment associated with the purchase of Brink Software Inc. accounted for approximately $5.0 million of the investing capital. Additionally,2016, capital expenditures of $2.1$3.4 million were primarily for PAR’s new ERP system and capital improvements made to our owned and leased properties.  Capitalized software was $2.7 million and was associated with investments in Restaurant/Retail software platforms.  In 2015, we received cash proceeds of $12.1 million related to the sale of the PSMS business.  This was offset by a $0.8 million write-off related to our former chief financial officer’s unauthorized transfers of Company’s funds.  Capital expenditures of $1.7 million were primarily related to capital improvements to leased properties as well as purchases of computer equipment associated with the Company’sour software support service offerings.  Capitalized software was $2.9$2.1 million and was used for investments in many of the Company’s Hospitality software platforms.  In 2013, capital expenditures of $1.1 million were primarily for purchases of computer equipment associated with the Company’s software support service offerings. Capitalized software was $4.7 million and was associated with investments for the Company’s Hospitalityour Restaurant/Retail software platforms.

Cash generated fromused in financing activities from continuing operations was $4.8$2.2 million for the year ended December 31, 20142016 versus cash used of $107,000$7.7 million for the same periodyear ended December 31, 2015.  In 2016, we paid the third installment associated with our purchase of Brink of $2.0 million, in 2013.addition to payments on long-term debt of $0.2 million, and proceeds from stock activity of $27,000.  In 2014,2015, the Company borrowed $5.0 milliondecreased borrowings on its credit facility in connection with the purchase of Brink Software Inc.,by $5.0 million, net and decreased its long term borrowings by $165,000.  In 2013, the Company decreasedon its long-term borrowingsdebt by $159,000$0.2 million, and benefited $52,000$0.5 million from the exercise of employee stock options.  Additionally, the second installment payment associated with our acquisition of Brink accounted for approximately $3.0 million of the cash used in financing activities during 2015.

DuringOn November 29, 2016, the Company, together with certain of its U.S. subsidiaries, as “Loan Guarantors” (together with the Company, the “Loan Parties”) entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as the “Lender”. The Credit Agreement provides for revolving loans in an aggregate principal amount of up to $15.0 million to be made available to the Company; availability at any time being equal to the lesser of (i) $15.0 million and (ii) a borrowing base (equal to the sum of 80% eligible accounts, 50% eligible raw materials inventory and 35% eligible finished goods inventory, with no more than 50% of total eligible inventory included in the borrowing base), less the aggregate principal amount outstanding (the “Credit Facility”). Interest accrues on outstanding principal balances at an applicable rate per annum determined, as of the end of each fiscal year 2013 and through June 4,quarter, by reference to the CBFR Spread or the Eurodollar Spread based on the Company’s consolidated indebtedness ratio as at the determination date. The Credit Facility replaces the Company’s asset-based credit agreement dated September 9, 2014 the Company maintained a credit facility with J.P. MorganJPMorgan Chase, N.A. (the “2014 ABL Credit Agreement”) and NBT Bank, N.A. (on behalf of itself and as successor by merger to Alliance Bank, N.A.) consisting of $20.0 million  in working capital lines of credit (with the option to increase to $30.0 million), which expired in June 2014. This agreement allowed the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread or at the bank's prime lending rate.  This credit facility was secured by certain assets portion of the Company.proceeds of the Credit Facility were used to pay-off all indebtedness outstanding under the 2014 ABL Credit Agreement.
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On June 5, 2014,
The Credit Facility matures three (3) years from the Company executed an amendment to its then existing credit facility to provide for the renewal of the facility through June 2017, with terms generally consistent to those of its prior facility. This facility provided the Company with capital of up to $20.0 million (with the option to increase to $30.0 million) in the form of a revolving line of credit. This agreement allowed the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread or at the bank's prime lending rate.

On September 9, 2014, the Company terminated its existing credit facilities with J.P. Morgan Chase, N.A. and NBT Bank, N.A. (on behalf of itself and as successor by merger to Alliance Bank, N.A.) consisting of $20.0 million in working capital lines of credit, and the Company and its domestic subsidiaries entered into a new three-year credit facility with J.P. Morgan Chase, N.A. The termsdate of the new agreement provide for up to $25 millionCredit Agreement and is guaranteed by the Loan Guarantors. The Credit Facility is secured by substantially all of a line of credit, with borrowing availability based on a percentage of value of variousthe assets of the Company and itsof the other Loan Parties; provided, that the Credit Facility is not secured by any liens on more than 65% of the voting stock of the Company’s foreign subsidiaries. The new agreement bears interestCredit Agreement contains representations and warranties and affirmative and negative covenants that are usual and customary, including representations, warranties and covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness, incur or permit to exist liens on assets, make investments, loans, advances, guarantees and acquisitions, consolidate or merge with or into any other company, engage in asset sales and pay dividends and make distributions. The Credit Agreement requires that the Company’s consolidated indebtedness ratio at the applicable bank rate (3.25% at December 31, 2014) or, at the Company's option, at the LIBOR rate plus the applicable interest rate spread (rangeend of 1.5% – 2.0%). At December 31, 2014, the Company had an outstanding balanceeach of approximately $5.0 million on this line of credit at a rate of 2.19%. The weighted average interest rate paid by the Company was approximately 2.64% duringits fiscal year 2014.  The new agreement contains traditional asset based loan covenantsquarters to be greater than 3.0 to 1.0 and includes covenants regarding earnings before interest, tax, depreciation & amortization (“EBITDA”) andmaintain a fixed charge coverage ratio of not less than 1.15 to 1.0 for the Company’s fiscal quarter ended December 31, 2016 (to be tested only in the event the Company’s total consolidated indebtedness equaled or exceeded $5 million at the end of such fiscal quarter) and provides1.25 to 1.0 for accelerationthe quarter ending March 31, 2017 and each quarter thereafter. Obligations under the Credit Agreement may be accelerated upon the occurrence ofcertain customary events of defaults.  Thedefault (subject to grace periods, as appropriate), including among others: nonpayment of principal, interest or fees; breach of the affirmative or negative covenants; breach of the representations or warranties in any material respect; event of default under, or acceleration of, other material indebtedness; bankruptcy or insolvency; material judgments entered against the Company wasor any of its subsidiaries; invalidity or unenforceability of any collateral documentation associated with the Credit Facility; and a change of control of the Company. We were in compliance with these covenants atas of December 31, 2014.2016.

On March 19, 2015,December 31, 2016, the Company amended its existingapplicable rate under the Credit Facility to reducewas 3.25% plus the EBITDA requirement and extendedCBFR Spread or LIBOR plus the fixed charge coverage ratio.  The amendment provides the Company flexibility to continue investing inEurodollar Spread based on the Company’s future product offerings while maintaining certain covenant thresholdsconsolidated indebtedness ratio.  There were no outstanding balances under the Credit Facility as defined in the amendment.  The Company anticipates it will be in compliance with its covenants throughout fiscal year 2015.
of December 31, 2016, as such we had borrowing availability of up to $15.0 million.
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In addition to the credit facility described above,Credit Facility, the Company has a mortgage loan, collateralized by certain real estate, with a balance of $919,000$0.6 million and $1,084,000 at$0.7 million as of December 31, 20142016 and 2013,2015, respectively.  This mortgage matures on November 1, 2019.  The Company'sInterest is fixed interest rate was 4.05% through October 1, 2014. Beginning on October 1, 2014, the fixed rate was converted to a new rate equal to the then-current five year fixed advanced rate charged by the New York Federal Home Loan bank, plus 225 basis points.  Effective November 1, 2014, the Company entered into an agreement that fixed the interest rate at 4.00% through the maturity date of the loan.maturity.  The annual mortgage payment, including interest through November 1, 2019, totals $206,000.is $0.2 million.

In connection with theour acquisition of Brink Software on September 18, 2014, the Companywe recorded indebtedness to theBrink’s former owners of Brink under the stock purchase agreement.  AtAs of December 31, 2014,2016 and 2015, the principal balance of the note payable was $5.0zero and $2.0 million, respectively, and it had a carrying value of $4.8 million.zero and $1.9 million, respectively.  The carrying value was based on the note’s estimated fair value at the time of the acquisition.  The note does  not bear interest, and repayment terms are $3.0 million, payablewhich was paid on the first anniversary of close, September 18, 2015, and $2.0 million payable on the second anniversary of close, which was paid in September 18, 2016.

During fiscal year 2015, the Company anticipates that its capital requirements will not exceed approximately $1.0 million to $3.0 million.  The Company does not routinely enter into long term contracts with its major Hospitality segment customers.  The Company commits to purchasing inventory from its suppliers based on a combination
We expect our operating cash flowflows and available capacity under our Credit Facility will be sufficient to meet its cash requirements throughour operating needs for the next twelve12 months. However, the Company may be required, or could elect, to seek additional funding prior to that time.  The Company’s future capital requirementsOur actual cash needs will depend on many factors, including itsour rate of revenue growth, including growth of our SaaS revenues, the timing and extent of spending to support our product development efforts, potential growth through strategic acquisition, expansion of sales and marketing, the timing of introductions of new products and enhancements to existing products, and market acceptance of its products.  The Companyour products, and  potential fines and penalties that, while currently inestimable, could be material (see Item 1A – “Risk Factors” for further discussion about the potential adverse effect of such fines and penalties on our business).  If we are required or otherwise elect to seek additional funding, we cannot assurebe certain that such additional equity or debt financingfunding will be available on terms and conditions acceptable terms orto us, if at all. The Company’s sources of liquidity beyond twelve months, in management’s opinion, will be its cash balances on hand at that time, funds provided by operations, funds available through its lines of credit and the long-term credit facilities that it can arrange.

The Company’sOur future principal payments under its stock purchase agreement with Brink,our mortgage and operating leases are as follows (in thousands):
  
Total
  
Less
 Than
1 Year
  
1-3
Years
  
3 - 5
Years
  
More than 5
Years
 
Debt obligations $5,739  $3,173  $2,188  $378  $- 
Operating lease  7,035   1,821   2,487   1,507   1,220 
Total $12,774  $4,994  $4,675  $1,885  $1,220 

  Total  
Less
Than
1 Year
  1-3 Years  
3 - 5
Years
  
More than 5
Years
 
Debt obligations $566  $187  $379  $-  $- 
Operating lease  4,403   1,360   2,004   536   503 
Total $4,969  $1,547  $2,383  $536  $503 

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements
Our Consolidated Financial Statements are based on the application of U.S. generally accepted accounting principles (“GAAP”).  GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported.  The Company believes itsWe believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied.  Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis throughout the Company.basis.  Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include revenue recognition, accounts receivable, inventories, accounting for business combinations, contingent consideration, goodwill and intangible assets, and taxes.
 
Revenue Recognition Policy

Restaurant/Retail Contracts
Our Hospitality group’sRestaurant/Retail segment’s revenues consist of sales of our standard POS system to the Company’s standard point-of-sale and property management systems of the HospitalityRestaurant/Retail segment. We derive revenue from the following sources: (1) hardware sales, (2) software license agreements, including soldperpetual licenses and software as a perpetual license and sold as a service, SaaS, (3) professional services, (4) hosting services and (5) post-contract customer support ("PCS"(“PCS”).
 
We recognize revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is probable.reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report.

Hardware

Revenue recognition on hardware sales occurs upon delivery to the customer site (or when shipped for systems that are not installed by the Company)us) when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectability is reasonably assured.

Software

Revenue recognition on software sales generally occurs upon delivery to the customer, when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectability is probable.reasonably assured.  For software sales sold as a perpetual license, and as a service,typically our Pixel software offering, where the Company iswe are the sole party that has the proprietary knowledge to install the software, revenue is recognized upon installation and when the system is ready to go live.

Service

Service revenue consists of installation and training services, field and depot repair, subscription software products, associated software maintenance, and software related hosted services.  Installation and training service revenue are based upon standard hourly/daily rates as well as contracted prices with the customer, and revenue is recognized as the services are performed.  Support maintenance and field and depot repair are provided to customers either on a time and materials basis or under a maintenance contract.  Services provided on a time and materials basis are recognized as the services are performed.  Service revenues from maintenance contracts are recorded as deferred revenue when billed to and collected from the customer and are recognized ratably over the underlying contract period.  Software sold as a service with our Brink and SureCheck software offerings, is recorded as deferred revenue when billed and collected and recognized based onratably over the contracted price of its contract term.

PAR
We frequently entersenter into multiple-element arrangements with itsour customers including hardware, software, professional consulting services and maintenance support services. For arrangements involving multiple deliverables, when deliverables include software and non-software products and services, PAR evaluateswe evaluate and separatesseparate each deliverable to determine whether it represents a separate unit of accounting based on the following criteria: (a) the delivered item has value to the customer on a stand-alone basis; and (b) if the contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in the control of PAR.our control.

The individualMultiple element arrangements which include hardware, service, and software offerings that are included in arrangements with our customers are identified and priced separately to the customerseparated based upon the stand alonestand-alone selling price for each individual hardware, service, or software sold in the arrangement irrespective of the combination of products and services which are included in a particular arrangement.  As such, overall consideration is allocated to each unit of accounting based on the unit'sunit’s relative selling prices. In such circumstances, the Company useswe use a hierarchy to determine the selling price to be used for allocating revenue to each deliverable: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party evidence of selling price (TPE), and (iii) best estimate of selling price (BESP). VSOE generally exists only when the Company sellswe sell the deliverable separately and is the price actually charged by the Companyus for that deliverable. VSOE is established for our software maintenance services to establish selling prices for our non-software related services, which include hardware maintenance, non-software related professional services, and transaction services. The Company usesWe use BESP to allocate revenue when we are unable to establish VSOE or TPE of selling price. BESP is primarily used for elements such as products that are not consistently priced within a narrow range. The Company determinesWe determine BESP for a deliverable by considering multiple factors including product and customer class, geography, average discount, and management'smanagement’s historical pricing practices. Amounts allocated to the delivered hardware and software elements are recognized at the time of sale provided the other conditions for revenue recognition have been met. Amounts allocated to the undelivered maintenance and other services elements are recognized as the services are provided or on a straight-line basis over the service period. In certain instances, customer acceptance is required prior to the passage of title and risk of loss of the delivered products. In such cases, revenue is not recognized until the customer acceptance is obtained. Delivery and acceptance generally occur in the same reporting period.
 
In situations where PAR’s solutions contain
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Software elements, generally software and software related services (generally PCS, and professional services),services revenue isare recognized in accordance with authoritative guidance on software revenue recognition.  For the software and software-related elements of such transactions, revenue is allocated based on the relative fair value of each element, and fair value is determined by vender specific objective evidence, (VSOE), where available.  If VSOE is not available for all elements, we will use the residual method to separate the elements as long as we have VSOE for the undelivered elements.  If the Companywe cannot objectively determine the fair value of any undelivered element included in such multiple-element arrangements, the Company deferswe defer the revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

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Government Contracts

The Company’sOur contract revenues generated by the Government segment result primarily from contract services performed for the U.S. Government under a variety of cost-plus fixed fee, time-and-material, and fixed-price contracts.  Revenue on cost-plus fixed fee contracts is recognized based on allowable costs for labor hours delivered, as well as other allowable costs plus the applicable fee.  Revenue on time and material contracts is recognized by multiplying the number of direct labor hours delivered in the performance of the contract by the contract billing rates and adding other direct costs as incurred.  Revenue from fixed-price contracts is recognized as labor hours are delivered which approximates the straight-line basis of the life of the contract. The Company’sOur obligation under these contracts is to provide labor hours to conduct research or to staff facilities with no other deliverables or performance obligations.  Anticipated losses on all contracts are recorded in full when identified.  Unbilled accounts receivable are stated in the Company’sour consolidated financial statements at their estimated realizable value.  Contract costs, including indirect expenses, are subject to audit and adjustment through negotiations between the Companyus and U.S. Government representatives.

Accounts Receivable-Allowance for Doubtful Accounts

Allowances for doubtful accounts are based on estimates of probable losses related to accounts receivable balances.  The establishment of allowances requires the use of judgment and assumptions regarding probable losses on receivable balances.  The CompanyWe continuously monitorsmonitor collections and payments from our customers and maintain a provision for estimated credit losses based on our historical experience and any specific customer collection issues that we have identified.  While such credit losses have historically been within our expectations and appropriate reserves have been established, PAR cannot guarantee that we will continue to experience the same credit loss rates that PAR has experienced in the past.  Thus, if the financial condition of our customers were to deteriorate, our actual losses may exceed our estimates, and additional allowances would be required.

Inventories

The Company’s inventories areOur inventory is valued at the lower of cost or market, with cost determined using the first-in, first-out (“FIFO”) method.  The Company usesWe use certain estimates and judgments and considers several factors including product demand, changes in customer requirements and changes in technology to provide for excess and obsolescence reserves to properly value inventory.
 
Capitalized Software Development Costs

The Company capitalizes
We capitalize certain costs related to the development of computer software used in its HospitalityRestaurant/Retail segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs.  The technological feasibility of a computer software product is established when the Company haswe have completed all planning, designing, coding, and testing activities that are necessary to establish that the product can be produced to meet its design specifications including functions, features, and technical performance requirements. Software development costs incurred after establishing feasibility (as defined within ASC 985-20)985-20 for software cost related to sold as a perpetual license and ASC-350-40 for software sold as a service) are capitalized and amortized on a product-by-product basis when the product is available for general release to customers.  Annual amortization, charged to cost of sales when the product is available for general release to customers, is computed using the greater of (a) the straight-line method over the remaining estimated economic life of the product, generally three to seven years or (b) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product.
 
Accounting for Business Combinations

The Company accountsWe account for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at their respective fair values on the date of acquisition. The fair value of the consideration paid is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded to goodwill. Intangible assets are amortized over the expected life of the asset. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future cash flows from revenues of the intangible assets acquired, estimates of appropriate discount rates used to present value expected future cash flows, estimated useful lives of the intangible assets acquired and other factors. Although the Company believeswe believe the assumptions and estimates the Company haswe have made have been reasonable and appropriate, they are based, in part, on historical experience, information obtained from the management of the acquired companies and future expectations. For these and other reasons, actual results may vary significantly from estimated results.

40
Contingent Consideration

The Company determinesWe determine the acquisition date fair value of contingent consideration using a discounted cash flow method, with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC Topic 820, Fair Value Measurement.  The significant inputs in the Level 3 measurement not supported by market activity included the Company’sour probability assessments of expected future cash flows related to the Company’sour acquisition of Brink Software Inc. in 2014, during the contingent consideration period, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the definitive agreement.  The liabilities for the contingent consideration areis established at the time of the acquisition and will be evaluated on a quarterly basis based on additional information as it becomes available.  Any change in the fair value adjustment is recorded in the earnings of that period.  During 2016, we recorded a $1.1 million adjustment to decrease the fair value of its contingent consideration related to the acquisition of Brink Software Inc., versus a $0.1 million adjustment to increase the fair value during 2015.  These adjustments are reflected within other expense on the statement of operations. Changes in the fair value of the contingent consideration obligations may result from changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations. Significant increases or decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.
Goodwill

Goodwill
The Company testsWe test goodwill for impairment on an annual basis on the first day of the fourth quarter, or more often if events or circumstances indicate there may be impairment.  The Company operatesWe operate in two businessreportable operating segments Hospitality- Restaurant/Retail and Government.  Goodwill impairment testingGovernment - and goodwill is performedtested at the sub-segment level (referred to as a reporting unit).  The three reporting units utilized by the Company for its impairment testing are: Restaurant, Hotel/Resort/Spa, and Government.this level.  Goodwill is assigned to a specific reporting unitoperating segment at the date the goodwill is initially recorded. Once goodwill has been assigned to a specific reporting unit,operating segment, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit,an operating segment, whether acquired or organically grown, are available to support the value of the goodwill.

Goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit’soperating segment’s fair value to its carrying value including goodwill. If the fair value of a reporting unitan operating segment exceeds its carrying value, applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of impairment, at which time a second step would be performed to measure the amount of impairment.  The second step involves calculating an implied fair value of goodwill for each reporting unitoperating segment for which the first step indicated impairment.

41
The Company utilizesWe utilize different methodologies in performing its goodwill impairment test.  For both the Governmentgovernment and Hotel/Resort/Spa reporting units,restaurant operating segments, these methodologies include both an income approach, namely a discounted cash flow method, and multiple market approaches;approaches and the guideline public company method and quoted price method and merger and acquisition method (Hotel/Resort/Spa reporting unit only).  Aside from the merger and acquisition method utilized in 2014 for the Hotel/Resort/Spa reporting unit, themethod.  The valuation methodologies and weightings used in the current year are generally consistent with those used in the Company’sour past annual impairment tests.

The discounted cash flow method derives a value by determining the present value of a projected level of income stream, including a terminal value.  This method involves the present value of a series of estimated future cash flows at the valuation date by the application of a discount rate, one which a prudent investor would require before making an investment in the equity of the Company.  The Company considersour equity.  We consider this method to be most reflective of a market participant’s view of fair value given the current market conditions, as it is based on the Company’sour forecasted results and, therefore, established its weighting at 80% of the fair value calculation.

Key assumptions within the Company’sour discounted cash flow model utilized for its annual impairment test included projected financial operating results, a long termlong-term growth rate of 3% and discount rates ranging from 17.5%17.0% to 25%23.5%, depending on the reporting unit.operating segment.  As stated above, as the discounted cash flow method derives value from the present value of a projected level of income stream, a modification to the Company’sour projected operating results including changes to the long termlong-term growth rate could impact the fair value.  The present value of the cash flows is determined using a discount rate based on the capital structure and capital costs of comparable public companies, as well as company-specific risk premium, as identified by the Company.us.  A change to the discount rate could impact the fair value determination.

The market approach is a generally-accepted way of determining a value indication of a business, business ownership interest, security or intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities or intangible assets that have been sold.  There are threetwo methodologies considered under the market approach: the merger and acquisition method, the public company method and the quoted price method.

42
The merger & acquisition method, public company method and quoted price method of appraisal are based on the premise that pricing multiples of publicly traded companies can be used as a tool to be applied in valuing closely held companies.  The mechanics of the method require the use of the stock price in conjunction with other factors to create a pricing multiple that can be used, with certain adjustments, to apply against the subject’s similar factor to determine an estimate of value for the subject company.  The CompanyWe considered these methods appropriate as they provide an indication of fair value as supported by current market conditions.  The CompanyWe established itsour weighting at 10% of the fair value calculation for the public company method and quoted price method for both the Restaurant/Retail and Government, reporting unit and weightings at 10%, 5% and 5%operating segments.
26
The most critical assumption underlying the market approaches we utilized by the Company are the comparable companies utilized.  Each market approach described above estimates revenue and earnings multiples for the Company based on itsour comparable companies.  As such, a change to the comparable companies could have an impact on the fair value determination.

The amount of goodwill carried by the Restaurant, Hotel/Resort/SpaRestaurant/Retail and Government reporting unitssegments is $10.3 million, $6.1 million and $0.7 million, respectively.  The estimated fair value of the Hotel/Resort/Spa reporting unitRestaurant/Retail segment exceeds its carrying value by approximately 14%18%.  The estimated fair value of the Governmentgovernment reporting unit is substantially in excess of its carrying value.  There were no goodwill impairment charges recorded for the restaurant and government reporting units for the years ended December 31, 2016 or 2015.

Hotel /Resort/Spa:During the year ended December 31, 2015, we sold substantially all of the assets of our hotel/spa technology business operated under PAR Springer-Miller Systems, Inc. (“PSMS”).  The transaction closed on November 4, 2015.  Accordingly, the results of operations of PSMS have been classified as discontinued operations in accordance with Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements – Discontinued Operations.  All prior period amounts have been reclassified to conform to the current period presentation.  See Note 2 – Divestiture and Discontinued Operations - of the Notes to Consolidated Financial Statements for further discussion.  At the time of sale, the hotel/spa reporting unit carried approximately $6.1 million of goodwill. Based on the purchase price, we recorded a $2.4 million impairment of the goodwill to write down the net assets to its fair value and we wrote-off the remaining associated goodwill.
Restaurants:

In deriving itsour fair value estimates, the Company haswe utilized key assumptions built on the current core business adjusted to reflect anticipated revenue increases from continued investment in itsour next generation software.  These assumptions, specifically those included within the discounted cash flow estimate, are comprised of the revenue growth rate, gross margin, operating expenses, working capital requirements, and depreciation and amortization expense.

The Company hasWe utilized annual revenue growth rates ranging between 2%3% and 54%23%.  The high endhigh-end growth rate reflects the Company’sour projected revenues resulting from the releaseincreased install base of ATRIO.  ThisBrink and SureCheck customers.  These software platformplatforms will expand the Company’sour capabilities into new markets.  The Company believesWe believe these estimates are reasonable given the size of the overall market which itwe will enter, combined with the projected market share the Company expectswe expect to achieve.  Overall, the projected revenue growth rates ultimately trend to an estimated long term growth rate of 3%.

43
The Company hasWe utilized gross margin estimates materially consistent withthat are reflective of increased recurring revenue from software sold as a service that will exceed historical gross margins achieved.  Estimates of operating expenses, working capital requirements and depreciation and amortization expense utilized for this reporting unit are generally consistent with actual historical amounts, adjusted to reflect its continued investment and projected revenue growth from ATRIO.  The Company believesour core technology platforms.  We believe utilization of actual historical results adjusted to reflect itsour continued investment in ATRIOour products is an appropriate basis supporting the fair value of the Hotel/Resort/Sparestaurant reporting unit.

Lastly, the Companywe utilized a discount rate of approximately 25%23.5% for this reporting unit.  This estimate was derived through a combination of current risk-free interest rate data, financial data from companies that PAR has deemed as its competitors, and was based on volatility between the Company’sour historical financial projections and actual results achieved.

The current economic conditions and the continued volatility in the U.S. and in many other countries in which the Company operateswe operate could contribute to decreased consumer confidence and continued economic uncertainty which may adversely impact the Company’sour operating performance.  Although the Company haswe have seen an improvement in the markets which it serves,we serve, the continued volatility in these markets could have an impact on purchases of the Company’sour products, which could result in a reduction of sales, operating income and cash flows.  Reductions in these results could have a material adverse impact on the underlying estimates used in deriving the fair value of the Company’sour reporting units used in support of itsour annual goodwill impairment test or could result in a triggering event requiring a fair value re-measurement, particularly if the Company iswe are unable to achieve the estimates of revenue growth indicated in the preceding paragraphs.  These conditions may result in an impairment charge in future periods.

Government:

The Company hasestimated fair value of the Government reporting unit is substantially in excess of its carrying value.  Consistent with prior year methodology, in deriving our fair value estimates, we have utilized key assumptions built on the current core business.  These assumptions, specifically those included within the discounted cash flow estimate, are comprised of the revenue growth rate, gross margin, operating expenses, working capital requirements, and depreciation and amortization expense.

We reconciled the aggregate estimated fair value of the reporting units to the market capitalization of the consolidated Company, including a reasonable control premium.premium noting no impairment as of December 31, 2016, or 2015 was recorded.

Deferred Taxes

The Company has significant amountsWe have $17.4 million of deferred tax assets that are reviewed for recoverability and valued accordingly.  These assets are evaluated by using estimates of future taxable income and the impact of tax planning strategies.  Valuations related to tax accruals and assets can be impacted by changes to tax codes, changes in statutory tax rates and the Company’sour estimates of its future taxable income levels.
New Accounting Pronouncements Not Yet Adopted

See Note 1 – Summary of Significant Accounting Principles - of the Notes to the Consolidated Financial Statements included in Part(Part IV, Item 15 of this ReportReport) for details of New Accounting Pronouncements Not Yet Adopted.details.

Off-Balance Sheet Arrangements

The Company doesWe do not have any off-balance sheet arrangements.

Item 7A.
Item 7A.
Quantitative and Qualitative Disclosures about Market RiskRisk.

inflationNot required.

Item 8.
Financial Statements.

PAR’s Consolidated Financial Statements and Notes thereto, together with the report of BDO USA, LLP, are included in Part IV, Item 15 of this Annual Report in response to this Item.

Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.
 
Inflation had little effect on revenues and related costs during 2014.  Management anticipates that margins will be maintained at acceptable levels to minimize the effects of inflation, if any.
28
interest rates

As of December 31, 2014, the Company had $5.0 million of variable debt.  The Company believes that an adverse change in interest rates of 100 basis points would not have a material impact on PAR’s business, financial condition, results of operations or cash flows.
foreign currency
The Company's primary exposures relate to certain non-dollar denominated sales and operating expenses in Europe and Asia. These primary currencies are the Great British Pound, the Euro, the Australian dollar, the Singapore dollar and the Chinese Renminbi.  Accordingly, changes in exchange rates may negatively affect our revenue and net income (loss) as expressed in U.S. dollars. We also have foreign currency risk related to foreign currency transactions and monetary assets and liabilities, including intercompany balances denominated in currencies that are not the functional currency. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. To date, the impacts of foreign currency exchange rate changes on our revenues and net income (loss) have not been material. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.

Item 9A.
Item 8:
Financial StatementsControls and Supplementary DataProcedures.

The Company’s 2014 consolidated financial statements, together with the report thereon
Evaluation of BDO USA, LLP dated March 31, 2015, are included elsewhere herein.  See Part IV, Item 15 for a list of Financial Statements.Disclosure Controls and Procedures.

Item 9:
Changes in and Disagreements With Accounting and Financial Disclosure

None.
Item 9A:Controls and Procedures

1.Evaluation of Disclosure Controls and Procedures.
Based on an evaluation of the Company’sWe maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2014, the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”)Act), conducted under the supervision of and with the participation of the Company’s chief executive officer and principal financial officer, such officers have concluded that the Company’s disclosure controls and procedures, which are designed to ensureprovide reasonable assurances that information we are required to be disclosed by the Companydisclose in the reports that it fileswe file or submitssubmit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and designed to ensure that such information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including the chiefour principal executive officer (Chief Executive Officer) and principal financial officers,officer (Chief Financial Officer), as appropriate, to allow timely decisions regarding required disclosures, aredisclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2016. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2016, as a result of the Evaluation Date.material weaknesses in our internal control over financial reporting previously disclosed in our Quarterly Report on Form 10-Q filed on November 14, 2016, for the fiscal quarter ended September 30, 2016 and described below, which were not remediated as of December 31, 2016. However, it has been determined that no material adjustments, restatements or other amendments to our previously issued financial statements are required.
Our management has concluded that the material weaknesses in our internal control over financial reporting previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and identified as: insufficient pre-hiring background checks and insufficient pre-approval procedures relating to treasury transactions, have been remediated. To remediate these identified material weaknesses, we implemented a new hiring policy that requires enhanced background checks, including a credit check, for accounting and IT personnel who have access to cash or information systems involving cash, and the retention of a private investigator to conduct background checks of executive officer candidates; and we implemented new treasury policies that, among other things, require the prior approval of the Board of Directors of all investments, and outline required review and approval procedures for anticipated wire transfers, prior to wire initiation. We tested our new policies, and based on the test results, management concluded the material weaknesses have been remediated.
Management’s Annual Report on Internal Control Over Financial Reporting.

46
2.Management’s Report on Internal Control over Financial Reporting.
PAR’sOur management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as such term is(as defined in Rule 13a-15(f) underof the Exchange Act.  The Company’s internal control system has been designed to provide reasonable assurance toAct). Our management andconducted an evaluation of the Boardeffectiveness of Directors regarding the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles.

A company’sour internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effectbased on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparationframework and presentation.  Because of inherent limitations due to, for example, the potential for human error or circumvention of controls, internal controls over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changescriteria established in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PAR’s management, under the supervision of and with the participation of the Company’s chief executive officer and principal financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014.  Management based this assessment on criteria for effective internal control over financial reporting described in the 1992 “Internal Control–Internal Control - Integrated Framework” Framework (2013) issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. Based on its assessment, based on those criteria,evaluation, our management believesconcluded that as of December 31, 2014, the Company’sour internal control over financial reporting was effective.not effective as of December 31, 2016, due to the material weaknesses in our internal control over financial reporting discussed below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Internal Investigation; Material Weaknesses.

As previously disclosed, our Audit Committee has been overseeing an internal investigation by outside counsel into import/export and sales documentation activities at our China and Singapore offices. The investigation, with its fact finding phase substantially complete, is focused on whether certain import/export and sales documentation activities at our China and Singapore offices were improper and in possible violation of the U.S. Foreign Corrupt Practices Act, or FCPA, and other applicable laws, and certain of our policies, including our Code of Business Conduct and Ethics.  Based on the investigation findings to date, we discovered  that certain members of our  China and Singapore staff  participated in or were aware of improper activities in China and Singapore, involving the improper bypassing of applicable customs laws of various countries. Those activities included the failure to properly label items for import into various non-U.S. countries, the failure to properly document the declared value of certain items exported to various non-U.S. countries, and  questionable payments made to customs officials in China without sufficient documentation to evidence or confirm the legitimacy of their purpose. The investigation also revealed that certain members of upper management knew or should have known of the questionable conduct in 2015 and early 2016, but failed to take action to prevent or correct such conduct. Our management identified material weaknesses in our internal controls with respect to oversight of our operations in China and Singapore. Such material weaknesses include:

·a control environment that did not effectively promote, maintain, or support the control consciousness of employees or a culture of adequate and prompt reporting of information internally;
47
·
the failure to maintain sufficient monitoring activities of consistent global practices and procedures to ensure deviations are detected and corrected on a timely basis; and
·insufficient policies, procedures, and training with respect to procurement and sales activities, including insufficient documentation involving arrangements with third parties, the import/export and customs laws of international jurisdictions and the FCPA, including deficiencies in our FCPA compliance policy and training program.
Remediation Efforts to Address Material Weaknesses.

As we disclosed in our Form 10-Q for the fiscal quarter ended September 30, 2016, we developed and had begun to implement changes in our internal control over financial reporting to remediate the material weaknesses described above. Since identifying the material weaknesses in our internal controls, we have:

·made, and will continue to make, as appropriate, personnel changes;
·begun revamping, updating, and expanding PAR’s Code of Business Conduct and Ethics and overall compliance policies and procedures;

·begun enhancements to the substance and regularity of our ethics and compliance training both in the U.S. and our foreign offices, including the initiation of company-wide, training of our personnel in applicable laws, rules, and regulations, to be supplemented by global training on our new compliance program once adopted;

·established regular channels of communication between senior management and local offices;

·begun to enhance our control environment with respect to sales, procurement, and reporting activities at local offices; and

·further revised and updated, and we continue to revise and update (as needed), our quarterly accounting and operations questionnaire/certifications.

In addition to the above, we are in the process of developing and implementing a comprehensive compliance program; with the assistance of special counsel to the Audit Committee, that is designed to be appropriate for us in light of our worldwide operations, particularly in geographical areas that present the greatest challenges to regulatory compliance, focused on applicable domestic and international anti-bribery, trade control, and other laws, rules, and regulations; we are enhancing our due diligence process for third party intermediaries, which will include the assistance of an outside vendor; and we are implementing monitoring procedures, including periodic global risk assessments and compliance audits, along with other testing.

While our remediation efforts are well underway, the process requires additional time and resources to complete. We currently plan to have the new compliance program adopted and rolled out in the second fiscal quarter of 2017. Our goal is to complete remedial efforts, including the baseline global risk assessment, in their entirety by the end of the third fiscal quarter of 2017, and to begin testing of  the enhanced controls immediately thereafter.
3.Changes in Internal Controls over Financial Reporting.
We caution that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

DuringChanges in Internal Controls Over Financial Reporting.

In evaluating whether there were any reportable changes in our internal control over financial reporting during the Company’s last fiscal quarter of 2014 (the fourth fiscal quarter)ended December 31, 2016, we determined that, other than the changes described above under “Remediation Efforts to Address Material Weaknesses”, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13 a-15(f))during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting. However, we do anticipate further changes will be implemented to remedy the material weaknesses identified above.
 
PART III

Item 10.
Item 10:
Directors, Executive Officers and Corporate Governance.

The information required by this item will appear under the caption “Directors, Executive Officers and Corporate Governance”be included in our 2015 definitive proxy statement for the annual meetingwith respect to our 2017 Annual Meeting of stockholders on May 28, 2015,Stockholders to be filed under Schedule 14A,with the SEC and is incorporated herein by reference.reference as it appears under the headings, “Proposal 1: Election of Directors”, “Directors and Executive Officers”, “Section 16(a) Beneficial Ownership Reporting Compliance”, “Corporate Governance – Code of Business Conduct and Ethics” and “Corporate Governance – Committees – Audit Committee”.

Item 11.
Item 11:
Executive Compensation.

The information required by this item will appear under the caption “Executive Compensation”be included in our 2015 definitive proxy statement for the annual meetingwith respect to our 2017 Annual Meeting of stockholders on May 28, 2015,Stockholders to be filed under Schedule 14A,with the SEC and is incorporated herein by reference.reference as it appears under the headings, “Director Compensation” and “Executive Compensation”.

Item 12.
Item 12:
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item will appear under the caption “Security Ownership of Management and Certain Beneficial Owners”be included in our 2015 definitive proxy statement for the annual meetingwith respect to our 2017 Annual Meeting of stockholders on May 28, 2015,Stockholders to be filed under Schedule 14A,with the SEC and is incorporated herein by reference.reference as it appears under the headings, “Executive Compensation – Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management”.

Item 13.
Item 13:
Certain Relationships and Related Transactions, and Director Independence.

The information required by this item will appear under the caption “Executive Compensation”be included in our 2015 definitive proxy statement for the annual meetingwith respect to our 2017 Annual Meeting of stockholders on May 28, 2015,Stockholders to be filed under Schedule 14A,with the SEC and is incorporated herein by reference.reference as it appears under the headings, “Transactions with Related Persons” and “Corporate Governance – Director Independence”.

Item 14.
Item 14:
Principal Accounting Fees and Services.

The response toinformation required by this item will appearbe included in our definitive proxy statement with respect to our 2017 Annual Meeting of Stockholders to be filed with the SEC and is incorporated herein by reference as it appears under the captionheading, “Principal Accounting Fees and Services” in our 2015 definitive proxy statement for the annual meeting of stockholders on May 28, 2015, to be filed under Schedule 14A, and is incorporated herein by reference..
 
PART IV

Item 15.
Item 15:
Exhibits and Financial Statement Schedules
Form 10-K Page

(a)Documents filed as a part of the Form 10-Kthis Annual Report

Financial Statements:
 1.Financial Statements:
Report of Independent Registered Public Accounting Firm5134
Consolidated Balance Sheets at December 31, 20142016 and 201320155235
Consolidated Statements of Operations for the years ended December 31, 20142016 and 201320155336
Consolidated Statements of Comprehensive LossIncome (Loss) for the years ended December 31, 20142016 and 201320155437
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 20142016 and 201320155538
Consolidated Statements of Cash Flows for the years ended December 31, 20142016 and 201320155639
Notes to Consolidated Financial Statements5740

2.Financial Statement Schedules. Schedules are omitted because they are not required under the applicable accounting regulations of the SEC.
(b)Exhibits

See listThe information required by the Item is set forth in the Exhibit Index that follows the signature page of exhibits on page 90.this Annual Report.
 
Item 16.
Form 10-K Summary.
50
None
Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
PAR Technology Corporation
New Hartford, New York

We have audited the accompanying consolidated balance sheets of PAR Technology Corporation and subsidiaries (the “Company”) as of December 31, 20142016, and 2013,2015, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flowsflow for each of the two years in the period ended December 31, 2014.then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PAR Technology Corporation and subsidiaries at December 31, 20142016 and 2013,2015, and the results of their operations and their cash flows for each of the two years in the periodthen ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

New York, New York
March 31, 2015April 17, 2017
 
PAR TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
 (in thousands, except share amounts)

 December 31, 
Assets 2014  2013  
December 31,
2016
  
December 31,
2015
 
Current assets:          
Cash and cash equivalents $10,167  $10,015  $9,055  $8,024 
Accounts receivable-net  31,445   30,688   30,705   29,530 
Inventories-net  25,922   24,465   26,237   21,499 
Note receivable  3,510   - 
Income taxes receivable  261   - 
Deferred income taxes  4,512   3,747   7,767   6,741 
Other current assets  4,597   3,418   4,027   3,431 
Assets of discontinued operations  462   377 
Total current assets  76,643   72,333   82,024   69,602 
Property, plant and equipment - net  6,137   5,494   7,035   5,716 
Note receivable  -   4,259 
Deferred income taxes  11,357   15,083   9,650   11,038 
Goodwill  17,167   6,852   11,051   11,051 
Intangible assets - net  22,952   15,071   10,966   10,898 
Other assets  3,043   2,675   3,785   3,687 
Total Assets $137,297  $117,508  $124,511  $116,251 
Liabilities and Shareholders’ Equity                
Current liabilities:                
Current portion of long-term debt $3,173  $166  $187  $2,103 
Borrowings under line of credit  5,000   - 
Accounts payable  19,676   17,200   16,687   11,729 
Accrued salaries and benefits  6,429   6,663   5,470   5,727 
Accrued expenses  6,578   2,701   4,682   7,644 
Customer deposits  2,345   1,071 
Deferred service revenue  12,695   12,170 
Customer deposits and deferred service revenue  19,814   10,819 
Income taxes payable  475   185   -   279 
Liabilities of discontinued operations  -   441 
Total current liabilities  56,371   40,156   46,840   38,742 
Long-term debt  2,566   918   379   566 
Other long-term liabilities  8,847   3,714   7,712   8,883 
Total liabilities  67,784   44,788   54,931   48,191 
Commitments and contingencies                
Shareholders’ Equity:                
Preferred stock, $.02 par value, 1,000,000 shares authorized  -   -   -   - 
Common stock, $.02 par value, 29,000,000 shares authorized; 17,274,708 and 17,301,925 shares issued, 15,566,599 and 15,593,816 outstanding at December 31, 2014 and 2013, respectively  346   344 
Common stock, $.02 par value, 29,000,000 shares authorized; 17,479,454 and 17,352,838 shares issued; 15,771,345 and 15,644,729 outstanding at December 31, 2016 and December 31, 2015, respectively  350   347 
Capital in excess of par value  44,854   43,635   46,203   45,753 
Retained earnings  31,465   35,116   32,357   30,574 
Accumulated other comprehensive loss  (1,316)  (539)  (3,494)  (2,778)
Treasury stock, at cost, 1,708,109 shares  (5,836)  (5,836)  (5,836)  (5,836)
Total shareholders’ equity  69,513   72,720   69,580   68,060 
Total Liabilities and Shareholders’ Equity $137,297  $117,508  $124,511  $116,251 

See accompanying notesNotes to consolidated financial statementsConsolidated Financial Statements
 
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)

 Year ended December 31,  Year ended December 31, 
 2014  2013  2016  2015 
Net revenues:          
Product $87,246  $90,847  $100,271  $94,397 
Service  58,675   61,529   49,070   46,754 
Contract  87,689   89,018   80,312   87,852 
  233,610   241,394   229,653   229,003 
Costs of sales:                
Product  59,520   62,317   73,976   68,223 
Service  40,421   43,659   35,647   33,875 
Contract  82,347   82,583   73,830   81,848 
  182,288   188,559   183,453   183,946 
Gross margin  51,322   52,835   46,200   45,057 
Operating expenses:                
Selling, general and administrative  37,297   37,925   31,440   27,374 
Research and development  15,965   15,567   11,581   10,067 
Amortization of identifiable intangible assets  279   -   966   987 
  53,541   53,492   43,987   38,428 
                
Operating loss from continuing operations  (2,219)  (657)
Other income, net  304   506 
Interest expense  (136)  (60)
Loss from continuing operations before (provision for) benefit from income taxes  (2,051)  (211)
(Provision for) benefit from income taxes  (1,600)  780 
(Loss) income from continuing operations  (3,651)  569 
Operating income from continuing operations  2,213   6,629 
Other income (expense), net  1,316   (800)
Interest income (expense)  121   (308)
Income from continuing operations before provision for income taxes  3,650   5,521 
Provision for income taxes  (1,147)  (1,500)
Income from continuing operations  2,503   4,021 
Discontinued operations                
Loss on discontinued operations (net of tax)  -   (211)  (720)  (4,912)
Net (loss) income $(3,651) $358 
Net income (loss) $1,783  $(891)
Basic Earnings per Share:                
(Loss) income from continuing operations  (0.24)  0.04 
Income from continuing operations  0.16   0.26 
Loss from discontinued operations  -   (0.01)  (0.05)  (0.32)
Net (loss) income $(0.24) $0.02 
Net income (loss) $0.11  $(0.06)
Diluted Earnings per Share:                
(Loss) income from continuing operations  (0.24)  0.04 
Income from continuing operations  0.16   0.26 
Loss from discontinued operations  -   (0.01)  (0.05)  (0.32)
Net (loss) income $(0.24) $0.02 
Net income (loss) $0.11  $(0.06)
Weighted average shares outstanding                
Basic  15,501   15,240   15,675   15,562 
Diluted  15,501   15,273   15,738   15,666 

See accompanying notesNotes to consolidated financial statementsConsolidated Financial Statements
 
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSINCOME (LOSS)
(in thousands)

 Year ended December 31,  Year ended December 31, 
 2014  2013  2016  2015 
          
Net (loss) income $(3,651) $358 
Net income (Loss) $1,783  $(891)
Other comprehensive loss net of applicable tax:                
Foreign currency translation adjustments  (777)  (435)  (716)  (1,462)
Comprehensive loss $(4,428) $(77)
Comprehensive income (Loss) $1,067  $(2,353)

See accompanying notesNotes to consolidated financial statementsConsolidated Financial Statements
 
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'SHAREHOLDERS’ EQUITY
(in thousands)

 
 
 
Common Stock
  
 
Capital in
excess of
  
 
 
Retained
  
Accumulated
Other
Comprehensive
  
 
 
Treasury Stock
  
 
Total
Shareholders’
  Common Stock  
Capital in
excess of
  Retained  
Accumulated
Other
Comprehensive
  Treasury Stock  
Total
Shareholders’
 
(in thousands) Shares  Amount  Par Value  Earnings  Loss  Shares  Amount  Equity  Shares  Amount  Par Value  Earnings  Loss  Shares  Amount  Equity 
                                        
Balances at December 31, 2012  17,038  $341  $43,661  $34,758  $(104)  (1,708) $(5,834) $72,822 
Balances at December 31, 2014  17,275  $346  $44,854  $31,465  $(1,316)  (1,708) $(5,836) $69,513 
                                
Net loss              (891)              (891)
Issuance of common stock upon the exercise of stock options  94   2   472                   474 
Net issuance of restricted stock awards  (17)  (1)                      (1)
Equity based compensation  -   -   487                   487 
Stock options and awards tax benefits          (60)                  (60)
Translation adjustments, net of tax of $476                  (1,462)          (1,462)
Balances at December 31, 2015  17,352  $347  $45,753  $30,574  $(2,778)  (1,708) $(5,836) $68,060 
                                                                
Net income              358               358               1,783               1,783 
Issuance of common stock upon the exercise of stock options  16   1   51           0   (2)  50   5   1   26                   27 
Net issuance of restricted stock awards  248   2   -                   2   122   2                       2 
Equity based compensation          187                   187           469                   469 
Stock options and awards tax benefits          (264)                  (264)          (45)                  (45)
Translation adjustments, net of tax of $114                           (435)            (435)
Balances at December 31, 2013  17,302   344   43,635   35,116   (539)  (1,708)  (5,836)  72,720 
                                
Net loss              (3,651)              (3,651)
Net issuance of restricted stock awards  (27)  2                       2 
Equity based compensation          1,185                   1,185 
Stock options and awards tax benefits          34                   34 
Translation adjustments, net of tax of $476                              (777)              (777)
Balances at December 31, 2014  17,275  $346  $44,854  $31,465  $(1,316)  (1,708) $(5,836) $69,513 
Translation adjustments, net of tax of $944
                  (716)          (716)
Balances at December 31, 2016  17,479  $350  $46,203  $32,357  $(3,494)  (1,708) $(5,836) $69,580 

See accompanying notesNotes to consolidated financial statementsConsolidated Financial Statements
 
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 Year ended December 31,  Year ended December 31, 
 2014  2013  2016  2015 
Cash flows from operating activities:          
Net (loss) income $(3,651) $358 
Net income (Loss) $1,783  $(891)
Loss from discontinued operations  -   211   720   4,912 
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:        
Depreciation and amortization  3,670   2,830 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:        
Insurance (recovery) loss on investment  (771)  776 
Depreciation, amortization, and accretion  4,624    3,070 
Provision for bad debts  412   716   401   772 
Provision for obsolete inventory  2,232   2,564   1,249   1,293 
Equity based compensation  1,185   187   469   487 
Change in fair value of contingent consideration  (1,130)  90 
Deferred income tax  516   (1,878)  708   (1,910)
Changes in operating assets and liabilities, net of acquisitions:                
Accounts receivable  (1,169)  (1,514)  (1,576)  (628)
Inventories  (3,689)  (857)  (5,987)  3,136 
Income tax receivable/(payable)  290   (361)  (540)  (196)
Other current assets  (1,179)  (221)  (248)  587 
Other assets  (368)  543   (194)  (644)
Accounts payable  2,477   (3,930)  4,958   (7,529)
Accrued salaries and benefits  (234)  265 
Accrued expenses  3,877   (1,770)  (2,023)  214 
Customer deposits  1,274   (309)  9,032   (1,062)
Deferred service revenue  525   (352)  (37)  251 
Other long-term liabilities  93   684   (41)  (54)
Net cash provided by (used in) operating activities-continuing operations  6,261   (2,834)
Deferred tax equity based compensation  (45)  (60)
Net cash provided by operating activities-continuing operations  11,352   2,614 
Net cash used in operating activities-discontinued operations  -   (396)  (356)   (2,020)
Net cash provided by (used in) operating activities  6,261   (3,230)
Net cash provided by operating activities  10,996   594 
Cash flows from investing activities:                
Capital expenditures  (2,108)  (1,136)  (3,433)  (1,705)
Capitalization of software costs  (2,894)  (4,652)  (2,685)  (2,148)
Payments for acquisition, net of cash acquired  (5,000)  - 
Net cash used in investing activities  (10,002)  (5,788)
Investment expenditure  -   (776)
Proceeds from sale of business  -   12,100 
Working capital adjustment paid  (977)  - 
Net cash (used in) provided by investing activities-continuing operations  (7,095)  7,471 
Net cash used in investing activities-discontinued operations  -   (1,046)
Net cash (used in) provided by investing activities  (7,095)  6,425 
Cash flows from financing activities:                
Payments of long-term debt  (165)  (159)  (181)  (173)
Payments of other borrowings  (214,980)  (222,156)
Proceeds from other borrowings  5,000   -   214,980   217,156 
Payments for deferred acquisition obligations  (2,000)  (3,000)
Proceeds from stock awards  2   52   27   473 
Net cash provided by (used in) financing activities  4,837   (107)
Net cash used in financing activities  (2,154)  (7,700)
Effect of exchange rate changes on cash and cash equivalents  (944)  (335)  (716)  (1,462)
Net increase (decrease) in cash and cash equivalents152(9,460)  1,031   (2,143)
Cash and cash equivalents at beginning of period  10,015   19,475   8,024   10,167 
Cash and cash equivalents at end of period  10,167   10,015   9,055   8,024 
Less cash and cash equivalents of discontinued operations at end of period  -   - 
Cash and cash equivalents of continuing operations at end of period $10,167  $10,015  $9,055  $8,024 
                
Supplemental disclosures of cash flow information:                
Cash paid during the period for:                
Interest $129  $60  $94  $206 
Income taxes, net of refunds $722  $1,373  $714  $310 
                
Supplemental disclosures of non-cash information:                
Acquisition through notes payable $4,820  $- 
Contingent consideration payable in connection with acquisition $5,040  $- 
Sale of business through note receivable $  $4,259 

See accompanying notesNotes to consolidated financial statementsConsolidated Financial Statements
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Summary of Significant Accounting Policies

Basis of consolidation
 
The consolidated financial statements include the accounts of PAR Technology Corporation and its subsidiaries (ParTech, Inc., ParTech (Shanghai) Company Ltd., PAR Springer-Miller Systems, Inc., Springer-Miller Canada, ULC, PAR Canada ULC, Brink Software, Inc., PAR Government Systems Corporation and Rome Research Corporation, Brink Software, Inc. and PAR Logistics Management Systems Corporation), collectively referred to as the “Company.” All significant intercompany transactions have been eliminated in consolidation.

On January 12, 2012 PAR Technology Corporation completed its sale of
During fiscal year 2015, the Company entered into an asset purchase agreement to sell substantially all of the assets of theour Hotel/Spa technology business operated under PAR Logistics ManagementSpringer-Miller Systems, Corporation (LMS) to ORBCOMM Inc. (“PSMS”).  The transaction closed on November 4, 2015.  Accordingly, the results of operations of LMS fiscal year 2013PSMS have been recordedclassified as discontinued operations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements —– Discontinued Operations.  DuringAll prior period amounts have been reclassified to conform to the current period ended December 31, 2014,presentation.  See Note 2 – Divestiture and Discontinued Operations - in the Company did not record any income or loss associated with its former LMS business.  During the period ended December 31, 2013, the Company recorded agreed upon working capital adjustments that resulted in a net loss of $211,000.Notes to Consolidated Financial Statements for further discussion.
 
Business combinations

The Company accounts for business combinations pursuant to ASC 805, Business Combinations, which requires that assets acquired and liabilities assumed be recorded at their respective fair values on the date of acquisition. The fair value of the consideration paid is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is allocated to goodwill (the “Acquisition Method”). The purchase price allocation process requires the Company to make significant assumptions and estimates in determining the purchase price and the assets acquired and liabilities assumed at the acquisition date. The Company’s assumptions and estimates are subject to refinement and, as a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. The Company’s consolidated financial statements and results of operations reflect an acquired business after the completion of the acquisition.
 
Contingent Consideration

The Company determines the acquisition date fair value of contingent consideration using a discounted cash flow method, with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC Topic 820, Fair Value Measurement.  The significant inputs in the Level 3 measurement not supported by market activity included the Company’s probability assessments of expected future cash flows related to the Company’s acquisition of Brink Software Inc. during the contingent consideration period, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the definitive agreement.  The liabilities for the contingent consideration are established at the time of the acquisition and will be evaluated on a quarterly basis based on additional information as it becomes available.  Any change in the fair value adjustment is recorded in the earnings of that period.  During 2016, we recorded a $1.1 million adjustment to decrease the fair value of our contingent consideration related to the acquisition of Brink Software Inc., versus a $0.1 million adjustment to increase the fair value during 2015.  This is reflected within other expense on the statement of operations. Changes in the fair value of the contingent consideration obligations may result from changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations. Significant increases or decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.

Revenue recognition policy

Restaurant/Retail Contracts
Our Hospitality group’sRestaurant/Retail segment’s revenues consist of sales of the Company’s standard point-of-sale and property management systems ofPOS system to the HospitalityRestaurant/Retail segment. We derive revenue from the following sources: (1) hardware sales, (2) software license agreements, including sold as a perpetual licenselicenses and soldsoftware as a service, (3) professional services, (4) hosting services and (5) post-contract customer support ("PCS"(“PCS”).
 
We recognize revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is probable. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report.

Hardware

Revenue recognition on hardware sales occurs upon delivery to the customer site (or when shipped for systems that are not installed by the Company) when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectability is reasonably assured.
Software

Revenue recognition on software sales generally occurs upon delivery to the customer, when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectability is probable.reasonably assured.  For software sales sold as a perpetual license, and as a service,typically our Pixel software offering, where the Company is the sole party that has the proprietary knowledge to install the software, revenue is recognized upon installation and when the system is ready to go live.

Service

Service revenue consists of installation and training services, field and depot repair, subscription software products, associated software maintenance, and software related hosted services.  Installation and training service revenue are based upon standard hourly/daily rates as well as contracted prices with the customer, and revenue is recognized as the services are performed.  Support maintenance and field and depot repair are provided to customers either on a time and materials basis or under a maintenance contract.  Services provided on a time and materials basis are recognized as the services are performed.  Service revenues from maintenance contracts are recorded as deferred revenue when billed to and collected from the customer and are recognized ratably over the underlying contract period.  Software sold as a service with our Brink and SureCheck software offerings, is recorded as deferred revenue when billed and collected and recognized based onratably over the contracted price of its contract term.
 
The Company frequently enters into multiple-element arrangements with itsour customers including hardware, software, professional consulting services and maintenance support services. For arrangements involving multiple deliverables, when deliverables include software and non-software products and services, PAR evaluateswe evaluate and separatesseparate each deliverable to determine whether it represents a separate unit of accounting based on the following criteria: (a) the delivered item has value to the customer on a stand-alone basis; and (b) if the contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in the control of PAR.

59
The individualMultiple element arrangements which include hardware, service, and software offerings that are included in arrangements with our customers are identified and priced separately to the customerseparated based upon the stand alonestand-alone price for each individual hardware, service, or software sold in the arrangement irrespective of the combination of products and services which are included in a particular arrangement.  As such, overall consideration is allocated to each unit of accounting based on the unit'sunit’s relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to each deliverable: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party evidence of selling price (TPE), and (iii) best estimate of selling price (BESP). VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. VSOE is established for our software maintenance services to establish selling prices for our non-software related services, which include hardware maintenance, non-software related professional services, and transaction services. The Company uses BESP to allocate revenue when we are unable to establish VSOE or TPE of selling price. BESP is primarily used for elements such as products that are not consistently priced within a narrow range. The Company determines BESP for a deliverable by considering multiple factors including product and customer class, geography, average discount, and management'smanagement’s historical pricing practices. Amounts allocated to the delivered hardware and software elements are recognized at the time of sale provided the other conditions for revenue recognition have been met. Amounts allocated to the undelivered maintenance and other services elements are recognized as the services are provided or on a straight-line basis over the service period. In certain instances, customer acceptance is required prior to the passage of title and risk of loss of the delivered products. In such cases, revenue is not recognized until the customer acceptance is obtained. Delivery and acceptance generally occur in the same reporting period.

In situations where PAR’s solutions contain
Software elements, generally software and software related services (generally PCS, and professional services),services revenue isare recognized in accordance with authoritative guidance on software revenue recognition.  For the software and software-related elements of such transactions, revenue is allocated based on the relative fair value of each element, and fair value is determined by vender specific objective evidence, (VSOE), where available.  If VSOE is not available for all elements, we will use the residual method to separate the elements as long as we have VSOE for the undelivered amounts.elements.  If the Companywe cannot objectively determine the fair value of any undelivered element included in such multiple-element arrangements, the Company deferswe defer the revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

Government Contracts

The Company’s contract revenues generated by the Government segment result primarily from contract services performed for the U.S. Government under a variety of cost-plus fixed fee, time-and-material, and fixed-price contracts.  Revenue on cost-plus fixed fee contracts is recognized based on allowable costs for labor hours delivered, as well as other allowable costs plus the applicable fee.  Revenue on time and material contracts is recognized by multiplying the number of direct labor hours delivered in the performance of the contract by the contract billing rates and adding other direct costs as incurred.  Revenue from fixed-price contracts is recognized as labor hours are delivered which approximates the straight-line basis of the life of the contract. The Company’s obligation under these contracts is to provide labor hours to conduct research or to staff facilities with no other deliverables or performance obligations.  Anticipated losses on all contracts are recorded in full when identified.  Unbilled accounts receivable areis stated in the Company’s consolidated financial statements at their estimated realizable value.  Contract costs, including indirect expenses, are subject to audit and adjustment through negotiations between the Company and U.S. Government representatives.

Warranty Provisions
60
TableWarranty provisions for product warranties are recorded in the period in which the Company becomes obligated to honor the related right, which generally is the period in which the related product revenue is recognized. The Company accrues warranty reserves based upon historical factors such as labor rates, average repair time, travel time, number of Contentsservice calls per machine and cost of replacement parts. When a sale is consummated, a warranty reserve is recorded based upon the estimated cost to provide the service over the warranty period.

Cash and cash equivalents

The Company considers all highly liquid investments, purchased with a remaining maturity of three months or less, to be cash equivalents.

Accounts receivable – Allowance for doubtful accounts

Allowances for doubtful accounts are based on estimates of probable losses related to accounts receivable balances.  The establishment of allowances requires the use of judgment and assumptions regarding probable losses on receivable balances.  The Company continuously monitors collections and payments from our customers and maintain a provision for estimated credit losses based on our historical experience and any specific customer collection issues that we have identified.  Thus, if the financial condition of our customers were to deteriorate, our actual losses may exceed our estimates, and additional allowances would be required.

Inventories

The Company’s inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out (“FIFO”) method.  The Company uses certain estimates and judgments and considers several factors including product demand, changes in customer requirements and changes in technology to provide for excess and obsolescence reserves to properly value inventory.

Property, plant and equipment

Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to twenty-five years.  Expenditures for maintenance and repairs are expensed as incurred.
Other assets

Other assets primarily consist of cash surrender value of life insurance related to the Company’s Deferred Compensation Plan.Plan eligible to certain employees.  The funded balance is reviewed on an annual basis.

Income taxes

The provision for income taxes is based upon pretax earnings with deferred income taxes provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities.  The Company records a valuation allowance when necessary to reduce deferred tax assets to their net realizable amounts.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Other long-term liabilities

Other long-term liabilities represent amounts owed to certain employees who are participants in the Company’s Deferred Compensation Plan and the estimated fair value of the contingent consideration payable related to the Brink Software Inc. acquisition. During 2016, we recorded a $1.1 million adjustment to decrease the fair value of our contingent consideration related to the acquisition of Brink Software Inc., versus a $0.1 million adjustment to increase the fair value during 2015.  This is reflected within other expense on the statement of operations. Changes in the fair value of the contingent consideration obligations may result from changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations.
 
Foreign currency

The assets and liabilities for the Company’s international operations are translated into U.S. dollars using year-end exchange rates. Income statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are recorded as a separate component of shareholders’ equity under the heading Accumulated Other Comprehensive Loss.Income (Loss).  Exchange gains and losses on intercompany balances of apermanently invested long-term investment natureloans are also recorded as a translation adjustment and are included in Accumulated Other Comprehensive Income (Loss).Loss.  Foreign currency transaction gains and losses are recorded in other income in the accompanying statements of operations.
Other income (expense)

The components of other (expense) income from continuing operations for the two years ending December 31 are as follows:
  
Year ended December 31
(in thousands)
 
  2016  2015 
       
Foreign currency loss $(24) $(193)
Rental (loss) income-net  (662)  264 
Insurance recovery / investment write off  771   (776)
Fair value adjustment contingent consideration  1,130   (90)
Other
  101   (5)
Income (expense) $1,316  $(800)

  
Year ended December 31
(in thousands)
 
  2014  2013 
     
Foreign currency gains / (loss) $(154) $146 
Rental income-net  359   448 
Other  99   (88)
  $304  $506 

During 2016, we recorded a $1.1 million adjustment to decrease the fair value of its contingent consideration related to the acquisition of Brink Software Inc.  In addition, we recorded an insurance recovery of $0.8 million in 2016 relating to the unauthorized transfers of the Company's funds by its former chief financial officer. Also, during 2016, the Company incurred a net loss on rental contracts of approximately $0.7 million. During 2015, the investment write-off of $0.8 million represents the write-off of unauthorized investments that were made in contravention of the Company’s policies and procedures involving the Company’s funds. The unauthorized investments occurred during the period between September 25, 2015 and November 6, 2015.
Identifiable intangible assets

The Company’s identifiable intangible assets represent intangible assets acquired from the Brink Software Inc. acquisition as well as internally developed software costs.  The Company capitalizes certain costs related to the development of computer software sold byused in its HospitalityRestaurant/Retail segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs.  The technological feasibility of a computer software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product can be produced to meet its design specifications including functions, features, and technical performance requirements. Software development costs incurred after establishing feasibility (as defined within ASC 985-20)985-20 for software cost related to sold as a perpetual license and ASC-350-40 for software sold as a service) are capitalized and amortized on a product-by-product basis when the product is available for general release to customers.  Software costs capitalized within continuing operations during the periods ended December 31, 20142016 and 20132015 were $2.9$2.7 million and $4.7$2.1 million, respectively.

Annual amortization, charged to cost of sales when the product is available for general release to customers, is computed using the greater of (a) the straight-line method over the remaining estimated economic life of the product, generally three to seven years or (b) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product.  Amortization of capitalized software costs from continuing operations amounted to $1.9$1.1 million and $1.3$0.8 million, in 20142016 and 2013,2015, respectively.

In 2014, the  The Company acquired identifiable intangibleassessed its recoverability of capitalized software assets in connection withnoting an impairment charge of $0.5 million to accelerate one of its acquisition of Brink Software.  Amortization of intangible assets acquired from the Brink acquisition amounted to $279,000 in 2014.software modules.  There was no amortizationimpairment charge recorded as of prior acquisitions recorded in 2014 and 2013.December 31, 2015.
 
The components of identifiable intangible assets, excluding discontinued operations, are:

 
December 31,
(in thousands)
  
December 31,
(in thousands)
    
 2014  2013  2016  2015  Estimated Useful Life 
Acquired and internally developed software costs $26,134  $16,640  $15,884  $13,702  3 - 7 years 
Customer relationships  160   -   160   160  7 years 
Non-competition agreements  30   - 
Trademarks, trade names (non-amortizable)  2,200   1,800 
Non-compete agreements  30   30  1 year 
  28,524   18,440   16,074   13,892    
Less accumulated amortization  (5,572)  (3,369)  (5,508)  (3,394)   
 $22,952  $15,071  $10,566  $10,498    
Trademarks, trade names (non-amortizable)  400   400  N/A 
 $10,966  $10,898    

The expected future amortization of these intangible assets assuming straight-line amortization of capitalized software costs and acquisition related intangibles is as follows (in thousands):

2015 $3,068 
2016  3,465 
2017  3,364  $2,219 
2018  3,262   2,054 
2019  2,985   1,616 
2020  1,396 
2021  1,031 
Thereafter  4,608   2,250 
Total $20,752  $10,566 

The Company has elected to test for impairment of indefinite lived intangible assets during the fourth quarter of its fiscal year.  To value the indefinite lived intangible assets, the Company utilizes the royalty method to estimate the fair values of the trademarks and trade names.  As a resultDuring 2016, the Company recorded an impairment charge of the testing, there$0.5 million to accelerate one of its software modules.  There was no related impairment charge recorded for the periods endedas of December 31, 2014 and 2013.2015.

Stock-based compensation

The Company recognizes all stock-based compensation to employees, including grants of employee stock options and restricted stock awards, in the financial statements as compensation cost over the vesting period using an accelerated expense recognition method, based on their fair value on the date of grant.
 
Earnings per share

Basic earnings per share are computed based on the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflect the dilutive impact of outstanding stock options and restricted stock awards.

The following is a reconciliation of the weighted average shares outstanding for the basic and diluted earnings per share computations (in thousands, except share and per share data):

 December 31,  December 31, 
 2014  2013  2016  2015 
Income (loss) from continuing operations $(3,651) $569 
Income from continuing operations $2,503  $4,021 
                
Basic:                
Shares outstanding at beginning of year  15,473   15,210   15,645   15,592 
Weighted average shares issued during the year  28   30 
Weighted average shares issued (cancelled) during the year, net  30   (30)
Weighted average common shares, basic  15,501   15,240   15,675   15,562 
Income (loss) from continuing operations per common share, basic $(0.24) $0.04 
Income from continuing operations per common share, basic $0.16  $0.26 
                
Diluted:                
Weighted average common shares, basic  15,501   15,240   15,675   15,562 
Weighted average shares issued during the year  -   1 
Dilutive impact of stock options and restricted stock awards  -   32   63   104 
Weighted average common shares, diluted  15,501   15,273   15,738   15,666 
Income (loss) from continuing operations per common share, diluted $(0.24) $0.04 
Income from continuing operations per common share, diluted $0.16  $0.26 

At December 31, 20142016 and 20132015 there were 215,00038,000 and 127,000112,000 incremental shares, respectively, from the assumed exercise of stock options that were excluded from the computation of diluted earnings per share because of the anti-dilutive effect on earnings per share.  There were no restricted stock awards excluded from the computation of diluted earnings per share for each of the fiscal years ended December 31, 20142016 and 2013.2015.

Goodwill

The Company tests goodwill for impairment on an annual basis, which is on the first day of the fourth quarter, or more often if events or circumstances indicate there may be impairment.  The Company operates in two businessreportable operating segments Hospitality- Restaurant/Retail and Government.  Goodwill impairment testing is performed at the sub-segment level (referred to as a reporting unit).  The threetwo reporting units utilized by the Company are: Restaurant, Hotel/Resort/Spa,Restaurant/Retail, and Government.  Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.  The amount outstanding for goodwill within continuing operations was $17.2 million and $6.9$11.1 million at December 31, 20142016 and 2013, respectively.  The increase was a result of $10.3 million of goodwill recorded by the Restaurant reporting unit from the acquisition of Brink Software.2015.  There was no impairment of goodwill for the periods ending December 31, 20142016 or 2013.2015.
  
The changes and carrying amounts of goodwill by reporting unit were as follows (in thousands):
  Restaurants  
Hotel/Resort/
Spa
  Government  Total 
         
Net Balances at December 31, 2012 $-  $6,116  $736  $6,852 
Goodwill  12,433   13,946   736   27,115 
Accumulated Impairment charge  (12,433)  (7,830)  -   (20,263)
Net Balances at December 31, 2013  -   6,116   736   6,852 
Goodwill  12,433   13,946   736   27,115 
Accumulated Impairment charge  (12,433)  (7,830)  -   (20,263)
Acquisition  10,315   -   -   10,315 
Net balance at December 31, 2014 $10,315  $6,116  $736  $17,167 

Impairment of long-lived assets

The Company evaluates the accounting and reporting for the impairment of long-lived assets in accordance with the reporting requirements of ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets.  The Company will recognize impairment of long-lived assets or asset groups if the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets.  If the carrying value of a long-lived asset or asset group is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset or asset group for assets to be held and used, or the amount by which the carrying value exceeds the fair market value less cost to sell for assets to be sold.  NoDuring 2016, the Company recorded an impairment charge of $0.5 million to accelerate one of its software modules.  There was identified during 2014 or 2013.no impairment charge recorded as of December 31, 2015.

Reclassifications

Amounts in prior years’ consolidated financial statements are reclassified whenever necessary to conform to the current year’s presentation. The results of operations of PSMS have been classified as discontinued operations in accordance with Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements – Discontinued Operations.  All prior period amounts have been reclassified to conform to the current period presentation.  See Note 3 – Discontinued Operations - in the Notes to Consolidated Financial Statements for further discussion.
Use of estimates

The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period.  Significant items subject to such estimates and assumptions include revenue recognition, stock based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant and equipment, identifiable intangible assets and goodwill, valuation allowances for receivables, inventories and deferred income tax assets, and measurement of contingent consideration at fair value. Actual results could differ from those estimates.

The current economic conditions and the continued volatility in the U.S. and in many other countries where the Company operates could contribute to decreased consumer confidence and continued economic uncertainty which may adversely impact the Company’s operating performance.  Although the Company has seen an improvement in the markets which it serves, the continued volatility in these markets could have an impact on purchases of the Company’s products, which could result in a reduction of sales, operating income and cash flows. This could have a material adverse effect on the Company’s business, financial condition and/or results of operations and could have a material adverse impact on the Company’s significant estimates discussed above, specifically the fair value of the Company’s reporting units used in support of its annual goodwill impairment test.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2014,March 2016, the FASBFinancial Accounting Standards Board (FASB) issued amended guidance onASU 2016-09 to simplify several aspects of the accounting for certainemployee share-based payment transactions standard, including the classification of excess tax benefits and deficiencies and the accounting for employee compensation awards.forfeitures. The amended guidance requires that share-based employee compensation awards with termsis effective for the Company beginning in the first quarter of a performance target that affects vesting2017 at which time we will adopt.  The updates to the accounting standard will include the following:

Excess tax benefits and that coulddeficiencies will no longer be achieved after the requisite service period be treatedrecognized as a performance condition. As such,change in additional paid-in-capital in the performance target should not be reflected in estimating the grant-date fair valueequity section of the award and compensation cost shouldbalance sheet, instead they are to be recognized in the period in which it becomes probable thatincome statement as a tax expense or benefit. In the performance targetstatement of cash flows, excess tax benefits and deficiencies will no longer be classified as a financing activity, instead they will be achieved.classified as an operating activity.  The impact of this change in accounting to future periods cannot be estimated, as it is dependent upon several variables not in control of the Company, such as the future timing and amount of employee option exercises, restricted stock vesting and the Company’s future stock price.
Entities will have the option to continue to reduce share-based compensation expense during the vesting period of outstanding awards for estimated future employee forfeitures or they may elect to recognize the impact of forfeitures as they actually occur.  The Company is requiredwill continue to adopt thisreduce the share-based compensation expense during the vesting period of outstanding awards for estimated future forfeitures.

The ASU also provides new guidance for its annualto other areas of the standard including minimum statutory tax withholding rules and interim periods beginning March 1, 2016. Thethe calculation of diluted common shares outstanding.

Adoption approach varies based on the amendment topic and the Company does not expect a significant impact at this time.

In February 2016, the FASB issued ASU 2016-02 impacting the accounting for leases intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. The revised standard will require entities to recognize a liability for its lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term. Lease obligations are to be measured at the present value of lease payments and accounted for using the effective interest method. The accounting for the leased asset will differ slightly depending on whether the agreement is deemed to be a financing or operating lease. For finance leases, the leased asset is depreciated on a straight-line basis and recorded separately from the interest expense in the income statement resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. The ASU requires that assets and liabilities be presented or disclosed separately and classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The new standard is effective for the Company beginning in the first quarter 2019 and early adoption is permitted, although unlikely at this time. We are currently evaluating the impact of these amendments on our financial statements.

In November 2015, the FASB issued new guidance related to the balance sheet classification of deferred taxes.  This standard requires an entity to classify all deferred tax assets, along with any valuation allowance, as noncurrent on the balance sheet. As a result, each jurisdiction will have one net noncurrent deferred tax asset or liability.  The new standard is effective for the Company for fiscal years beginning after December 15, 2016.  The adoption of this guidancestandard in Q1 2017, which will be applied prospectively, is not expected to have a material impact on itsthe Company’s consolidated financial statements.

In July 2015, the FASB issued new guidance related to the measurement of inventory.  This standard changes the inventory valuation method from the lower of cost or market to the lower of cost or net realizable value for inventory valued under the first-in, first-out or average cost methods.  The new standard is effective for the Company beginning in Q1 of 2017, and requires prospective adoption.  We do not anticipate the adoption will have a material impact on the Company’s consolidated financial statements.

In August 2014, the FASB issued new guidance related to disclosures around going concern, including management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures when conditions or events raise substantial doubt about an entity’s ability to continue as a going concern. The new standard is effective for the Company beginning in Q1 2017, with early adoption permitted although the Company did not early adopt. The impact of adopting this guidance on January 1, 2017 is not expected to have a material impact on our consolidated financial statements.
 
In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized.  The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.  AdoptionIn July 2015, the FASB affirmed its proposal of a one-year deferral of the amendments is requiredeffective date of the new revenue standard.  As a result, the new guidance will be effective for the Company beginning in the first quarter of fiscal 2017. Early adoption is not permitted.Q1 2018. The amendments may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application. PAR is currently evaluating the impact of these amendments and plans not to early adopt and to adopt in 2018.  In the transition alternativessecond quarter of 2017, we will commence a project to assess the potential impact of the new standard on PAR's financial statements.

In April 2014, the FASB issued guidance that raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and other disposals that do not meet the definition of a discontinued operations. The new guidance defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The new guidance is effective on January 1, 2015, with early adoption permitted. While we do not expect a material impact on PAR’sour consolidated financial statements upon adoption,and related disclosures.  This project will also include the effects on future periods will depend uponassessment and enhancement of our internal processes and systems to address the nature and significance of future disposals.new standard.  At this time, we have not yet selected a transition method.

Recently Adopted Accounting Pronouncements

In July 2013, the FASB issued guidance eliminating diversityNone noted in practice surrounding the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance requires entities to net an unrecognized tax benefit with a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if the carryforward would be used to settle additional tax due upon disallowance of a tax position. The amendment is effective for fiscal periods beginning after December 15, 2013 with early adoption permitted. The adoption of this amendment on January 1, 2014 did not have a significant impact on the Company's financial position or results of operations.prior two years.

Note 2 — Divestiture and Discontinued Operations
 
68On November 4, 2015, ParTech, Inc. (“PTI”), a wholly owned subsidiary of PAR Technology Corporation, PAR Springer-Miller Systems, Inc. (“PSMS”), Springer-Miller International, LLC (“SMI”), and Springer-Miller Canada, ULC (“SMC”) (PTI, PSMS, SMI and SMC are collectively referred to herein as the “Group”), entered into an asset purchase agreement (the “APA”)  with Gary Jonas Computing Ltd., SMS Software Holdings LLC, and Jonas Computing (UK) Ltd. (the “Purchasers”),   each of which is an affiliate of the Jonas Software Group of Constellation Software Inc. of Toronto, Ontario,  for the sale of substantially all of the assets of PSMS. Total consideration to be received from the sale is $16.6 million in cash (the “Base Purchase Price”), with $12.1 million received at the time of closing, and $4.5 million receivable eighteen months after the closing date, a portion of which amount will be available to pay certain indemnification obligations of the group, and/or adjusted based on the net tangible asset calculation, as defined in the APA  The estimated fair value of the remaining portion of the note receivable, less any estimated working capital adjustments, due on May 4, 2017 is approximately $3.5 million and is included within current assets in the Company consolidated balance sheets.  During 2016, the Company reduced the receivable by $0.9 million based on the terms of the net tangible asset calculation as the working capital shortfall was greater than previously estimated.
In addition to the base purchase price, contingent consideration of up to $1.5 million could be received by the Company based on achievement of certain agreed-upon revenue and earnings targets for calendar years 2016 through 2018, as set forth in the APA.  As of December 31, 2016, the Company has not recorded any amount associated with this contingent consideration as we do not believe achievement of the related targets is probable.
In March 2013,Summarized financial information for the FASB clarified that, whenCompany’s discontinued operations is as follows (in thousands):

  
December 31,
(in thousands)
 
  2016  2015 
Assets      
Other current assets $462  $377 
Assets of discontinued operation $462  $377 
         
Liabilities        
Accrued salaries and benefits $-  $441 
Liabilities of discontinued operation $-  $441 

Summarized financial information for the Company’s discontinued operations is as follows (in thousands):

  
December 31,
(in thousands)
 
  2016  2015 
       
Total revenues $-  $14,545 
         
Loss from discontinued operations before income taxes $(1,131) $(5,702)
Loss on disposition  -   (2,408)
Benefit from income taxes  411   3,198 
Loss from discontinued operations, net of taxes $(720) $(4,912)
During 2016, the Company recognized a reporting entity (parent) ceasesloss on discontinued operations of $0.7 million (net of tax) mainly due to have a controlling financial interest inreduction of the note receivable of $0.6 million (net of tax) and $0.1 million (net of tax) adjustment due to a subsidiary or grouploss on foreign currency exposure.   The reduction of assets thatthe note receivable is a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. The cumulative translation adjustment should be released into net income only if the sale or transfer resultsreflected in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The FASB also clarified that if a business combination is achieved in stages related to a previously held equity method investment (step-acquisition) that is a foreign entity, the amount of accumulated other comprehensive income that is reclassifiedCompany’s earnings for 2016 and included in the calculation of gain or loss as of the acquisition date shall include any foreign currency translation adjustment related to that previously held investment. The amendments are effective prospectively for fiscal years beginning after December 15, 2013, with early adoption permitted. The adoption of this amendment on January 1, 2014 did not have a significant impact on the Company's financial position or results of operations.

In February 2013, the FASB issued guidance requiring an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date aswill reduce the amount the entity agreedCompany aniticipates collecting on May 4, 2017 to pay for the arrangement between them and the other entities that are also obligated to the liability and any additional amount the entity expects to pay on behalf of the other entities. The amendments are effective for fiscal periods (and interim reporting periods within those years) beginning after December 15, 2013. The adoption of this amendment on January 1, 2014 did not have a significant impact on the Company's financial position or results of operations.$3.5 million.

Note 2 — Acquisition

On September 18, 2014, PAR Technology Corporation (the "Company") and its wholly-owned subsidiary, ParTech, Inc. ("ParTech"), entered into and closed a definitive agreement with Brink Software Inc. ("Brink") and all the shareholders of Brink pursuant to which ParTech has purchased the equity interest of Brink in a two-step closing.  This acquisition was to expand the Company’s cloud based POS software offerings to complement the Company’s existing infrastructure. The guaranteed portion of the purchase price for Brink’s shares will total $10 million in cash, which is payable over a period of three years with $5.0 million paid at closing, $3.0 million payable on the first year anniversary of close, and $2.0 million payable on the second year anniversary of close.  In addition to the guaranteed payments, there isadjustments above, the Company paid a contingent consideration$1.0 million working capital adjustment, of up to $7.0which $0.9 million payable to the former ownerswas included in accrued expenses at December 31, 2015, that resulted in a loss (net of Brink based on the achievementtax) of certain conditions$26,000.  The working capital payment was estimated and paid as it was defined in the definitive agreement.  Springer-Miller APA.
 
The payment of $5.0 million on September 18, 2014, was for the purchase of 51% of Brink’s outstanding shares. The remaining 49% will be purchased and transferred on September 18, 2015, the first anniversary of the initial closing date, for a purchase price of $5.0 million, $3.0 million of which will be payable at the second closing and the $2.0 million balance will be payable on September 18, 2016.  The Company has a current note payable included within the Consolidated Balance Sheet of $3.0 million for payment at the second close.  The estimated fair value of the long term portion of the note payable due on September 18, 2016 is approximately $1.8 million and is included within long-term debt in PAR’s consolidated balance sheet.  Per the stock purchase agreement, Brink shareholders assigned their voting rights of the remaining 49% of Brink shares to PAR.  As a result, PAR controls 100% of the Brink shares and fully consolidates the financial results of Brink in accordance with ASC Topic 805.  The agreement also provides for up to $1.0 million of the purchase price to be delivered into escrow if one or more claims arise within the first twelve months of the transaction. Such escrow will serve as a source of payment for any indemnification obligations that may arise. 

The contingent purchase price maximum of $7.0 million can be earned through fiscal year 2018, based upon the achievement of certain conditions as defined in the definitive agreement.  The estimated fair value of this contingent consideration is approximately $5.0 million and is included within non-current liabilities in PAR’s consolidated balance sheet (see note 12). 

In determining the purchase price allocation, the Company considered, among other factors, market participants’ intentions to use the acquired assets and the historical and estimated future demand for the acquired Brink POS cloud based point of sale application.As of September 18, 2014, the Company recorded an aggregate purchase price of $14.9 million, including a cash payment of $5.0 million, net of cash acquired of $184,000, plus additional estimated cash payments of $9.9 million, which represents the fair value of the remaining consideration.  
The total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed by the Company based on their fair values as of the closing date of the acquisition.  The excess of the purchase price over those fair values was recorded to goodwill.  The following table summarizes our allocation of purchase price (in thousands):

Accounts receivable $83 
Inventories  116 
Intangible assets  7,190 
Goodwill  10,315 
Other assets  90 
Total assets acquired $17,794 
     
Accounts payable $124 
Other current liabilites  365 
Deferred tax liabilities 2,445
Total liabilities assumed $2,934 
         
Purchase price $14,860 

The identifiable intangible assets acquired and their estimated useful lives (based on third party valuations) are as follows:

  Fair Value 
Estimated
Useful Life
Trade Name $400  Indefinite
Developed Technology  6,600  7 Years
Customer Relationships  160  7 Years
Non-Competition Agreements  30  7 Years
  $7,190  

The intangible assets are being amortized on a straight line basis, which is consistent with the pattern that the economic benefits of the intangible assets are expected to be utilized based on the estimated cash flows generated from such assets.  The Company recognized approximately $279,000 of amortization expense related to the amortizable intangible assets at December 31, 2014 based on the aforementioned estimates.
On an unaudited proforma basis, assuming the completed acquisition has occurred as of the beginning of the periods presented, the consolidated results of the Company would have been as follows (in thousands, except per share amounts):

  Year ended December 31, 
  2014  2013 
Revenues $235,075  $242,476 
Net loss $(4,281) $(779)
         
Earnings per share:        
Basic $(0.28) $(0.05)
Diluted $(0.28) $(0.05)

The unaudited proforma financial information presented above gives effect to purchase accounting adjustments which have resulted or are expected to result from the acquisition.  This proforma information is not necessarily indicative of the results that would actually have been obtained had the companies combined for the periods presents.

The Company has recognized transaction, integration, and other acquisition related costs of approximately $163,000 through December 31, 2014, which have been recorded within sales, general, and administration expense within the Company’s Consolidated Statements of Operations. Additionally, the results of the Brink acquisition acquired in 2014 contributed $832,000 to PAR’s revenue and further reduced PAR’s net loss by $145,000.  The results of operations of the Brink acquisition is reported in the Company’s consolidated results of operations of the Company from the date of acquisition.51
Note 3 — Accounts Receivable, net

The Company’s net accounts receivable consist of:consists of, excluding discontinued operations:

 
December 31,
(in thousands)
  
December 31,
(in thousands)
 
 2014  2013  2015  2015 
Government segment:          
Billed $9,340  $16,932  $6,779  $9,400 
Advanced billings  (450)  (4,335)  (1,599)  (1,266)
  8,890   12,597   5,180   8,134 
Hospitality segment:                
Accounts receivable - net  22,555   18,091   25,525   21,396 
 $31,445  $30,688  $30,705  $29,530 

At December 31, 20142016 and 2013,2015, the Company had recorded allowances for doubtful accounts of $582,000$0.9 million and $561,000,$0.9 million, respectively, against HospitalityRestaurant/Retail segment accounts receivable.  Write-offs of accounts receivable during fiscal years 20142016 and 20132015 were $391,000$0.3 million and $696,000,$0.4 million, respectively.  The provision for doubtful accounts recorded in the consolidated statements of operations was $412,000$0.4 million and $716,000$0.8 million in 20142016 and 2013,2015, respectively.

Note 4 — Inventories, net

Inventories are used primarily in the manufacture maintenance, and service of the Hospitality segment systems.  Inventories are net of related reserves.Restaurant/Retail products.  The components of inventories-net are:inventory, net consist of the following, excluding discontinued operations:
 
 
December 31,
(in thousands)
 2014 2013 
Finished Goods $13,609  $12,033 
Work in process  457   297 
 
Component parts  3,748   3,558 
Service parts  8,108   8,577 
  $25,922  $24,465 
  
December 31,
(in thousands)
 
  2016  2015 
Finished Goods $9,423  $8,775 
Work in process  443   402 
Component parts  10,386   5,068 
Service parts  5,985   7,254 
  $26,237  $21,499 
At December 31, 2016 and December 31, 2015, the Company had recorded inventory reserves of $9.2 million and $8.8 million, respectively, against Restaurant/Retail inventories, which relates primarily to service parts.
 
Note 5 — Property, Plant and Equipment

The components of property, plant and equipment, excluding discontinued operations, are:

 
December 31,
(in thousands)
  
December 31,
(in thousands)
 
 2014  2013  2016  2015 
Land $253  $253  $253  $253 
Building and improvements  6,467   6,540   5,816   5,645 
Rental property  5,308   5,311   5,345   5,330 
Furniture and equipment  13,177   25,431   13,890   11,804 
  25,205   37,535   25,304   23,032 
Less accumulated depreciation  (19,070)  (32,041)  (18,269)  (17,316)
 $6,135  $5,494  $7,035  $5,716 

The estimated useful lives of buildings and improvements and rental property are twenty to twenty-five years.  The estimated useful lives of furniture and equipment range from three to eight years.  Depreciation expense from continuing operations was $1,467,000$2.1 million and $1,502,000$1.1 million for 20142016 and 2013,2015, respectively.

The Company leases a portion of its headquarters facility to various tenants.  Net rent received from these leases totaled $359,000$0.3 million and $448,000$0.3 million for 20142016 and 2013,2015, respectively.  Future minimum rent payments due to the Company under these lease arrangements are approximately $237,000 in 2015$0.2 million, and 2016$0.1 million 2017 and $178,000 in 2017.2018, respectively.

The Company leases office space under various operating leases. Rental expense from continuing operations on these operating leases was approximately $2.0$1.6 million and $2.6$1.4 million for 20142016 and 2013,2015, respectively.  Future minimum lease payments under all non-cancelable operating leases are (in thousands):

2015  1,821 
2016  1,456 
2017  1,031   1,360 
2018  786   1,109 
2019  721   895 
2020  328 
2021  208 
Thereafter  1,220   503 
 $7,035  $4,403 

Note 6 — Debt

On November 29, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, as the Borrower thereunder, together with certain of the Company’s US subsidiaries, as “Loan Guarantors” (together with the Company, the “Loan Parties”), and JPMorgan Chase Bank, N.A., as the “Lender”. The Credit Agreement provides for revolving loans in an aggregate principal amount of up to $15.0 million to be made available to the Company; availability at any time being equal to the lesser of (i) $15.0 million and (ii) a borrowing base (equal to the sum of 80% eligible accounts, 50% eligible raw materials inventory and 35% eligible finished goods inventory, with no more than 50% of total eligible inventory included in the borrowing base), less the aggregate principal amount outstanding (the “Credit Facility”). Interest accrues on outstanding principal balances at an applicable rate per annum determined, as of the end of each fiscal quarter of the Company, by reference to the CBFR Spread or the Eurodollar Spread based on the Company’s consolidated indebtedness ratio as at the determination date. The Credit Facility replaces the Company’s asset-based credit agreement dated September 9, 2014 with JPMorgan Chase, N.A. (the “2014 ABL Credit Agreement”) and a portion of the proceeds of the Credit Facility were used to pay-off all indebtedness outstanding under the Company’s 2014 ABL Credit Agreement.
 
Note 6 — Debt
During fiscal year 2013The Credit Facility matures three (3) years from the date of the Credit Agreement and through June 4, 2014,is guaranteed by the Company maintained a credit facility with J.P. Morgan Chase, N.A. and NBT Bank, N.A. (on behalf of itself and as successor by merger to Alliance Bank, N.A.) consisting of $20.0 million  in working capital lines of credit (with the option to increase to $30.0 million), which expired in June 2014.  This agreement allowed the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread or at the bank's prime lending rate.  This credit facility wasLoan Guarantors. The Credit Facility is secured by certain assetssubstantially all of the Company.

On June 5, 2014, the Company executed an amendment to its then existing credit facility to provide for the renewal of the facility through June 2017, with terms generally consistent to those of its prior facility.  This facility provided the Company with capital of up to $20.0 million (with the option to increase to $30.0 million) in the form of a revolving line of credit.  This agreement allowed the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread or at the bank's prime lending rate.

On September 9, 2014, the Company terminated its existing credit facilities with J.P. Morgan Chase, N.A. and NBT Bank, N.A. (on behalf of itself and as successor by merger to Alliance Bank, N.A.) consisting of $20.0 million in working capital lines of credit, and the Company and its domestic subsidiaries entered into a new three-year credit facility with J.P. Morgan Chase, N.A. The terms of the new agreement provide for up to $25 million of a line of credit, with borrowing availability based on a percentage of value of various assets of the Company and itsof the other Loan Parties; provided, that the Credit Facility is not secured by any liens on more than 65% of the voting stock of the Company’s foreign subsidiaries. The new agreement bears interestCredit Agreement contains representations and warranties and affirmative and negative covenants that are usual and customary, including representations, warranties and covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness, incur or permit to exist liens on assets, make investments, loans, advances, guarantees and acquisitions, consolidate or merge with or into any other company, engage in asset sales and pay dividends and make distributions. The Credit Agreement requires that the Company’s consolidated indebtedness ratio at the applicable bank rate (3.25% at December 31, 2014) or, at the Company's option, at the LIBOR rate plus the applicable interest rate spread (rangeend of 1.5% – 2.0%).  At December 31, 2014, the Company had an outstanding balanceeach of approximately $5.0 million on this line of credit at a rate of 2.19%.  The weighted average interest rate paid by the Company was approximately 2.64% duringits fiscal year 2014.   The new agreement contains traditional asset based loan covenantsquarters to be greater than 3.0 to 1.0 and includes covenants regarding earnings before interest, tax, depreciation & amortization (“EBITDA”) andmaintain a fixed charge coverage ratio of not less than 1.15 to 1.0 for the Company’s fiscal quarter ending December 31, 2016 (to be tested only in the event the Company’s total consolidated indebtedness equaled or exceeded $5.0 million at the end of such fiscal quarter) and provides1.25 to 1.0 for accelerationthe quarter ending March 31, 2017 and each quarter thereafter. Obligations under the Credit Agreement may be accelerated upon the occurrence ofcertain customary events of defaults.default (subject to grace periods, as appropriate), including among others: nonpayment of principal, interest or fees; breach of the affirmative or negative covenants; breach of the representations or warranties in any material respect; event of default under, or acceleration of, other material indebtedness; bankruptcy or insolvency; material judgments entered against the Company or any of its subsidiaries; invalidity or unenforceability of any collateral documentation associated with the Credit Facility; and a change of control of the Company there was no outstanding balance on the line of credit at December 31, 2016.   The Company was in compliance with these covenants atas of December 31, 2014.2016.
On March 19, 2015, the Company amended its existing Credit Facility to reduce the EBITDA requirement and extended the fixed charge coverage ratio.  The amendment provides the Company flexibility to continue investing in the Company’s future product offerings while maintaining certain covenant thresholds as defined in the amendment.  The Company anticipates it will be in compliance with its covenants throughout fiscal year 2015.
In addition to the credit facility described above,Credit Facility, the Company has a mortgage loan, collateralized by certain real estate, with a balance of $919,000$0.6 million and $1,084,000 at$0.7 million as of December 31, 20142016 and 2013,2015, respectively.  This mortgage matures on November 1, 2019.  The Company's fixedCompany’s interest rate was 4.05% through October 1, 2014.  Beginning on October 1, 2014, theis fixed rate was converted to a new rate equal to the then-current five year fixed advanced rate charged by the New York Federal Home Loan bank, plus 225 basis points.  Effective November 1, 2014, the Company entered into an agreement that fixed the interest rate at 4.00% through the maturity date of the loan.  The annual mortgage payment including interest through November 1, 2019 totals $206,000.$0.2 million.

In connection with the acquisition of Brink Software on September 18, 2014, the Company recorded indebtedness to the former owners of Brink under the stock purchase agreement.  AtAs of December 31, 2014,2016 and 2015, the principal balance of the note payable was $5.0zero and $2.0 million and it had a carrying value of zero and $4.8 million.million, respectively.  The carrying value was based on the note’s estimated fair value at the time of acquisition.  The note doesdid not bear interest and repayment terms are $3.0 million, payablewhich was paid on the first anniversary of close, September 18, 2015, and $2.0 million payable on the second anniversary of close, which was paid in September 18, 2016.

The Company’s future principal payments under the stock purchase agreement and itsour mortgage are as follows (in thousands):

  
Total
  
Less
Than
1 Year
  
1-3 Years
  
3 - 5
Years
  
More than 5
Years
 
Debt obligations $566  $187  $379  $-  $- 
Operating lease  4,403   1,360   2,004   536   503 
Total $4,969  $1,547  $2,383  $536  $503 
2015 $3,173 
2016  2,000 
2017  188 
2018  195 
2019  183 
  $5,739 
Note 7 — Stock Based Compensation

The Company recognizes all stock-based compensation to employees and directors, including grants of employee stock options and restricted stock awards, in the financial statements as compensation cost over the vesting period based on their fair value on the date of grant.  Total stock-based compensation expense included in selling, general and administrative expense in 20142016 and 20132015 was $1,185,000$0.5 million and $187,000,$0.5 million, respectively.  The amount recorded for the twelve months ended December 31, 20142016 and 20132015 was recorded net of benefits of $114,000$0.3 million and $436,000,$0.2 million, as the result of forfeitures of unvested stock awards prior to the completion of the requisite service period.  The amount of total stock based compensation includes $608,000$0.1 million and $438,000$0.2 million in 20142016 and 2013,2015, respectively, relating to restricted stock awards.  No compensation expense has been capitalized during 20142016 and 2013.2015.

The Company has reserved 2,250,0001.0 million shares under its 20052015 Equity Incentive Plan (“EIP”).  Stock options under this Plan may be incentive stock options or nonqualified stock options. The Plan also provides for restricted stock awards, including performance based awards.  Stock options are nontransferable other than upon death.  Option grants generally vest over a one to fivethree year period after the grant and typically expire ten years after the date of the grant. The EIP provides for the grant of several different forms of stock-based compensation, including stock options to purchase shares of PAR common stock. The Compensation Committee of the Board of Directors (Compensation Committee) has discretion to determine the material terms and conditions of option awards under the EIP, provided that (i) the exercise price must be no less than the fair market value of PAR common stock (defined as the closing price) on the date of grant, (ii) the term must be no longer than ten years, and (iii) in no event shall the normal vesting schedule provide for vesting in less than one year. Other terms and conditions of an award of stock options will be determined by the Compensation Committee as set forth in the agreement relating to that award. The Compensation Committee has authority to administer the EIP.
 
Information with respect to stock options included within this plan is as follows:

  
No. of Shares
(in thousands)
  
Weighted
Average
Exercise Price
  
Aggregate
Intrinsic Value (in
thousands)
 
Outstanding at December 31, 2013  1,048  $5.45  $270 
Options granted  417   5.15     
Forfeited and cancelled  (225)  5.16     
Outstanding at December 31, 2014  1,240  $5.28  $1,264 
Vested and expected to vest at December 31, 2014  1,192  $5.28  $1,215 
Total shares exercisable as of December 31, 2014  344  $5.60  $344 
Shares remaining available for grant  332         
  
No. of Shares
 (in thousands)
  
Weighted
Average
Exercise Price
  
Aggregate
 Intrinsic Value (in
thousands)
 
Outstanding at December 31, 2015  933  $5.14  $1,579 
Options granted  133   5.48     
Options exercised  (5)  5.32     
Forfeited and cancelled  (82)  4.85     
Expired  (30)  4.63     
Outstanding at December 31, 2016  949  $5.22  $264 
Vested and expected to vest at December 31, 2016  1,062  $5.26  $260 
Total shares exercisable as of December 31, 2016  397  $5.22  $111 
Shares remaining available for grant  701         

The weighted average grant date fair value of options granted during the years 20142016 and 20132015 was $1.68$1.81 and $1.55,$1.44, respectively.  There were no options exercised during the year ended December 31, 2014.  The total intrinsic value of options exercised during the year ended December 31, 20132016 was $11,000.$5,800. The total intrinsic value of options exercised during the year ended December 31, 2015 was $119,000.  New shares of the Company’s common stock are issued as a result of stock option exercises in 2013.2016 and for options exercised in 2015. The fair value of options at the date of the grant was estimated using the Black-Scholes model with the following assumptions for the respective period ending December 31:

  2016  2015 
       
Expected option life 5.7 years  5.1 years 
Weighted average risk-free interest rate  1.3%  1.6%
Weighted average expected volatility  33%  30%
Expected dividend yield  0%  0%
  2014  2013 
     
Expected option life 5.9 years  4.6 years 
Weighted average risk-free interest rate  1.7%  1.3%
Weighted average expected volatility  31%  33%
Expected dividend yield  0%  0%
For the years ended December 31, 20142016 and 2013,2015, the expected option life was based on the Company’s historical experience with similar type options.  Expected volatility is based on historical volatility levels of the Company’s common stock over the preceding period of time consistent with the expected life.  The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life.  Stock options outstanding at December 31, 20142016 are summarized as follows:

Range of
 Exercise Prices
  
Number
Outstanding
(in thousands)
 
Weighted
Average
 Remaining Life
 
Weighted
Average
Exercise
Price
 
         
$4.72 - $7.08   1,082 7.52 years $5.26 
 
Range of
Exercise Prices
  
Number
Outstanding
(in thousands)
 
Weighted
Average
Remaining Life
 
Weighted
Average
Exercise
Price
 
      
$4.06 - $6.25   1,203 8.62 years $5.07 
$6.26 - $11.40   37 1.37 years $10.04 
$4.06 - $11.40   1,240 8.41 years $5.28 
56

At December 31, 20142016, the aggregate unrecognized compensation cost of unvested equity awards, as determined using a Black-Scholes option valuation model, was $1.7$0.5 million (net of estimated forfeitures) which is expected to be recognized as compensation expense in fiscal years 20152017 through 2018.2019. The Company has not paid cash dividends on its common stock, and the Company presently intends to continue to retain earnings for reinvestment in growth opportunities.  Accordingly, it is anticipated no cash dividends will be paid in the foreseeable future.
Current year activity with respect to the Company’s non-vested restricted stock awards is as follows:

Non-vested shares (in thousands)
 Shares  
Weighted
Average grant-
date fair value
 
Balance at January 1, 2014  277  $4.65 
Non-vested restricted stock awards (in thousands)
 Shares  
Weighted
Average grant-
date fair value
 
Balance at January 1, 2016  85  $5.13 
Granted  170   5.24   168   5.23 
Vested  (112)  4.23   (44)  4.94 
Forfeited and cancelled  (62)  3.46   (46)  5.31 
Balance at December 31, 2014  273  $4.68 
Balance at December 31, 2016  163  $5.22 

The EIP also provides for the issuance of restricted stock, as well as restricted stock units.   These types of awards can have either service based or performance based vesting with performance goals being established by the Compensation Committee.  Grants of restricted stock with service based vesting are subject to vesting periods ranging from zero1 to 60 months.3 years.  Grants of restricted stock with performance based vesting are subject to a vesting period of 121 to 36 months3 years and performance conditions as defined by the Compensation Committee.  The Company assesses the likelihood of achievement throughout the performance period and recognizes compensation expense associated with its performance awards based on this assessment.  Other terms and conditions applicable to any award of restricted stock will be determined by the Compensation Committee and set forth in the agreement relating to that award.

During 20142016 and 2013,2015, the Company issued 170,000168,000 and 247,00034,000 restricted stock awards, respectively, at a per share price of $0.02.  Included within the equity grants were approximately 109,000 performance based restricted stock awards which vest upon the achievement of Business Unit and Consolidated financial goals relative to fiscal years 2014 through 2016.  These equity awards are forfeited if the performance conditions are not achieved for each fiscal year.  For the periods ended December 31, 20142016 and 2013,2015, the Company recognized compensation expense related to the performance awards based on its estimate of the probability of achievement in accordance with ASC Topic 718.  The Company did not recognize any compensation expense related to the performance awards for the period ended December 31, 2013.
The fair value of restricted stock awards is based on the average price of the Company’s common stock on the date of grant.  The weighted average grant date fair value of restricted stock awards granted during the years 20142016 and 20132015 was $5.24$5.23 and $4.50,$4.67, respectively.  In accordance with the terms of the restricted stock award agreements, the Company released 112,00085,000 and 49,000110,000 shares during 20142016 and 2013,2015, respectively.  During 2014,2016, there were 62,000approximately 46,000 shares of restricted stock cancelled, of which 52,00045,000 were performance based restricted shares.  During 2013,2015, there were 95,000112,000 shares of restricted stock cancelled, of which 93,000102,000 were performance based restricted shares.

Note 8—8 — Income Taxes

The provision for (benefit from) income taxes from continuing operations consists of:

  
Year ended December 31,
(in thousands)
 
  2016  2015 
       
Current income tax:      
Federal $61  $221 
State  167   141 
Foreign  211   267 
   439   629 
Deferred income tax:        
Federal  768   816 
State  (60)  55 
   708   871 
Provision for income taxes $1,147  $1,500 
  
Year ended December 31,
(in thousands)
 
  2014  2013 
     
Current income tax:    
Federal $115  $(16)
State  212   27 
Foreign  757   1,087 
   1,084   1,098 
Deferred income tax:        
Federal  370   (1,813)
State  146   (65)
   516   (1,878)
Provision for (benefit from) income taxes $1,600  $(780)

NoThe deferred tax benefit or expense related to discontinued operations was $0.4 million in fiscal year 2016 and $3.2 million recorded in fiscal year 2014 compared to a benefit of $108,000 during fiscal year 2013.2015.
Deferred tax liabilities (assets) are comprised of the following at:

  
December 31,
(in thousands)
 
  2016  2015 
Deferred tax liabilities:      
Software development costs $2,223  $1,841 
Acquired intangible assets  1,731   2,088 
Gross deferred tax liabilities  3,954   3,929 
         
Allowances for bad debts and inventory  (4,505)  (4,804)
Capitalized inventory costs  (104)  (75)
Intangible assets  (1,388)  (1,747)
Employee benefit accruals  (2,089)  (2,050)
Federal net operating loss carryforward  (5,820)  (6,215)
State net operating loss carryforward  (1,085)  (1,111)
Tax credit carryforwards  (6,888)  (8,760)
Foreign currency  (33)  (33)
Other  (1,333)  (334)
Gross deferred tax assets  (23,245)  (25,129)
         
Less valuation allowance  1,874   3,421 
         
Net deferred tax assets $(17,417) $(17,779)
 
  
December 31,
(in thousands)
 
  2014  2013 
Deferred tax liabilities:    
Software development costs $4,984  $5,042 
Acquired intangible assets 2,350 -
Gross deferred tax liabilities  7,334   5,042 
         
Allowances for bad debts and inventory  (4,524)  (3,819)
Capitalized inventory costs  (114)  (122)
Intangible assets  (2,100)  (3,223)
Employee benefit accruals  (1,715)  (1,764)
Federal net operating loss carryforward  (9,249)  (10,524)
State net operating loss carryforward  (1,104)  (1,200)
Tax credit carryforwards  (7,809)  (4,979)
Foreign currency  (33)  (33)
Other  (502)  (585)
Gross deferred tax assets  (27,150)  (26,249)
         
Less valuation allowance  3,947   2,377 
         
Net deferred tax assets $(15,869) $(18,830)
58

The Company has Federal tax credit carryforwards of $4.5$6.7 million that expire in various tax years from 20152017 to 2034.2036.  The Company has a Federal operating loss carryforward of $26.4$18.8 million that expires in various tax years through 2034.  Of the operating loss carryforward, $1.6$1.7 million will result in a benefit within additional paid in capital when realized.  The Company also has state tax credit carryforwards of $307,000$0.2 million and state net operating loss carryforwards of $20.1$7.2 million whichthat expire in various tax years through 2034.  In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  As a result of this analysis and based on the current year’s taxable loss,income, and utilization of certain carryforwards management determined that we should reduce our valuation allowance in the current year.  A valuation allowance is still required to the extent it is more likely than not that the future benefit associated with the foreign tax credit carryforwards and certain state tax credits and loss carryforwards will not be realized.  As a result, the Company recorded a tax expense associated with an additionalincrease of the deferred tax asset valuation allowance of $1.6$0.1 million and $179,000 for 2014 and 2013, respectively.2016.
The Company records the benefits relating to uncertain tax positions only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.  At December 31, 2014,2016, the Company’s reserve for uncertain tax positions is not material and the Company believes it haswe believe we have adequately provided for its tax-related liabilities.  The Company is no longer subject to United States federal income tax examinations for years before 2011.2013.  The provision for (benefit from) income taxes differed from the provision computed by applying the Federal statutory rate to income (loss) from continuing operations before taxes due to the following:

 Year ended December 31,  Year ended December 31, 
 2014  2013  2016  2015 
Federal statutory tax rate  (34.0)%  (34.0)%  34.0%  34.0%
State taxes  13.8   1.7   1.4   5.8 
Non deductible expenses  10.1   61.3   2.7   1.0 
Tax credits  (21.5)  (378.2)  (6.7)  (4.8)
Repatriation of foreign earnings  109.8   0.0 
Foreign income tax rate differential  (79.3)  (103.0)  (2.1)  (1.3)
Valuation allowance  76.6   84.8   0.1   (9.5)
Tax return and audit adjustments  0.0   3.8 
Other  2.5   (2.4)  2.0   (1.8)
  78.0%  (369.8)%  31.4%  27.2%

Note 9 — Employee Benefit Plans

The Company has a deferred profit-sharing retirement plan that covers substantially all employees. The Company’s annual contribution to the plan is discretionary. The Company’s did not make a contribution in 20142016 or 2013.2015.  The plan also contains a 401(k) provision that allows employees to contribute a percentage of their salary up to the statutory limitation.  These contributions are matched at the rate of 10% by the Company. The Company’s matching contributions under the 401(k) component were $318,000$0.3 million and $299,000$0.4 million in 20142016 and 2013,2015, respectively.
 
The Company also maintains an incentive-compensation plan. Participants in the plan are key employees as determined by the Board of Directors and executive management. Compensation under the plan is based on the achievement of predetermined financial performance goals of the Company and its subsidiaries.  Awards under the plan are payable in cash.  Awards under the plan totaled $656,000$0.5 million and $620,000,$0.8 million, in 20142016 and 2013,2015, respectively.

The Company also sponsors a Deferred Compensation Plandeferred compensation plan for a select group of highly compensated employees.  Participants may make elective deferrals of their salary to the plan in excess of tax code limitations that apply to the Company’s qualified plan.  The Company invests the participants’ deferred amounts to fund these obligations.  The Company also has the sole discretion to make employer contributions to the plan on behalf of the participants, though itwe did not make any employer contributions in 20142016 or 2013.2015.

Note 10 — Contingencies

The Company is
We are subject to legal proceedings, which arise in the ordinary course of business. Additionally, U.S. Government contract costs are subject to periodic audit and adjustment. InFurther, as disclosed in “Item 9A. Controls and Procedures”, we are currently conducting an internal investigation into import/export and sales documentation activities at our China and Singapore offices. The investigation is being conducted under the opinionoversight of management,our Audit Committee, with the ultimate liability, ifassistance of outside counsel, and is focused on compliance with provisions of the U.S. Foreign Corrupt Practices Act, or FCPA, and other applicable laws, and certain of our policies, including our Code of Business Conduct and Ethics. We have voluntarily notified the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) of these matters, and are fully cooperating with these agencies. During the year ended December 31, 2016, we recorded $1.3 million of expenses relating to the investigation, including expenses of outside legal counsel and forensic accountants. We are currently unable to predict what actions the SEC, the DOJ, or other governmental agencies (including foreign governmental agencies) might take, or what the likely outcome of any with respect to thesesuch actions will not materially affectmight be, or estimate the range of reasonably possible fines or penalties, which may be material. The SEC, DOJ, and other governmental authorities have a broad range of civil and criminal sanctions, and the imposition of sanctions, fines or remedial measures could have a material adverse effect on the Company’s business, prospects, reputation, financial position,condition, liquidity, results of operations or cash flows of the Company.flows.

Note 11 — Segment and Related Information

The Company is organized in two reporting units: Restaurant/Retail, and Government. Management views the Restaurant/Retail and Government segments separately in operating its business, as the products and services are different for each segment. The Company’s reportable segments are strategic business units that have separate management teamschief operating decision maker is the Company’s Chief Executive Officer.  The Hotel/Spa reporting was sold as of November 4, 2015, and infrastructures that offer different productsis classified as discontinued operations (see Note 2 – Divestiture and services.Discontinued Operations - of the Notes to Consolidated Financial Statements).

The Company has two reportable business segments Hospitality- Restaurant/Retail segment and Government.Government segment.  The HospitalityRestaurant/Retail segment offers integrated solutions to the hospitality industry.restaurant and retail industry consisting of restaurants, grocery storesand specialty retail outlets.  These offerings include industry leading hardware and software applications utilized at the point-of-sale, back of store and corporate office property management, spa and activity applications and includes the acquisition of Brink Software.  This segment also offers customer support including field service, installation, and twenty-four hourtwenty-four-hour telephone support and depot repair.  With our SureCheck solution, we continue to expand our business into retail, big box retailers, grocery stores, and contract food management organizations.  The Governmentgovernment segment performs complex technical studies, analysis, and experiments, develops innovative solutions, and provides world-class on-site engineering in support of advanced defense, security, and aerospace systems.  This segment also provides affordable expert on-site services for operating and maintaining U.S. Government-owned communication assets.
 
Information noted as “Other” primarily relates to the Company’s corporate, home office operations.
Information as to the Company’s segments is set forth below.  Amounts below exclude discontinued operations.

 
Year ended December 31,
(in thousands)
  
Year ended December 31,
(in thousands)
 
 2014  2013  2016  2015 
Revenues:          
Hospitality $145,921  $152,376 
Restaurant/Retail $149,341  $141,151 
Government  87,689   89,018   80,312   87,852 
Total $233,610  $241,394  $229,653  $229,003 
                
Operating income (loss) :                
Hospitality $(5,312) $(5,005)
Restaurant/Retail $825  $1,721 
Government  4,883   5,949   6,160   5,365 
Other  (1,790)  (1,601)  (4,772)  (457)
  (2,219)  (657)  2,213   6,629 
Other income, net  304   506   1,316   (800)
Interest expense  (136)  (60)
Interest income (expense)  121   (308)
Income from continuing operations before provision for income taxes $(2,051) $(211) $3,650  $5,521 
                
Identifiable assets:                
Hospitality $104,027  $81,386 
Restaurant/Retail $87,672  $72,948 
Government  11,221   16,936   6,504   10,052 
Other  22,049   19,186   29,873   32,874 
Total $137,297  $117,508  $124,049  $115,874 
                
Goodwill:                
Hospitality $16,431  $6,116 
Restaurant/Retail $10,315  $10,315 
Government  736   736   736   736 
Total $17,167  $6,852  $11,051  $11,051 
                
Depreciation and amortization:        
Hospitality $3,341  $2,454 
Depreciation, amortization and accretion:        
Restaurant/Retail $3,479  $2,673 
Government  50   46   38   48 
Other  279   330   1,107   349 
Total $3,670  $2,830  $4,624  $3,070 
                
Capital expenditures including software costs:                
Hospitality $3,997  $5,523 
Restaurant/Retail $3,285  $3,645 
Government  36   63   41   - 
Other  969   202   2,792   208 
Total $5,002  $5,788  $6,118  $3,853 
 
The following table presents revenues by country based on the location of the use of the product or services.  Amounts below exclude discontinued operations.

  December 31, 
  2016  2015 
United States $210,821  $197,303 
Other Countries  18,832   31,700 
Total $229,653  $229,003 
  December 31, 
  2014  2013 
United States $202,573  $201,815 
Other Countries  31,037   39,579 
Total $233,610  $241,394 

The following table presents assets by country based on the location of the asset.  Amounts below exclude discontinued operations.

  December 31, 
  2016  2015 
United States $110,369  $100,583 
Other Countries  13,680   15,291 
Total $124,049  $115,874 
  December 31, 
  2014  2013 
United States $116,155  $99,937 
Other Countries  21,142   17,571 
Total $137,297  $117,508 

Customers comprising 10% or more of the Company’s total revenues, excluding discontinued operations, are summarized as follows:

  December 31, 
  2016  2015 
Restaurant and Retail segment:
      
McDonald’s Corporation  25%  19%
Yum! Brands, Inc.  11%  10%
Government segment:
        
U.S. Department of Defense  35%  38%
All Others  29%  33%
   100%  100%
  December 31, 
  2014  2013 
Hospitality segment:
    
McDonald’s Corporation  16%  19%
Yum! Brands, Inc.  12%  13%
Government segment:
        
U.S. Department of Defense  38%  37%
All Others  34%  31%
   100%  100%

No other customer within All Others represented more than 10% of the Company’s total revenue for the years ended December 31, 2016 and 2015.
Note 12 — Fair Value of Financial Instruments

The Company’s financial instruments have been recorded at fair value using available market information and valuation techniques.  The fair value hierarchy is based upon three levels of input, which are:

Level 1 − quoted prices in active markets for identical assets or liabilities (observable)
 
Level 2 − inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable market data for essentially the full term of the asset or liability (observable)

Level 3 − unobservable inputs that are supported by little or no market activity, but are significant to determining the fair value of the asset or liability (unobservable)

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, debt instruments and debt instruments.deferred compensation assets and liabilities. For cash and cash equivalents, trade receivables and trade payables, the carrying amounts of these financial instruments as of December 31, 20142016, and 20132015 were considered representative of their fair values.  The estimated fair value of the Company’s long-term debt and line of credit at December 31, 20142016 and 20132015 was based on variable and fixed interest rates at December 31, 20142016 and 2013,2015, respectively, for new issues with similar remaining maturities and approximates the respective carrying values at December 31, 20142016 and 2013.2015.

The deferred compensation assets and liabilities primarily relate to the Company’s Deferred Compensation Plan,deferred compensation plan, which allows for pre-tax salary deferrals for certain key employees (see note 9)Note 9 – Employees Benefit Plans - of the Notes to Consolidated Financial Statements). Changes in the fair value of the deferred compensation liabilities are derived using quoted prices in active markets of the asset selections made by the participants. The deferred compensation liabilities are classified within Level 2, as defined under U.S. GAAP, because their inputs are derived principally from observable market data by correlation to the hypothetical investments. The Company holds insurance investments to partially offset the Company’s liabilities under the Deferred Compensation Plan,deferred compensation plan, which are recorded at fair value each period using the cash surrender value of the insurance investments.

The Company has obligations, to be paid in cash, to the former owners of Brink Software, based on the achievement of certain conditions as defined in the definitive agreement (see note 2)Note 1 – Summary of Significant Accounting Policies - sub-footnote Contingent Consideration - of the Notes to Consolidated Financial Statements). 
The fair value of this contingent consideration payable was estimated using a discounted cash flow method, with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820, Fair Value Measurementsfair value measurements and Disclosures.disclosures. The significant inputs in the Level 3 measurement not supported by market activity included the Company’s probability assessments of expected future cash flows related to the Company’s acquisition of Brink Software during the contingent consideration period, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the definitive agreement.  The liabilities for the contingent consideration were established at the time of the acquisition and will beare evaluated on a quarterly basis based on additional information as it becomes available.  Any change in the fair value adjustment is recorded in the earnings of that period.  Changes in the fair value of the contingent consideration obligations may result from changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations.Significant increases or decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.
 
The following table presents a summary of changes in fair value of the Company’s Level 3 assets and liabilities that are measured at fair value on a recurring basis (in thousands):

  Level 3 Inputs 
  Liabilities 
Balance at December 31, 2013 $- 
New level 3 liability (contingent consideration liability)  5,040 
Total gains (losses) reported in earnings  - 
Transfers into or out of Level 3  - 
Balance at December 31, 2014 $5,040 
  Level 3 Inputs 
  Liabilities 
Balance at December 31, 2015 $5,130 
New level 3 liability  - 
Change in fair value of contingent consideration liability  (1,130)
Transfers into or out of Level 3  - 
Balance at December 31, 2016 $4,000 

Note 13 — Related Party Transactions

The Company leases its corporate wellness facility to related parties at a current rate of $9,775 per month. The Company receives a complimentary membership to this facility which is provided to all employees.  During 20142016 and 20132015 the Company received rental income amounting to $117,300 for the lease of the facility in each year.

Our director, Paul D. Eurek, is President of Xpanxion LLC. In October 2016, we entered into a software development agreement with Xpanxion.  In 2016, we incurred approximated $0.2 million of fees to Xpanxion under the software development agreement, but made no payments. Mr. Eurek's successor has been announced, and he intends to be fully retired from Xpanxion on June 30, 2017.
Note 14 — Subsequent Events

On March 19, 2015, the Company amended its credit facility with J.P. Morgan Chase, N.A.  See Note 6 for further details.None noted
 
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 PAR TECHNOLOGY CORPORATION
  
March 31, 2015April 17, 2017/s/ Ronald J. CascianoDonald H. Foley
 Ronald J. CascianoDonald H. Foley
 Chief Executive Officer & President
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantRegistrant and in the capacities and on the dates indicated.

SignaturesTitleDate

/s/ Donald H. FoleyDateChief Executive Officer, President & Director
Donald H. Foley(Principal Executive Officer)April 17, 2017
 
/s/ Ronald J. CascianoBryan A. Menar Chief Financial Officer 
Ronald J. CascianoBryan A. MenarChief Executive Officer &President(Principal Financial Officer)March 31, 2015April 17, 2017
  
/s/ Cynthia A. Russo 
/s/ John S. BarsantiCynthia A. Russo Director 
John S. BarsantiDirectorMarch 31, 2015April 17, 2017
   
/s/ Paul D. Eurek  
Paul D. EurekDirectorMarch 31, 2015April 17, 2017
   
/s/ Todd E. Tyler  
Todd E. TylerDirectorMarch 31, 2015April 17, 2017
   
/s/ John W. Sammon  
John W. SammonDirectorMarch 31, 2015
/s/ Steven M. Malone
Steven M. MaloneVice President, Controller andChief Accounting Officer(Principal Financial Officer)March 31, 2015April 17, 2017
 
List of Exhibits

Exhibit Index
 
Exhibit No.
Description of InstrumentIncorporated by reference into this Annual
3.(i)Certificate of Incorporation, as amended May 22, 2014.Filed as Exhibit 3(i) to Form 8-K filed May 29, 2014 of PAR Technology Corporation and incorporated herein by reference.
3.(ii)By-laws, as amended May 22, 2014.Filed as Exhibit 3.(ii) to Form 8-K filed May 29, 2014 of PAR Technology Corporation incorporated herein by reference.
3.3By-laws, as amended.Filed as Exhibit 3(ii) to Form 8-K filed March 25, 2013 of PAR Technology Corporation and incorporated herein by reference.
3.4By-laws, as amended July 29, 2013Filed as Exhibit 3(ii) to Form 8-K filed August 2, 2013 of PAR Technology Corporation and incorporated herein by reference.
4Specimen Certificate representing the Common Stock.Filed as Exhibit 4  to Registration Statement
Report on Form S-2 (Registration No. 333-04077) of PAR Technology Corporation incorporated herein by reference.
10.1Letter of Agreement with Sanmina– SCI CorporationFiled as Exhibit 10.1 to Form S-3/A (Registration No. 333-102197) of PAR Technology Corporation incorporated herein by reference.
10.2JP Morgan term loan.Filed as Exhibit 10.3 to Form 10-K for the year ended December 31, 2006 and incorporated herein by reference.
10.32005 Equity Incentive Plan of PAR Technology CorporationFiled as Exhibit 4.2 to Form S-8 (Registration No. 333-137647) of PAR Technology Corporation and incorporated herein by reference.
10.42005 Equity Incentive Plan, as amendedFiled as Exhibit 4.1 to Registration Statement on Form S-8 (Registration No. 333-187246) of PAR Technology Corporation incorporated herein by reference.
 
Exhibit
Number
 
Exhibit Description
 
 
Form (File No.)
 
Exhibit
Date Filed/Furnished
      
      
2(i) ***
 
 
Stock Purchase Agreement, dated as of September 18, 2014, among Brink Software Inc., the Shareholders, ParTech, Inc. and
PAR Technology Corporation
 Quarterly Report on Form 10-Q (File No. 001-09720)10.311/14/2014
      
2(ii)
 
Asset Purchase Agreement, dated as of November 4, 2015, among Gary Jonas Computing Ltd., SMS Software Holdings LLC, Jonas Computing (UK) Ltd., PAR Springer-Miller Systems, Inc., Springer-Miller International, LLC, Springer- Miller Canada, ULC, Partech, Inc., and Constellation Software, Inc. 
Annual Report on Form 10-K (File No. (001-09720)
 
10.26
 
3/30/2016
      
3(i)Certificate of Incorporation, as amended May 22, 2014 Current Report on Form 8-K (File No. 001-09720)3(i)5/29/2014
      
3(ii)
 
By-laws, as amended May 22, 2014 Current Report on Form 8-K (001-09720)3(ii)5/29/2014
      
4
 
Specimen Certificate for shares of common stock
 
 Registration Statement on Form S-2 (File No. 333-04077)45/20/1996
      
10.1PAR Technology Corporation 2005 Equity Incentive Plan Registration Statement on Form S-8 (File No. 333-137647)4.2
9/28/2006
 
90
Incorporated by reference into this Annual
Report on Form 10-K
Exhibit
Number
 
Exhibit Description
 
 
Form
 
Exhibit
Date Filed
      
10.2
 
 
PAR Technology Corporation 2005 Equity Incentive Plan, as amended Registration Statement on Form S-8 (File No. 333-187246)4.13/14/2013
      
10.3
 
PAR Technology Corporation Restricted Stock Agreement pursuant to the 2005 Equity Incentive Plan (Form)
 
 Quarterly Report on Form 10-Q (File No. 001-09720)10.18/8/2013
      
10.4
 
PAR Technology Corporation 2005 Equity Incentive Plan Notice of Award (Form) Annual Report on Form 10-K (File No. 001-09720)10.173/14/2014
      
10.5 ††PAR Technology Corporation 2005 Equity Incentive Plan Outside Director Notice of Restricted Stock Award and Agreement (Form) Annual Report on Form 10-K (File No. 001-09720)10.213/31/2015
      
10.6PAR Technology Corporation 2005 Equity Incentive Plan Notice of Award and Agreement (Form) Annual Report on Form 10-K (File No. 001-09720)10.233/31/2015
      
10.7 ***
 
Credit Agreement, dated as of September 9, 2014, among PAR Technology Corporation, the other Loan Parties, and JPMorgan Chase Bank, N.A. Quarterly Report on Form 10-Q (File No. 001-09720)10.111/14/2014
      
10.8Pledge and Security Agreement entered into as of September 9, 2014, among PAR Technology Corporation, Ausable Solutions Inc., PAR Government Systems Corporation, PAR Springer-Miller Systems, Inc., Rome Research Corporation, Springer-Miller International, LLC, ParTech, Inc., and JPMorgan Chase Bank, N.A. Quarterly Report on Form 10-Q (File No. 001-09720)10.211/14/2014
List
Incorporated by reference into this Annual
Report on Form 10-K
Exhibit
Number
 
Exhibit Description
 
 
Form
 
Exhibit
Date Filed
      
10.9 ***Second Amendment to Credit Agreement and Other Loan Documents, dated as of March 19, 2015, among PAR Technology Corporation, Ausable Solutions Inc., PAR Government Systems Corporation, PAR Springer-Miller Systems, Inc., Rome Research Corporation, Springer-Miller International, LLC, ParTech, Inc., Brink Software, Inc, and JPMorgan Chase Bank, N.A. Annual Report on Form 10-K (File No. 001-09720)10.243/31/2015
      
10.10Fourth Amendment to Credit Agreement, dated as of March 24, 2016, among PAR Technology Corporation, the other Loan Parties (as defined in the Credit Agreement dated September 9, 2014 (as amended)) and JPMorgan Chase Bank, N.A. Annual Report on Form 10-K (File No. 001-09720)10.293/30/2016
      
10.11Fifth Amendment to Credit Agreement, dated as of August 5, 2016, among PAR Technology Corporation, the other Loan Parties (as defined in the Credit Agreement dated September 9, 2014 (as amended)) and JPMorgan Chase Bank, N.A. Quarterly Report on Form 10-Q (File No. 001-09720)10.18/8/2016
      
10.12
Sixth Amendment to Credit Agreement, dated as of November 14, 2016, among PAR Technology Corporation, the other Loan Parties (as defined in the Credit Agreement dated September 9, 2014 (as amended)) and
JPMorgan Chase Bank N.A.
 Quarterly Report on Form 10-Q (File No. 001-09720)10.111/14/2016
      
10.13PAR Technology Corporation 2015 Equity Incentive Plan Registration Statement on Form S-8 (File No. 333-208063)4.211/16/2015
      
10.14PAR Technology Corporation 2015 Equity Incentive Plan Notice of Award (Form) Registration Statement on Form S-8 (File No. 333-208063)4.311/16/2015
68
Table of Exhibits (Continued)Contents

Exhibit No.
Description of InstrumentIncorporated by reference into this Annual
Report on Form 10-K
Exhibit
Number
Exhibit Description
 
Form
Exhibit
10.6Form of Restricted Stock Award Agreement Pursuant to the 2005 Equity Incentive Plan
Date Filed as Exhibit 10.1 to Form 10-Q as for the quarter ended June 30, 2013 and incorporated by reference.
10.7Pledge and Security Agreement  with JP Morgan ChaseFiled as Exhibit 10.2 to Form 8-K dated June 16, 2008 of PAR Technology Corporation and incorporated herein by reference.
   
10.810.15 ††Separation Letter Agreement dated March 25, 2013 between Registrant and Paul B. Domorski.Filed as an Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2013 and incorporated herein by reference.
10.9June 2011 – Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A; NBT Bank, N.A.; Alliance Bank, N.A.Filed as an Exhibit 10.1 to Form 8-K dated June 6, 2011 of PAR Technology Corporation 2015 Equity Incentive Plan Outside Director Notice of Restricted Stock Award and incorporated herein by reference.Agreement (Form)Registration Statement on Form S-8 (File No. 333-208063)4.411/16/2015
   
10.10June 2011 - Amendment No. 1 to Pledge and Security Agreement with JPMorgan Chase Bank, N.A.Filed as an Exhibit 10.2 to Form 8-K dated June 6, 2011 of PAR Technology Corporation and incorporated herein by reference.
10.11 ***December 2011 - Asset Purchase and Sale Agreement by and between PAR Technology Corporation , PAR Government Systems Corporation, PAR Logistics Management Systems Corporation and  ORBCOMM Inc. and PLMS Acquisition, LLC.Filed as an Exhibit 10.13 to Form 10-K dated April 4, 2012 of PAR Technology Corporation and incorporated herein by reference.
10.12February 2013 - Amendment No. 2 to Pledge and Security Agreement with JPMorgan Chase Bank, N.A.Filed as an Exhibit 10.14 to Form 10-K dated March 13, 2013 of PAR Technology Corporation and incorporated herein by reference.
10.13 10.16††Employment Offer Letter, dated March 21, 2013, between Registrant and Ronald J. Casciano and PAR Technology CorporationFiled as an Exhibit 10.1*+ toQuarterly Report on Form 10-Q for the quarter ended March 31, (File No. 001-09720) 10.15/9/2013 and incorporated herein by reference.
 
10.14 10.17††Employment Offer Letter, dated March 21, 2013, between RegistrantKaren E. Sammon and Robert P. JerabeckPAR Technology CorporationFiled as an Exhibit 10.2*+ toQuarterly Report on Form 10-Q for the quarter ended March 31, (File No. 001-09720) 10.3 5/9/2013 and incorporated herein by reference.
 
10.1510.18††Employment Offer Letter, dated March 21, 2013July 13, 2015, between RegistrantMichael Bartusek and Karen E. SammonPAR Technology CorporationFiled as an Exhibit 10.3*+ to Form 10-Q for the quarter ended March 31, 2013 and incorporated herein by reference.
List of Exhibits (Continued)
Exhibit No.
Description of Instrument
 
10.16Form of Notice of Equity Award and Agreement Pursuant to the 2005 Equity Incentive PlanFiled as an Exhibit 10.17 toAnnual Report on Form 10-K dated March 14, 2014 of Par Technology Corporation and incorporated herein by reference
(File No. 001-09720)10.25 
10.17June 2014 – Amendment No. 3 to Pledge and Security Agreement with JPMorgan Chase Bank, N.A.Filed as an Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2014 and incorporated herein by reference3/30/2016 
   
10.18 ***10.19 ††Credit Agreement with JPMorgan Chase Bank, N.A.Employment Offer Letter, dated as of September 9, 2014November 16, 2015, between Karen E. Sammon and PAR Technology CorporationFiled as an Exhibit 10.1 toAnnual Report on Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference10-K (File No. 001-09720)10.273/30/2016
   
10.1910.20 ††PledgeEmployment Offer Letter, dated December 10, 2015, between Matthew Cicchinelli and Security Agreement with JPMorgan Chase Bank, N.A. dated as of September 9, 2014PAR Technology CorporationFiled as an Exhibit 10.2 toAnnual Report on Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference10-K (File No. 001-09720)10.283/30/2016
  
10.20 ***Stock Purchase Agreement by and among Brink Software, Inc., the Shareholders, ParTech, Inc., and Par Technology Corporation dated as of September 18, 2014Filed as an Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference
   
10.21
FormCredit Agreement dated as of Outside Director Notice of Restricted Stock AwardNovember 29, 2016, among PAR Technology Corporation, the other Loan Parties (as defined in the Credit Agreement) and Agreement Pursuant to the 2005 Equity Incentive PlanJPMorgan Chase Bank N.A.Filed herewith 
   
10.2310.22 ††
Form of Notice of AwardEmployment Offer Letter, dated November 14, 2016, between Bryan Menar and Agreement Pursuant to the 2005 Equity Incentive PlanPAR Technology CorporationFiled herewith 
   
10.24 ***21
Second Amendment to Credit Agreement and Other Loan Documents with JPMorgan Chase Bank, N.A. dated asSubsidiaries of March 19, 2014PAR Technology CorporationFiled herewith 
   
2223(ii)
SubsidiariesConsent of the registrantBDO USA, LLPFiled herewith 
   
23.1
Consent of Independent Registered Public Accounting Firm
 
31.1
Certification of ChiefPrincipal Executive Officer & President Pursuantpursuant to Section 302Rule 13a-14(a) of the Sarbanes-OxleySecurities Exchange Act of 2002.1934, as amendedFiled herewith 
   
31.2
Certification of Vice President, Controller and Chief AccountingPrincipal Financial Officer Pursuantpursuant to Section 302Rule 13a-14(a) of the Sarbanes-OxleySecurities Exchange Act of 2002.1934, as amended Filed herewith 
Incorporated by reference into this Annual
Report on Form 10-K
Exhibit
Number
Exhibit Description
Form
Exhibit
Date Filed
   
32.1
Certification of Chief ExecutivePrincipal Financial Officer & Presidentpursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Vice President, Controller and Chief Accounting Officer Pursuant to 18
U.S.C. Section 1350 as Adopted Pursuant
Furnished herewith
32.2
Certification of Principal Financial Officer pursuant to Section 906Rule 13a-14(b) of the Sarbanes-OxleySecurities Exchange Act of 2002.1934, as amended, and 18
U.S.C. Section 1350
Furnished herewith
 
***101.INSPortions of this Exhibit were omitted pursuant to a request for confidential treatment.  The omitted portions have been separately filed with the Securities and Exchange Commission.XBRL Instance DocumentFiled herewith
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith

 ††    Indicates management contract or compensatory plan or arrangement.
*** Portions of this Exhibit were omitted pursuant to a request for confidential treatment.  The omitted portions have been separately filed with the Securities and Exchange Commission.
 
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