SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

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

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 such files). Yes þ No ☐


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

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

As of ~~August 1, 2020, 18,250,625~~May 3, 2021, 25,979,138 shares of the registrant’s common stock, $0.02 par value, were outstanding.

Forward-Looking Statements


Item 1.			Financial Statements (unaudited)

Common Stock Additional paid in capital Retained
Earnings (accumulated deficit) Accumulated
Other
Comprehensive
Loss Treasury Stock Total
Shareholders’
Equity
Shares Amount Shares Amount
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
Stock-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
Net loss (1,109) (1,109)
Issuance of common stock upon the exercise of stock options 79 3 210 $ 213
Stock-based compensation 602 602
Foreign currency translation adjustments 131 $ 131
Convertible notes conversion discount (net of taxes $4.1 million and issuance costs of $1.1 million)

12,465 12,465
Balances at June 30, 2019 18,035 360 63,806 1,589 (4,132) 1,708 (5,836) 55,787


	Common Stock			Additional Paid in Capital		Accumulated deficit		Accumulated Other Comprehensive Loss		Treasury Stock			Total Shareholders’ Equity
	Shares	Amount								Shares	Amount
Balances at December 31, 2020	22,983	$	459	$	243,575	$	(46,706)	$	(3,936)	1,066	$	(4,987)	$	188,405
Issuance of common stock upon the exercise of stock options	34	1		408		—		—		—	—		409
Net issuance of restricted stock	87	2		263		—		—		—	—		265
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock	—	—		—		—		—		76	(3,974)		(3,974)
Stock-based compensation	—	—		1,320		—		—		—	—		1,320
Foreign currency translation adjustments	—	—		—		—		(302)		—	—		(302)
Net loss	—	—		—		(8,271)		—		—	—		(8,271)
Balances at March 31, 2021	23,104	$	462	$	245,566	$	(54,977)	$	(4,238)	1,142	$	(8,961)	$	177,852


	Common Stock			Additional Paid in Capital		Accumulated deficit		Accumulated Other Comprehensive Loss		Treasury Stock			Total Shareholders’ Equity
	Shares	Amount								Shares	Amount
Balances at December 31, 2019	18,360	$	367	$	94,372	$	(10,144)	$	(5,368)	1,731	$	(6,380)	$	72,847
Issuance of common stock upon the exercise of stock options	2	—		30		—		—			—		30
Net issuance of restricted stock awards	21	—		—		—		—			—		—
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock	—	—		—		—		—		38	(524)		(524)
Issuance of restricted stock for acquisition	908	19		—		—		—		—	—		19
Equity component of redeemed 2024 convertible notes (net of deferred taxes of $1.8 million)				(7,988)						(722)	2,435		(5,553)
Equity component of issued 2026 convertible notes (net of deferred taxes of $6.2 million and issuance costs of $0.9 million)	—	—		19,097		—		—		—	—		19,097
Stock-based compensation	—	—		1,089		—		—		—	—		1,089
Foreign currency translation adjustments	—	—		—		—		201		—	—		201
Net loss	—	—		—		(10,910)		—		—	—		(10,910)
Balances at March 31, 2020	19,291	$	386	$	106,600	$	(21,054)	$	(5,167)	1,047	$	(4,469)	$	76,296

~~PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited, in thousands, except share and per share amounts)~~

Six Months Ended
June 30,
2020 2019
Cash flows from operating activities:
Net loss $ (19,886) $ (3,838)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and accretion 6,700 3,121
Current expected credit losses 978 397
Provision for obsolete inventory 1,439 (522)
Stock-based compensation 2,212 850
Loss on debt extinguishment 8,123 —
Deferred income tax (4,408) (4,065)
Changes in operating assets and liabilities:
Accounts receivable 2,560 (284)
Inventories (8,105) 1,876
Other current assets 260 (3,406)
Other assets 119 150
Accounts payable (931) (2,208)
Accrued salaries and benefits (231) (240)
Accrued expenses (652) 2,840
Customer deposits and deferred service revenue (2,438) 1,548
Other long-term liabilities 618 (2,760)
Net cash used in operating activities (13,642) (6,541)
Cash flows from investing activities:
Settlement of working capital for acquisitions 172 —
Capital expenditures (188) (1,693)
Capitalization of software costs (4,613) (1,624)
Net cash used in investing activities (4,629) (3,317)
Cash flows from financing activities:
Payments of long-term debt (313) —
Payment of contingent consideration — (2,550)
Payments of bank borrowings — (17,459)
Proceeds from bank borrowings — 9,640
Payments for the extinguishment of notes payable (66,250) —
Proceeds from notes payable, net of issuance costs 115,916 75,039
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock (332) —
Proceeds from exercise of stock options
42 243
Net cash provided by financing activities 49,063 64,913
Effect of exchange rate changes on cash and cash equivalents (53) 121
Net increase in cash and cash equivalents 30,739 55,176
Cash and cash equivalents at beginning of period 28,036 3,485
Cash and equivalents at end of period $ 58,775 $ 58,661
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,262 $ 153
Income taxes, net of refunds 10 125
Capitalized software recorded in accounts payable 245 —

See accompanying notes to unaudited interim condensed consolidated financial statements

Table of Contents

PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(8,271)	$	(10,910)
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation, amortization and accretion	3,990		3,142
Current expected credit losses	18		244
Provision for obsolete inventory	210		1,188
Stock-based compensation	1,320		1,089
Loss on debt extinguishment	0		8,123

Deferred income tax	0		(5,386)
Changes in operating assets and liabilities:
Accounts receivable	4,267		(1,289)
Inventories	(3,850)		(5,201)
Other current assets	(4,343)		(2,764)
Other assets	421		85
Accounts payable	5,658		218
Accrued salaries and benefits	(3,916)		(1,646)
Accrued expenses	1,332		(283)
Customer deposits and deferred service revenue	143		(1,733)
Other long-term liabilities	(413)		0
Net cash used in operating activities	(3,434)		(15,123)
Cash flows from investing activities:

Capital expenditures	(152)		(188)
Capitalization of software costs	(1,517)		(1,852)
Net cash used in investing activities	(1,669)		(2,040)
Cash flows from financing activities:
Payments of long-term debt	(163)		(154)



Payments for the extinguishment of notes payable	0		(66,250)
Proceeds from notes payable, net of issuance costs	0		115,916
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock	(2,362)		(153)
Proceeds from exercise of stock options	409		30
Net cash (used in) provided by financing activities	(2,116)		49,389
Effect of exchange rate changes on cash and cash equivalents	(345)		(173)
Net (decrease) increase in operating activities	(7,564)		32,053
Cash and cash equivalents at beginning of period	180,686		28,036
Cash and equivalents at end of period	$	173,122	$	60,089

Supplemental non-cash investing and financing flow information:
Cash paid for interest	$	19	$	953
Income taxes, net of refunds	5		0
Capitalized software recorded in accounts payable	317		0
Capital expenditures in accounts payable	122		0

See accompanying notes to unaudited interim condensed consolidated financial statement

Table of Contents

PAR TECHNOLOGY CORPORATION ~~AND SUBSIDIARIES~~

NOTES TO ~~UNAUDITED INTERIM~~ CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of ~~presentation~~Presentation

The accompanying unaudited ~~interim~~ condensed consolidated financial statements ("(“financial ~~statements"~~statement”) of PAR Technology Corporation ~~and~~through its consolidated subsidiaries ~~(the~~(collectively, the “Company”, “PAR”, ~~"we"~~“we”, ~~"us", "our"~~“us” or “our Company”) have been prepared in accordance with ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States of America (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Regulation S-X pertaining to interim financial ~~statements.~~statements as promulgated by the Securities and Exchange Commission (“SEC”). In the opinion of management, the Company's financial statements include all normal and recurring adjustments necessary in order to make the financial statements not misleading and to provide a fair presentation of the Company's financial results for the interim period included in this Quarterly Report on Form 10-Q ~~(“Quarterly~~(this “Quarterly Report”). Interim results are not necessarily indicative of results for the full year or any future periods. The information included in this Quarterly Report should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020 filed with the ~~Securities and Exchange Commission (“SEC”)~~SEC on March 16, ~~2020.~~2021 (“2020 Annual Report”).

The preparation of the financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant and equipment including right-to-use assets and liabilities, identifiable intangible assets and goodwill, the measurement of liabilities and equity recognized for outstanding convertible notes, valuation allowances for receivables, inventories, and measurement of contingent consideration at fair value. Actual results could differ from those estimates. The Company's estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic; the extent to which the COVID-19 pandemic will impact these estimates is uncertain and cannot be predicted, and there can be no assurance that the COVID-19 pandemic will not have a material and adverse effect on these estimates.

The Company operates in 2 distinct 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 provides point-of-sale ~~(POS)~~(“POS”) software and hardware, back-office software, and integrated technical solutions to the restaurant and retail industries. The Government ~~reporting~~ segment provides intelligence, surveillance, and reconnaissance solutions and mission systems support to the United States Department of Defense and other Federal agencies. In addition, the financial statements include corporate ~~and eliminations,~~operations, which isare comprised of enterprise-wide functional departments.

~~Additionally, the Company has reclassified certain costs~~Cash and expenses in the condensed consolidated statement of operations for the three and six months ended June 30, 2020, amounting to $0.2 million and $0.5 million, respectively, from amortization of intangible assets to cost of service to cost of service to conform to current period presentation. These reclassifications had no effect on previously reported total costs and operating expenses and net loss.Cash Equivalents

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

equivalents including money market funds.

~~Preparation~~The Company maintained bank balances that, at times, exceeded the federally insured limit during the three months ended March 31, 2021. The Company has not experienced losses relating to these deposits and management does not believe that

the Company is exposed to any significant credit risk with respect to these amounts.

Cash and cash equivalents consist of the ~~financial statements~~following (in thousands):


	March 31, 2021		December 31, 2020
Cash and cash equivalents
Cash	$	63,580	$	59,700
Money market funds	109,542		120,986
Total cash and cash equivalents	$	173,122	$	180,686

Gain on Insurance Proceeds

During the three months ended March 31, 2021, the Company received $4.4 million of insurance proceeds in ~~conformity~~connection with ~~GAAP requires management~~the settlement of a legacy claim.

Table of Contents

Other Long-Term liabilities

Other long-term liabilities represent amounts owed to ~~make estimates~~employees that participate in the Company’s deferred compensation

plan, and ~~assumptions that affect~~ the ~~reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date~~long-term portion of the ~~financial statements~~Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) deferred payroll taxes. The amount owed to employees participating in the deferred compensation plan was $2.8 million at March 31, 2021 and December 31, 2020.

Under the CARES Act employers can defer payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the ~~reported amounts~~remaining 50% due December 31, 2022. As permitted under the CARES Act, the Company deferred payment of ~~revenue~~the employer portion of social security taxes through the end of 2020. As of March 31, 2021 and ~~expenses~~December 31, 2020, the Company deferred a total of $2.8 million of payroll taxes during 2020, to be paid equally in the ~~reporting period.~~fourth quarters of 2021 and 2022. The current portion of the deferred payroll taxes was $1.4 million at March 31, 2021 and December 31, 2020 and was included within accrued salaries and benefits and $1.4 million in other long-term liabilities on the consolidated balance sheet.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update ("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 Company adopted ASU 2016-13 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.

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. The Company adopted ASU 2017-04 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.

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 measurement disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. ASU 2018-13 modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. The Company adopted ASU 2018-13 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.

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 hosting arrangement. ASU 2018-15 also requires the capitalized costs associated with the design, development and implementation of cloud hosted arrangements to be amortized over the term of the hosting arrangement. The Company adopted ASU 2018-15 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): ~~"Simplifying~~Simplifying the Accounting for Income ~~Taxes"~~Taxes, which is intended to simplify various requirements related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The Company adopted ASU ~~2019-12~~2016-13 effective January 1, 2021, and the application of the standard had no material impact on the Company's financial statements for the three months ended March 31, 2021.

Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which is intended to reduce the number of accounting models for convertible debt instruments and convertible preferred stock, and amend guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2020,~~2021, with early adoption permitted. The Company is currently assessing the impact of this standard on its financial statements.

With the exception of the ~~new~~ standards discussed above, there were no other recent accounting pronouncements or changes in accounting pronouncements during the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 that are of significance or potential significance to the ~~Company, as compared to the recent accounting pronouncements described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.~~Company.

Note 2 -— Revenue Recognition

~~Our~~The Company's revenue is derived from ~~Software~~software as a ~~Service (SaaS)~~service (“SaaS”), hardware and software sales, software activation, hardware support, installations, maintenance and professional services. Accounting Standards Codification ~~("ASC"~~(“ASC”) ~~606: "Revenue~~Topic 606: Revenue from Contracts with ~~Customers"~~ Customers requires usthe Company to distinguish and measure performance obligations under customer contracts. Contract consideration is allocated to all performance obligations within the arrangement or contract. Performance obligations that are determined not to be distinct are combined with other performance obligations until the combined unit is determined to be distinct and that combined unit is then recognized as revenue over time or at a point in time depending on when control is transferred.

WeThe Company evaluated the potential performance obligations within ~~our~~its Restaurant/Retail ~~reporting~~ segment and evaluated whether each performance obligation met the ASC Topic 606 criteria to be considered distinct performance obligations. Revenue in the Restaurant/Retail ~~reporting~~ segment is recognized at a point in time for software, hardware and installations. 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 SaaS, ~~our~~Advanced Exchange hardware ~~Advanced Exchange,~~service programs, 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~~The Company’s support services are stand-ready obligations that are provided over the life of the contract, generally 12 months. ~~We offer~~The Company offers installation services to ~~our~~its customers for hardware and software for which wethe Company primarily ~~hire~~hires third-party contractors to install the equipment on ~~our~~the Company's behalf. ~~We pay third-party~~The Company pays third party contractors an installation service ~~fees at mutually~~fee based on an hourly rate agreed ~~rates.~~to by the Company and contractor. When ~~third-party~~third party installers are used, ~~we determine~~the Company determines whether the nature of ~~our~~its performance obligations is to provide the specified goods or services ~~ourselves~~itself (principal) or to arrange for a third-party to provide the goods or services (agent). In ~~direct~~the Company's customer

Table of Contents

arrangements, ~~we have discretion over our pricing; we are~~the Company is primarily responsible for providing a good or service; and ~~we have~~the Company has inventory risk before the good or service is transferred to the ~~customer.~~customer, and the Company has discretion in establishing prices. As a result, ~~we have~~the Company concluded that ~~we are~~it is the principal in the arrangement and ~~record~~records installation revenue on a gross basis.

~~Our contracts~~The support services associated with hardware and software sales are a “stand-ready obligation” satisfied over time on the basis that the customer consumes and receives a benefit from having access to the Company's support resources, when and as needed, throughout the contract term. For this reason, the support services are recognized ratably over the term since the Company satisfies its obligation to stand ready by performing these services each day. Contracts typically require payment within 30 to 90 days from the shipping date or installation ~~date.~~date, depending on the Company's terms with the customer. The primary method used to estimate a stand-alone selling price, is ~~by referring to~~ the price that ~~we charge~~the Company charges for ~~that~~the particular good or service ~~when we sell it~~sold by the Company separately under similar circumstances to similar customers. The Company determines stand-alone selling ~~price~~prices as follows: hardware, software ~~(on-premises and SaaS)~~ and software activation ~~(which is a one-time~~(one-time fee ~~charged~~ at the initial offering of ~~software)~~software or SaaS) performance obligations are recognized at a stand-alone selling price based on the price at which the Company sells the particular good or service separately in similar circumstances and to similar customers. The stand-alone selling price for all other performance obligations, including: pass-through hardware, such as terminals, printers, or card readers; hardware support ~~including~~(referred to as Advanced ~~Exchange,~~Exchange), installation, ~~and maintenance;~~maintenance, software ~~upgrades;~~upgrades, and professional services ~~including project management,~~(project management) is recognized by using an expected cost plus margin.

~~Our~~The Company's revenue in the Government ~~reporting~~ segment is ~~generally~~ recognized over time as control ~~of products or services~~ is generally transferred continuously to ~~our~~its customers. ~~While revenue~~Revenue generated by the Government ~~reporting~~ segment is predominantly related to ~~services, we do generate~~services; provided, however, revenue ~~from sales~~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 ~~as of a determination~~to date to measure progress toward satisfying ~~our~~the Company's performance obligations. Incurred ~~costs represent~~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 and 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~~judgment to estimate the total contract revenue and costs. For long-term fixed price contracts, ~~we estimate~~the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract, and recognize itthat 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 ~~same~~aforesaid assumptions, ~~adjusted for estimated~~and adjusting the estimate of costs to complete a contract. Once the services provided are determined to be distinct or not distinct, ~~we evaluate~~the Company evaluates 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 ~~contract.~~solicitation. The performance obligations are typically not ~~distinct; however, in~~distinct. In cases where there are distinct performance obligations, the transaction price iswould be allocated to each performance obligation ~~ratably,~~on a ratable basis based upon the stand-alone selling price of each performance obligation. Cost plus margin is used for the cost plus fixed fee contract portfolios as well as the fixed price and time and materials contracts portfolios to determine the stand-alone selling price.

In determining when to recognize revenue, ~~we analyze~~the Company analyzes whether ~~our~~its performance obligations in ~~our~~its Government 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 of time. However, there may be circumstances where the latter or both scenarios could apply to a contract.

~~We generally anticipate receipt of~~The Company does not include backlog as revenue as it may not result in actual revenue in any particular period, or at all. The Company usually expects payment within 30 to 90 days from ~~the date~~satisfaction of ~~service.~~a performance obligation. None of ~~our~~the Company's contracts as of ~~December~~March 31, ~~2019~~2021 or ~~June 30,~~March 31, 2020 contained a significant financing component.

Table of Contents

Performance Obligations Outstanding

The Company's performance obligations outstanding represent the transaction price of firm, non-cancellable orders, with expected delivery dates to customers ~~subsequent to June 30,~~after March 31, 2021 and March 31, 2020, ~~and June 30, 2019,~~ respectively, for work that has not yet been performed. The activity of outstanding performance obligations as isit relates to customer deposits and deferred service revenue is as follows:

(in thousands) 2020 2019
Beginning balance - January 1 $ 16,000 $ 14,134
Change in deferred revenue (430) (327)
Changes in customer deposits (2,008) 1,272
Ending balance - June 30 $ 13,562 $ 15,079


(in thousands)	2021		2020
Beginning balance - January 1	$	11,082	$	12,486
Recognition of deferred revenue	(2,603)		(4,034)
Deferral of revenue	2,597		4,026
Ending balance - March 31	$	11,076	$	12,478

The above table excludes customer deposits of $1.6 million and $1.8 million for the three months ended March 31, 2021 and 2020, respectively. The majority of the deferred revenue balances above relate to professional services, maintenance agreements, and software licenses. These are recognized straight-line over the life of the contract, with the majority of the balance being recognized within the next twelve months.

In the Restaurant/Retail ~~reporting~~ segment most performance obligations ~~over one year are related~~relate to service and support contracts, approximately ~~73%~~78% of which ~~we expect~~the Company expects to fulfill within ~~the one-year period~~one year. The Company expects to fulfill 100% of support and ~~100%~~service contracts within 60 months. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, transaction prices allocated to future performance obligations were ~~$10.5~~$11.1 million and ~~$10.9~~$11.1 million, respectively.

During the three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~and June 30, 2019, we~~the Company recognized revenue of ~~$3.6~~$2.6 million and ~~$3.9~~$4.0 million,

respectively, which are included in ~~the~~ contract liabilities at the beginning of the respective period. During the six months ended June 30, 2020 and June 30, 2019, we recognized revenue of $7.7 million and $9.0 million, respectively, included in the contract liabilities at the beginning of the respectiveeach such period.

The value of existing contracts in the Government ~~reporting~~ segment at ~~June 30,~~March 31, 2021, net of amounts relating to work performed to that date, was approximately $140.1 million, of which $30.2 million was funded, and at December 31, 2020, net of amounts relating to work performed to that date, was approximately ~~$129.6~~$150.5 million, of which ~~$35.5 million was funded, and at December 31, 2019, net of amounts relating to work performed to that date, was approximately $148.7 million, of which $32.8~~$27.8 million was funded. The value of existing contracts, net of amounts relating to work performed ~~to that date~~at March 31, 2021 are expected to be recognized as revenue over time as follows (in thousands):


Next 12 Months	$	~~56,458~~56,238
Months 13-24	~~32,644~~47,328
Months 25-36	~~24,821~~24,434
Thereafter	~~15,690~~12,066
TOTAL	$	~~129,613~~140,066

Disaggregated Revenue

The Company disaggregates revenue from ~~customer~~ contracts with customers by major product ~~group~~line for each of its reporting ~~segment. The~~segments because the Company believes ~~this method~~it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Disaggregation of revenue ~~for the three and six months ended June 30, 2020 and June 30, 2019~~ is as ~~follows:~~follows (in thousands):

(in thousands) Three months ended June 30, 2020
Restaurant/Retail - Point in Time Restaurant/Retail - Over Time Government - Over Time
Restaurant/Retail $ 19,820 $ 7,813 $ —
Mission Systems $ — $ — $ 8,087
ISR Solutions $ — $ — $ 9,971
TOTAL $ 19,820 $ 7,813 $ 18,058

(in thousands) Three months ended June 30, 2019
Restaurant/Retail - Point in Time Restaurant/Retail - Over Time Government - Over Time
Restaurant/Retail $ 21,503 $ 5,829 $ —
Grocery 283 647 —
Mission Systems — — 8,192
ISR Solutions — — 7,793
TOTAL $ 21,786 $ 6,476 $ 15,985


(in thousands)		Six months ended June 30, 2020
		Restaurant/Retail - Point in Time		Restaurant/Retail - Over Time		Government - Over Time			Three months ended March 31, 2021
Restaurant/Retail		$	47,635	$	17,407	$	—
									Restaurant/Retail Point in Time		Restaurant/Retail Over Time		Government Over Time
Hardware								Hardware	$	17,835	$	0	$	0
Software								Software	243		7,633		0
Service								Service	3,412		7,461		0
Mission Systems	Mission Systems	—		—		16,535		Mission Systems	0		0		9,547
ISR Solutions	ISR Solutions	—		—		18,846		ISR Solutions	0		0		8,131
Product								Product	0		0		205
TOTAL	TOTAL	$	47,635	$	17,407	$	35,381	TOTAL	$	21,490	$	15,094	$	17,883

The Company has reclassified the prior year information in the above table to conform to the current year presentation.

Practical Expedients and Exemptions

The Company generally expenses sales commissions when incurred because the amortization period iswould be less than one year or the total amount of commissions is immaterial. ~~We record these expenses~~Commissions are recorded in selling, general and administrative ~~in the condensed consolidated statements of operations.~~

Note 3 — ~~Acquisitions~~

~~Drive-Thru Acquisition~~

~~Restaurant Magic Acquisition~~


~~(in thousands)~~	~~Purchase price allocation~~
~~Developed technology~~	$	~~16,400~~
~~Customer relationships~~	~~1,100~~
~~Trade name~~	~~900~~
~~Tangible assets~~	~~1,344~~
~~Goodwill~~	~~27,773~~
~~Total assets~~	~~47,517~~
~~Accounts payable and accrued expenses~~	~~629~~
~~Deferred revenue~~	~~715~~
~~Earn out liability~~	~~3,340~~
~~Consideration paid~~	$	~~42,833~~

~~Unaudited Pro Forma Financial Information~~

(in thousands) Three months ended June 30, 2019 Six months ended June 30, 2019
Total revenue $ 50,921 $ 102,274
Net income $ 1,044 $ 781

~~Note 4 — Divestiture~~

~~Sale of SureCheck~~

~~Note 5 —~~ Accounts Receivable, Net

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the ~~Company's~~Company had current, expected credit loss ~~was $2.0~~of $1.3 million and ~~$1.8~~$1.4 million, respectively, against ~~the~~ accounts receivable for the Restaurant/Retail ~~reporting~~ segment. ~~The changes~~Changes in the current, expected credit loss ~~during the six months ended June 30, 2020~~ were as follows:

Table of Contents

Note 64 — Inventories, Net

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


(in thousands)	(in thousands)	June 30, 2020		December 31, 2019		(in thousands)	March 31, 2021		December 31, 2020
Finished goods	Finished goods	$	13,495	$	8,320	Finished goods	$	14,634	$	12,747

Work in process						Work in process	8		16
Component parts	Component parts	7,672		6,768		Component parts	6,717		6,105
Service parts	Service parts	4,825		4,238		Service parts	3,937		2,770
		$	25,992	$	19,326		$	25,296	$	21,638

Note 75 — Identifiable Intangible Assets and Goodwill

~~Identifiable~~The Company's identifiable intangible assets represent intangible assets acquired ~~by the Company in connection with its acquisition of Brink Software Inc. ("Brink Acquisition"), the Drive-Thru Acquisition and the Restaurant Magic Acquisition,~~from acquisitions and software development costs. The Company capitalizes certain costs related to the development of its platform and other software applications for internal use in accordance with ASC Topic 350-40, Intangibles - Goodwill and Other - Internal - Use Software. The Company begins to capitalize its costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended. The Company stops capitalizing these costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three to five years. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in the Company's consolidated statements of operations.

The Company exercises judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that the Company can change the manner in which new features and functionalities are developed and tested related to its platform, assessing the ongoing value of capitalized assets or determining the estimated useful lives over which the costs are amortized, the amount of internal-use 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,~~capitalizes and testing activities necessary to establish that the software product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility of 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 software product is available for general release to customers. amortizes could change in future periods.

Included in ~~"Acquired and internally developed software costs" in the table below~~identifiable intangible assets are approximately ~~$3.5~~$3.6 million and ~~$2.5~~$6.5 million of costs related to software products that have not satisfied the general release threshold as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. These software products are expected to satisfy the general release threshold within the next 12 months. Software ~~development~~ costs ~~are also capitalized in accordance with ASC 350-40, “Intangibles - Goodwill and Other - Internal - Use Software,” and are amortized over the expected benefit period, which generally ranges from~~ ~~three~~ ~~to five years. Software development costs capitalized~~placed into service during the three months ended ~~June 30,~~March 31, 2021 and March 31, 2020 ~~and June 30, 2019~~ were ~~$2.6~~$4.8 million and ~~$0.6~~$1.8 million, respectively. ~~Software development costs capitalized during the six months ended June 30, 2020 and June 30, 2019 were $4.3 million and $1.6 million, respectively.~~

For the three month period ended June 30, 2020, $0.8 million and $0.2 million were recorded in cost of service and amortization of intangible assets, respectively, compared to $0.2 million in cost of service for the three months ended June 30, 2019. For the six month period ended June 30, 2020, $1.7 million and $0.4 million were recorded in cost of service and

The components of identifiable intangible assets are:

The expected future amortization of intangible assets, assuming straight-line amortization of capitalized software development costs and acquisition related intangibles, ~~and~~ excluding software costs not meeting the general release threshold, is as follows (in thousands):

The Company operates in 2 reporting segments, Restaurant/Retail and Government, which are also the Company's identified reporting ~~units.~~units for purposes of evaluating goodwill impairment. The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment of goodwill. Goodwill is assigned to a specific reporting unit at the date the goodwill is initially recorded; once assigned, goodwill no longer retains its association with a particular acquisition and all of the activities within the reporting unit, whether acquired organically or from a third-party, ~~or organically acquired,~~ are available to support the value of the goodwill. The amount of goodwill carried by the Restaurant/Retail and Government segments ~~were~~remained at $41.2 million ~~and $41.4 million at June 30, 2020~~for both March 31, 2021 and December 31, ~~2019,~~2020, respectively. The Company recognized additions to goodwill as part of the Drive-Thru Acquisition and Restaurant Magic Acquisition as indicated in Note 3; in June 2020 a $0.2 million favorable working capital adjustment was recognized related to the Restaurant Magic Acquisition. NaN impairment charges were recorded for the periods ended June 30, 2020 or June 30, 2019.

On April 15, 2019, the Company sold $80.0 million in aggregate principal amount of 4.500% Convertible Senior Notes due 2024 (the ~~"2024 Notes"~~“2024 Notes”). The 2024 Notes were sold pursuant to an indenture, dated April 15, 2019, ~~(the "2024 Indenture"),~~ between the Company and The Bank of New York Mellon Trust Company, N.A., as ~~Trustee.~~Trustee (the “2024 Indenture”). The 2024 Notes pay interest at a rate equal to 4.500% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2019. Interest accrues on the 2024 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 2024 Notes mature on April 15, 2024.

On February 10, 2020, the Company sold $120.0 million in aggregate principal amount of 2.875% Convertible Senior Notes due 2026 (the ~~"2026 Notes"~~“2026 Notes” and, together with the 2024 Notes, the ~~"Notes"~~“Notes”). The 2026 Notes were sold pursuant to an indenture, dated February 10, 2020 (the ~~"2026 Indenture"~~“2026 Indenture” and, together with the 2024 Indenture, the ~~"Indentures"~~“Indentures”), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. The 2026 Notes pay interest at a rate equal to 2.875% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2020.

The Company used approximately $66.3 million (excluding cash payments relating to accrued interest and fractional shares) from its sale of the 2026 Notes and issued 722,423 shares of common ~~shares~~stock at $32.43 per share out of treasury stock with an average cost basis of $3.37 per share to repurchase approximately $66.3 million in aggregate principal amount of the 2024

Notes through individually negotiated transactions. Of the total price paid for the 2024 Notes, $59.0 million was allocated to the 2024 Notes settlement, $30.8 million was allocated to the equity component, and $1.0 million was used to pay off accrued interest on the 2024 Notes. The consideration transferred was allocated to the liability and equity components of the 2024 Notes using the equivalent rate that reflected the borrowing rate for a similar non-convertible debt instrument immediately prior to settlement. The transaction resulted in a loss on settlement of convertible notes of $8.1 million, which is recorded as a Loss on extinguishment of debt in the Company’s unaudited condensed consolidated ~~statement~~statements of operations. The loss represents the difference between (i) the fair value of the liability component and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.

The carrying amount of the liability component was calculated by estimating the fair value of similar notes that do not have associated convertible features. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the fair value amount of the Notes. The valuation model used in determining the fair value of the liability component for the Notes includes inputs, such as the implied debt yield within the nonconvertible borrowing rate. The implied estimated effective rate of the liability component of the 2024 Notes and 2026 Notes ~~is 10.24%~~was 10.2% and ~~7.33%~~7.3%, respectively.

The Notes are senior, unsecured obligations of the Company. The 2024 Notes and the 2026 Notes are convertible, in whole or in part, at the option of the holder, upon the occurrence of specified events or certain fundamental changes set forth in the Indentures prior to the close of business on the business day immediately preceding October 15, 2023 and October 15, 2025, respectively; and, thereafter, at any time until the close of business on the second business day immediately preceding maturity. The 2024 Notes are convertible into Company common stock at an initial conversion rate of 35.0217 shares per $1,000 principal amount and the 2026 Notes are convertible into Company common stock at an initial conversion rate of 23.2722 shares per $1,000 principal amount. Upon conversion, the Company may elect to settle by paying or delivering either solely cash, shares of Company common stock or a combination of cash and shares of Company common stock.

In accordance with ASC Topic 470-20 ~~"Debt~~ Debt with Conversion and Other Options — Beneficial Conversion ~~Features"~~Features, the initial measurement of the 2024 Notes at fair value resulted in a liability of $62.4 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in Additional Paid in Capital of $17.6 ~~million. In accordance with ASC 470-20,~~million; and the initial measurement of the 2026 Notes at fair value resulted in a liability of $93.8 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in Additional Paid in Capital of $26.2 million. Issuance costs for the ~~transactions~~Notes amounted to $4.9 million and $4.2 million for the 2024 Notes and 2026 Notes, respectively. These costs were allocated to debt and equity components on a ratable basis. For the 2024 Notes this amounted to $3.8 million and $1.1 million to the debt and equity components, respectively. For the 2026 Notes this amounted to ~~$3.1~~$3.3 million and ~~$1.1~~$0.9 million to the debt toand equity components, respectively.

The Indentures contain covenants that, among other things, restrict the Company’s ability to merge, consolidate or sell, or otherwise dispose of, substantially all of its assets and customary Events of Default (as defined in the Indentures).

~~In connection with the sale~~As a result of the ~~2026~~changes to the equity components of the Notes, the Company ~~recorded an~~recognized a deferred income tax benefit of ~~$4.4~~$5.4 million induring the ~~first six~~three months of 2020 as a result of the creation of a deferred tax liability associated with the portion of the 2026 Notes that was classified within stockholders' equity. While GAAP requires the offset of the deferred tax liability to be recorded in additional paid-in capital, consistent with the equity portion of the 2026 Notes, the creation of the deferred tax liability produced evidence of recoverability of the Company's net deferred tax assets which resulted in the release of a valuation allowance, totaling $4.4 million, reflected as an income tax benefit in the first six months ofended March 31, 2020.

The following table summarizes information about the net carrying amounts of the ~~2024 Notes and 2026~~ Notes as of ~~June 30, 2020:~~March 31, 2021:

The following table summarizes interest expense recognized on the ~~2024 Notes and 2026~~ Notes:

(in thousands) Six Months Ended June 30,
2020 2019
Contractual interest expense $ 2,015 $ 644
Amortization of debt issuance costs and discount 2,059 746
Total interest expense $ 4,074 $ 1,390

In connection with the ~~Restaurant Magic Acquisition, see Note 3 - Acquisitions,~~acquisition of AccSys, LLC in December 2019, the Company entered into a $2.0 million ~~was paid by delivery of a~~ subordinated promissory note. The note bears interest at ~~4.5%~~5.75% per annum, with monthly payments of principal and interest in the amount of ~~$60,391~~$60,625 payable beginning January 15, 2020 through maturity on December 15, 2022. As of ~~June 30, 2020,~~March 31, 2021, the outstanding balance of the subordinated promissory note was ~~$1.7~~$1.2 million of which ~~$0.6~~$0.7 million was in the current portion of long-term debt. The Company's future minimum principal payments are ~~$0.3 million, $0.7~~$0.5 million and $0.7 million for the remainder of ~~2020,~~ 2021 and 2022, respectively.

Note 7 — Common Stock

On October 5, 2020, the Company completed an underwritten public offering (the “Secondary Offering”) of 3,350,000 shares of common stock at a price to the public of $38.00 per share, resulting in $121.8 million of proceeds, net of underwriting discounts and commissions and offering expenses payable by the Company. In connection with the Secondary Offering, the Company granted Jeffries LLC, the underwriter of the offering, a 30 day option to purchase up to an additional 502,500 shares of common stock at the same public offering price, less underwriting discounts and commissions. On November 3, 2020, Jeffries, LLC partially exercised its option and purchased 266,022 shares of common stock, resulting in an additional $9.6 million of proceeds, net of underwriting discounts and commissions and offering expenses payable by the Company.

Note 98 — Stock Based Compensation

The Company applies the fair value recognition provisions of ASC Topic ~~718: "Stock Compensation"~~718: Stock Compensation. ~~The Company~~Stock-based compensation expense, net of forfeitures of $34.0 thousand and $52.0 thousand for March 31, 2021 and March 31, 2020, respectively, was recorded ~~stock based compensation~~to the following line items in the consolidated statements of ~~$2.2 million and $0.9 million for the six month periods ended June 30, 2020 and June 30, 2019, respectively. The Company recorded stock based compensation of $1.1 million and $0.6 million~~operations for the three ~~month periods~~months ended ~~June 30, 2020 and June 30, 2019, respectively.~~ March 31:


	2021		2020
Cost of Sales - Contracts	$	67	$	94
Selling, general and administrative	1,253		995
Total stock-based compensation expense	$	1,320	$	1,089

At ~~June 30, 2020,~~March 31, 2021, the aggregate unrecognized compensation expense related to unvested equity awards was ~~$8.9~~$9.1 million, ~~(net of estimated forfeitures),~~ which is expected to be recognized as compensation expense in fiscal years ~~2020~~2021 through ~~2023.~~2024.

A summary of stock option activity for the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021 is below:

Note 9 — Net Loss Per Share

~~Note 10 — Net loss per share~~

The potential ~~dilutive effect~~effects of ~~the~~ 2024 Notes and ~~the~~ 2026 Notes conversion features ~~(See Note 8 - Debt)~~ were excluded from the diluted net loss per share as of ~~June 30, 2020~~March 31, 2021 and ~~June 30, 2019.~~March 31, 2020. Potential shares from ~~the~~ 2024 Notes and ~~the~~ 2026 Notes conversion features at ~~their~~ respective ~~initial~~maximum conversion ~~prices~~rates of ~~$28.55~~46.4037 per share and ~~$42.97~~30.8356 per share are approximately ~~481,548~~638,051 and ~~2,792,664,~~3,700,272, respectively. Refer to “Note 6 — Debt” for additional information.

Note 1110 — Contingencies

From time to time, the Company is party to legal proceedings arising in the ordinary course of business. Additionally, U.S. Government contract costs are subject to periodic audit and adjustment. Based on information currently available, and based on its evaluation of such information, the Company believes the legal proceedings in which it is currently involved are not material or are not likely to result in a material adverse effect on the Company’s business, financial condition or results of operations, or cannot currently be estimated.

~~The Company is a party to a proceeding filed by~~On March 21, 2019, Kandice Neals on behalf of herself and others similarly situated (the ~~"Neals Plaintiff"~~“Neals Plaintiff”) filed a complaint against ~~the Company on March 21, 2019~~PAR Technology Corporation in the Circuit Court of Cook County, Illinois County Department, Chancery Division. The complaint asserted that ~~the Company~~PAR Technology Corporation 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-sale systems. The ~~Neals~~ lawsuit was removed to the Federal District Court for the Northern District of Illinois (the ~~District Court"~~“District Court”) and was subsequently dismissed on December 19, 2019 without prejudice. On January 15, 2020, the Neals Plaintiff filed an amended complaint against ParTech, Inc. with the District Court. On January 29, 2020, ParTech, Inc. filed its answer and affirmative defenses to the amended complaint. The Company believes ~~the Neals~~that this lawsuit is without merit. The ~~Company does~~Company’s estimated liability for this complaint is not ~~currently believe an accrual is appropriate, but will continue~~material and related contingencies are not expected to ~~monitor~~have a material effect on the ~~lawsuit to provide for probable and estimable losses.~~Company’s financial statements.

In 2016, the Company's Audit Committee commenced an internal investigation into conduct at the Company's China and Singapore offices and voluntarily notified the SEC and the U.S. Department of Justice ~~("DOJ"~~(“DOJ”) of 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. 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. Based on ~~discussions with~~recent communications from the Singaporean authority, a penalty related to this matter is probable; the Company’s estimated liability for this penalty is not material and related contingencies are not expected to have a material effect on the Company’s financial statements.

Note 1211 — Segment and Related Information

Three Months
Ended June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Revenues:
Restaurant/Retail $ 27,633 $ 28,262 $ 65,042 $ 57,822
Government 18,058 15,985 35,381 31,107
Total $ 45,691 $ 44,247 $ 100,423 $ 88,929
Operating loss:
Restaurant/Retail $ (7,697) $ (4,615) $ (13,767) $ (7,597)
Government 1,349 1,518 2,528 2,881
Other 630 (356) 66 (838)
Total (5,718) (3,453) (11,173) (5,554)
Other expense (139) (374) (764) (804)
Interest expense, net (2,111) (1,244) (4,083) (1,390)
Loss on extinguishment of debt — — (8,123) —
Loss before provision for income taxes $ (7,968) $ (5,071) $ (24,143) $ (7,748)
Depreciation, amortization and accretion:
Restaurant/Retail $ 1,951 $ 1,201 $ 3,806 $ 2,069
Government 40 18 56 37
Other 1,567 890 2,838 1,015
Total $ 3,558 $ 2,109 $ 6,700 $ 3,121
Capital expenditures including software costs:
Restaurant/Retail $ 2,783 $ 778 $ 4,490 $ 1,841
Government 223 — 434 176
Other — 616 122 1,300
Total $ 3,006 $ 1,394 $ 5,046 $ 3,317
Revenues by country:
United States $ 44,626 $ 41,657 $ 97,257 $ 83,582
Other Countries 1,065 2,590 3,166 5,347
Total $ 45,691 $ 44,247 $ 100,423 $ 88,929


(in thousands)	Three Months Ended March 31,
	2021		2020
Net Revenues:
Restaurant/Retail	$	36,584	$	37,409
Government	17,883		17,323
Total	$	54,467	$	54,732

Operating loss:
Restaurant/Retail	$	(9,285)	$	(6,070)
Government	1,190		1,179
Other	2,074		(783)
Total	(6,021)		(5,674)
Other expense, net	(51)		(406)
Interest expense, net	(2,160)		(1,972)
Loss on extinguishment of debt	0		(8,123)
Loss before benefit from income taxes	$	(8,232)	$	(16,175)

Depreciation, amortization and accretion:
Restaurant/Retail	$	2,429	$	1,855
Government	36		16
Other	1,525		1,271
Total	$	3,990	$	3,142


(in thousands)	Three Months Ended March 31,
	2021		2020
Capital expenditures including software costs:
Restaurant/Retail	$	1,517	$	1,707
Government	152		211
Other	0		122
Total	$	1,669	$	2,040

Revenues by country:
United States	$	50,603	$	52,631
Other Countries	3,864		2,101
Total	$	54,467	$	54,732

The following table represents assets by reporting segment.


(in thousands)	March 31, 2021		December 31, 2020
Restaurant/Retail	$	141,330	$	140,606
Government	13,165		13,150
Other	184,180		189,993
Total	$	338,675	$	343,749

The following table represents identifiable long-lived ~~assets by reporting segment (in thousands).~~

June 30, 2020 December 31, 2019
Restaurant/Retail $ 1,776 $ 1,987
Government 241 272
Other 11,486 12,093
Total $ 13,503 $ 14,352

June 30, 2020 December 31, 2019
United States $ 13,424 $ 14,260
Other Countries 79 92
Total $ 13,503 $ 14,352
assets.


(in thousands)	March 31, 2021		December 31, 2020
United States	$	247,937	$	250,275
Other Countries	14,449		16,570
Total	$	262,386	$	266,845

The following table represents goodwill by reporting ~~segment (in thousands).~~

June 30, 2020 December 31, 2019
Restaurant/Retail $ 40,478 $ 40,650
Government 736 736
Total $ 41,214 $ 41,386
segment.


(in thousands)	March 31, 2021		December 31, 2020
Restaurant/Retail	$	40,478	$	40,478
Government	736		736
Total	$	41,214	$	41,214

Customers comprising 10% or more of the Company’s total revenues by reporting segment are summarized as follows:

Three Months Ended June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Restaurant/Retail reporting segment:
McDonald’s Corporation 9 % 10 % 9 % 10 %
Yum! Brands, Inc. 10 % 13 % 11 % 13 %
Dairy Queen 11 % 7 % 14 % 7 %
Government reporting segment:
U.S. Department of Defense 40 % 36 % 35 % 35 %
All Others 30 % 34 % 31 % 35 %
100 % 100 % 100 % 100 %


	Three Months Ended March 31,
	2021		2020
Restaurant/Retail reporting segment:
Dairy Queen	9	%	16	%
Yum! Brands, Inc.	12	%	11	%


Government reporting segment:
U.S. Department of Defense	33	%	32	%
All Others	46	%	41	%
	100	%	100	%

Note 1312 — 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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were considered representative of their fair values. The estimated fair value of the 2024 Notes and 2026 Notes at March 31, 2021 was ~~$15.0~~$32.0 million and ~~$112.1~~$206.0 million, ~~respectively, at June 30, 2020.~~ respectively. The valuation techniques used to determine the fair value of the 2024 Notes and the 2026 Notes are classified within Level 2 of the fair value hierarchy.

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 Topic 820: ~~"Fair~~Fair Value ~~Measurements"~~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 amounts owed to employees participating in the deferred compensation plan at ~~June 30, 2020~~March 31, 2021 was ~~$2.9~~$2.6 million compared to ~~$3.2~~$2.8 million at December 31, ~~2019~~2020 and is included in other long-term liabilities on the balance sheets.

The Company's Level 3 liability had a fair value of $0 at March 31, 2021 and December 31, 2020.

The following table ~~presents a summary of changes in~~provides quantitative information associated with the fair value measurement of the Company’s Level 3 liability for contingent consideration at March 31, 2021 and December 31, 2020.


Contingency Type	Maximum Payout (undiscounted) (in thousands)		Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average or Range
Revenue-based payments	$	1,965	$	0	Monte Carlo	Revenue volatility	25.0	%
						Discount rate	14.0	%
						Projected year(s) of payment	2021-2022

Note 13 — Subsequent Event

On April 8, 2021, the Company, ParTech, Inc., and Sliver Merger Sub, Inc., a wholly owned subsidiary of ParTech, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Punchh Inc. (“Punchh”), and Fortis Advisors LLC (“Stockholder Representative”), solely in its capacity as the initial Stockholder Representative. The Merger was executed as part of the Company's strategy to be a unified commerce cloud platform for restaurants and retailers, and included the addition of Punchh's loyalty and customer engagement platform. Pursuant to the Merger Agreement, on April 8, 2021, Merger Sub merged with and into Punchh (the “Merger”), with Punchh surviving the Merger and becoming a wholly owned subsidiary of the Company. In connection with the Merger, the Company paid former Punchh stockholders approximately $500.0 million (including holders of vested options and warrants) consisting of approximately (i) $390.0 million in cash (the “Cash Consideration”), and (ii) 1,594,202 shares of the Company's common stock, in each case subject to certain adjustments (including customary adjustments for Punchh cash, debt, debt-like items, and net working capital at closing) for 100% of the equity interests in Punchh.

The initial accounting for the business combination was incomplete at May 10, 2021; however, the Company's financial results for the three-month period ending March 31, 2021 did include acquisition related costs of $0.7 million. The assets and liabilities of Punchh will be adjusted to their respective fair values as of April 8, 2021, the closing date of the transaction, including working capital, property, plant and equipment, and identifiable intangible assets acquired through the Merger. The excess of the purchase price over the fair value of net assets acquired will be recorded to goodwill. Intangible assets acquired include, but are not necessarily limited to, developed technology and customer relationships. The estimated acquisition date fair value of these and other acquired assets and liabilities assumed may ultimately be based, in part, on inputs that are ~~measured at fair value on a recurring basis, and are recorded as a component of other long-term liabilities on~~unobservable. The Company's initial purchase price allocation will be presented in the ~~consolidated balance sheet (in thousands):~~


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,~~“the Company,” “we,” “us” and “our” ~~mean~~refers to 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 financial statements and the notes thereto included under Part I, Item 1 of this Quarterly Report and our audited consolidated financial statement and the notes thereto included under Part II, Item 8 of ~~our~~the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020 filed with the SEC on March 16, 2021 (“2020 Annual Report”). See also, “Forward-Looking Statements” ~~below.~~

~~Forward-Looking Statements~~

PAR Technology Corporation operates in two distinct ~~businesses: our~~reporting segments: Restaurant/Retail ~~business~~and Government. Our Restaurant/Retail segment provides point-of-sale ~~(POS)~~(“POS”) software and hardware, back-office software, and integrated technical solutions to the retail and restaurant ~~industries; our~~

industries. Our Government ~~business~~segment provides intelligence, surveillance, and reconnaissance solutions (“ISR”) and mission systems support to the ~~U.S.~~ Department of Defense ~~("DoD"~~(“DoD”) and other Federal agencies.

Our Restaurant/Retail segment is a leading provider of POS software, systems, and services to the restaurant and retail industries. Our promise is to deliver the solutions that connect people to the restaurants, meals, and moments they love. We provide multi-unit and individual restaurants, franchisees, and enterprise customers in the three major restaurant categories: fast casual, quick serve, and table service, a fully integrated cloud solution, with our leading Brink ~~POS®~~POS cloud software and our point-of-sale hardware for the front-of-house, our leading back-office cloud software - Data ~~Central®~~Central - for the back-of-house, and our wireless headsets for drive-thru order taking.

The Brink ~~POS®~~POS is an open solution ~~offers~~offering customers anthe opportunity to integrate with third party products and in-house systems. In support of our customers need to quickly adapt to changing market conditions, we claim the largest integration ecosystem ~~providing access to industry trends and features,~~– 200+ partners across various product solution categories including mobile/~~on-line~~online ordering, self-ordering kiosks, loyalty programs, kitchen video systems, guest surveys, enterprise reporting, and other ~~features~~solutions relevant to our customers’ businesses, including ~~Restaurant Magic's cloud, SaaS~~our cloud-based back-office ~~applications~~solution - Data ~~Central®. Data Central® provides~~Central. These integration capabilities enables restaurants ~~with the necessary tools~~ to ~~achieve peak~~increase visits, customer check size, improve operational ~~and financial~~ efficiency, and ~~integrates information from~~most importantly, position them to win in an ever changing and challenging market.

Our open architecture POS ~~inventory, supply, payroll,~~platforms are optimized to host our POS software applications, as well as many third-party POS applications, and ~~accounting~~are compatible with a variety of peripheral devices. We partner with numerous vendors that offer complementary in-store peripherals, such as cash drawers, card readers and printers and kitchen video systems, allowing us to ~~provide~~deliver a ~~comprehensive view of a restaurant's operations.~~completely integrated solution through one vendor.

We believe our ~~cloud~~software, hardware and integrated solutions ~~hardware offerings and services~~ uniquely ~~positions~~position us to be a leader in ~~helping~~assisting customers to ~~digitize~~innovate and improve their in-store operations in a rapidly changing and challenging market, particularly in light of the ~~modern restaurant.~~continued impacts of the COVID-19 pandemic on the restaurant industry. Our continued success and growth will depend upon our ability to ~~successfully~~advance and create new technology, products and services to meet customer demands, as well as deploy capital ~~to where it earns its highest return.~~and resources that uniquely deliver customer value. This includes the development and introduction of new products and ~~product enhancements,~~services, targeted acquisitions and a constant review of internal spend. ~~We have spent extensive time building a culture of intense rigor around capital allocation and we believe it will be a key part of our future success.~~

~~Our~~PAR's Government ~~business~~segment provides technical expertise in contract development of advanced systems and software solutions for the ~~U.S.~~ DoD and other Federal agencies, as well as satellite, communication, and IT mission systems support at a number of U.S. Government facilities both in the U.S. and worldwide. ~~Our strategy~~The Government segment is ~~to build upon our Government business' sustained performance~~focused on ~~existing service contracts, coupled~~two principal offerings, intelligence solutions and mission systems contract support, with ~~investments~~additional revenue from a small number of licensed software products for use in ~~enhanced business development capabilities. We believe we are well positioned to realize continued renewals of expiring contracts~~analytic and ~~extensions of existing contracts, and to secure service and solution contracts in expanded areas within the U.S. DoD and other Federal agencies.~~operational environments that leverage geospatial intelligence data. 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. DoD 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 our Government ~~business.~~segment.

~~COVID-19~~COVID 19 Update

~~Over the past few months, the~~The COVID-19 pandemic ~~has continued~~continues to ~~spread throughout~~cause significant disruption to the U.S. and global economies. While certain foreign jurisdictions, such as Canada and Europe, have re-imposed lockdowns and curfews in 2021, a number of localities in the ~~world~~U.S. have eased restrictions in the first quarter of 2021 and ~~has resulted in authorities implementing numerous measures~~the U.S. economy continues to contain the virus, including travel bans, travel restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. We are unable to accurately predict the full impact that COVID-19 will have on our resultsshow signs of operations and financial condition due to numerous uncertainties, including the duration and severity of the pandemic and related containment measures. Our adherence to these containment measures has impacted our day-to-day operations and could disruptrecovery. Although our business ~~and operations, as well as that of our key customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time.~~

~~During the quarter, our Restaurant/Retail reporting segment~~ began experiencing the impact of the COVID-19 pandemic due to its impact on our restaurant and retail customers and their response, including site closures, changes in product and service offerings and delivery formats, and delayed product adoptions and installations. April and May were impacted the most primarily due to a pause in a majority of the Brink POS® installations and temporary site closures. Monthly recurring software fees were not charged to sites that were temporarily closed. By June, installations commenced and as of July 30, 2020 site closures were down to 6% when compared to March 15, 2020.

We continue to perform a number of actions to mitigate the impact of the virus on our employees and business. To support the health and safety of our employees, we suspended all non-essential travel for our employees, the vast majority of our non-manufacturing employees continue to work-from-home, and augmented shifts for our manufacturing employees are still in place. Additionally, early in the second quarter of 2020, we reduced discretionary costs, implemented a hiring freeze on non-essential positions, we reduced the size of our workforce, and temporarily furloughed employees and temporarily reduced the salaries of othershave seen improvements in our ~~Restaurant/Retail reporting segment~~financial results as markets have strengthened and businesses have gained confidence in the progress to control the pandemic in the U.S. Beginning in the second half of 2020 through the quarter ended March 31, 2021, revenue has been in line with or above prior year results, our annual recurring revenue has increased quarter-over-quarter, and we have booked at least 1,181 new Brink POS sites in each of the last three quarters. Our Government business continues to not be materially impacted by the COVID-19 pandemic.

~~As allowed under the Coronavirus Aid, Relief~~effects and ~~Economic Security Act, as amended (the "CARES Act"), we are deferring payment~~potential effects of the employer portion of Social Security taxes through the end of 2020. The amount of the cumulative deferral at the end of 2020 is currently estimated to be $1.8 million to $2.2 million, of which 50% is payable on each of December 31, 2021 and December 31, 2022. As of June 28, 2020, we deferred $0.6 million of social security taxes, which is included in other long-term liabilities in the consolidated balance sheets

~~While~~ the COVID-19 pandemic ~~has not had a material adverse impact~~ on all aspects of our ~~Government reporting segment~~business, however it is difficult to ~~date, we have continued our work-from-home for all non-essential employees and on-site operations are accomplished through telework and a staggered staffing approach that achieves~~predict the intent and benefits of social distancing. For contracts requiring specialized equipment, we established an off-site lab environment that permits the safe continuation of development and testing activities until government facilities fully reopen.

~~Significant uncertainty still exists regarding the magnitude, phasing and duration of the~~full impact of the COVID-19 ~~pandemic; therefore, we cannot predict at this time the full extent of its impact~~pandemic on our business in future periods. The pandemic may affect our Restaurant/Retail business in certain ways, including causing disruptions in our supply chain, increasing payment defaults by customers, causing reductions or delays in software or hardware deployments and curtailing customer demand, any of which could adversely impact our business, operations, financial condition and financial ~~condition~~results.

•On April 8, 2021, we acquired Punchh Inc (“Punchh”) for approximately $500 million paid in ~~future periods.~~cash and shares of PAR common stock to Punchh shareholders. The cash consideration for the acquisition was primarily financed with a combination of equity and debt. Refer to the “Liquidity and Capital Resource” section of Management's Discussion

and Analysis for additional acquisition financing information. The acquisition enabled us to take an important step in executing our strategy to be the leading unified commerce cloud platform for restaurants and retailers. The addition of Punchh's loyalty and customer engagement platform positions us to offer integrated point-of-sale, back office, payment and customer engagement solutions across channels. Refer to Note 13 — “Subsequent Event” for additional information.

Condensed Consolidated Results of Operations —

Three months ended ~~June 30, 2020~~March 31, 2021 Compared to Three months ended ~~June 30, 2019~~March 31, 2020

We reported consolidated revenues of ~~$45.7~~$54.5 million for the quarter ended ~~June 30, 2020, an increase~~March 31, 2021, a decrease of ~~3.4%~~0.5% from ~~$44.2~~$54.7 million recorded for the quarter ended ~~June 30, 2019.~~March 31, 2020. Our net loss from ~~continuing~~ operations was ~~$9.0~~$8.3 million, or ~~$0.49~~$0.38 per diluted share, for the ~~second~~first quarter of ~~2020 versus~~2021, compared to a net loss of ~~$1.1~~$10.9 million, or ~~$0.07~~$0.61 per diluted share, for the ~~second~~first quarter of 2019. The unfavorable comparison is driven mainly by a tax benefit recorded in 2019 of $4.0 million related to a reduction of the deferred tax valuation allowance that arose due to the recording of a deferred tax liability created as a result of the accounting for the sale of the 2024 Notes. Our year-over-year unfavorable performance was also driven by increased research & development ("R&D") spending, increased interest expense related to sale of the 2026 Notes and resulting refinance of the 2024 Notes, and increased depreciation and amortization expense related to the Restaurant Magic Acquisition and Drive-Thru Acquisition.

Three Months Ended June 30, $ %
(in thousands) 2020 2019 variance variance
Restaurant/Retail
Core * $ 15,394 $ 18,028 (2,634) (15) %
Brink ** 12,235 9,304 2,931 32 %
SureCheck 4 930 (926) (100) %
Total Restaurant Retail $ 27,633 $ 28,262 $ (629) (2) %
Government
Intelligence, surveillance, and reconnaissance $ 9,741 $ 7,256 2,485 34 %
Mission Systems 8,088 8,192 (104) (1) %
Product Sales 229 537 (308) (57) %
Total Government $ 18,058 $ 15,985 $ 2,073 13 %

Product revenues were ~~$12.3~~$18.6 million for the quarter ended ~~June 30, 2020, a decrease of 16.3% from $14.7~~March 31, 2021, comparable with the $18.6 million recorded for the quarter ended ~~June 30, 2019, primarily driven by a decrease of $2.4~~March 31, 2020.

Service revenues were $18.0 million ~~in revenue driven from our Core customers, as hardware refreshment stalled as a result of COVID-19 responses. Drive-thru product revenue~~ for the quarter ended ~~June 30, 2020 was $3.5 million. Product revenue related to Brink for the quarter ended June 30, 2020 was $3.8 million,~~March 31, 2021, a decrease of

~~Service~~Contract revenues were ~~$15.3~~$17.9 million for the quarter ended ~~June 30, 2020,~~March 31, 2021, an increase of ~~13.3%~~3.5% or ~~$1.8~~$0.6 million from ~~$13.5~~$17.3 million recorded for the quarter ended June 30, 2019, primarily due to the addition of the Restaurant Magic business and the growth in Brink recurring software revenues. Service revenue associated with Brink includes recurring software revenue of $5.4 million, an increase of 35.0% from $4.0 million recorded for the quarter ended June 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $2.1 million. Drive-thru service revenue for the quarter ended June 30, 2020 was $0.4 million.

Product margins for the quarter ended ~~June 30, 2020~~March 31, 2021 were ~~19.1%~~19.8%, compared to ~~22.5%~~20.0%, recorded for the quarter ended ~~June 30, 2019,~~March 31, 2020. The decrease in margin is primarily due to ~~unfavorable overhead absorption with reduced revenue and~~ increased ~~freight costs in the beginning of the quarter.~~overheads costs.

Service margins for the quarter ended ~~June 30, 2020~~March 31, 2021 were ~~35.2%~~29.6%,compared to ~~25.2%~~32.6% recorded for the quarter ended ~~June 30, 2019,~~March 31, 2020, primarily driven by a ~~shift~~decrease in ~~mix that resulted from our M&A activity with the Restaurant Magic Acquisition, the Drive-Thru Acquisition~~implementation revenue and ~~divestment of Surecheck.~~increase in software related costs.

Contract margins for the quarter ended ~~June 30, 2020~~March 31, 2021 were ~~7.4%~~6.7%, compared to ~~10.0%~~6.9% for the quarter ended ~~June 30, 2019,~~March 31, 2020, primarily due to ~~lower product services revenue~~reduced revenues in Mission Systems and ~~increased business development investment in product services~~higher labor costs compared to the quarter ended ~~June 30, 2019.~~March 31, 2020.

Selling, general, and administrative ~~("SG&A")~~ expenses increased to ~~$10.0~~$14.5 million for the quarter ended ~~June 30, 2020~~March 31, 2021 from ~~$9.1~~$11.6 million for the quarter ended ~~June 30, 2019,~~March 31, 2020, an increase of ~~9.9%~~24.9%. The increase was primarily driven by ~~an additional~~a $1.1 million increase in variable compensation and $0.7 million in acquisition costs related to our acquisition of ~~SG&A expense from recently acquired Restaurant Magic~~Punchh, Inc on April 8th, 2021.

Research and ~~Drive-Thru businesses.~~

For the ~~quarter~~quarters ended ~~June 30,~~March 31, 2021 and March 31, 2020, we recorded $0.3 million and $0.2 million, respectively of amortization expense associated with acquired identifiable non-developed technology intangible assets ~~acquired in the Drive-Thru Acquisition~~ and the Restaurant Magic Acquisition, compared to $0.0 million for the quarter ended June 30, 2019. Amortization expense associated with identifiable developed technology intangible assets are accounted forrecorded as cost of sales within service costs of sales.

Also included in operating expense for the three-months ended March 31, 2021 was a $4.4 million gain on insurance proceeds received in connection with the Company's settlement of a legacy claim. There was no comparable reduction to expense for the three months ended March 31, 2020.

In other expense, net, we recorded $0.1 million for the quarter ended ~~June 30, 2020,~~March 31, 2021, compared to other expense, net, of $0.4 million recorded for the quarter ended ~~June 30, 2019. This decrease was driven by foreign currency fair value adjustments.~~March 31, 2020.

In interest expense, net, we recorded ~~$2.1~~$2.2 million for the quarter ended ~~June 30, 2020,~~March 31, 2021, compared to ~~$1.2~~$2.0 million recorded for the quarter ended ~~June 30, 2019.~~March 31, 2020. This increase was primarily driven by an increase in the balance of convertible debt and associated interest expense related to the ~~2024 Notes and~~ 2026 Notes ~~which~~issued in the first quarter of 2020. Interest expense, net includes $1.2 million of non-cash accretion of debt discount and amortization of issuance costs for the three months ended ~~June 30, 2020.~~

~~Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019~~

Liquidity and Capital Resources

For the ~~six~~three months ended ~~June 30, 2020 the Company’s~~March 31, 2021 our primary source of liquidity was ~~its sale of the 2026 Notes.~~existing cash and cash equivalents generated through financing transactions in 2020. Cash used in operating activities was ~~$13.6~~$3.4 million for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, compared to ~~$6.5~~$15.1 million for the ~~six~~three months ended ~~June 30, 2019. The~~March 31, 2020. This variance was driven primarily by ~~an increase~~improvements in ~~net loss and net~~ working capital needs for the first quarter of 2020 as a result of an increase in strategic procurement of inventory, prepaid assets for annual insurance premiums, and annual variable compensation, and decrease in customer deposits. Inventory levels were strategically increased to support the roll out of projects for Brink and to mitigate risk of supply chain disruption due to the COVID-19 pandemic.requirements.

Cash used in investing activities was ~~$4.6~~$1.7 million for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$3.3~~$2.0 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Investing activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 included capital expenditures of ~~$4.6~~$1.5 million infor developed technology costs associated with ~~investments in~~ our Restaurant/Retail ~~reporting~~ segment software platforms compared to ~~$1.6~~$1.9 million for software platforms ~~and $1.7 million for implementation of our ERP system~~ for the ~~six months~~quarter ended ~~June 30, 2019.~~ March 31, 2020.

Cash ~~provided by~~used in financing activities was ~~$49.1~~$2.1 million for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, compared to cash provided by financing activities of ~~$64.9~~$49.4 million for the ~~six~~three months ended ~~June 30, 2019. The six~~March 31, 2020. During the three months ended ~~June 30,~~March 31, 2020, ~~included~~we received net proceeds of $49.5 million from the ~~$120~~$120.0 million issuance of the 2026 Notes ~~partially~~ offset by the repurchase of a majority of the 2024 Notes.

On April 8, 2021, we entered into a merger agreement with Punchh Inc., Punchh survived the merger becoming our wholly owned subsidiary. In connection with the merger, we paid former Punchh stockholders an aggregate of approximately (i) $390.0 million in cash (the “Cash Consideration”), and (ii) 1,594,202 shares of our common stock. To partially fund the Cash Consideration, we entered into a credit agreement with the lenders thereto and Owl Rock First Lien Master Fund, L.P. as administrative agent and collateral agent that provides for a term loan in an initial aggregate principal amount of $180.0 million, and securities purchase agreements with each of PAR Act III, LLC, and certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as investment adviser to raise approximately $160.0 million through a private placement of our common stock. The ~~six months ended June 30, 2019 included~~credit facility matures four years from the ~~$80 million issuance~~date of the ~~2024 Notes.~~credit agreement, and the outstanding loans thereunder bear interest currently at a rate equal to the Eurocurrency rate plus a margin of 4.75%. The remainder of the Cash Consideration was provided from our cash and cash equivalent accounts. Total cash used from our balance sheet for the merger including transaction costs was approximately $66.0 million. Refer to Part I, Refer to Note 13 — “Subsequent Event” for additional information.

We expect our available cash and cash equivalents will be sufficient to meet our operating needs for the next 12 months. Our actual cash needs will depend on many factors, including our rate of revenue growth, growth of our SaaS revenues, the timing and extent of spending to support our product development efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our products, and the factors described above in this Part I, Item 2. ~~"Management's~~“Management's Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” and elsewhere in this Quarterly Report ~~and in our Annual Report on Form 10-K~~ for the fiscal ~~year~~period ended ~~December~~March 31, ~~2019~~2021, and in the 2020 Annual Report and our other filings with the ~~Securities and Exchange Commission.~~SEC.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or obligations.

Contractual Obligations

~~Contractual Obligations~~

(in thousands) Payments Due by Period
Total Less Than 1 Year 1-3 Years 4-5 Years More Than 5 Years
Operating lease obligations $ 2,544 $ 505 $ 1,924 $ 75 $ 40
Other purchase obligations 13,074 12,131 943
Debt obligations 135,440 647 1,043 13,750 120,000
$ 151,058 $ 13,283 $ 3,910 $ 13,825 $ 120,040

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are based on the application of ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States of America (“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, the recognition of right-to-use assets and liabilities,~~ goodwill and intangible assets, ~~the measurement of liabilities and equity recognized for outstanding convertible notes~~ 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~~the 2020 Annual ~~Report on Form 10-K for the year ended December 31, 2019.~~Report.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

~~Not Required.~~Foreign Currency Exchange Risk

Our primary exposures relate to certain non-dollar denominated sales and operating expenses in Europe and Asia. These primary currencies are the Great British Pound, the Euro, the Australian dollar, the Singapore dollar and the Chinese Renminbi. Accordingly, changes in exchange rates may negatively affect our revenue and net income (loss) as expressed in U.S. dollars. We also have foreign currency risk related to foreign currency transactions and monetary assets and liabilities, including intercompany balances denominated in currencies that are not the functional currency. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. As of March 31, 2021, the impact of foreign currency exchange rate changes on our revenues and net income (loss) have not been material. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.

As of March 31, 2021, we had $13.8 million and $120.0 million in aggregate principal amount of the 2024 Notes and 2026 Notes outstanding, respectively. We carry the Notes at face value less amortized discount on the consolidated balance sheet. Since the Notes bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the fair value of the Notes changes when the market price of our stock fluctuates or interest rates change.


Item 4.			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 Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~June 30, 2020.~~March 31, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of ~~June 30, 2020.~~such date due to material weaknesses in our internal control over financial reporting previously identified in Item 9A. “Controls and Procedures” of our 2020 Annual Report.

Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 1.			Legal Proceedings

The information in Note 1110 – Contingencies, to the financial statements, is responsive to this Item and is incorporated by reference herein.


Item 1A.			Risk Factors

The risks described in the “Risk Factors” section of our 2020 Annual Report, ~~on Form 10-K for the fiscal year ended December 31, 2019,~~ as amended and supplemented by this Quarterly Report, including the risks ~~described in the “Risk Factors” section of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020~~below, remain current in all material ~~respects, including~~respects.

Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our operating subsidiaries to pay our debt.

Our ability to make scheduled payments on the principal of, to pay interest on, or to refinance our debt, including our debt evidenced by the 2024 Notes and 2026 Notes and under the term loan, depends on our ~~business,~~future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our operating subsidiaries may not generate sufficient cash flow from operations in the future to service our debt. If our operating subsidiaries are unable to generate such cash flow, we may be required to 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 raise funds through additional financing, such as the issuance of equity or debt securities, refinancing our debt, and otherwise accessing the credit and capital markets at the times and in the amounts needed and on acceptable terms will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities on desirable terms or at all, which could result in a default on our debt obligations, and materially and adversely affect our financial condition and ~~financial results, as further discussed in this Quarterly Report. We continue to actively manage~~restrict our business to respond to the uncertainties and risks created by the COVID-19 pandemic and the continuously evolving science and government and consumer responses. State and local governments in certain regions of the United States have been easing restrictions previously implemented in response to the COVID-19 pandemic, while other areas of the United States have experienced increased numbers of COVID-19 infections and uncertainty as to government and consumer response, demonstrating that the COVID-19 pandemic continues to be fluid with uncertainties and risks remainingoperations.

The covenants in the ~~U.S. and elsewhere. The extent to which~~credit agreement that govern our indebtedness under the ~~COVID-19 pandemic will continue to impact~~term loan may limit our ~~business, operations, financial condition~~operating and financial ~~results depends on future developments~~flexibility.

•incur debt and liens;

•make investments, loans and advances;

•consummate a merger or consolidation;

•sell, lease, assign, transfer or otherwise dispose of property;

•declare or pay dividends;

•prepay, redeem or repurchase debt;

•engage in affiliate transactions;

•change our business; and

•terminate or modify our organizational documents.


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

Under our equity incentive plan, 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.~~stock and restricted stock units. 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 three ~~and six~~ months ended ~~June 30, 2020, 30,398~~March 31, 2021, 61,181 shares were ~~purchased~~withheld at an average price of ~~$17.58~~$74.88 per share.

* The schedules and exhibits to such agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

†† Indicates management contract or compensatory plan or arrangement.

Exhibit
Number

Incorporated by reference into

this Quarterly Report on Form 10-Q

Date
Filed or
Furnished

Exhibit Description

Form

Exhibit No.

~~3(i)~~

~~Certificate of Incorporation of PAR Technology Corporation, as amended~~ ~~June 5, 2020~~

~~Form S-8 (File No.333-239230)~~

~~4.1~~

~~6/17/2020~~

~~10.1~~ ††

~~Amended and Restated PAR Technology Corporation 2015 Equity Incentive Plan, as amended June 4, 2020~~

~~Form S-8 (File No.333-239230)~~

~~99.1~~

~~6/17/2020~~

~~10.2~~ ††

~~Employment Letter: Service as President, effective July 6, 2020, between PAR Government Systems Corporation and Matthew Cicchinelli~~

~~Filed herewith~~

~~10.3~~ ††

~~Amendment, Grant Notice - Restricted Sock Award and the Restricted Stock Award Agreement, effective July 6, 2020, Matthew Cicchinelli, Participant.~~

~~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~~

~~Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~

~~Filed herewith~~

~~101.SCH~~

~~Inline XBRL Taxonomy Extension Schema Document~~

~~Filed herewith~~

~~101.CAL~~

~~Inline XBRL Taxonomy Extension Calculation Linkbase Document~~

~~Filed herewith~~

101.DEF

~~Inline~~ XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

~~Inline~~ XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

104

Cover Page Interactive Data File -(embedded within the ~~cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 is formatted in~~ Inline ~~XBRL.~~XBRL document)

Filed herewith

~~†† Indicates management contract or compensatory plan or arrangement.~~


		PAR TECHNOLOGY CORPORATION
		(Registrant)

Date:	~~August 7, 2020~~May 10, 2021	/s/ Bryan A. Menar
		Bryan A. Menar
		Chief Financial and Accounting Officer
		(Principal Financial ~~and Accounting~~ Officer)


Delaware			16-1434688
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.02 par value	PAR	New York Stock Exchange



Assets	June 30, 2020		December 31, 2019
Current assets:
Cash and cash equivalents	$	58,775	$	28,036
Accounts receivable – net	38,236		41,774
Inventories – net	25,992		19,326

Other current assets	4,167		4,427
Total current assets	127,170		93,563
Property, plant and equipment – net	13,503		14,351
Goodwill	41,214		41,386
Intangible assets – net	34,305		32,948
Lease right-of-use assets	2,445		3,017
Other assets	4,249		4,347
Total Assets	$	222,886	$	189,612
Liabilities and Shareholders’ Equity
Current liabilities:

Current portion of long-term debt	$	647	$	630
Accounts payable	15,699		16,385
Accrued salaries and benefits	7,538		7,769
Accrued expenses	2,523		3,176
Lease liabilities - current portion	1,295		2,060
Customer deposits and deferred service revenue	9,625		12,084


Total current liabilities	37,327		42,104
Lease liabilities - net of current portion	1,235		1,021
Deferred service revenue – non current	3,937		3,916
Long-term debt	103,849		62,414
Other long-term liabilities	7,928		7,310
Total liabilities	154,276		116,765
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized	—		—
Common stock, $.02 par value, 58,000,000 shares authorized; 19,295,313 and 18,360,205 shares issued, 18,245,225 and 16,629,177 outstanding at June 30, 2020 and December 31, 2019, respectively	386		367
Additional paid in capital	107,540		94,372
Accumulated deficit	(30,030)		(10,144)
Accumulated other comprehensive loss	(5,009)		(5,368)
Treasury stock, at cost, 1,050,088 shares and 1,731,028 shares at June 30, 2020 and December 31, 2019, respectively	(4,277)		(6,380)
Total shareholders’ equity	68,610		72,847
Total Liabilities and Shareholders’ Equity	$	222,886	$	189,612


Assets	March 31, 2021		December 31, 2020
Current assets:
Cash and cash equivalents	$	173,122	$	180,686
Accounts receivable – net	38,706		42,980
Inventories – net	25,296		21,638
Other current assets	7,970		3,625
Total current assets	245,094		248,929
Property, plant and equipment – net	13,627		13,856
Goodwill	41,214		41,214
Intangible assets – net	32,652		33,121
Lease right-of-use assets	2,423		2,569
Other assets	3,665		4,060
Total assets	$	338,675	$	343,749
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	676	$	666
Accounts payable	18,886		12,791
Accrued salaries and benefits	10,620		13,190
Accrued expenses	3,930		2,606
Lease liabilities – current portion	1,133		1,200
Customer deposits and deferred service revenue	9,895		9,506
Total current liabilities	45,140		39,959
Lease liabilities – net of current portion	1,410		1,462
Deferred service revenue – noncurrent	2,838		3,082
Long-term debt	106,851		105,844
Other long-term liabilities	4,584		4,997
Total liabilities	160,823		155,344
Commitments and contingencies	0		0
Shareholders’ equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized	0		0
Common stock, $.02 par value, 58,000,000 shares authorized, 23,103,979 and 22,982,955 shares issued, 21,961,788 and 21,917,357 outstanding at March 31, 2021 and December 31, 2020, respectively	462		459
Additional paid in capital	245,566		243,575
Accumulated deficit	(54,977)		(46,706)
Accumulated other comprehensive loss	(4,238)		(3,936)
Treasury stock, at cost, 1,142,191 shares and 1,065,598 shares at March 31, 2021 and December 31, 2020, respectively	(8,961)		(4,987)
Total shareholders’ equity	177,852		188,405
Total Liabilities and Shareholders’ Equity	$	338,675	$	343,749


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net revenues:	Net revenues:									Net revenues:
Product	Product	$	12,333	$	14,728	$	30,967	$	30,245	Product	$	18,556	$	18,634
Service	Service	15,300		13,534		34,075		27,577		Service	18,028		18,775
Contract	Contract	18,058		15,985		35,381		31,107		Contract	17,883		17,323
		45,691		44,247		100,423		88,929			54,467		54,732
Costs of sales:	Costs of sales:									Costs of sales:
Product	Product	9,982		11,412		24,887		22,653		Product	14,885		14,905
Service	Service	9,912		10,118		22,558		20,385		Service	12,695		12,646
Contract	Contract	16,718		14,386		32,852		28,036		Contract	16,687		16,134
		36,612		35,916		80,297		71,074			44,267		43,685
Gross margin	Gross margin	9,079		8,331		20,126		17,855		Gross margin	10,200		11,047
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	10,049		9,059		21,476		17,623		Selling, general and administrative	14,537		11,646
Research and development	Research and development	4,538		2,725		9,403		5,786		Research and development	5,809		4,865
Amortization of identifiable intangible assets	Amortization of identifiable intangible assets	210		—		420		—		Amortization of identifiable intangible assets	275		210
Gain on insurance proceeds										Gain on insurance proceeds	(4,400)		0

		14,797		11,784		31,299		23,409			16,221		16,721
Operating loss	Operating loss	(5,718)		(3,453)		(11,173)		(5,554)		Operating loss	(6,021)		(5,674)
Other expense, net		(139)		(374)		(764)		(804)
Interest expense, net		(2,111)		(1,244)		(4,083)		(1,390)
Other expense – net										Other expense – net	(51)		(406)
Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		(8,123)		—		Loss on extinguishment of debt	0		(8,123)
Loss before benefit from (provision for) income taxes		(7,968)		(5,071)		(24,143)		(7,748)
Interest expense – net										Interest expense – net	(2,160)		(1,972)
Loss before provision for income taxes										Loss before provision for income taxes	(8,232)		(16,175)
(Provision for) benefit from income taxes	(Provision for) benefit from income taxes	(1,008)		3,962		4,257		3,910		(Provision for) benefit from income taxes	(39)		5,265

Net loss	Net loss	$	(8,976)	$	(1,109)	$	(19,886)	$	(3,838)	Net loss	$	(8,271)	$	(10,910)
Basic Earnings per Share:
Net loss		$	(0.49)	$	(0.07)	$	(1.10)	$	(0.24)
Diluted Earnings per Share:
Net loss		$	(0.49)	$	(0.07)	$	(1.10)	$	(0.24)
Weighted average shares outstanding:
Basic		18,244		16,290		18,092		16,085
Diluted		18,244		16,290		18,092		16,085
Net loss per share (basic and diluted)										Net loss per share (basic and diluted)	$	(0.38)	$	(0.61)
Weighted average shares outstanding (basic and outstanding)										Weighted average shares outstanding (basic and outstanding)	21,929		17,941


	Common Stock					Additional paid in capital		Retained Earnings (accumulated deficit)		Accumulated Other Comprehensive Loss	Treasury Stock				Total Shareholders’ Equity
		Shares		Amount												Shares	Amount

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
Stock-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
Net loss						(1,109)							(1,109)
Issuance of common stock upon the exercise of stock options	79	3		210									$	213
Stock-based compensation				602									602
Foreign currency translation adjustments								131					$	131
Convertible notes conversion discount (net of taxes $4.1 million and issuance costs of $1.1 million)				12,465									12,465
Balances at June 30, 2019	18,035	360		63,806		1,589		(4,132)		1,708	(5,836)		55,787


(in thousands)	Three months ended June 30, 2020
	Restaurant/Retail - Point in Time		Restaurant/Retail - Over Time		Government - Over Time
Restaurant/Retail	$	19,820	$	7,813	$	—

Mission Systems	$	—	$	—	$	8,087
ISR Solutions	$	—	$	—	$	9,971
TOTAL	$	19,820	$	7,813	$	18,058


(in thousands)	Three months ended June 30, 2019
	Restaurant/Retail - Point in Time		Restaurant/Retail - Over Time		Government - Over Time
Restaurant/Retail	$	21,503	$	5,829	$	—
Grocery	283		647		—
Mission Systems	—		—		8,192
ISR Solutions	—		—		7,793
TOTAL	$	21,786	$	6,476	$	15,985


(in thousands)		Six months ended June 30, 2019
		Restaurant/Retail - Point in Time		Restaurant/Retail - Over Time		Government - Over Time			Three months ended March 31, 2020
Restaurant/Retail		$	43,880	$	11,579	$	—
Grocery		732		1,631		—
									Restaurant/Retail Point in Time		Restaurant/Retail Over Time		Government Over Time
Hardware								Hardware	$	18,137	$	0	$	0
Software								Software	562		6,382		0
Service								Service	4,942		7,386		0
Mission Systems	Mission Systems	—		—		16,738		Mission Systems	0		0		8,448
ISR Solutions	ISR Solutions	—		—		14,369		ISR Solutions	0		0		8,772
Product								Product	0		0		103
TOTAL	TOTAL	$	44,612	$	13,210	$	31,107	TOTAL	$	23,641	$	13,768	$	17,323


2020, remaining		$	3,623
2021		6,872
2021, remaining				2021, remaining	$	6,479
2022	2022	5,539		2022	7,321
2023	2023	3,581		2023	5,321
2024	2024	3,186		2024	3,360
2025				2025	3,105
Thereafter	Thereafter	6,102		Thereafter	3,069
Total	Total	$	28,903	Total	$	28,655


(in thousands)	(in thousands)	2024 Notes		2026 Notes		(in thousands)	2024 Notes		2026 Notes
Principal amount of 2024 Notes outstanding		$	13,750	$	120,000
Principal amount of notes outstanding						Principal amount of notes outstanding	$	13,750	$	120,000
Unamortized discount (including unamortized debt issuance cost)	Unamortized discount (including unamortized debt issuance cost)	(3,055)		(27,884)		Unamortized discount (including unamortized debt issuance cost)	(2,447)		(24,984)
Total long-term portion of notes payable	Total long-term portion of notes payable	$	10,695	$	92,116	Total long-term portion of notes payable	$	11,303	$	95,016


(in thousands)	Six Months Ended June 30,
	2020		2019
Contractual interest expense	$	2,015	$	644
Amortization of debt issuance costs and discount	2,059		746
Total interest expense	$	4,074	$	1,390


(in thousands)	Options Outstanding	Weighted Average Exercise Price
Outstanding at January 1, 2020	410	14.50
Granted	587	12.64
Exercised	(6)	10.16
Forfeited and cancelled	(63)	7.49
Outstanding at June 30, 2020	928	13.83


(in thousands, except for exercise price)	Options Outstanding	Weighted Average Exercise Price
Outstanding at January 1, 2021	957	$	14.29

Exercised	(34)	12.29
Canceled/forfeited	(29)	18.78
Outstanding at March 31, 2021	894	$	14.22


(in thousands)		Restricted Stock Awards	Weighted Average Award Value
Outstanding at Balance at January 1, 2020		171	23.53
(in thousands, except for award value)				(in thousands, except for award value)	Restricted Stock Awards	Weighted Average Award Value
Outstanding at January 1, 2021				Outstanding at January 1, 2021	61	$	25.62
Granted	Granted	21	29.19	Granted	2	22.36
Vested	Vested	(122)	25.82	Vested	(33)	24.91
Forfeited and cancelled	Forfeited and cancelled	(40)	15.35	Forfeited and cancelled	(1)	20.94
Outstanding at June 30, 2020		30	29.30
Outstanding at March 31, 2021				Outstanding at March 31, 2021	29	$	26.25


(in thousands)	RSU Awards	Weighted Average Award Value
Outstanding at Balance at January 1, 2020	—	—
Granted	360	12.64
Vested	—	—
Forfeited and cancelled	—	—
Outstanding at June 30, 2020	360	12.64


(in thousands, except per share data)	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net loss	$	(8,976)	$	(1,109)	$	(19,886)	$	(3,838)

Basic:
Shares outstanding at beginning of period	18,244		16,044		16,629		16,041
Weighted average shares issued during the period, net	—		246		1,463		44
Weighted average common shares, basic	18,244		16,290		18,092		16,085
Net loss per common share, basic	$	(0.49)	$	(0.07)	$	(1.10)	$	(0.24)
Diluted:
Weighted average common shares, basic	18,244		16,290		18,092		16,085

Weighted average common shares, diluted	18,244		16,290		18,092		16,085
Net loss per common share, diluted	$	(0.49)	$	(0.07)	$	(1.10)	$	(0.24)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Restaurant/Retail	$	27,633	$	28,262	$	65,042	$	57,822
Government	18,058		15,985		35,381		31,107
Total	$	45,691	$	44,247	$	100,423	$	88,929

Operating loss:
Restaurant/Retail	$	(7,697)	$	(4,615)	$	(13,767)	$	(7,597)
Government	1,349		1,518		2,528		2,881
Other	630		(356)		66		(838)
Total	(5,718)		(3,453)		(11,173)		(5,554)
Other expense	(139)		(374)		(764)		(804)
Interest expense, net	(2,111)		(1,244)		(4,083)		(1,390)
Loss on extinguishment of debt	—		—		(8,123)		—
Loss before provision for income taxes	$	(7,968)	$	(5,071)	$	(24,143)	$	(7,748)

Depreciation, amortization and accretion:
Restaurant/Retail	$	1,951	$	1,201	$	3,806	$	2,069
Government	40		18		56		37
Other	1,567		890		2,838		1,015
Total	$	3,558	$	2,109	$	6,700	$	3,121

Capital expenditures including software costs:
Restaurant/Retail	$	2,783	$	778	$	4,490	$	1,841
Government	223		—		434		176
Other	—		616		122		1,300
Total	$	3,006	$	1,394	$	5,046	$	3,317

Revenues by country:
United States	$	44,626	$	41,657	$	97,257	$	83,582
Other Countries	1,065		2,590		3,166		5,347
Total	$	45,691	$	44,247	$	100,423	$	88,929


~~(in thousands)~~	~~Level 3 Inputs~~
	~~Liabilities~~




~~Balance at December 31, 2019~~	$	~~3,340~~
~~New level 3 liability~~	—
~~Total gains (losses) reported in earnings~~	—
~~Settlement of Level 3 liabilities~~	—
~~Balance at June 30, 2020~~	$	~~3,340~~


	Three Months Ended March 31				$		%
(in thousands)	2021		2020		variance		variance
Restaurant/Retail
Hardware	$	17,835	$	18,137	$	(302)	(2)	%
Software	7,876		6,944		932		13	%
Services	10,873		12,328		(1,455)		(12)	%
Total Restaurant Retail*	$	36,584	$	37,409	$	(825)	(2)	%

Government
Intelligence, surveillance, and reconnaissance	$	9,547	$	8,772	$	775	9	%
Mission systems	8,131		8,448		(317)		(4)	%
Product sales	205		103		102		99	%
Total Government	$	17,883	$	17,323	$	560	3	%

Total Net Revenue	$	54,467	$	54,732	$	(265)	(0.5)	%


(in thousands)	Payments Due by Period
			Total			Less Than 1 Year			1-3 Years			4-5 Years			More Than 5 Years
Operating lease obligations	$	2,544		$	505		$	1,924		$	75		$	40
Other purchase obligations	13,074			12,131			943
Debt obligations	135,440			647			1,043			13,750			120,000
	$	151,058		$	13,283		$	3,910		$	13,825		$	120,040