UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2018.~~March 31, 2019.

☐ TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From __________ to __________

Commission File Number 1-09720

PAR TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)



Delaware	16-1434688
(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)

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

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 þ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No ☐

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



Large Accelerated Filer ☐	Accelerated Filer þ
Non Accelerated Filer ☐	Smaller Reporting Company þ��
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

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



Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	PAR	New York Stock Exchange

As of ~~November 8, 2018, 16,217,667~~May 1, 2019, 16,252,648 shares of the registrant’s common stock, $0.02 par value, were outstanding.

PAR TECHNOLOGY CORPORATION

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION



Item Number		Page

Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheets at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 (unaudited)	1

	Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and March 31, 2018 ~~and September 30, 2017~~ (unaudited)	23

	Consolidated Statements of Comprehensive (Loss) Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and March 31, 2018 ~~and September 30, 2017~~ (unaudited)	34

	Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2019 and March 31, 2018 (unaudited)	5

	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and March 31, 2018 ~~and September 30, 2017~~ (unaudited)	4 6

	Notes to Unaudited Interim Consolidated Financial Statements	6 7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1917

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2620

Item 4.	Controls and Procedures	2621

PART II
OTHER INFORMATION

Item 1.	Legal Proceedings	2721

Item 1A.	Risk Factors	2721

Item 2.	Unregistered Sales of Equity Securities and Use Of Proceeds	27

~~Item 5.~~	~~Other Information~~	2723

Item 6.	Exhibits	2923

Signatures		3125

PART I – FINANCIAL INFORMATION



Item 1.	Financial Statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)


Assets	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Current assets:
Cash and cash equivalents	$	5,817		$	6,600		$	4,142		$	3,485
Accounts receivable-net	27,150			30,077			29,311			26,219
Inventories-net	24,345			21,746			22,639			22,737
Assets held for sale	901			939
Other current assets	4,486			4,209			5,099			3,251
Total current assets	62,699			63,571			61,191			55,692
Property, plant and equipment – net	11,933			9,816			13,169			12,575
Deferred income taxes	—			13,809
Goodwill	11,051			11,051			11,051			11,051
Intangible assets – net	12,567			12,070			11,176			10,859
Operating lease right-of-use assets							3,697			—
Other assets	4,546			4,307			4,764			4,504
Total Assets	$	102,796		$	114,624		$	105,048		$	94,681
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	204		$	195
Borrowings of line of credit	6,965			950			$	16,139		$	7,819
Accounts payable	12,879			14,332			14,794			12,644
Accrued salaries and benefits	6,022			6,275			5,145			5,940
Accrued expenses	3,782			3,926			2,223			2,113
Operating lease liabilities - current portion							1,540			—
Customer deposits and deferred service revenue	10,235			10,241			11,540			9,851
Other current liabilities	2,600			—			—			2,550
Total current liabilities	42,687			35,919			51,381			40,917
Long-term debt	31			185
Operating lease liabilities - net of current portion							2,177			—
Deferred service revenue	4,641			2,668			4,807			4,407
Other long-term liabilities	3,392			6,866			3,198			3,411
Total liabilities	50,751			45,638			61,563			48,735
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; 17,869,430 and 17,677,161 shares issued, 16,161,321 and 15,969,052 outstanding at September 30, 2018 and December 31, 2017, respectively	357			354
Common stock, $.02 par value, 29,000,000 shares authorized; 17,956,318 and 17,879,761 shares issued, 16,248,209 and 16,171,652 outstanding at March 31, 2019 and December 31, 2018, respectively							357			357
Capital in excess of par value	49,849			48,349			50,529			50,251
Retained earnings	11,590			29,549			2,698			5,427
Accumulated other comprehensive loss	(3,915		)	(3,430		)	(4,263		)	(4,253		)
Treasury stock, at cost, 1,708,109 shares	(5,836		)	(5,836		)	(5,836		)	(5,836		)
Total shareholders’ equity	52,045			68,986			43,485			45,946
Total Liabilities and Shareholders’ Equity	$	102,796		$	114,624		$	105,048		$	94,681

See accompanying notes to unaudited interim consolidated financial statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Net revenues:
Product	$	15,451		$	20,706		$	62,658		$	90,594		$	15,517		$	26,324
Service	13,475			13,317			40,615			42,694			14,043			13,196
Contract	17,436			14,915			51,321			43,776			15,122			16,141
	46,362			48,938			154,594			177,064			44,682			55,661
Costs of sales:
Product	12,065			15,861			46,844			67,822			11,241			19,440
Service	10,248			10,241			30,000			31,113			10,027			9,547
Contract	15,511			13,608			46,005			39,264			13,650			14,827
	37,824			39,710			122,849			138,199			34,918			43,814
Gross margin	8,538			9,228			31,745			38,865			9,764			11,847
Operating expenses:
Selling, general and administrative	7,967			9,054			25,587			27,581			8,564			8,600
Research and development	2,992			2,529			9,082			8,161			3,060			2,868
Amortization of identifiable intangible assets	241			241			724			724			241			241
	11,200			11,824			35,393			36,466			11,865			11,709
Operating (loss) income from continuing operations	(2,662		)	(2,596		)	(3,648		)	2,399
Other income (expense), net	455			(70		)	120			(264		)
Operating (loss) income													(2,101		)	138
Other (expense) income, net													(430		)	49
Interest expense, net	(142		)	(39		)	(261		)	(84		)	(146		)	(41		)
(Loss) income from continuing operations before benefit from / (provision for) income taxes	(2,349		)	(2,705		)	(3,789		)	2,051
Benefit from / (provision for) income taxes	(14,355		)	1,188			(14,170		)	(327		)
(Loss) income from continuing operations	(16,704		)	(1,517		)	(17,959		)	1,724
Discontinued operations
Income from discontinued operations (net of tax)	—			—			—			183
(Loss) income before provision for income taxes													(2,677		)	146
Provision for income taxes													(52		)	(78		)
Net (loss) income	$	(16,704	)	$	(1,517	)	$	(17,959	)	$	1,907		$	(2,729	)	$	68
Basic (Loss) Earnings per Share:
(Loss) income from continuing operations	(1.04		)	(0.10		)	(1.12		)	0.11
Income from discontinued operations	—			—			—			0.01
Net (loss) income per share	$	(1.04	)	$	(0.10	)	$	(1.12	)	$	0.12
Diluted (Loss) Earnings per Share:
(Loss) income from continuing operations	(1.04		)	(0.10		)	(1.12		)	0.11
Income from discontinued operations	—			—			—			0.01
Net (loss) income per share	$	(1.04	)	$	(0.10	)	$	(1.12	)	$	0.12
Basic Earnings per Share:
Net (loss) income													$	(0.17	)	$	—
Diluted Earnings per Share:
Net (loss) income													$	(0.17	)	$	—
Weighted average shares outstanding
Basic	16,071			15,976			16,033			15,949			16,044			15,948
Diluted	16,071			15,976			16,033			16,260			16,044			16,286

See accompanying notes to unaudited interim consolidated financial statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Net (loss) income	$	(16,704	)	$	(1,517	)	$	(17,959	)	$	1,907		$	(2,729	)	$	68
Other comprehensive (loss) income, net of applicable tax:
Foreign currency translation adjustments	(283		)	75			(485		)	(81		)	(10		)	423
Comprehensive (loss) income	$	(16,987	)	$	(1,442	)	$	(18,444	)	$	1,826		$	(2,739	)	$	491

See accompanying notes to unaudited interim consolidated financial statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(in thousands)

(Unaudited)



(in thousands)	Common Stock			Capital in excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Total Shareholders’ Equity
(in thousands)	Shares	Amount		Capital in excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Loss			Shares		Amount			Total Shareholders’ Equity

Balances at December 31, 2017	17,677	$	354	$	48,349	$	29,549		$	(3,430	)	(1,708	)	$	(5,836	)	$	68,986
Net income	—	—		—		68			—			—		—			68
Equity based compensation	—	—		181		—			—			—		—			181
Foreign currency translation adjustments	—	—		—		—			423			—		—			423
Balances at March 31, 2018	17,677	$	354	$	48,530	$	29,617		$	(3,007	)	(1,708	)	$	(5,836	)	$	69,658

Balances at December 31, 2018	17,878	$	357	$	50,251	$	5,427		$	(4,253	)	(1,708	)	$	(5,836	)	$	45,946
Net loss	—	—		—		(2,729		)	—			—		—			(2,729		)
Issuance of common stock upon the exercise of stock options	78	—		30		—			—			—		—			30
Equity based compensation	—	—		248		—			—			—		—			248
Foreign currency translation adjustments	—	—		—		—			(10		)	—		—			(10		)
Balances at March 31, 2019	17,956	$	357	$	50,529	$	2,698		$	(4,263	)	(1,708	)	$	(5,836	)	$	43,485

See accompanying notes to unaudited interim consolidated financial statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Nine Months Ended
September 30,
2018 2017
Cash flows from operating activities:
Net (loss) income $ (17,959 ) $ 1,907
Income from discontinued operations —
(183 )
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Depreciation, amortization and accretion 3,491
2,805
Provision for bad debts 493
302
Provision for obsolete inventory 965
1,543
Equity based compensation 754
301
Deferred income tax 13,809
415
Changes in operating assets and liabilities:

Accounts receivable 2,434
1,549
Inventories (3,564 ) (2,022 )
Income tax receivable —
117
Other current assets (277 ) 441
Other assets (239 ) (57 )
Accounts payable (1,453 ) (7,239 )
Accrued salaries and benefits (253 ) 441
Accrued expenses (1,270 ) (862 )
Customer deposits and deferred service revenue 1,967
(7,318 )
Other long-term liabilities (874 ) 85
Net cash used in operating activities-continuing operations (1,976 ) (7,775 )
Net cash provided by operating activities-discontinued operations —
462
Net cash used in operating activities (1,976 ) (7,313 )
Cash flows from investing activities:

Capital expenditures (3,001 ) (3,947 )
Capitalization of software costs (3,066 ) (3,276 )
Proceeds from real estate 1,126

—
Net cash used in investing activities (4,941 ) (7,223 )
Cash flows from financing activities:

Payments of long-term debt (145 ) (138 )
Payments of other borrowings (28,921 ) (16,700 )
Proceeds from other borrowings 34,936
18,150
Proceeds from stock options 749

1,675
Proceeds from note receivable —

3,794
Net cash provided by financing activities 6,619
6,781
Effect of exchange rate changes on cash and cash equivalents (485 ) (127 )
Net decrease in cash and cash equivalents (783 ) (7,882 )
Cash and cash equivalents at beginning of period 6,600
9,055
Cash and equivalents at end of period $ 5,817
$ 1,173

Supplemental disclosures of cash flow information:


			Three Months Ended March 31,
			2019			2018
Cash flows from operating activities:
Net (loss) income			$	(2,729	)	$	68
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation, amortization and accretion			1,012			1,062
Provision for bad debts			107			100
Provision for obsolete inventory			588			696
Equity based compensation			248			181
Deferred income tax			—			(78		)
Changes in operating assets and liabilities:
Accounts receivable			(3,199		)	(5,934		)
Inventories			(490		)	(1,344		)
Other current assets			(1,848		)	(1,102		)
Other assets			(240		)	(84		)
Accounts payable			2,150			3,205
Accrued salaries and benefits			(795		)	(879		)
Accrued expenses			110			(142		)
Customer deposits and deferred service revenue			2,089			2,015
Other long-term liabilities			(213		)	(307		)
Net cash used in operating activities			(3,210		)	(2,543		)
Cash flows from investing activities:
Capital expenditures			(887		)	(568		)
Capitalization of software costs			(1,036		)	(1,102		)
Net cash used in investing activities			(1,923		)	(1,670		)
Cash flows from financing activities:
Payments of long-term debt			—			(48		)
Payment of contingent consideration for Brink Earn Out			(2,550		)	—
Payments of other borrowings			(16,777		)	(2,000		)
Proceeds from other borrowings			25,097			5,000
Proceeds from stock options			30			—
Net cash provided by financing activities			5,800			2,952
Effect of exchange rate changes on cash and cash equivalents			(10		)	423
Net increase (decrease) in cash and cash equivalents			657			(838		)
Cash and cash equivalents at beginning of period			3,485			6,600
Cash and equivalents at end of period			$	4,142		$	5,762

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	206	102	$	115		$	75
Income taxes, net of refunds	142	432	—			—
Additions to right-of-use assets and deferred rent obtained from operating lease liabilities			3,717			—

See accompanying notes to unaudited interim consolidated financial statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of presentation

The accompanying unaudited interim consolidated financial statements of PAR Technology Corporation (the “Company” or “PAR”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Article 108 of Regulation S-X pertaining to interim financial statements. Accordingly, they do not include all information and footnotes required by GAAP for annual financial statements. In the opinion of management, such unaudited interim consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the results for the interim periods included in this Quarterly Report on Form 10-Q (“Quarterly Report”). Operating results for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 are not necessarily indicative of the results of operations that may be expected for any future period. ~~Certain amounts for prior periods have been reclassified to conform to the current period classification.~~

The preparation of the unaudited interim consolidated financial statements requires management of the Company to make a number of estimates ~~judgments~~ and assumptions relating to the reported ~~amounts~~amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the ~~unaudited interim~~ consolidated financial statements and the reported ~~amount~~amounts of revenues and expenses during the period. ~~Primary areas where financial information is~~Significant items subject to ~~the use of~~such estimates ~~assumptions~~ and ~~the application of judgment~~assumptions include revenue recognition, ~~accounts receivable, inventories, accounting for~~stock based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations ~~contingent consideration, equity compensation, goodwill~~at fair value, the carrying amount of property, plant and equipment, identifiable intangible assets and ~~taxes.~~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 unaudited interim consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the Securities and Exchange Commission (“SEC”) on March ~~16, 2018.~~

~~Going Concern Assessment~~

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Management has evaluated whether relevant conditions or events, considered in the aggregate, indicate that there is substantial doubt about the Company's ability to continue as a going concern. Substantial doubt exists when conditions and events, considered in the aggregate, indicate it is probable that the Company will be unable to meet its obligations as they become due during the one-year period following the date of the Company's financial statements for the quarter ended September 30, 2018. The assessment is based on the relevant conditions that are known or reasonably knowable as of November 9, 2018.

As of September 30, 2018, the Company had a working capital surplus of $20.0 million. The Credit Agreement entered into on June 5, 2018 by the Company and certain of its U.S. subsidiaries with Citizens Bank, N.A., as lender thereunder, provides for revolving loans in an aggregate principal amount of up to $25 million, subject to affirmative and negative covenants, including certain financial maintenance covenants consisting of maximum leverage ratios and minimum consolidated EBITDA. Based on the Company’s current estimates, the Company anticipates that it will not meet the financial maintenance covenants for the quarter ending December 31, 2018. In the event of noncompliance and if the Company is unable to secure waivers or modifications to the Credit Agreement or alternative sources of capital to allow the Company to come into compliance with the covenants or allow the Company to repay or refinance the Credit Agreement, an event of default may occur under the Credit Agreement. If an event of default were to occur under the Credit Agreement, the lender may accelerate the payment of amounts outstanding and otherwise exercise any remedies to which it may be entitled. In addition, in such a case, the Company may no longer have access to the liquidity provided by the Credit Agreement and, as a result, the Company may not have sufficient liquidity to make the anticipated investments in the Brink business and satisfy operating expenses, capital expenditures and other cash needs. These conditions raise substantial doubt about our ability to continue as a going concern. However, the Company believes alternative sources of capital are available including from other sources of debt financings and/or future sales of its equity securities, and the equity value of the Company’s real estate holdings. Further, the Company can make reductions and reallocate its expenditures and investments to reduce near term cash requirements. One or more of these mitigating responses, together with anticipated revenues, are expected to provide the Company with sufficient liquidity to continue as a going concern. No assurances, however, can be given, in the event the Company is not successful in obtaining the necessary waivers or modifications to the Credit Agreement, that other sources of capital will be available, or, if available, the Company will be able to secure such capital on favorable terms. The Company’s failure to secure the necessary waivers or modifications, to generate enough revenue, control or further reduce

expenditures and/or to secure capital from other sources may result in an inability of the Company to continue as a going concern. Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

18, 2019.

Note 2 - Revenue Recognition

~~In May 2014,~~Beginning on January 1, 2018, the ~~Financial Accounting Standards Board ("FASB") issued~~Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company applies the five-step model, as described in ASU 2014-09 Revenue from Contracts with Customers, ~~codified as ASC Topic 606 (“ASC 606”). The FASB issued amendments~~ to ~~ASC 606 during 2016. ASC 606 requires additional disclosures regarding~~contracts when it is probable that the ~~nature, amount, timing and uncertainty of revenue and related cash flows arising from contracts with customers. ASC 606~~Company will collect the consideration it is ~~effective for annual and interim reporting periods beginning after December 15, 2017.~~

~~Two adoption methods are permitted under ASU 2014-09. The new standard may be adopted through either retrospective application~~entitled to ~~all periods presented~~ in our consolidated financial statements (full retrospective) or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective). The Company adopted the new standard effective January 1, 2018 using the modified retrospective method. We reviewed significant open contracts with customers for each revenue source.

Our revenue is derived from Software as a Service (SaaS), hardware and software sales, software activation, hardware support, installations, maintenance, professional services, contracts and programs. ASC 606 requires us to distinguish and measure performance obligations under customer contracts. Transaction prices are allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Performance obligations are satisfied over time as work progresses or at a point in time.

We evaluated the potential performance obligations within our Restaurant/Retail reporting segment (Brink/POS, SureCheck, and PixelPoint) and evaluated whether each deliverable or promise met the ASC 606 criteria to be considered distinct performance obligations. Revenue in the Restaurant/Retail reporting segment is recognized at a point in time for software, manufactured or “purchased for re-sale” hardware (such as terminals, peripherals printers, card readers and other accessories), installations and “pass through licenses”. Revenue on these items are recognized when the customer obtains control of the asset. This generally occurs upon delivery and acceptance by the customer or upon installation or delivery to a third party carrier for onward delivery to customer. Additionally, revenue in the Restaurant/Retail reporting segment relating to subscription services for software, SaaS, Advanced Exchange, on-site support and other services is recognized over time as the customer simultaneously receives and consumes the benefits of the Company’s performance obligations. Our support services are stand-ready obligations that are provided over the life of the contract, which typically ranges from 12 months to 60 months. We offer installation services to our customers for hardware and software for which we primarily hire third-party contractors to install the equipment on our behalf. We pay the third-party contractors an installation service fee based on an hourly rate as agreed upon between us and contractor. When third party installers are used, we determine whether the nature of our promises are performance obligations to provide the specified goods or services ourselves (principal) or to arrangeexchange for the ~~third party to provide the~~ goods orand services ~~(agent). In our customer arrangements, we are primarily responsible for providing a good or service, we have inventory risk before the good or service is~~ transferred to the ~~customer, and we have discretion in establishing prices. We~~customer. The following steps are applied to achieve that principle:

Step 1: Identify the ~~principal~~contract with the customer

Step 2: Identify the performance obligations in the ~~arrangement and record installation revenue on a gross basis.~~contract

Step 3: Determine the transaction price

At times we will offer maintenance services at different prices for customers based on the life of the service, which typically ranges from 12 to 60 months. The support services are a ‘stand-ready obligation’ satisfied over time on the basis that customer consumes and receives a benefit from having access to our support resources, when and as needed, throughout the contract term. For this reason, the support services are recognized ratably over the term since we satisfy our obligation to stand ready by performing these services each day.

Our contracts typically require payment within 30 to 90 days from the shipping date or installation date, depending on our terms with the customer. For all sales not bundled with other performance obligations, the Company determines selling price based on the following table.



~~Restaurant and Retail~~
~~Performance Obligation~~	~~Stand-alone Selling Price~~	~~Cost Plus Margin~~
~~Hardware~~	X
~~Pass Thru Hardware (Terminals, Printers, Card Readers, etc.)~~		X
~~Hardware Support (i.e., Advanced Exchange)~~		X
~~Installation~~		X
~~Maintenance~~		X
~~Software~~	X
~~Software Updates~~		X
~~Professional Services / Project Management~~		X
~~Software Activation~~		X

Our revenue in the Government reporting segment is recognized over time as control is generally transferred continuously to our customers. Revenue generated by the Government reporting segment is predominantly related to services provided, however, revenue is also generated through the sale of materials, software, hardware, and maintenance. For the Government reporting segment cost plus fixed fee contract portfolio, revenue is recognized over time using costs incurred to date to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and general & administrative expenses. Profit is recognized on the fixed fee portion of the contract as costs are incurred and invoiced. Long-term fixed price contracts and programs involve the use of various techniques to estimate total contract revenue and costs. For long-term fixed price contracts, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include: labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors. Revenue and profit in future periods of contract performance are recognized using the aforesaid assumptions and adjusting the estimate. AllocatingStep 4: Allocate the transaction price ~~varies based on~~to the performance obligations ~~within~~in the contract

Step 5: Recognize revenue when the company satisfies a specific contract as the stand-alone selling price of the software and maintenance/support is not always discernable. Once the services provided are determined to be distinct or not distinct, we evaluate how to allocate the transaction price. Generally, the Government reporting segment does not sell the same good or service to similar customers and the contract performance obligations are unique to each government solicitation. The performance obligations are typically not distinct. In cases where there are distinct performance obligations, the transaction price would be allocated to each performance obligation ~~on a standalone basis. Cost plus margin is used for the cost plus fixed fee contract portfolios, and residual is used for the fixed price and time & materials contracts portfolios.~~

~~In determining when to recognize revenue, we analyze whether our performance obligations in our contracts are satisfied over a period of time or at a point in time. In general, our~~The Company’s performance obligations are satisfied ~~over a period~~at the point in time when products are shipped or services are received by the customer, which is when the customer has the title and has assumed the significant risks and rewards of ~~time. However, there may be circumstances where the latter or both scenarios could apply to a contract.~~ownership.

We usually expect payment within 30 to 90 days from the date of service, depending on our terms with the customer. None of our contracts as of September 30, 2018 contained a significant financing component.

~~There was no impact on retained earnings for the nine months ended September 30, 2018 based on the adoption of ASC 606.~~

Performance Obligations Outstanding

Our performance obligations outstanding represent the transaction price of firm, non-cancellable orders, with expected delivery dates to customers subsequent to ~~September 30,~~March 31, 2019 and December 31, 2018, respectively, for ~~which~~ work that has not ~~yet~~ been performed. The aggregate performance obligations attributable to ~~each of~~ our two reporting segments, Restaurant/Retail and Government, is as follows (in thousands):


	As of September 30, 2018				As of March 31, 2019
	Current - under one year		Non-current - over one year		Current - under one year	Non-current - over one year
Restaurant	$	10,188	$	4,641	11,198	4,807
Government	47		—		337	—
TOTAL	$	10,235	$	4,641	11,535	4,807


	As of December 31, 2017				As of December 31, 2018
	Current - under one year		Non-current - over one year		Current - under one year	Non-current - over one year
Restaurant	$	6,199	$	2,668	9,320	4,407
Government	585		—		325	—
TOTAL	$	6,784	$	2,668	9,645	4,407

Most performance obligations over one year are related to service and support contracts, approximately 70% of which we expect to fulfill within the one-year period and 100% within 60 months.

During the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, we recognized revenue of ~~$4.8 million and $7.7~~$5.7 million that was included in contract liabilities at the beginning of the ~~period, respectively.~~period.

Disaggregated Revenue

We disaggregate revenue from contracts ~~with~~from customers by major product group for each of the reporting segments ~~because~~as we believe it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. ~~Disaggregated~~Disaggregation of revenue for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and March 31, 2018 is as follows (in thousands):


	Three months ended September 30, 2018			Three months ended March 31, 2019
	Restaurant/Retail - Point in Time	Restaurant/Retail - Over Time	Government - Over Time	Restaurant/Retail - Point in Time	Restaurant/Retail - Over Time	Government - Over Time
Restaurant	21,761	5,727	—	22,336	5,790	—
Grocery	691	747	—	490	944	—
Mission Systems	—	—	8,283	—	—	8,546
ISR Solutions	—	—	9,153	—	—	6,576
TOTAL	22,452	6,474	17,436	22,826	6,734	15,122


	Nine months ended September 30, 2018			Three months ended March 31, 2018
	Restaurant/Retail - Point in Time	Restaurant/Retail - Over Time	Government - Over Time	Restaurant/Retail - Point in Time	Restaurant/Retail - Over Time	Government - Over Time
Restaurant	81,422	17,258	—	32,164	5,857	—
Grocery	2,251	2,342	—	753	746	—
Mission Systems	—	—	25,324	—	—	8,334
ISR Solutions	—	—	25,997	—	—	7,807
TOTAL	83,673	19,600	51,321	32,917	6,603	16,141

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period ~~would be~~is less than one year or the total amount of commissions ~~would be~~is immaterial. ~~Commissions are recorded in~~We record these costs within selling, general and administrative ~~expenses (SG&A).~~ expenses.

We elected to exclude from the measurement of the transaction price all taxes assessed by a governmental ~~authorities~~authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (for example, sales, use, value added, and some excise taxes).

Note 3 — ~~Divestiture and Discontinued Operations~~Leases

~~On November 4, 2015,~~Adoption

Effective January 1, 2019, the Company ~~sold substantially all~~adopted the new lease accounting standard, ASC 842, Leases, using the modified retrospective method of applying the new standard at the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry forward the historical lease classification. Adoption of this standard resulted in the recording of operating lease right-of-use (ROU) assets and corresponding operating lease liabilities of ~~its hotel/spa technology business operated by PAR Springer-Miller Systems, Inc., Springer-Miller International, LLC,~~approximately $4.0 million. The Company's financial position for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and ~~Springer-Miller Canada, ULC (collectively, “PSMS”) pursuant~~continue to ~~an asset purchase agreement (the “PSMS APA”) dated on even date therewith among PSMS and Gary Jonas Computing~~be reported in accordance with previous guidance.

~~Ltd., SMS Software Holdings LLC,~~A significant portion of our operating and ~~Jonas Computing (UK) Ltd. (the “Purchasers”). Accordingly, the results~~finance lease portfolio includes corporate offices, research and development facilities, information technology (IT) equipment, and automobiles. The majority of ~~operations~~our leases have remaining lease terms of ~~PSMS have been classified as discontinued operations in~~1 year to 5 years. Substantially all lease expense is presented within selling, general and administrative expenses on the Consolidated Statements of Operations (unaudited) and Consolidated Statements of Cash Flows (unaudited) in accordance with Accounting Standards Codification (“ASC”) ASC 205-20 (Presentation of Financial Statements – Discontinued Operations). Additionally, the assets and associated liabilities have been classified as discontinued operations in the consolidated balance sheets (unaudited). Total consideration to be received from the sale is $16.6 million in cash (the “Base Purchase Price”), with $12.1 million paid at the closing of the asset sale and up to $4.5 million payable 18 months following the closing (the “Holdback Amount”). On May 5, 2017, the Company received payment of $4.2 million of the Holdback Amount, the unpaid balance is reflective of a negative purchase price adjustment based on the net tangible asset calculation provided under the PSMS APA. In addition to the Base Purchase Price, contingent consideration of up to $1.5 million (the “Earn-Out”) could be received by the Company based on the achievement of certain agreed-upon revenue and earnings targets for calendar years 2017, 2018 and 2019 (up to $500,000 per calendar year), subject to setoff for PSMS and ParTech, Inc. indemnification obligations thereunder and unresolved claims. The Company received no Earn-Out payment for calendar year 2017 and, as of September 30, 2018, the Company did not record any amount associated with calendar years 2018 and 2019, as the Company does not believe achievement of the related revenue and earnings targets is probable.

~~As of September 30, 2018 and December 31, 2017, the Company did not have any assets or liabilities from discontinued operations.~~

~~Summarized financial operating results for the Company’s discontinued operations is as follows (in thousands):~~Operations.

Three Months
Ended September 30, Nine Months
Ended September 30,
2018
2017 2018
2017
Operations
Total revenues $ —
$ —
$ —

$ —

Income from discontinued operations before income taxes $ —
$ —
$ —

$ 284
Provision for income taxes —
—
—

(101 )
Income from discontinued operations, net of taxes $ —
$ —
$ —

$ 183



	Three Months Ended
	March 31, 2019		March 31, 2018
Operating lease cost	$	546	$	457
Total lease cost	$	546	$	457

~~During the three and nine months ended September 30, 2017, the Company recognized income on discontinued operations of $0 (net of tax) and $0.2 million (net of tax), respectively, mainly due~~Supplemental cash flow information related to ~~an increase of the note receivable. The increase of the note receivable is reflected in the Company’s earnings for 2017 and~~leases was ~~received by the Company on May 5, 2017. No amount~~as follows:



	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	546

Supplemental balance sheet information related to leases was ~~recorded for the three and nine months ended September 30, 2018.~~as follows:



	March 31, 2019
Operating leases
Operating lease right-of-use assets	3,697
Operating lease liabilities - current portion	1,540
Operating lease liabilities - net of current portion	2,177
Total operating lease liabilities	3,717
Weighted-average remaining lease term
Operating leases	3.4 years
Weighted-average discount rate
Operating leases	4	%

Future minimum lease payments are as follows:



	Operating Leases
2019	$	1,652
2020	1,006
2021	902
2022	752
2023	574
Thereafter	75
Total lease payments	4,961
Less: interest	(1,244		)
Total	$	3,717

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year would have been as follows:



	Total			Less Than 1 Year			1-3 Years		3 - 5 Years		More than 5 Years
Operating leases	$	4,961		$	1,652		$	1,908	$	1,326	$	75
Total	$	4,961	—	$	1,652	—	$	1,908	$	1,326	$	75

Note 4 — Accounts Receivable

The Company’s accounts receivable, net, consists of (in thousands):


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Government segment:
Government reporting segment:
Billed	$	8,712		$	9,028		$	10,428		$	9,100
Advanced billings	(729		)	(1,977		)	(243		)	(563		)
	7,983			7,051			10,185			8,537

Restaurant/Retail segment:	19,167			23,026
Restaurant/Retail reporting segment:							19,126			17,682
Accounts receivable - net	$	27,150		$	30,077		$	29,311		$	26,219

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company ~~had~~ recorded allowances for doubtful accounts of $1.4 million and ~~$0.9~~$1.3 million, respectively, against Restaurant/Retail reporting segment accounts receivable.

Note 5 — Inventories

Inventories are primarily used in the manufacture, maintenance and service ~~for~~of Restaurant/Retail reporting segment products. The components of inventories, net, consist of the following (in thousands):


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Finished goods	$	12,952	$	9,535	$	11,312	$	12,472
Work in process	418		766		452		67
Component parts	5,425		5,480		4,522		4,716
Service parts	5,550		5,965		6,353		5,482
	$	24,345	$	21,746	$	22,639	$	22,737

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company ~~had~~ recorded inventory reserves of ~~$11.0~~$10.4 million and ~~$10.0~~$9.8 million, respectively, against Restaurant/Retail reporting segment inventories, which ~~relates~~relate primarily to service parts.

Note 6 — Identifiable Intangible Assets and Goodwill

Identifiable intangible assets represent intangible assets acquired by the Company in connection with its acquisition of Brink Software Inc. in 2014 ("Brink Acquisition") and software development costs. The Company capitalizes certain software development costs for software used in its Restaurant/Retail reporting 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 software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility for software sold as a perpetual license, as defined within ASC 985-20 (Software – Costs of Software to be sold, Leased, or Marketed) are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Software development is also capitalized in accordance with ASC 350-40, “Intangibles - Goodwill and Other - Internal - Use Software,” and is amortized over the expected benefit period, which generally ranges from three to seven years. Software development costs capitalized within continuing operations during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and March 31, 2018 were $1.0 million and ~~$3.1 million, respectively. Software development costs capitalized within continuing operations during the three and nine months ended September 30, 2017 were~~ $1.1 ~~million and $3.3~~ million, respectively.

Annual amortization, charged to cost of sales 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.~~years or (b) the ratio that current gross revenues for the product bear to the total of current and anticipated future gross revenues for the product. Amortization of capitalized software development

costs from continuing operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 were ~~$0.9~~$0.5 million and ~~$2.6~~$0.8 million, respectively. ~~Amortization of capitalized software development costs from continuing operations for the three and nine months ended September 30, 2017 were $0.4 million and $1.1 million, respectively.~~

Amortization of intangible assets acquired in the Brink Acquisition amounted to $0.2 million ~~and $0.7 million~~ for each of the three month periods ended March 31, 2019 and nine months ended September 30, 2018, respectively. Amortization of intangible assets acquired in the Brink Acquisition amounted to $0.2 million and $0.7 million for the three and nine months ended September 30, 2017, respectively.2018.

The components of identifiable intangible assets ~~excluding discontinued operations,~~ are (in thousands):


	September 30, 2018			December 31, 2017			Estimated Useful Life	March 31, 2019			December 31, 2018			Estimated Useful Life
Acquired and internally developed software costs	$	22,736		$	19,670		3 - 7 years	$	23,013		$	21,977		3 - 7 years
Customer relationships	160			160			7 years	160			160			7 years
Non-competition agreements	30			30			1 year	30			30			1 year
	22,926			19,860				23,203			22,167
Less accumulated amortization	(10,759		)	(8,190		)		(12,427		)	(11,708		)
	$	12,167		$	11,670			$	10,776		$	10,459
Trademarks, trade names (non-amortizable)	400			400			N/A	400			400			N/A
	$	12,567		$	12,070			$	11,176		$	10,859

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


2018	$	1,107
2019	3,082		$	2,046
2020	2,640		2,653
2021	1,685		1,549
2022	692		649
2023			365
Thereafter	2,961		3,514
Total	$	12,167	$	10,776

The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment. The Company operates in two ~~reportable business~~reporting segments, Restaurant/Retail and Government. Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to a specific reporting unit at the date the goodwill is initially recorded. Once goodwill has been assigned to a specific reporting unit, 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 ~~Company conducted a goodwill impairment test as of September 30, 2018 and concluded there was no impairment as of that date. The~~ amount of goodwill carried by the Restaurant/Retail and Government reporting units is $10.3 million and $0.8 million, respectively, at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. No impairment charges were recorded for the periods ended March 31, 2019 and December 31, 2018.

Note 7 — Stock Based Compensation

The Company applies the fair value recognition provisions of ASC Topic 718. The Company recorded stock based compensation of ~~$0.4 million and $0.8~~$0.2 million for each of the three ~~and nine~~ month periods ended ~~September 30, 2018, respectively. The Company recorded stock based compensation of $0.1 million~~March 31, 2019 and ~~$0.3 million for the three and nine month periods ended September 30, 2017, respectively.~~March 31, 2018. The amount recorded for ~~both~~ the three ~~and nine month periods~~months ended ~~September 30, 2018 were~~March 31, 2019 was net of benefits of ~~$18,000 as a~~$27,000 and March 31, 2018 was zero which was the result of forfeitures of unvested stock awards prior to completion of the requisite service period and/or failure to achieve performance criteria. The amount recorded for both the three and nine month periods ended September 30, 2017 were net of benefits of $1,000 as a result of forfeitures of unvested stock awards prior to completion of the requisite service period and/or failure to achieve performance criteria.

At ~~September 30, 2018,~~March 31, 2019, the aggregate unrecognized compensation expense related to unvested equity awards was ~~$2.2~~$1.9 million (net of estimated forfeitures), which is expected to be recognized as compensation expense in fiscal years ~~2018~~2019 through ~~2020.~~2021.

For the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the Company recognized compensation expense related to performance awards based on its estimate of the probability of achievement in accordance with ASC Topic 718.

Note 8 ~~— Debt~~

On June 5, 2018, we entered into a Credit Agreement (the “Credit Agreement”) with certain of our U.S. subsidiaries and Citizens Bank, N.A. The Credit Agreement provides for revolving loans in an aggregate principal amount of up to $25.0 million (the “Credit Facility”). The Credit Facility includes a $15.0 million accordion option, which we can request in $5.0 million increments. The accordion increase is uncommitted and is not available if an event of default exists. In connection with entering into the Credit Agreement, we repaid in full all outstanding obligations owed under the credit agreement dated November 29, 2016 (as subsequently amended, modified, and supplemented) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), and terminated the JPMorgan Chase credit agreement and all commitments (other than an undrawn letter of credit) by JPMorgan Chase to extend further credit thereunder.

The Credit Facility matures three (3) years from the date of the Credit Agreement and is guaranteed by our U.S. subsidiaries that are parties thereto. The Credit Facility is secured by substantially all of our assets and the subsidiary guarantors. The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including certain financial maintenance covenants consisting of maximum consolidated leverage ratios and minimum consolidated EBITDA, and covenants that restrict our ability and our subsidiaries to incur additional indebtedness, incur or permit to exist liens on assets, make investments and acquisitions, consolidate or merge, engage in asset sales, pay dividends, and make distributions. The revolving loans bear interest at the LIBOR rate plus 1.5%. Obligations under the Credit Agreement may be accelerated upon certain customary events of default (subject to grace or cure periods, as appropriate).

On September 30, 2018, the applicable rate under the Credit Facility was 1.5% plus LIBOR. There was a $7.0 million outstanding balance and up to $18.0 million available under the Credit Facility as of September 30, 2018 compared to $1.0 million outstanding under the JPMorgan Chase credit agreement as of December 31, 2017.

In addition to the Credit Facility, the Company had a loan, collateralized by a mortgage on certain real estate, with a balance of $0.2 million and $0.4 million as of September 30, 2018 and 2017, respectively. This loan matures on November 1, 2019. The interest rate is fixed at 4.00% through the maturity date of the loan. The annual loan payment including interest through November 1, 2019 totals $0.2 million. On October 1, 2018, the Company finalized a sale of the real estate held as collateral and the remaining balance on the loan was paid in full.

~~Note 9~~ — Net (loss) income per share

~~(Loss) earnings~~

Earnings per share are calculated in accordance with ASC Topic 260, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS). It requires the presentation of basic and diluted EPS. Basic EPS excludes all dilution and is based upon the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that would occur if convertible securities or other contracts to issue common stock were exercised. For the ~~nine~~three months ended ~~September 30, 2018 and September 30, 2017,~~March 31, 2019, there were no486,000 anti-dilutive stock options ~~outstanding.~~outstanding compared to none as of March 31, 2018.

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

Three Months
Ended September 30,
2018 2017
Net loss from continuing operations $ (16,704 ) $ (1,517 )

Basic:

Shares outstanding at beginning of period 15,993
15,907
Weighted average shares issued during the period, net 78
69
Weighted average common shares, basic 16,071
15,976
Net loss from continuing operations per common share, basic $ (1.04 ) $ (0.10 )
Diluted:

Weighted average common shares, basic 16,071
15,976
Dilutive impact of stock options and restricted stock awards —
—
Weighted average common shares, diluted 16,071
15,976
Net loss from continuing operations per common share, diluted $ (1.04 ) $ (0.10 )


	Nine Months Ended September 30,					Three Months Ended March 31,
	2018			2017		2019			2018
Net (loss) income from continuing operations	$	(17,959	)	$	1,724
Net (loss) income						$	(2,729	)	$	68

Basic:
Shares outstanding at beginning of period	15,949			15,771		16,041			15,949
Weighted average shares issued during the period, net	84			178
Weighted average shares issued/(repurchased) during the period, net						3			(1		)
Weighted average common shares, basic	16,033			15,949		16,044			15,948
Net (loss) income from continuing operations per common share, basic	$	(1.12	)	$	0.11
Net (loss) income per common share, basic						$	(0.17	)	$	—
Diluted:
Weighted average common shares, basic	16,033			15,949		16,044			15,948
Dilutive impact of stock options and restricted stock awards	—			311		—			338
Weighted average common shares, diluted	16,033			16,260		16,044			16,286
Net (loss) income from continuing operations per common share, diluted	$	(1.12	)	$	0.11
Net (loss) income per common share, diluted						$	(0.17	)	$	—

Note ~~10 - Income Taxes~~

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act ("Tax Act"). SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which accounting under Accounting Standards Codification 740, ~~Income Taxes~~ ("ASC 740") is complete. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, but the company is able to determine a reasonable estimate, the company must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act. Because of the complexity of the new Global Intangible Low-Taxed Income (GILTI) tax rules, the Company continues to evaluate this provision of the Tax Reform Act and the application of ASC 740, Income Taxes. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company’s selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Whether the Company expects to have future U.S. inclusions in taxable income related to GILTI depends on not

only the Company’s current structure and estimated future results of global operations, but also its intent and ability to modify its structure. The Company’s currently in the process of analyzing its structure and, as a result, is not yet able to reasonably estimate the effect of this provision of the Tax Reform Act. Therefore, the Company has not made any adjustments related to potential GILTI tax in its financial statements and has not made a policy decision regarding whether to record deferred tax on GILTI.

~~Deferred Tax Assets and Valuation Allowance~~

Management assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets. The Company had deferred income tax assets of $14.9 million as of September 30, 2018 compared to $13.9 million as of December 31, 2017. Previously, based on information at the prior measurement dates, we did not have a valuation allowance for deferred tax assets arising from US federal income tax net operating loss carryforwards. FASB ASC 740-10-30 indicates that experiencing cumulative losses in recent years is a type of objectively verifiable negative evidence for entities to consider in evaluating the need for a valuation allowance on deferred tax assets. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. The Company has incurred losses in recent years and is in a loss position for the nine months ended September 30, 2018. Because of the impact of cumulative losses have on the determination of the recoverability of deferred tax assets through future earnings, the Company evaluated its ability to realize its deferred tax assets as it would require a substantial amount of objectively verifiable positive evidence of future income to support the realizability of the deferred tax assets. On the basis of this evaluation, the Company established a full valuation allowance as of September 30, 2018 for the full carrying value of deferred tax assets as it was concluded that the negative evidence now outweighs the positive evidence and thus it is more likely than not that the deferred tax assets will not be realized. Losses in the third quarter were greater than previously anticipated. The Company will continue to evaluate its position and the valuation allowance could be reversed in a future period if sufficient objectively verifiable positive evidence outweighs such negative evidence.

~~Note 11~~9 — Contingencies

The Company is 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. In the third quarter of 2016, the Company's Audit Committee commenced an internal investigation into ~~certain activities~~conduct at ~~our~~the Company's China and Singapore offices to determine whether certain import/export and sales documentation activities were improper and in violation of the U.S. Foreign Corrupt Practices Act ("FCPA") and other applicable laws and certain Company policies. WeIn the fourth quarter of 2016, the Company voluntarily notified ~~and are fully cooperating with~~ the SEC and the U.S. Department of Justice ("DOJ") of the internal ~~investigation. On~~investigation, and on May 1, 2017 the Company received a document subpoena from the SEC for documents relating to the internal investigation. Following the conclusion of the Audit Committee's internal investigation, the Company voluntarily reported the relevant findings of the investigation to the China and Singapore authorities and is fully ~~cooperating.~~cooperating with these authorities. During the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, we recorded ~~$0.3~~$0.2 million ~~and $0.9 million, respectively,~~ of expenses relating to the internal investigation, ~~and the SEC subpoena,~~ including expenses of outside legal counsel and forensic accountants, compared to ~~$0.7~~$0.3 million ~~and $2.3 million, respectively,~~ for the three ~~and nine~~ months ended ~~September 30, 2017. We~~March 31, 2018.

As described in Note 13 - Subsequent Events, to the unaudited interim consolidated financial statements, in early April 2019, the SEC notified the Company that based on current information, it did not intend to recommend an enforcement action against the Company; shortly, thereafter, the DOJ advised that it did not intend to separately proceed. As stated above, we continue to cooperate with the China and Singapore authorities; we are currently ~~unable~~not able to predict what actions ~~the SEC, DOJ, or other governmental agencies (including China and Singapore authorities)~~these authorities might take, or what the likely outcome of any such actions might be, or estimate the range of reasonably possible fines or penalties, which may be material. The ~~SEC, DOJ,~~China and ~~other governmental~~Singapore authorities have a broad range of civil and criminal sanctions, and the imposition of ~~sanctions,~~ fines or ~~remedial measures~~penalties could have a material adverse effect on the Company’s business, prospects, reputation, financial condition, ~~liquidity,~~ results of operations or cash flows.

Note 1210 — Segment and Related Information

The Company operates in two distinct ~~reportable~~reporting segments, Restaurant/Retail and Government. The Company’s chief operating decision maker is the Company’s Chief Executive Officer. The Restaurant/Retail reporting segment offers point-of-sale ("POS")~~, food safety~~ and management technology solutions to restaurants and retail, including in the fast casual, quick serve and table service restaurant ~~categories, and specialty retail outlets.~~categories. This segment also offers customer support including field service, installation, Advanced Exchange, and ~~twenty-four-hour~~twenty-four-

hour telephone support and depot repair. The Government reporting segment performs complex technical studies, analysis, and experiments, develops innovative solutions, and provides on-site engineering in support of advanced defense, security, and aerospace systems. This segment also provides 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 reporting segments is set forth below ~~excluding discontinued operations~~ (in thousands).


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Revenues:
Restaurant/Retail	$	28,926		$	34,023		$	103,273		$	133,288		$	29,560		$	39,520
Government	17,436			14,915			51,321			43,776			15,122			16,141
Total	$	46,362		$	48,938		$	154,594		$	177,064		$	44,682		$	55,661

Operating (loss) income:
Restaurant/Retail	$	(3,836	)	$	(3,559	)	$	(7,244	)	$	603		$	(2,982	)	$	(608	)
Government	1,854			1,267			5,132			4,364			1,363			1,266
Other	(680		)	(304		)	(1,536		)	(2,568		)	(482		)	(520		)
	(2,662		)	(2,596		)	(3,648		)	2,399			(2,101		)	138
Other income (expense), net	455			(70		)	120			(264		)
Other (expense) income, net													(430		)	49
Interest expense, net	(142		)	(39		)	(261		)	(84		)	(146		)	(41		)
(Loss) income before benefit from / (provision for) income taxes	$	(2,349	)	$	(2,705	)	$	(3,789	)	$	2,051
(Loss) income before provision for income taxes													$	(2,677	)	$	146

Depreciation, amortization and accretion:
Restaurant/Retail	$	1,215		$	886		$	3,014		$	2,481		$	868		$	908
Government	6			5			17			16			19			5
Other	157			62			460			308			125			149
Total	$	1,378		$	953		$	3,491		$	2,805		$	1,012		$	1,062

Capital expenditures including software costs:
Restaurant/Retail	$	1,098		$	1,121		$	3,363		$	3,452		$	1,063		$	1,139
Government	67			—			104			7			176			—
Other	1,067			457			2,600			3,764			684			531
Total	$	2,232		$	1,578		$	6,067		$	7,223		$	1,923		$	1,670

Revenues by country:
United States	$	43,183		$	44,418		$	144,706		$	163,606		$	41,925		$	52,678
Other Countries	3,179			4,520			9,888			13,458			2,757			2,983
Total	$	46,362		$	48,938		$	154,594		$	177,064		$	44,682		$	55,661

The following table represents identifiable assets by reporting segment ~~excluding discontinued operations~~ (in thousands).


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Restaurant/Retail	$	75,132	$	74,257	$	73,255	$	68,004
Government	9,518		8,714		13,487		9,867
Other	18,146		31,653		18,306		16,810
Total	$	102,796	$	114,624	$	105,048	$	94,681

The following table represents assets by country based on the location of the assets ~~excluding discontinued operations~~ (in thousands).


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
United States	$	90,970	$	99,284	$	95,105	$	84,652
Other Countries	11,826		15,340		9,943		10,029
Total	$	102,796	$	114,624	$	105,048	$	94,681

The following table represents goodwill by reporting unit ~~excluding discontinued operations~~ (in thousands).


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Restaurant/Retail	$	10,315	$	10,315	$	10,315	$	10,315
Government	736		736		736		736
Total	$	11,051	$	11,051	$	11,051	$	11,051

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Restaurant/Retail segment:
Restaurant/Retail reporting segment:
McDonald’s Corporation	15	%	23	%	20	%	35	%	10	%	27	%
Yum! Brands, Inc.	13	%	17	%	11	%	14	%	13	%	11	%
Government segment:
Government reporting segment:
U.S. Department of Defense	38	%	31	%	33	%	25	%	34	%	29	%
All Others	34	%	29	%	36	%	26	%	43	%	33	%
	100	%	100	%	100	%	100	%	100	%	100	%

No other customer within All Others represented more than 10% of the Company’s total revenue for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Note ~~13 —~~11 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 primarily consist of cash and cash equivalents, trade receivables, trade payables, debt instruments and deferred compensation assets and liabilities. The carrying amounts of cash and cash equivalents, trade receivables and trade payables as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were considered representative of their fair values. The estimated fair value of the Company’s long-term debt and line of credit ~~at September 30, 2018~~on March 31, 2019 and December 31, ~~2017~~2018 was based on variable and fixed interest rates on such respective dates and approximates their respective carrying values at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

The deferred compensation assets and liabilities primarily relate to the Company’s deferred compensation plan, which allows for pre-tax salary deferrals for certain key employees. 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, the fair value classification as defined under FASB ASC 820, "Fair Value Measurements", 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 its deferred compensation plan, which are recorded at fair value each period using the cash surrender value of the insurance investments.

The ~~amount~~amounts owed to employees participating in the Deferred Compensation Plan at ~~September 30, 2018~~March 31, 2019 was ~~$3.4~~$3.2 million compared to ~~$3.9~~$3.6 million at December 31, ~~2017~~2018 and is included in other long-term liabilities on the consolidated balance sheets.

Under the stock purchase agreement governing the Brink Acquisition, in the event certain defined revenues ~~are~~were determined to have been achieved in 2015, 2016, 2017 and 2018 ("contingent consideration period"), the Company iswould be obligated to pay additional purchase price consideration ("Brink Earn Out"). The fair value of the Brink Earn Out 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 Measurements and 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 Inc. during the contingent consideration period, appropriately discounted considering the uncertainties associated with the obligation. Any change in the fair value adjustment ishad been recorded in the earnings of that contingent consideration period. ~~Changes in~~For the ~~fair value~~$2.6 million of ~~the~~ Brink Earn Out ~~may result from changes~~targets achieved during the 2018 period, the Company paid the amount in ~~probability assumptions with respect to~~full in March 2019. No Brink Earn Out targets had been achieved for the ~~likelihood of achieving the various contingent payment obligations. Significant increases~~2015, 2016, or ~~decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurements.~~2017 years.

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, and are recorded as a component of other ~~current liabilities as of September 30, 2018 and other~~ long-term liabilities ~~as of December 31, 2017~~ on the consolidated balance sheet (in thousands):

Level 3 Inputs
Liabilities
Balance at January 1, 2017 $ 4,000
New level 3 liability —
Total (gains) losses reported in earnings (1,000 )
Transfers into or out of Level 3 $ —
Balance at December 31, 2017 $ 3,000
New level 3 liability —
Total (gains) losses reported in earnings (400 )
Transfers into or out of Level 3 —
Balance at September 30, 2018 $ 2,600



	Level 3 Inputs
	Liabilities
Balance at December 31, 2018	$	2,550
New level 3 liability	—
Total gains (losses) reported in earnings	—
Settlement of Level 3 liabilities	(2,550		)
Balance at March 31, 2019	$	—

Note 1412 — Related Party Transactions

The Company leased its corporate wellness facility to related parties at a rate of $9,775 per month. The Company received complimentary memberships to this facility which were provided to ~~its~~ local employees. Expenses incurred by the Company relating to the facility amounted to $0 and ~~$74,000~~$55,000 during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, respectively. ~~Expenses incurred by~~The Company did not recognize any rental income from the ~~Company relating to the facility amounted to $51,000 and $174,000~~related party during the three ~~and nine~~ months ended ~~September 30, 2017, respectively. The Company~~March 31, 2019 and recognized ~~rental income from related parties of $0 and $39,100, respectively,~~$29,325 for the three ~~and nine~~ month ~~periods~~period ended ~~September 30,~~March 31, 2018. ~~The~~Additionally, the Company ~~recognized rental income from related parties of $29,325 and $87,975, respectively, for the three and nine month periods ended September 30, 2017. The~~did not have any rent receivable ~~at September 30, 2018 and December 31, 2017 was zero and $59,000, respectively. This arrangement between the Company and~~from the related party ~~terminated on April 30,~~for the periods ended March 31, 2019 or December 31, 2018.

~~In October 2016,~~

Note 13 — Subsequent Events

Convertible Notes

On April 10, 2019, the Company entered into a ~~statement~~Purchase Agreement with Jefferies LLC, (the “Initial Purchaser”), relating to its issuance and sale of ~~work~~$80.0 million in aggregate principal amount, including the simultaneous closing of the full exercise on April 11, 2019 of the Initial Purchaser’s option to purchase additional notes, of 4.5% Convertible Senior Notes due 2024 (the “notes”). The notes were issued pursuant to an indenture, dated April 15, 2019, between the Company and The Bank of New York Mellon Trust Company, N.A. (“~~SOW”~~Trustee”) ~~with Xpanxion LLC for software development services. For~~, referred to herein as the ~~nine months ended September 30, 2017, we incurred~~“Indenture.”

The Company received net proceeds from its sale of the notes, including net proceeds from the option to purchase additional notes, of approximately ~~$1,000,000~~$75.2 million. A portion of ~~expenses~~the proceeds was used to ~~Xpanxion, LLC~~repay in full amounts outstanding under the ~~SOW.~~Credit Agreement, dated June 5, 2018, among the Company, as borrower, with certain of its U.S. subsidiaries, and Citizens Bank, N.A., as lender (as amended by the First Amendment thereto, dated March 4, 2019, the “Credit Agreement), which were approximately $16.1 million as of March 31, 2019, and terminate the Credit Agreement. the Company intends to use the remaining proceeds for general corporate purposes, including funding investment in the Company’s Brink business and for other working capital needs. The Company ~~did not incur~~may also use a portion of the proceeds to acquire or invest in other assets complementary to its business. The notes are senior, unsecured obligations of the Company and bear interest at a rate equal to 4.500% per year. Interest on the notes is payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2019. Interest will accrue on the notes from the last date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from April 15, 2019. Unless earlier converted, redeemed or repurchased, the notes will mature on April 15, 2024.

The notes are convertible, at the option of the holder, at any ~~expenses~~time prior to ~~Xpanxion~~the close of business on the business day immediately preceding October 15, 2023, but only in the following circumstances: (1) during any calendar quarter commencing after the ~~nine months ended September 30, 2018. Until his retirement~~calendar quarter ending on June 30, ~~2017, Paul Eurek,~~2019 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on such trading day; (2) during the five consecutive business day period immediately after any five consecutive trading day period (the five consecutive trading day period being referred to as the ‘‘measurement period’’) in which the trading price (as defined in the offering memorandum) per $1,000 principal amount of the notes, as determined following a ~~former director~~request by a holder of the notes, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; (3) upon the occurrence of certain specified corporate events; or (4) if the Company has called the notes for redemption. In addition, regardless of the foregoing circumstances, holders may convert their notes at any time on or after October 15, 2023 until the close of business on the second business day immediately preceding the maturity date. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of the Company ~~was President~~common stock or a combination of ~~Xpanxion LLC.~~cash and shares of the Company common stock, at its election.

The Indenture contains covenants that, among other things, restrict the Company’s ability to merge, consolidate or sell, or otherwise dispose of, substantially all of its assets. These limitations are subject to a number of important qualifications and exceptions. The Indenture contains customary Events of Default (as defined in the Indenture), including default for 30 days in the payment when due of interest on the notes; default in the payment when due (at maturity, upon redemption or otherwise) of the principal of the notes; failure to comply with covenants and other obligations under the Indenture, including delivery of required notices and obligations in connection with conversion, in certain cases subject to notice and grace periods; payment defaults and accelerations with respect to other indebtedness of the Company and its significant subsidiaries in the aggregate principal amount of $10.0 million or more; failure by the Company or its significant subsidiaries to pay certain final judgments aggregating in excess of $10.0 million within 60 consecutive days of such final judgment; and specified events involving bankruptcy, insolvency or reorganization of the Company or its significant subsidiaries.

~~Note~~Upon an Event of Default, the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding may declare all the notes to be due and payable immediately. In the case of Events of Default relating to bankruptcy, insolvency or reorganization, all outstanding notes will become due and payable immediately without further action or notice.

Termination of Citizens Bank Credit Agreement

In connection with its issuance of the notes, on April 15, ~~— Subsequent Event~~2019, the Company repaid all amounts outstanding under, and terminated, the Credit Agreement. The Credit Agreement had provided for revolving loans in an aggregate principal amount of up to $25.0 million, or, during any Borrowing Base Period (as defined in the Credit Agreement), up to the lesser of $25.0 million and the Borrowing Base (as defined in the Credit Agreement), less any principal amount outstanding. Borrowings under the Credit Agreement were scheduled to fully mature on June 5, 2021.

Internal Investigation

On ~~October 1, 2018,~~April 10, 2019, the SEC notified the Company ~~finalized a sale of real estate and other assets. The net book value of~~that based on current information, it did not intend to recommend enforcement against the ~~assets as of September 30, 2018 was $901,000 and $939,000 as of September 30, 2017 and are classified as assets held for sale on~~Company; shortly, thereafter, the Company’s consolidated balance sheets. Proceeds from the sale of the real estate and other assets were $1.1 million as presented in the Company’s consolidated statement of cash flows as cash flow from investing activities.

DOJ advised that it did not intend to proceed.



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

When used in this Quarterly Report on Form 10-Q (“Quarterly Report”), the terms “PAR”, “Company,” “we,” “us” and “our” mean PAR Technology Corporation and its consolidated subsidiaries, unless the context indicates otherwise. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim consolidated financial statements and the ~~notes~~Notes thereto included under Part I, Item 1 of this Quarterly Report. See also, “Forward-Looking Statements” below.

Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and the Private Securities 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: delays in new product development and/or product introduction; changes in customer base and product, and service demands, including changes in product or service demands by the two customers from whom a significant portion of our revenue is derived; risks associated with the internal investigation into conduct at our China and Singapore offices, including sanctions and fines that may be imposed by the U.S. Department of Justice ("DOJ"), the Securities and Exchange Commission (“SEC”), and other governmental authorities; and the other risk factorsto, those discussed in ~~this Quarterly Report in Part II, Item 1A. Risk Factors and in~~ our ~~most recent~~ Annual Report on Form 10-K ~~and other filings with the SEC.~~as filed on March 18, 2019. 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.

Overview

Our Restaurant/Retail segment provides point-of-sale (“POS”)~~, food safety,~~ and restaurant management technology solutions; and our Government segment provides intelligence, surveillance, and reconnaissance ("ISR") solutions and mission systems support.

~~Restaurant/Retail Segment~~

We are a leading provider of POS solutions to restaurants and retail ~~outlets. Our solutions~~outlets and services include cloud-based and on-premise software applications, hardware platforms, and related installation, technical, and maintenance support services tailored for the needs of restaurants and retailers. Our product and service offerings include:

•Brink POS, a leading cloud-based enterprise software solution for restaurants, primarily in the quick serve/fast casual categories. As a cloud POS platform, Brink POS scales for use by single and multi-unit operators with traditional and/or mobile platforms; it eliminates the requirement for an in-store back-office server and simplifies software version control and organizational updates. Brink POS provides specific modules and integrates with mobile/online ordering, loyalty, kitchen video systems, guest surveys, enterprise reporting, and mobile dashboard capabilities. Brink POS is sold as a cloud software-as-a-service, SaaS.

•PixelPoint, an on-premise 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. PixelPoint is also international and can be sold in international restaurant markets.

Our POS hardware platforms are purpose design, purpose built for use in a variety of restaurant environments. Our software and hardware platforms deliver a complete, integrated solution for multi-unit and individual restaurants, franchisees, and enterprise customers in the three major restaurant categories: fast casual, quick serve, and table service. Each of these restaurant categories has distinct operating characteristics and service delivery requirements that are managed by Brink POS and PixelPoint. Both Brink POS and PixelPoint allow customers to configure their technology systems to meet their order entry, food preparation, inventory, and workforce management needs, while capturing real-time transaction data at each location and delivering valuable business intelligence throughout the enterprise.

Our SureCheck solution offers big box, food retail (grocery), C-store and contract food customers with a comprehensive digital food safety and automated task management solution to manage Hazard Analysis & Critical Control Points, to implement Chef Critical Control Points compliance, and to augment facility maintenance. SureCheck provides retail operators a tool to effectively capture and monitor data to manage policy compliance and oversight, loss prevention, merchandising, and other audit functions. The SureCheck platform is comprised of three integrated technologies that are easy to use and quick to deploy: the SureCheck mobile application, a multi-mode wireless temperature-measuring device with optional remote temperatures sensors, and a cloud-based enterprise configuration and reporting server application.

~~We face competition across all categories in the Restaurant/Retail segment in which~~ we compete based on product design, innovative features and functionality, quality and reliability, price, customer service, and delivery capability. The food safety and workforce efficiency market is an expanding and evolving market, and SureCheck competes for customers on the same basis as our POS product solutions.

~~We believe the financial performance of the Restaurant/Retail segment and its future success are primarily dependent upon the growth of~~expect our Brink line of business, ~~(“Brink”),~~ including our Brink POS ~~and other cloud-based~~SaaS software solution, inclusive of related hardware, installation and technical support and other customer ~~services.~~services, to be the primary focus and driver of growth in the Restaurant/Retail reporting segment. Our ability to ~~capitalize on the digital revolution disrupting the restaurant space by leveraging~~grow and expand our presence as a cloud-based, ~~technologies~~software solutions leader requires that we strategically and ~~integrated solutions depends on a number of factors, including:~~effectively distribute and invest our ~~ability to access~~ capital including under our Credit Agreement (see “Liquidity and Capital Resources” discussion below), other sources of debt financings, or the sale of equity securities; and the timing and size of our investments and expenditures in areas that will drive long-term growth, ~~including:~~including product development, consisting primarily of expenses in software engineering ~~product development~~ and related personnel costs; sales and marketing, consisting primarily of advertising, marketing, general promotional expenditures and ~~sales~~strategic partnerships; and ~~marketing personnel costs;~~ customer support, consisting primarily of ~~help-desk and related personnel costs; and general and administrative, including IT infrastructure expenditures.~~help-desk.

Our Government reporting segment provides technical expertise under contract in ~~contract~~ development of advanced systems and software solutions for the U.S. Department of Defense and other federal agencies, as well as technology management ~~technology~~ and communications support services to the U.S. Department of Defense.

The strategy for our Government reporting segment is to build on our sustained ~~superior~~ performance on existing service contracts, coupled with investments in enhanced business development capabilities. We believe we are well positioned to realize continued renewals of expiring contracts and extensions of existing contracts, and secure service 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 investments in new technologies provide opportunities to offer systems integration, products, and highly-specialized service solutions to the U.S. Department of Defense and other 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 are factors we monitor as we develop and implement our business strategy for the Government reporting segment.

Internal Investigation Update

~~As previously disclosed, in~~

We recorded $0.2 million for the ~~third quarter~~three months ended March 31, 2019 compared to $0.3 million for the three months ended March 31, 2018 of ~~2016, our Audit Committee commenced an internal investigation into~~post-investigation expenses relating to conduct at our China and Singapore offices, to determine whether certain import/export and sales documentation activities were improper and in violation of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other applicable laws and certain of our policies. We voluntarily notified, and are fully cooperating with, the SEC and the DOJ of the internal investigation. On May 1, 2017, we received a subpoena from the SEC for documents relating to the internal investigation. The SEC’s investigation is a non-public, fact-finding inquiry. Following the conclusion of the Audit Committee’s internal investigation, we voluntarily reported the relevant findings to the China and Singapore authorities and are fully cooperating. During the three and nine months ended September 30, 2018, we recorded $0.3 million and $0.9 million, respectively, of expenses relating to the internal investigation and the SEC subpoena, including ~~expenses of~~ outside legal counsel and forensic ~~accountants compared to $0.7 million and $2.3 million , respectively, for~~

~~the three and nine months ended September 30, 2017.~~accountant fees. See ~~note 10~~Note 9 - Contingencies, to the unaudited interim consolidated financial statements, for additional information concerning ~~expenses of~~such expenses; see also, Note 13 - Subsequent Events, to the ~~internal investigation.~~

unaudited interim consolidated financial statements.

Results of Operations —

Three Months Ended ~~September 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~September 30, 2017~~March 31, 2018

We reported revenues of ~~$46.4~~$44.7 million for the quarter ended ~~September 30, 2018,~~March 31, 2019, a decrease of ~~5.3%~~19.7% from ~~$48.9~~$55.7 million reported for the quarter ended ~~September 30, 2017.~~March 31, 2018. Our net loss from ~~continuing~~ operations was ~~$16.7~~$2.7 million or ~~$1.04 loss~~$0.17 per diluted share for the ~~third~~first quarter of ~~2018~~2019 versus net ~~loss~~income of ~~$1.5~~$0.1 million or ~~$0.10~~$0.00 per diluted share for the same period in ~~2017. Our year-over-year performance was due~~2018.

Operating segment revenues for the quarter ended March 31, 2019 were $29.6 million for Restaurant/Retail, a decrease of 25.2% from $39.5 million reported for the quarter ended March 31, 2018 and $15.1 million for Government, a decrease of 6.3% from $16.1 million reported for the quarter ended March 31, 2018. Restaurant/Retail revenue for the quarter ended March 31, 2019 by business line consisted of $18.7 million for our line of business comprised of non-Brink customers, primarily focused on hardware and respective services ("CORE"), $9.5 million for Brink, and $1.4 million for SureCheck, compared to ~~lower Restaurant / Retail hardware~~ revenue for the quarter end March 31, 2018 by business line of $32.2 million for CORE, $5.8 million for Brink, and ~~corresponding hardware support service~~$1.5 million for SureCheck. Government revenue ~~from our traditional tier 1 customers in addition~~for the quarter ended March 31, 2019 by business line consisted of $6.3 million for Intelligence, Surveillance, and Reconnaissance (“ISR”), $8.5 million for Mission Systems, and $0.3 million for Product Sales, compared to ~~increased research~~revenue for the quarter end March 31, 2018 by business line of $7.8 million for ISR, $8.3 million for Mission Systems, and development investments in Brink. We were able to offset these reductions with growth in Brink SaaS revenue, continued growth in the Government segment, as well as reductions in general and administrative costs. Additionally, we recorded a one-time valuation allowance of $14.9$0.0 million ~~to reduce the carrying value of our deferred tax assets.~~for Product Sales.

Product revenues were $15.5 million for the quarter ended ~~September 30, 2018,~~March 31, 2019, a decrease of ~~25.4%~~41.1% from ~~$20.7~~$26.3 million recorded for the same period in 2018, primarily due to reduced hardware projects with a tier 1 customer in the first quarter of 2018. Product revenue related to Brink was $4.5 million, an increase of 71% from $2.6 million for the same period in 2018.

Service revenues were $14.0 million for the quarter ended March 31, 2019, a increase of 6.3% from $13.2 million reported for the same period in ~~2017. Our hardware sales in the Restaurant/Retail segment were down versus prior year~~2018, primarily due to ~~unfavorable domestic and international sales with our traditional tier 1 customers. Hardware sales related to~~ Brink service revenue of $5.0 million, an increase of 58% from $3.1 million for the same period in 2018. Brink service revenue includes SaaS revenue of $3.1 million, an increase of 64% from $1.9 million for the same period in 2018.

Contract revenues were ~~$2.5~~$15.1 million for the quarter ended ~~September 30, 2018, an increase~~March 31, 2019, a decrease of ~~21%~~6.2% from ~~the $2.0 million in the quarter ended September 30, 2017.~~

~~Service revenues were $13.5 million for the quarter ended September 30, 2018, an increase of 1.2% from $13.3~~$16.1 million reported for the same period in ~~2017, primarily~~2018. The decrease reflects a reduction in ISR due to ~~a 61% increase in SaaS~~contract funding and ~~service support revenue related~~ceiling limitations largely attributable to ~~Brink offset by a decrease in hardware support services. The increase in Brink related revenue was driven by~~one of ISR's programs that is currently undergoing an ~~increase in the installment base of 87% from September 30, 2017 to September 30, 2018.~~

Contract revenues were $17.4 million for the quarter ended September 30, 2018, an increase of 16.9% from $14.9 million reported for the same period in 2017. The increase reflects growth associated with both Mission Systems (“MS”) and Intelligence, Surveillance, and Reconnaissance (“ISR”) lines of business. The Government segment experienced the fourth quarter in a row of positive year-over-year growth.organizational funding transition.

Product margins for the quarter ended ~~September 30, 2018~~March 31, 2019 were ~~21.9%~~27.6%, compared to ~~23.4%~~26.2% for the same period in ~~2017. The decrease in product margin is primarily~~2018. Product margins for the quarter improved slightly due to ~~increases in reserves for SureCheck product inventory.~~favorable sales mix.

Service margins for the quarter ended ~~September 30, 2018~~March 31, 2019 were ~~23.9%~~28.6%, compared to ~~23.1%~~27.7% recorded for the same period in ~~2017.~~2018. Service margins for the quarter ended ~~September 30, 2018 increased mainly~~March 31, 2019 was primarily due to ~~increased contribution from SaaS revenue.~~favorable product mix due with the growth of Brink SaaS.

Contract margins for the quarter ended ~~September 30, 2018~~March 31, 2019 were ~~11.0%~~9.7%, compared to ~~8.8%~~8.1% for the same period in ~~2017. The increase~~2018 due primarily to improved ISR profitability and high margin Product Sales revenue included in ~~margin is primarily due to an increase in ISR product sales.~~ 2019 contract mix.

Selling, general and administrative (SG&A) expenses remained consistent for each of the quarters ended March 31, 2019 and 2018 at $8.6 million. The Company increased investment in Brink sales and marketing by $0.3 million while offsetting G&A and sales costs in other business lines. SG&A expenses associated with the internal investigation for the quarter ended ~~September 30, 2018~~March 31, 2019 were ~~$8.0~~$0.2 million ~~a decrease of 12.0%~~as compared to ~~the $9.1~~$0.3 million for the quarter ended ~~September 30, 2017. We were able to reduce total SG&A costs while increasing sales and marketing for Brink by $0.6M.~~March 31, 2018.

Research and development (R&D) expenses were ~~$3.0~~$3.1 million for the quarter ended ~~September 30, 2018,~~March 31, 2019, an increase of ~~18.3%~~6.7% from ~~$2.5~~$2.9 million for the same period in ~~2017. The increase is attributable to an increase of $1.0 million~~2018 primarily driven by increased spending in Brink ~~research and development expenses.~~software development.

~~During~~For each of the quarters ended ~~September 30,~~March 31, 2019 and March 31, 2018, ~~and September 30, 2017,~~ we recorded $0.2 million of amortization expense associated with identifiable intangible assets acquired in the Brink Acquisition.

Other (expense) income, net, was ~~$455,000~~($430,000) for the quarter ended ~~September 30, 2018,~~March 31, 2019, compared to other ~~expense,~~(expense) income, net, ~~of $70,000~~of$49,000 for the same period in ~~2017.~~2018. Other ~~income in the quarter reflects a valuation adjustment for a contingent liability (see note 12 to the unaudited interim consolidated financial statements).~~

~~Interest expense,~~(expense), net, was $142,000 for the quarter ended September 30, 2018 compared to $39,000 for quarter ended September 30, 2017. This increase is due to increased borrowings on the line of credit under our Credit Facility as well as increases in underlying reference rates.

For the three months ended September 30, 2018, our effective income tax rate was (611.1)%, compared to 43.9% for the same period in 2017. The change in our effective income tax rate is primarily due to the lower statutory federal income tax rate under the Tax Act as well as a favorable increase to permanent differences in taxable income, offset by the impact of the establishment of a full valuation allowance on our net deferred tax assets.

~~Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017~~

We reported revenues of $154.6 million for the nine months ended September 30, 2018, a decrease of 12.7% from $177.1 million reported for the nine months ended September 30, 2017. Our net loss from continuing operations was $18.0 million or $1.12 loss per diluted share for the nine months ended September 30, 2018 versus net income of $1.7 million or $0.11 per diluted share for the same period in 2017. Our year-over-year unfavorable performance was due to lower Restaurant / Retail hardware revenue and corresponding hardware support service revenue from our traditional tier 1 customers. We were able to offset these reductions with continued growth in the Government segment, reductions in general and administrative costs and growth in Brink revenue, including related SaaS, hardware and support services. Additionally, we recorded a one-time valuation allowance of $14.9 million to reduce the carrying value of our deferred tax assets.

Product revenues were $62.7 million for the nine months ended September 30, 2018, a decrease of 30.8% from $90.6 million recorded for the same period in 2017. Our hardware sales in the Restaurant/Retail reporting segment were down versus prior year as we lapped major hardware project installations with a large domestic customer in both the first and second quarters of 2017 in addition to lower international revenue in the Restaurant/Retail reporting segment versus prior year.

Service revenues were $40.6 million for the nine months ended September 30, 2018, a decrease of 4.9% from $42.7 million reported for the same period in 2017, primarily due to a decrease in hardware support services and hardware installations with our traditional customers, partially offset by a $2.6 million increase in Brink SaaS revenue.

Contract revenues were $51.3 million for the nine months ended September 30, 2018, an increase of 17.2% from $43.8 million reported for the same period in 2017. The increase reflects a 23% growth in ISR and 13% growth in MS year-over-year.

Product margins for the nine months ended September 30, 2018 were 25.2%, compared to 25.1% for the same period in 2017. Product margins for the nine months ended were consistent compared to the prior year with favorable product mix offset by pricing pressure on hardware.

Service margins for the nine months ended September 30, 2018 were 26.1%, compared to 27.1% recorded for the same period in 2017. Service margins for the nine months ended September 30, 2018 decreased due to increased investments in the Company's call center to support growth in Brink installment base and unfavorable overhead absorption related to a decline in hardware support services, partially offset by favorable product mix driven by growth in SaaS revenue.

~~Contract margins for the nine months ended September 30, 2018 were 10.4%, compared to 10.3% for the same period in 2017. Improved ISR margins offset a reduction in MS margins year-over-year.~~

SG&A expenses for the nine months ended September 30, 2018 were $25.6 million, a decrease of 7.2% compared to the $27.6 million for the nine months ended September 30, 2017. The decrease is primarily due to a reduction in costs associated with the internal investigation into conduct at our China and Singapore offices, and cost savings in domestic and international operations partially offset by additional investments in sales to support the growth of Brink. SG&A expenses associated with the internal investigation for the nine months ended September 30, 2018 were $0.9 million as compared to $2.3 million for the nine months ended September 30, 2017.

Research and development expenses were $9.1 million for the nine months ended September 30, 2018, an increase of 11.3% from $8.2 million for the same period in 2017. This increase is primarily attributable to an increase of $1.4 million in Brink research and development expenses.

During each of the nine months ended September 30, 2018 and September 30, 2017, we recorded $0.7 million of amortization expense associated with identifiable intangible assets acquired in the Brink Acquisition.

~~Other income, net, was $0.1 million for the nine months ended September 30, 2018, compared to other expense, net of $0.3 million for the same period in 2017. Other income/expense~~ primarily includes, fair market value fluctuations of our deferred compensation plan, ~~valuation adjustments for a contingent liability (see note 12 to the unaudited interim consolidated financial statements),~~ rental income, and foreign currency fair value adjustments. For the quarter ended March 31, 2019, a $0.2 million adjustment was made in connection with the conclusion of the Brink Acquisition.

Interest expense, net, ~~was $261,000~~of $146,000 for the ~~nine months~~quarter ended ~~September 30, 2018~~March 31, 2019 compared to ~~$84,000~~$41,000 for ~~nine months~~quarter ended ~~September 30, 2017~~March 31, 2018 was due to increased borrowings on the revolving line of credit under our Credit ~~Facility and increases in the underlying reference rates.~~Agreement.

For the nine months ended September 30, 2018, our effective income tax rate was (374.0)%, compared to 15.9% for the same period in 2017. The change in our effective income tax rate is primarily due to the lower statutory federal income tax rate under the Tax Act, offset by lower favorable temporary differences resulting from stock compensation and the impact of the establishment of a full valuation allowance on our net deferred tax assets.

Liquidity and Capital Resources

Our primary sources of liquidity have been cash ~~flow~~ from operations and borrowings on our the revolving line of credit under ~~our~~the Credit ~~Facility.~~Agreement. Cash used in operating activities ~~from continuing operations~~ was ~~$2.0~~$3.2 million for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, compared to ~~cash used in operating activities from continuing operations of $7.8~~$2.5 million for the same period in ~~2017. This decrease in cash used in operating activities was primarily driven by a decrease in net working capital requirements partially offset by a decrease in year-over-year operating income.~~2018.

Cash used in investing activities ~~from continuing operations~~ was ~~$4.9~~$1.9 million for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 versus ~~$7.2~~$1.7 million for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018. In the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, our capital expenditures of ~~$3.0~~$0.9 million were primarily related to the implementation of our enterprise resource planning system ~~and capital improvements made to our owned and leased properties~~ compared to ~~$3.9~~$0.6 million in the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018. We capitalized ~~$3.1~~$1.0 million in costs associated with investments in our Restaurant/Retail reporting segment software platforms during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 compared to ~~$3.3~~$1.1 million for the ~~nine~~three months ended ~~September 30, 2017. The capital expenditures and capitalized software costs were offset by proceeds from a pending real estate transaction of $1.1 million.~~March 31, 2018.

Cash provided by financing activities ~~from continuing operations~~ was ~~$6.6~~$5.8 million for the ~~nine~~three months ended September 30, 2018, reflecting $6.0 million of net borrowings under our line of credit and $0.7 million of proceeds from exercised employee stock options offset by payments of $0.1 million on a real estate loan. CashMarch 31, 2019 versus cash provided by financing activities ~~were in line with the $6.8~~of $3.0 million ~~provided by financing activities~~ for the ~~nine~~three months ended ~~September 30, 2017.~~ March 31, 2018. This change was a result of borrowings on our revolving line of credit under our Credit Agreement net of $2.6 million distribution related to the final payment related to the conclusion of the Brink Acquisition.

On June 5, 2018, wethe Company entered into a Credit Agreement (the “Credit Agreement”) with certain of ~~our~~its U.S. subsidiaries and Citizens Bank, N.A. ~~The Credit Agreement provides for~~(“Citizens Bank”) providing the Company with a revolving ~~loans in~~line of credit up to an aggregate principal amount of ~~up to~~ $25.0 million ~~(the “Credit Facility”)~~(or the Borrowing Base, during any Borrowing Base Period). The Credit ~~Facility includes a $15.0 million accordion option, which we can request in $5.0 million increments. The accordion increase is uncommitted and is not available if~~Agreement, was amended by an ~~event of default exists. In connection with entering into the~~Amendment to Credit Agreement, ~~we repaid~~dated March 4, 2019 (the “Amendment”). Among the relief provided by the Amendment, was a waiver of the Company's noncompliance with the financial covenants contained in full all outstanding obligations owed under the credit agreement dated November 29, 2016 (as subsequently amended, modified, and supplemented) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), and terminated the JPMorgan Chase credit agreement and all commitments (other than an undrawn letter of credit) by JPMorgan Chase to extend further credit thereunder.

~~The Credit Facility matures three (3) years from the date of~~ the Credit Agreement and ~~is guaranteed by our U.S. subsidiaries that are parties thereto. The Credit Facility is secured by substantially all of our assets and~~temporary relief from these financial covenants until the subsidiary guarantors. The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including certain financial maintenance covenants consisting of maximum consolidated leverage ratios and minimum consolidated EBITDA, and covenants that restrict our ability and our subsidiaries to incur additional indebtedness, incur or permit to exist liens on assets, make investments and acquisitions, consolidate or merge, engage in asset sales, pay dividends, and make distributions. The revolving loans bear interest at the LIBOR rate plus 1.5%. Obligationsfiscal quarter ending September 30, 2019. There was a $16.1 million outstanding balance under the Credit Agreement ~~may be accelerated upon certain customary events~~as of ~~default (subject to grace or cure periods, as appropriate).~~March 31, 2019.

~~In addition~~As described in Note 13 - Subsequent Events, to the ~~Credit Facility,~~unaudited interim consolidated financial statements, on April 15, 2019, the Company ~~has~~sold an aggregate principal amount of $80.0 million 4.5% Convertible Senior Notes due 2024 (“notes”) and used a ~~loan, collateralized by a mortgage on certain real estate, with a balance of $0.2 million and $0.4 million as of September 30, 2018 and 2017, respectively. This loan matures on November 1, 2019. The~~

~~interest rate is fixed at 4.00% through the maturity date~~portion of the loan. The annual loan payment including interest through November 1, 2019 totals $0.2 million. On October 1, 2018, the Company finalized a sale of the real estate held as collateral and the remaining balance on the loan was paid in full.

The Company continues to increase its investment of resources required to fund the growth of Brink. The investments in areas such as research and development, sales and marketing, customer support (help desk), and IT infrastructure have outpaced cash provided from other operating activities. As a result, the Company has experienced operating losses four of the last five quarters and this trend is expected to continue as we execute the Brink strategy.

Based on our current estimates we anticipate that we will not meet the financial maintenance covenant requirements under our Credit Agreement for the fourth quarter of 2018. In the event of non-compliance and if we are unable to secure waivers or modifications to our Credit Agreement or timely receipt of alternative sources of capital to allow us to come into compliance with the covenants or allow usproceeds to repay ~~or refinance the Credit Agreement, an event of default may occur~~in full all amounts outstanding under the Credit Agreement, ~~(see Item 1A. “Risk Factors”). In such a case, we may no longer have access to the liquidity provided by~~as amended, and, in connection therewith, terminated the Credit ~~Agreement~~Agreement.

We expect our operating cash flows and ~~as a result, we might not have~~net proceeds from the notes will be sufficient ~~liquidity~~ to ~~make~~meet our operating needs for the ~~anticipated investments in Brink and satisfy operating expenses, capital expenditures and other~~next 12 months. Our actual cash ~~needs. We are evaluating alternative sources~~needs will depend on many factors, including our rate of ~~capital,~~revenue growth, including ~~modifications to our Credit Agreement, debt financings and/or future sales~~growth of our ~~equity securities,~~SaaS revenues, the timing and ~~the equity value~~extent of spending to support our real estate holdings. Brink related revenue growth and revenue growth in our Government business, controlled and/or reduced expenditures, obtaining the necessary waivers or modifications to our Credit Agreement, and/or securing alternative sources of capital are necessary for the Company to fully execute the Brink strategy; if we are not successful, we may need to reduce and/or delayproduct development efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our ~~investments in Brink.~~products, and potential fines and penalties that, while currently inestimable, could be material.

Critical Accounting Policies and Estimates

Our unaudited interim 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. We 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. Primary areas where financial information 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, equity compensation, goodwill and intangible assets, and taxes. Our critical accounting policies have not changed materially from the discussion of those policies included under “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 except as it relates to ~~revenue recognition~~leases as a result of the adoption of ASC ~~606~~842 as ~~disclosed~~discussed in ~~note 2~~Note 3 - Leases, to the unaudited interim consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date, based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for the Company beginning with its fiscal year ending December 31, 2019, however early application is permitted for reporting periods beginning after December 15, 2018. The Company does not anticipate ASU 2016-13 will have a material impact to the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates Step 2 from the goodwill impairment test which required entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective for us on January 1, 2020, with earlier adoption permitted; it is not expected to have a material impact on the Company's unaudited interim consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the fair value measurements disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. The new guidance modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. ASU 2018-13 is effective for the Company beginning with and including its fiscal year ending December 31, 2019 and each quarterly period thereafter. Early adoption is permitted. The Company is currently assessing the impact this new guidance may have on the Company’s unaudited interim consolidated financial statements and footnote disclosures.

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other (Topic 350) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 provides guidance on the measurement of costs for internal-use software during the design, development and implementation stages for customers in a cloud based hosting arrangement. AU 2018-15 also requires the capitalized costs associated with the design, development and implementation of cloud based, hosted arrangements to be amortized over the term of the hosting arrangement. ASU 2018-15 will be effective for the Company on January 1, 2020, with earlier adoption permitted; it is not expected to have a material impact on the Company's unaudited interim consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, "Leases (Topic 842)", 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 iswas effective for the Company beginning inJanuary 1, 2019 (see Note 3 - Leases, to the first quarter of 2019. In July 2018, the FASB issued new guidance that provided for a new optional transition method that allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to opening retained earnings. Under this approach, comparative periods are not restated. The Company expects to adopt this guidance when effective using the optional transition method. Adoption will have a material impact on the Company'sunaudited interim consolidated financial statements, primarily to the consolidated balance sheets and related disclosures, as a result of recognizing right-of-use assets and lease liabilities arising from its operating leases. We are reviewing contracts with our lessors of offices, vehicles and other equipment to determine whether

these agreements contain any potential embedded leases. Although our assessment is not complete, we currently expect the adoption of this guidance to result in the addition of significant balances of leased assets and corresponding lease liabilities to our consolidated balance sheets, primarily related to our lease of office space and vehicles.

~~In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~statements)." ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date, based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for the Company beginning with its fiscal year ending December 31, 2019, however early application is permitted for reporting periods beginning after December 15, 2018. The Company does not anticipate ASU 2016-13 will have a material impact to the consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment~~.” ASU 2017-04 eliminates Step 2 from the goodwill impairment test which required entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective for the Company on January 1, 2020, with earlier adoption permitted; it is not expected to have a material impact on the Company's consolidated financial statements.

~~In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement~~ .” ASU 2018-13 modifies the fair value measurements disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. The new guidance modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. ASU 2018-13 is effective for the Company beginning with and including its fiscal year ending December 31, 2019 and each quarterly period thereafter. Early adoption is permitted. The Company is currently assessing the impact this new guidance may have on the Company’s consolidated financial statements and footnote disclosures.

~~In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other (Topic 350) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~.” ASU 2018-15 provides guidance on the measurement of costs for internal-use software during the design, development and implementation stages for customers in a cloud based hosting arrangement. AU 2018-15 also requires the capitalized costs associated with the design, development and implementation of cloud based, hosted arrangements to be amortized over the term of the hosting arrangement. ASU 2018-15 will be effective for the Company on January 1, 2020, with earlier adoption permitted; it is not expected to have a material impact on the Company's consolidated financial statements.

~~Recently Adopted Accounting Pronouncements~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~"Revenue from Contracts with Customers"~~, codified as ASC Topic 606. The FASB issued amendments to ASC Topic 606 during 2016. The guidance requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and related cash flows arising from contracts with customers. This guidance became effective for annual and interim reporting periods beginning after December 15, 2017 and allows for either full retrospective adoption or modified retrospective adoption.

The Company adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective method. Under that method, we applied the standard to all contracts existing as of January 1, 2018. There was no impact to the Company’s retained earnings for the nine months ended September 30, 2018 as a result of the adoption of ASC 606.

~~The Company assessed its control framework as a result of adopting the new standard and notes minimal changes to its systems and other control processes.~~

~~In August 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-15, "Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.~~" ASU 2016-15 is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. ASU 2016-15 became effective for interim and annual reporting periods beginning after December 15, 2017. Entities are required to apply the guidance retrospectively; however, if it

is impracticable to apply the guidance retrospectively for an issue, the amendments related to that issue are applied prospectively. As this guidance only affects the classification within the statement of cash flows, ASU 2016-15 did not have a material impact on the Company's unaudited consolidated financial statements.

~~In May 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting.~~” ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under ASU 2017-09, an entity does not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the award's fair value, (ii) the award's vesting conditions and (iii) the award's classification as an equity or liability instrument. ASU 2017-09 became effective for us on January 1, 2018 and did not have a material impact on the Company's unaudited consolidated financial statements for the nine months ended September 30, 2018.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Not Required.



Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of ~~September 30, 2018.~~March 31, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September 30, 2018.~~March 31, 2019.

Changes in Internal Controls Over Financial Reporting.

There were no changes in internal control over financial reporting during the quarter ended ~~September 30, 2018~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information



Item 1.	Legal Proceedings

The information in ~~note 10~~Note 9 – Contingencies, to the unaudited interim consolidated financial statements, is responsive to this Item and is incorporated by reference herein.



Item 1A.	Risk Factors

Our ~~operations~~financial condition and ~~financial~~ results of operations are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, as filed with the SEC on March ~~16, 2018, which could adversely affect our business, financial condition, results of operations, cash flows, and liquidity.~~

Our ability to execute our business plan and continue to fund current operations will require us to obtain waivers or modifications to our Credit Agreement or secure alternative sources of capital, which may be unavailable on acceptable terms, or at all.~~We have experienced operating losses in the last four out of five quarters, inclusive of the current quarter ended September 30, 2018.~~18, 2019. As ~~discussed~~disclosed above under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”, ~~our ability to successfully execute our strategy, requires that~~on April 15, 2019, we ~~continue to invest in Brink; however, allocation~~sold an aggregate principal amount of our capital resources in Brink, without corresponding revenue growth, controlled or reduced expenditures, and/or access to other sources of capital, creates a circumstance that we may not meet the maximum leverage ratio and minimum EBITDA covenants under the Credit Agreement during the fourth fiscal quarter of 2018.$80.0 million 4.5% Convertible Senior Notes due 2024 (“notes”). In ~~the event of non-compliance and if we are unable to secure waivers or modifications~~addition to the ~~Credit Agreement or alternative sources of capital to allow us to come into compliance with~~Risk Factors discussed in our Annual Report on Form 10-K for the covenants or allow us to repay or refinance the Credit Agreement, an event of default may occur under the Credit Agreement. If an event of default were to occur under the Credit Agreement, our lender may accelerate the payment of amounts outstanding and otherwise exercise any remedies to which it mayfiscal year ended December 31, 2018, consideration should be ~~entitled. In addition, in such a case, we may no longer have access~~given to the ~~liquidity provided by the Credit Agreement~~following risk factors.

Servicing our debt may require a significant amount of cash, and ~~as a result,~~ we may not have ~~the~~ sufficient ~~liquidity~~cash flow from our business to make the anticipated investments in Brink and satisfy operating expenses, capital expenditures and other cash needs. (see note 1 to the unaudited interim consolidated financial statements). No assurance can be given that we will be successful in obtaining necessary waivers or modifications topay our ~~Credit Agreement or other sources of capital will be available, or, if available, will be on terms acceptable to us.~~ debt.Our ability to ~~successfully execute~~make scheduled payments of the principal of, to pay interest on or to refinance the notes and any future indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business ~~strategy~~may not generate cash flow from operations in the ~~near term is largely dependent on~~future sufficient to service our ~~ability to obtain waivers or modifications to~~debt because of factors beyond our Credit Agreement or secure alternative sources of capital, and over time will be impacted by our ability to attain operating efficiencies, control expenditures, and, ultimately, to generate additional revenue.control. If we are unable to ~~obtain necessary waivers or modifications to our Credit Agreement or secure additional sources of capital in the near term and, in the longer term, successfully execute on our business strategy,~~generate such cash flow, we may ~~need~~be required to ~~pursue alternative strategies~~adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and ~~might~~our financial condition at such time. We may not be able to ~~continue as~~engage in any of these activities or engage in these activities on desirable terms, which could result in a ~~going concern.~~default on our debt obligations.

~~Our business~~We may incur substantially more debt or take other actions, which would intensify the risks discussed above.We may incur substantial additional debt in the future, including secured debt. We will not be restricted under the terms of the indenture governing the notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the notes but that could diminish our ability to make payments on the notes.

We may not have the ability to raise the funds necessary to pay interest on the notes, to repurchase the notes upon a fundamental change or to settle conversions of the notes in cash. We are obligated to pay interest on the notes semi-annually in cash and, in certain circumstances, we are obligated to pay additional interest or special interest on the notes. If a fundamental change occurs, holders of the notes may require us to repurchase all or a portion of their notes in cash. Furthermore, upon conversion of any notes, unless we elect to deliver solely shares of our common stock to settle the conversion (excluding cash in lieu of delivering fractional shares of our common stock), we must make cash payments in respect of the notes. Any of the cash payments described above could be significant, and we may not have enough available cash or be able to obtain financing so that we can make such payments when due. If we fail to pay interest on the notes, repurchase the notes when required or deliver the

consideration due upon conversion, we will be in default under the indenture.

The conditional conversion feature of the notes, if triggered, may adversely affect our financial condition and operating results. In the event the conditional conversion feature of the notes is triggered, holders of the notes will be entitled to convert the notes at any time during specified periods at their option. Even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Certain provisions in the indenture governing the notes could delay or prevent an otherwise beneficial takeover or takeover attempt of us. Certain provisions in the notes and the indenture could make it more difficult or more expensive for a third party to acquire us. For example, if a takeover would constitute a fundamental change, holders of the notes will have the right to require us to repurchase their notes in cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their notes in connection with such takeover. In either case, and in other cases, our obligations under the notes and the indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management.

The conversion of the notes could result in dilution of ownership to existing stockholders.Holders may elect to convert their notes at any time on or after October 15, 2023 until maturity and, upon the occurrence of specified events, holders may convert their notes before October 15, 2023. We may satisfy our conversion obligation by paying or delivering cash, shares of our common stock or a combination of cash and shares. The issuance of shares of our common stock upon conversion will result in dilution of ownership to existing stockholders.

Future sales of our common stock in the public market could lower the market price for our common stock. In the future, we may sell additional shares of our common stock to raise capital. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance and sale of substantial amounts of common stock, or the perception that such issuances and sales may occur, could adversely affect the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

The price of our common stock may be negatively impacted by the notes. The market price of our common stock could be affected by possible sales of common stock by investors who view the notes as an attractive means of equity participation in us and by hedging or arbitrage activity involving our common stock. In addition, our credit quality may vary substantially during the term of the notes and will be influenced by a number of factors, including variations in our cash flows and the amount of indebtedness we have outstanding.

The accounting method for convertible debt securities that may be settled in cash, such as the notes, could have a material effect on our reported financial results. In May 2008, the Financial Accounting Standards Board, or FASB, issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options, or ASC 470-20. ASC 470-20 requires an entity to separately account for the liability and equity components of convertible debt instruments whose conversion may be settled entirely or partially in cash (such as the notes) in a manner that reflects the issuer’s economic interest cost for non-convertible debt. Initially, the liability component of the notes will be valued at the fair value of a similar debt instrument that does not have an associated equity component and will be reflected as a liability in our consolidated balance sheet beginning the fiscal quarter ending June 30, 2019 ("FQE June 2019"). The equity component of the notes will be included in the additional paid-in capital section of our stockholders’ equity on our consolidated balance sheet for the FQE June 2019, and the value of the equity component will be treated as original issue discount for purposes of accounting for the debt component. This original issue discount will be amortized to non-cash interest expense over the term of the notes, and we will record a greater amount of non-cash interest expense in current periods as a result of ~~shareholder activism~~this amortization. Accordingly, we will report lower net income in our financial results because ASC 470-20 will require the interest expense associated with the notes to include both the current period’s amortization of the debt discount and the notes’ coupon interest, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the notes. In addition, under certain circumstances, convertible debt instruments whose conversion may be settled entirely or partly in cash (such as the notes) are currently accounted for using the treasury stock method. Under this method, the shares issuable upon conversion of the notes are not included in the calculation of diluted earnings per share unless the conversion value of the notes exceeds their principal amount at the end of the relevant reporting period. If the conversion value exceeds their principal amount, then, for diluted earnings per share purposes, the notes are accounted for as if the number of shares of common stock that would be necessary to settle the excess, if we elected to settle the excess in shares, are issued. The accounting standards in the future may not continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares, if any, issuable upon conversion of the notes, then our diluted earnings per share could be adversely affected.

We are subject to laws and regulations governing the protection of personally identifiable information; we are also subject to cyber-attacks. A failure to comply with applicable privacy or data protection laws or a cyber-attack could harm our reputation and have a material adverse effect on our business. ~~Recently we have been~~We collect, process, transmit, and/or store (on our operating systems and those of third-party providers) customer transactional data and their customers’ and employees' personally identifiable information and/or other data and information. Personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions; moreover, what constitutes personally identifiable information and what other data and/or information is subject to the ~~focus of shareholder activism~~privacy laws continues to evolve and ~~demands concerning our management, governance, strategic direction,~~the laws that do reference data privacy continue to be interpreted by the courts and ~~operations. Such activism can be disruptive to our business, divert~~their applicability and reach are therefore uncertain. Our failure and/or the ~~attention~~failure of our ~~management~~customers, vendors and ~~employees,~~service providers to comply with applicable privacy and data protection laws and regulations could damage our reputation, discourage current and potential customers from using our products and services, result in ~~significant additional expense~~fines and/or proceedings by governmental agencies, complaints by private individuals, and/or the payment of penalties to ~~us. In addition,~~consumers, any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our currentone or ~~potential customers, and make it more difficult to attract and retain qualified personnel and business partners,~~ all of which could adversely affect our ~~business. In addition, actions~~business, financial condition and results of ~~activist shareholders~~operations. Compliance with these laws and regulations, or changes in these laws and regulations, may be onerous and expensive and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance. Moreover, allegations of non-compliance whether or not true could be costly, time consuming, distracting to management, and cause ~~significant fluctuations~~reputational harm. Illustrative of this risk, on March 21, 2019, Kandice Neals on behalf of herself and others similarly situated filed a complaint against us in the Circuit Court of Cook County, Illinois County Department, Chancery Division. The complaint asserts that the Company violated the Illinois Biometric Information Privacy Act in the alleged collection, use and storage of her and others’ biometric data derived from fingerprint scans taken for authentication purposes on point-of-sales systems. While we believe the lawsuit is without merit and intend to defend it vigorously, even if we are ultimately successful in our ~~stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect~~defense, we will need to spend money, time and attention to defend against the ~~underlying fundamentals~~complaint. Our operating systems, and ~~prospects~~those of our ~~business.~~

~~Significant changes~~third-party providers, could become subject to cyber-attacks, including using computer viruses, credential harvesting, dedicated denial of services attacks, malware, social engineering and other means for obtaining unauthorized access to or disrupting the operation of our systems and those of our third-party providers. Any failure or interruption of our operating systems or those of our third-party providers could result in ~~U.S.~~operational disruptions or misappropriation of information, including interruption of systems availability or denial of access to and ~~international trade policies that restrict imports~~misuse of applications or ~~increase tariffs~~information required by our customers to conduct their business. Any operational disruptions or misappropriation of information (including personally identifiable information or personal data) could harm our relationship with our customers and could have a material adverse effect on our ~~results of operations~~. We depend on third-party manufacturers and suppliers located outside of the United States, including in China, in connection with the manufacture of certain of our products and related components. Accordingly, our business is subject to risks associated with international manufacturing. For example, the Trump Administration has called for substantial changes to U.S. foreign trade policy, including the possibility of imposing greater restrictions on international trade and significant increases in tariffs on goods imported into the United States, and has increased tariffs on certain goods imported into the United States from China. Increased tariffs on goods imported from China or the institution of additional protectionist trade measures could adversely affect our manufacturing costs, and in turn our business, financial condition, ~~operating~~and results ~~and cash flows.~~of operations.



Item 2.	Unregistered Sales of Equity Securities and Use Of Proceeds

Under our equity incentive plans, employees may elect to have us withhold shares to satisfy minimum statutory federal, state and local tax withholding obligations arising from the vesting of their 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. For the ~~nine~~three months ended ~~September 30, 2018, no~~March 31, 2019, 3,349 shares were ~~withheld.~~purchased at an average price of $24.92 per share.



Item 5.	Other Information

On the third (3rd) full trading day (“Grant Date”) of the Company's common stock on the New York Stock Exchange following the Company's disclosure of its quarterly financial results for the quarter ended September 30, 2018, Director Savneet Singh will be granted such number of shares of restricted stock of the Company equal to the quotient of $7,945.00 divided by the closing price of the Company’s common stock on the Grant Date and such shares shall immediately vest. The shares of restricted stock will be granted under the PAR Technology Corporation 2015 Equity Incentive Plan in consideration for Director Singh’s service as a director for the period from April 20, 2018 through June 8, 2018 (“stub-service period”). As previously disclosed in the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on April 12, 2018, consistent with the compensation paid to the Company’s non-employee directors at the time, Director Singh was paid the cash portion of his non-employee director compensation for the stub-service period; however, Mr. Singh did not receive the equity portion of his compensation for the stub-service period.Not Applicable.



Item 6.	Exhibits



~~Exhibit~~ ~~Number~~		~~Incorporated by reference into~~ ~~this Quarterly Report on Form 10-Q~~		~~Date~~ ~~Filed or~~ ~~Furnished~~
~~Exhibit~~ ~~Number~~	~~Exhibit Description~~	~~Form~~	~~Exhibit No.~~	~~Date~~ ~~Filed or~~ ~~Furnished~~

~~10.1~~††	~~Offer Letter Amendment (Donald H. Foley), dated August 7, 2018~~	~~10-Q~~	~~10.8~~	~~August 9, 2018~~

~~31.1~~	~~Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended~~			~~Filed herewith~~

~~31.2~~	~~Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended~~			~~Filed herewith~~

~~32.1~~	~~Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350~~			~~Furnished herewith~~

~~32.2~~	~~Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350~~			~~Furnished herewith~~

~~101.INS~~	~~XBRL Instance Document~~			~~Filed herewith~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~			~~Filed herewith~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~			~~Filed herewith~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~			~~Filed herewith~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~			~~Filed herewith~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~			~~Filed herewith~~



Exhibit Number		Incorporated by reference into this Quarterly Report on Form 10-Q		Date Filed or Furnished
Exhibit Number	Exhibit Description	Form	Exhibit No.	Date Filed or Furnished

10.1	First Amendment to Credit Agreement dated March 4, 2019 among PAR Technology Corporation, the Loan Parties and Citizens Bank, N.A.	10-K	10.36	3/18/19

10.2††	Employment Letter: Service as Chief Executive Officer, dated March 22,2019, between PAR Technology Corporation and Savneet Singh			Filed herewith

31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended			Filed herewith

31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended			Filed herewith

32.1	Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350			Furnished herewith

32.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350			Furnished herewith

101.INS	XBRL Instance Document			Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document			Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document			Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document			Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document			Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document			Filed herewith

†† Indicates management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		PAR TECHNOLOGY CORPORATION
		(Registrant)

Date:	~~November 9, 2018~~May 7, 2019	/s/ Bryan A. Menar
		Bryan A. Menar
		Chief Financial and Accounting Officer
		(Principal Financial Officer)

3125



	Level 3 Inputs
	Liabilities
Balance at January 1, 2017	$	4,000
New level 3 liability	—
Total (gains) losses reported in earnings	(1,000		)
Transfers into or out of Level 3	$	—
Balance at December 31, 2017	$	3,000
New level 3 liability	—
Total (gains) losses reported in earnings	(400		)
Transfers into or out of Level 3	—
Balance at September 30, 2018	$	2,600