UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 30, 2021~~March 31, 2022

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

SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From __________ to __________

Commission File Number: 1-09720

PAR TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			16-1434688
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification 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)

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


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

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 ☐

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


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

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

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

As of ~~August 2, 2021, 25,857,858~~May 3, 2022, 27,062,382 shares of the registrant’s common stock, $0.02 par value, were outstanding.

PAR TECHNOLOGY CORPORATION

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION


Item Number		Page

	Forward-Looking Statements

Item 1.	Financial Statements (unaudited)	2

	Condensed Consolidated Balance Sheets at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (unaudited)	2

	Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~ (unaudited)	3

	Condensed Consolidated Statements of Comprehensive Loss for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~ (unaudited)	4

	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~ (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~ (unaudited)	76

	Notes to Condensed Consolidated Financial Statements (unaudited)	98

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2625

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3233

Item 4.	Controls and Procedures	3233
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	3234

Item 1A.	Risk Factors	3334

Item 2.	Unregistered Sales of Equity Securities and Use Of Proceeds	34

Item 6.	Exhibits	3335

Signatures		36

“PARTM,” “Brink ~~POS®~~POS®,” ~~“PixelPoint®~~“Punchh®,” “Data Central®,” “Restaurant Magic®,” “PAR ~~EverServ®~~PhaseTM,” ~~“Restaurant Magic®~~“PixelPoint®”~~, “Data Central®”,~~ and ~~“Punchh®” are~~other trademarks ~~of PAR Technology Corporation.~~appearing in this Quarterly Report belong to us. This ~~report~~Quarterly Report may also contain trade names and trademarks of other companies. Our use of ~~or reference to~~ such other ~~companies'~~companies’ trade names or trademarks is not intended to imply any endorsement or sponsorship by these companies of ~~PAR Technology Corporation~~us or ~~its~~our products or services.

Table of Contents

~~Forward-Looking Statements~~FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021~~March 31, 2022 (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature, but rather are predictive of ~~our~~PAR’s future operations, financial condition, financial results, business strategies and prospects. Forward-looking statements are generally identified by words such as “anticipate,” “believe,” ~~“belief,”~~“can”, “could”, “continue,~~” “could,~~” “expect,” “estimate,” “future”, “goal”, “intend,” “may,” “opportunity,” “plan,” “should,” “target”, “will,” “would,” “will likely result,” and similar expressions. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties, many of which are beyond ~~our~~PAR’s control, which could cause ~~our~~PAR’s actual results to differ materially from those expressed in or implied by forward-looking statements, including ~~forward-looking~~ statements relating to and ~~our~~PAR’s expectations regarding ~~our recent acquisition~~the effects of ~~Punchh Inc.~~COVID-19 on its business, financial condition, and results of operations and the ~~anticipated~~mitigating or otherwise intended impact of PAR’s responses to the same; the timing and expected benefits of ~~such acquisition~~acquisitions, divestitures, and capital markets transactions; statements of the plans, strategies and objectives of management for future operations, including PAR’s unified commerce cloud platform and its go-to-market strategy; statements concerning the expected development, demand, performance, market share or competitive performance relating to PAR’s products or services; projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, deferred taxes, or other financial items, or of PAR’s annual recurring revenue, active sites, net loss, net loss per share and other key performance indicators and financial measures; statements concerning potential supply constraints, component shortages, manufacturing disruptions or logistics challenges; statements about PAR’s human capital strategy and engagement; statements regarding current or future macroeconomic trends or geopolitical events and the impact of those trends and events on PAR and its financial performance; statements regarding claims, disputes or other litigation matters; and any statements of assumptions underlying any of the foregoing. Factors, risks, trends, and uncertainties that could cause PAR’s actual results to differ materially from those expressed in or implied by forward-looking statements include the effects of COVID-19 ~~pandemic, including the new Delta variant,~~ on ~~our~~PAR’s business, financial condition, and results of operations and ~~financial results. While we have taken~~the timing and ~~continue~~actions by PAR, as well as by governments, businesses, customers and consumers, including store closures (temporary or permanent), decreased or delayed product and service adoptions and installations, delayed payments or payment defaults by customers, and the health and safety of PAR’s employees; PAR’s ability to ~~take precautionary measures intended to minimize the impact of COVID-19 to our employees~~add and ~~to our business, there can be no assurances that these actions are sufficient~~maintain active sites, retain and ~~that additional actions will not be required. Factors that have adversely affected~~manage third-party suppliers, secure alternative suppliers, and ~~may continue to adversely affect,~~navigate component shortages, manufacturing disruptions and that could subsequently adversely impact, our business, operations and financial results due to the COVID-19 pandemic include: customer store closures; significant reductions or volatility in demand for our products and services; shortages of hardware materials and components,logistics challenges, shipping delays and increased costs; canceled or delayed store implementations, decreased product adoptions and bookings; reduced or delayed software or hardware deployments and a reprioritization of investments in technology or point-of-sale infrastructure; delayed or payment defaults by customers; our ability to be agile in the execution of our business and strategies and our management of business continuity risks, including increased exposure to potential cybersecurity breaches and attacks, disruptions or delays in product assembly and fulfillment, and limitations on our selling and marketing efforts; ourPAR’s ability to successfully attract, hire and retain necessary qualified employees to develop and expand ~~our business;~~its business, as exacerbated by the “Great Resignation” or “Big Quit”; the protection of PAR’s intellectual property; PAR’s ability to increase the number of integration partners, and acquire and/or develop relevant technology offerings for current, new, and potential customers for the ~~possible impairment~~build-out of ~~goodwill~~its unified commerce cloud platform; the impact of macroeconomic trends and geopolitical events, including the effects of the Russia-Ukraine conflict and inflation; risks associated with PAR’s international operations; changes in estimates and assumptions PAR makes in connection with the preparation of its financial statements and in building business and operational plans and strategies; disruptions in operations from system security risks, data protection breaches, and cyberattacks; PAR’s agility to execute its business and strategies and manage its business continuity risks, including disruptions or delays in product assembly and fulfillment and limitations on PAR’s selling and marketing efforts; potential impacts, liabilities and costs from pending or potential investigations, claims and disputes; and other intangible assets in the event of a significant decline in our financial performance. The extent to which the COVID-19 pandemic will continue to impact our business, operations, and financial results 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 our business, operations and financial results during any quarter or year in which we are affected. Other factors, risks, trends and uncertainties that could cause ~~our~~PAR’s actual results to differ materially from those expressed in or implied by forward-looking statements ~~are described under Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations”, Part II, Item 1A. “Risk Factors” and elsewhere~~contained in this Quarterly Report, in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021 filed with the Securities and Exchange Commission (“SEC”) on March ~~16, 2021, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 10, 2021,~~1, 2022, and in our other filings with the SEC. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (unaudited)


~~Item 1.~~			~~Financial Statements~~ ~~(unaudited)~~

PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share ~~and per share~~ amounts)

(Unaudited)


Assets	Assets	June 30, 2021		December 31, 2020		Assets	March 31, 2022		December 31, 2021
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	85,218	$	180,686	Cash and cash equivalents	$	163,207	$	188,419
Accounts receivable – net	Accounts receivable – net	45,248		42,980		Accounts receivable – net	54,571		49,978
Inventories – net		29,947		21,638
Inventories						Inventories	40,930		35,078
Other current assets	Other current assets	16,592		3,625		Other current assets	11,379		9,532
Total current assets	Total current assets	177,005		248,929		Total current assets	270,087		283,007
Property, plant and equipment – net	Property, plant and equipment – net	14,006		13,856		Property, plant and equipment – net	13,429		13,709
Goodwill	Goodwill	458,773		41,214		Goodwill	457,433		457,306
Intangible assets – net	Intangible assets – net	130,726		33,121		Intangible assets – net	114,579		118,763
Lease right-of-use assets	Lease right-of-use assets	4,779		2,569		Lease right-of-use assets	3,935		4,348
Other assets	Other assets	12,386		4,060		Other assets	12,233		11,016
Total assets	Total assets	$	797,675	$	343,749	Total assets	$	871,696	$	888,149
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	685	$	666	Current portion of long-term debt	$	533	$	705
Accounts payable	Accounts payable	21,822		12,791		Accounts payable	22,623		20,845
Accrued salaries and benefits	Accrued salaries and benefits	16,225		13,190		Accrued salaries and benefits	12,718		17,265
Accrued expenses	Accrued expenses	5,172		2,606		Accrued expenses	3,943		5,042
Lease liabilities – current portion	Lease liabilities – current portion	1,865		1,200		Lease liabilities – current portion	2,153		2,266
Customer deposits and deferred service revenue	Customer deposits and deferred service revenue	14,584		9,506		Customer deposits and deferred service revenue	16,367		14,394
Total current liabilities	Total current liabilities	60,353		39,959		Total current liabilities	58,337		60,517
Lease liabilities – net of current portion	Lease liabilities – net of current portion	3,322		1,462		Lease liabilities – net of current portion	2,116		2,440
Deferred service revenue – noncurrent	Deferred service revenue – noncurrent	5,234		3,082		Deferred service revenue – noncurrent	6,463		7,597
Long-term debt	Long-term debt	279,087		105,844		Long-term debt	387,681		305,845
Other long-term liabilities	Other long-term liabilities	13,118		4,997		Other long-term liabilities	5,629		7,405
Total liabilities	Total liabilities	361,114		155,344		Total liabilities	460,226		383,804
Commitments and contingencies (Note 11)		0		0

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized	Preferred stock, $.02 par value, 1,000,000 shares authorized	0		0		Preferred stock, $.02 par value, 1,000,000 shares authorized	—		—
Common stock, $.02 par value, 58,000,000 shares authorized, 26,998,216 and 22,982,955 shares issued, 25,848,889 and 21,917,357 outstanding at June 30, 2021 and December 31, 2020, respectively		540		459
Common stock, $.02 par value, 58,000,000 shares authorized, 28,278,562 and 28,094,333 shares issued, 27,052,454 and 26,924,397 outstanding at March 31, 2022 and December 31, 2021, respectively						Common stock, $.02 par value, 58,000,000 shares authorized, 28,278,562 and 28,094,333 shares issued, 27,052,454 and 26,924,397 outstanding at March 31, 2022 and December 31, 2021, respectively	565		562
Additional paid in capital	Additional paid in capital	514,295		243,575		Additional paid in capital	578,628		640,937
Accumulated deficit	Accumulated deficit	(64,933)		(46,706)		Accumulated deficit	(151,535)		(122,505)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,883)		(3,936)		Accumulated other comprehensive loss	(3,192)		(3,704)
Treasury stock, at cost, 1,149,327 shares and 1,065,598 shares at June 30, 2021 and December 31, 2020, respectively		(9,458)		(4,987)
Treasury stock, at cost, 1,226,108 shares and 1,181,449 shares at March 31, 2022 and December 31, 2021, respectively						Treasury stock, at cost, 1,226,108 shares and 1,181,449 shares at March 31, 2022 and December 31, 2021, respectively	(12,996)		(10,945)
Total shareholders’ equity	Total shareholders’ equity	436,561		188,405		Total shareholders’ equity	411,470		504,345
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	797,675	$	343,749	Total Liabilities and Shareholders’ Equity	$	871,696	$	888,149

See accompanying notes to unaudited interim condensed consolidated financial statements

Table of Contents

PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
													Three Months Ended March 31,
				2021			2020			2021				2020				2022			2021
Net revenues:
Revenues, net:													Revenues, net:
Product	Product	$	23,939		$	12,333		$	42,495		$	30,967	Product			$	25,073		$	18,556
Service	Service	27,185			15,300			45,213			34,075		Service			33,773			18,028

Contract	Contract	17,826			18,058			35,709			35,381		Contract			21,439			17,883
		68,950			45,691			123,417			100,423
Total revenues, net													Total revenues, net			80,285			54,467
Costs of sales:	Costs of sales:												Costs of sales:
Product	Product	18,487			9,982			33,372			24,887		Product			19,997			14,885
Service	Service	18,940			9,912			31,635			22,558		Service			19,796			12,695
Contract	Contract	16,420			16,718			33,107			32,852		Contract			19,879			16,687
		53,847			36,612			98,114			80,297
Total cost of sales													Total cost of sales			59,672			44,267
Gross margin	Gross margin	15,103			9,079			25,303			20,126		Gross margin			20,613			10,200
Operating expenses:	Operating expenses:												Operating expenses:
Selling, general and administrative	Selling, general and administrative	22,946			10,049			37,483			21,476		Selling, general and administrative			22,368			14,537
Research and development	Research and development	8,643			4,538			14,452			9,403		Research and development			10,841			5,809
Amortization of identifiable intangible assets	Amortization of identifiable intangible assets	489			210			764			420		Amortization of identifiable intangible assets			213			275
Gain on insurance proceeds	Gain on insurance proceeds	0			0			(4,400)			0		Gain on insurance proceeds			—			(4,400)
Total operating expenses													Total operating expenses			33,422			16,221
Operating loss													Operating loss			(12,809)			(6,021)
Other expense, net													Other expense, net			(368)			(51)
Interest expense, net													Interest expense, net			(2,463)			(2,160)
		32,078			14,797			48,299			31,299
Operating loss		(16,975)			(5,718)			(22,996)			(11,173)
Other expense – net		(341)			(139)			(392)			(764)
Loss on extinguishment of debt		0			0			0			(8,123)
Interest expense – net		(4,937)			(2,111)			(7,097)			(4,083)
Loss before provision for income taxes	Loss before provision for income taxes	(22,253)			(7,968)			(30,485)			(24,143)		Loss before provision for income taxes			(15,640)			(8,232)
Benefit from (provision for) income taxes		12,297			(1,008)			12,258			4,257
Provision for income taxes													Provision for income taxes			(10)			(39)
Net loss	Net loss	$	(9,956)		$	(8,976)		$	(18,227)		$	(19,886)	Net loss			$	(15,650)		$	(8,271)
Net loss per share (basic and diluted)	Net loss per share (basic and diluted)	$	(0.39)		$	(0.49)		$	(0.77)		$	(1.10)	Net loss per share (basic and diluted)			$	(0.58)		$	(0.38)
Weighted average shares outstanding (basic and outstanding)		25,484			18,244			23,716			18,092
Weighted average shares outstanding (basic and diluted)													Weighted average shares outstanding (basic and diluted)			26,970			21,929

See accompanying notes to unaudited interim condensed consolidated financial statements

Table of Contents

PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Net loss	Net loss	$	(9,956)	$	(8,976)	$	(18,227)	$	(19,886)	Net loss		$	(15,650)	$	(8,271)
Other comprehensive income loss, net of applicable tax:
Other comprehensive income (loss), net of applicable tax:										Other comprehensive income (loss), net of applicable tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	355		158		53		359		Foreign currency translation adjustments		512		(302)
Comprehensive loss	Comprehensive loss	$	(9,601)	$	(8,818)	$	(18,174)	$	(19,527)	Comprehensive loss		$	(15,138)	$	(8,573)

See accompanying notes to unaudited interim condensed consolidated financial statements

Table of Contents

PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)


		Common Stock			Additional Paid in Capital				Accumulated deficit			Accumulated Other Comprehensive Loss		Treasury Stock				Total Shareholders’ Equity			Common Stock					Additional Paid in Capital				Accumulated Deficit				Accumulated Other Comprehensive Income (Loss)				Treasury Stock						Total Shareholders’ Equity
		Shares	Amount								Shares			Amount		Shares					Amount							Shares								Amount
Balances at December 31, 2020		22,983	$	459			$	243,575				$	(46,706)	$	(3,936)	1,066		$	(4,987)			$	188,405
Balances at December 31, 2021																				Balances at December 31, 2021	28,095			$	562			$	640,937			$	(122,505)			$	(3,704)		1,181			$	(10,945)			$	504,345
Impact of ASU 2020-06 implementation (see Note 1 - Basis of Presentation)																				Impact of ASU 2020-06 implementation (see Note 1 - Basis of Presentation)						(66,656)				(13,380)														(80,036)
Balances at January 1, 2022																				Balances at January 1, 2022	28,095			$	562	$	574,281			$	(135,885)			$	(3,704)			1,181		$	(10,945)			$	424,309
Issuance of common stock upon the exercise of stock options	Issuance of common stock upon the exercise of stock options	34	1		408				—			—		—		—		409		Issuance of common stock upon the exercise of stock options	96			2		811				—				—				—		—				813
Net issuance of restricted stock		87	2		263				—			—		—		—		265
Net issuance of restricted stock awards and restricted stock units																				Net issuance of restricted stock awards and restricted stock units	88			1		—				—				—				—		—				1
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock	Treasury stock acquired from employees upon vesting or forfeiture of restricted stock	—	—		—				—			—		76		(3,974)		(3,974)		Treasury stock acquired from employees upon vesting or forfeiture of restricted stock	—			—		—				—				—				45		(2,051)				(2,051)
Stock-based compensation	Stock-based compensation	—	—		1,320				—			—		—		—		1,320		Stock-based compensation	—			—		3,536				—				—				—		—				3,536
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—				—			(302)		—		—		(302)		Foreign currency translation adjustments	—			—		—				—				512				—		—				512
Net loss	Net loss	—	—		—				(8,271)			—		—		—		(8,271)		Net loss	—			—		—				(15,650)				—				—		—				(15,650)
Balances at March 31, 2021		23,104	$	462	$	245,566			$	(54,977)		$	(4,238)	1,142		$	(8,961)	$	177,852
Issuance of common stock upon the exercise of stock options		20	—		209				—			—		—		—		209
Net issuance of restricted stock awards		28	1		—				—			—		—		—		1
Issuance of common stock for acquisition		1,493	30		108,629				—			—		—		—		108,659
Issuance of common stock, net of issuance costs of $4.3 million		2,353	47		155,640				—			—		—		—		155,687
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock		—	—		—				—			—		7		(497)		(497)
Stock-based compensation		—	—		4,251				—			—		—		—		4,251
Foreign currency translation adjustments		—	—		—				—			355		—		—		355
Net loss		—	—		—				(9,956)			—		—		—		(9,956)
Balances at June 30, 2021		26,998	$	540	$	514,295			$	(64,933)		$	(3,883)	1,149		$	(9,458)	$	436,561
Balances at March 31, 2022																				Balances at March 31, 2022	28,279			$	565	$	578,628			$	(151,535)			$	(3,192)			1,226		$	(12,996)			$	411,470

~~See accompanying notes to unaudited interim condensed consolidated financial statements~~


	Common Stock			Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock			Total Shareholders’ Equity
	Shares	Amount								Shares	Amount
Balances at January 1, 2021	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 units	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

~~Table of Contents~~

~~PAR TECHNOLOGY CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)~~

~~(In thousands)~~

~~(Unaudited)~~

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
Issuance of common stock upon the exercise of stock options 4 — 12 — — — — 12
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock — — (195) — — 3 192 (3)
Stock-based compensation — — 1,123 — — — — 1,123
Foreign currency translation adjustments — — — — 158 — — 158
Net loss — — — (8,976) — — — (8,976)
Balances at June 30, 2020 19,295 $ 386 $ 107,540 $ (30,030) $ (5,009) 1,050 $ (4,277) $ 68,610

See accompanying notes to unaudited interim condensed consolidated financial statements

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PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net loss $ (18,227) $ (19,886)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization 8,870 4,537
Accretion of debt in interest expense 2,917 2,163
Current expected credit losses 922 978
Provision for obsolete inventory 511 1,439
Stock-based compensation 5,571 2,212
Loss on debt extinguishment 0 8,123
Deferred income tax (12,360) (4,408)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable 7,065 2,560
Inventories (8,765) (8,105)
Other current assets (11,049) 260
Other assets (1,525) 119
Accounts payable 4,933 (931)
Accrued salaries and benefits (1,276) (231)
Accrued expenses (6,345) (652)
Customer deposits and deferred service revenue (3,901) (2,438)
Other long-term liabilities (399) 618
Net cash used in operating activities (33,058) (13,642)
Cash flows from investing activities:
Settlement of working capital for acquisitions 0 172
Cash paid for acquisition, net of cash acquired (377,263) 0
Capital expenditures (600) (188)
Capitalization of software costs (3,838) (4,613)
Net cash used in investing activities (381,701) (4,629)
Cash flows from financing activities:
Principal payments of long-term debt (3,643) (313)
Payments for the extinguishment of notes payable 0 (66,250)
Proceeds from common stock issuance 160,000 0
Payments for common stock issuance costs (4,314) 0
Proceeds from debt issuance, net of original issue discount 176,385 115,916
Payments for debt issuance costs (5,711) 0
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock (3,987) (332)
Proceeds from exercise of stock options 617 42
Net cash provided by financing activities 319,347 49,063
Effect of exchange rate changes on cash and cash equivalents (56) (53)
Net (decrease) increase in cash and cash equivalents (95,468) 30,739
Cash and cash equivalents at beginning of period 180,686 28,036
Cash and equivalents at end of period $ 85,218 $ 58,775


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(15,650)	$	(8,271)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	6,400		2,810
Accretion of debt in interest expense	486		1,180
Current expected credit losses	326		18
Provision for obsolete inventory	529		210
Stock-based compensation	3,536		1,320


Changes in operating assets and liabilities, net of acquisition:
Accounts receivable	(4,868)		4,267
Inventories	(6,338)		(3,850)
Other current assets	(1,849)		(4,343)
Other assets	(1,353)		421
Accounts payable	1,906		5,658
Accrued salaries and benefits	(4,511)		(3,916)
Accrued expenses	(1,117)		1,332
Customer deposits and deferred service revenue	1,651		143
Other long-term liabilities	(346)		(413)
Net cash used in operating activities	(21,198)		(3,434)
Cash flows from investing activities:

Cash paid for acquisition	(1,212)		—
Capital expenditures	(280)		(152)
Capitalization of software costs	(1,568)		(1,517)
Net cash used in investing activities	(3,060)		(1,669)
Cash flows from financing activities:
Principal payments of long-term debt	(173)		(163)





Treasury stock acquired from employees upon vesting or forfeiture of restricted stock	(2,051)		(2,362)
Proceeds from exercise of stock options	813		409
Net cash used in financing activities	(1,411)		(2,116)
Effect of exchange rate changes on cash and cash equivalents	457		(345)
Net decrease in cash and cash equivalents	(25,212)		(7,564)
Cash and cash equivalents at beginning of period	188,419		180,686
Cash and equivalents at end of period	$	163,207	$	173,122

See accompanying notes to unaudited interim condensed consolidated financial ~~statement~~

statements

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PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

(Unaudited)

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Cash paid for interest $ 3,724 $ 1,262
Cash taxes paid, net of refunds 58 10
Capitalized software recorded in accounts payable 73 245
Capital expenditures in accounts payable 20 0
Tax withholding in accrued salaries and benefits related to treasury stock acquired from employees 482 0
Common stock issued for acquisition 108,659 0
Acquisition consideration not yet settled 1,001 0


	Three Months Ended March 31,
	2022		2021
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	9	$	19


Capitalized software recorded in accounts payable	13		317
Capital expenditures in accounts payable	73		122

See accompanying notes to unaudited interim condensed consolidated financial statements

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PAR TECHNOLOGY CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Note 1 — Basis of Presentation~~NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (“financial statements”) of PAR Technology Corporation ~~through~~and its consolidated subsidiaries (collectively, the “Company”, “PAR”, “we”, “us” or “our Company”) have been prepared in accordance with accounting principles generally accepted 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 as promulgated by the ~~Securities and Exchange Commission (“SEC”).~~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 for the quarter ended June 30, 2021 (this “Quarterly Report”).~~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, ~~2020 filed with the SEC on March 16,~~ 2021 ~~(“2020~~(the “2021 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~~current expected credit losses for receivables, net realizable value for inventories, and measurement of contingent consideration at fair value. Actual results could differ from these estimates. The Company's estimates and assumption are subject to uncertainties, including those associated with market conditions, risks and trends and the ongoing COVID-19 ~~pandemic, which cannot be predicted. There can be no assurance that the COVID-19 pandemic will not have a material adverse effect on the Company's estimates.~~pandemic.

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 segment provides ~~point-of-sale (“POS”)~~enterprise restaurants, franchisees, and other restaurant outlets in the three major restaurant categories, quick service, fast casual, and table service, with operational efficiencies, offering them an integrated cloud solution by combining Brink POS cloud software for front-of-house, Data Central back-office cloud solution, PAR Pay and ~~hardware,~~PAR Payment Services for payments, and Punchh loyalty ~~software, back-office software,~~ and ~~integrated technical solutions to the restaurant and retail industries.~~engagement solution on a unified commerce cloud platform. The Government segment provides ~~intelligence, surveillance,~~technical expertise and ~~reconnaissance~~development of advanced systems and software solutions ~~and mission systems support to~~for the ~~United States~~U.S. Department of Defense (“DoD”) and other ~~Federal agencies.~~federal agencies, as well as satellite command and control, communication, and IT mission systems at several DoD facilities worldwide. The financial statements also include corporate operations, which are comprised of enterprise-wide functional departments.

Cash and Cash Equivalents

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

The Company maintained bank balances that, at times, exceeded the federally insured limit during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. 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.

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


		June 30, 2021		December 31, 2020
(in thousands)						(in thousands)	March 31, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents					Cash and cash equivalents
Cash	Cash	$	60,413	$	59,700	Cash	$	72,076	$	69,249
Money market funds	Money market funds	24,805		120,986		Money market funds	91,131		119,170
Total cash and cash equivalents	Total cash and cash equivalents	$	85,218	$	180,686	Total cash and cash equivalents	$	163,207	$	188,419

Gain on Insurance Proceeds

During the first quarter of 2021, the Company received $4.4 million of insurance proceeds in connection with the settlement of a legacy ~~claim; there were 0 additional~~claim. NaN insurance proceeds were received during the three months ended ~~June 30, 2021.~~March 31, 2022.

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Other Long-Term Liabilities

Other ~~long-term~~ liabilities represent amounts owed to employees that participate in the Company’s deferred compensation plan and the long-term portion of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) deferred payroll taxes. ~~The amount~~Amounts owed to employees participating in the deferred compensation plan was ~~$2.8~~$2.1 million and $2.4 million at ~~June 30, 2021~~March 31, 2022 and December 31, 2020. Additionally, indemnification and net deferred tax liabilities resulting from the Punchh Acquisition of approximately $6.0 million and $2.5 million, respectively, are presented within other long-term liabilities. (See “Note 3 — Acquisition” for additional information.)2021, respectively.

Under the CARES Act employers can defer payment of the employer portion of social security taxes through the end of ~~2020, with~~2020: 50% of the deferred amount was due December 31, 2021 and the remaining 50% is due December 31, 2022. As ~~permitted~~allowed under the CARES Act, the Company deferred payment of the employer portion of social security taxes through the end of 2020. As of ~~June 30, 2021 and~~ December 31, 2020, the Company deferred a total of $2.8 million and in connection with the Punchh Acquisition during 2021, an additional $1.0 million of deferred payroll taxes ~~during 2020,~~were recognized. The Company paid $1.9 million in December 2021 and the remaining balance is to be paid ~~equally~~ in ~~the fourth quarters of 2021 and~~December 2022. ~~The current portion of the deferred~~Deferred payroll taxes ~~was $1.4~~were $1.9 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 and ~~was~~were included within accrued salaries and benefits ~~and $1.4 million in other long-term liabilities~~ on the condensed consolidated balance ~~sheet.~~sheets.

Related Party Transactions

Act III Management LLC (“Act III Management”), a service company to the restaurant, hospitality, and

entertainment industries, provides software development and restaurant technology consulting services to the

Company pursuant to a master development agreement. Keith Pascal, a director of the Company, is an employee of

Act III Management and serves as its vice president and secretary. Mr. Pascal does not have an ownership interest in Act III Management.As of March 31, 2022, the Company had $0.1 million of accounts payable owed to Act III Management and in the three months ended March 31, 2022, the Company paid Act III Management $0.2 million for services performed under the master development agreement.

Recently Adopted Accounting Pronouncements

In ~~December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income 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 effective January 1, 2021, and the application of the standard had no material impact on the Company's financial statements for the six months ended June 30, 2021.

~~Accounting Pronouncements Not Yet Adopted~~

In August 2020, the FASB issued ASU No. 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). The new guidance is intended to simplify the accounting for certain convertible instruments with characteristics of both liability and equity. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. As a result, after the adoption of this guidance, an entity’s convertible debt instrument will be wholly accounted for as debt. The guidance also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations by requiring the use of the if-converted method. The guidance is effective for fiscal years beginning after December 15, 2021 and can be adopted on either a fully retrospective or modified retrospective basis. The Company adopted the new standard as of January 1, 2022 under the modified retrospective method and recorded a cumulative effect upon adoption of a $81.3 million increase to convertible notes, $66.6 million reduction to other paid in capital, $13.4 million reduction to accumulated deficit, and a $1.3 million reduction to deferred tax liability to reflect the reversal of the separation of the convertible debt between debt and equity. Prior year presentation of debt was not impacted. The adoption of this standard also decreased the amount of non-cash interest expense to be recognized in future periods as a result of eliminating the discount associated with the equity component. There was

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no impact to the Company’s condensed consolidated statements of cash flows as the result of the adoption of ASU No. 2020-06.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which is intended to ~~reduce the number of accounting models for convertible debt instruments~~require acquiring entities to apply Topic 606 to recognize and ~~convertible preferred stock,~~measure contract assets and ~~amend guidance for the derivatives scope exception for contracts~~contract liabilities in ~~an entity’s own equity to reduce form-over-substance-based accounting conclusions.~~a business combination. ASU ~~2020-06~~2021-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2021,~~2022, with early adoption permitted. The Company ~~is currently assessing~~early adopted the new standard as of January 1, 2022, with no impact to the Company's condensed consolidated financial statements at adoption. Future impact of ~~this standard~~adoption is dependent on ~~its financial statements.~~Company's activity as an acquiring entity in transactions subject to Topic 805.

With the exception of the standards discussed above, there were no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended ~~June 30, 2021~~March 31, 2022 that are of significance or potential significance to the Company.

~~Note 2 — Revenue Recognition~~

NOTE 2: REVENUE RECOGNITION

The Company's revenue is derived from software as a service (“SaaS”), hardware and software sales, software activation, hardware support, installations, maintenance and professional services. Accounting Standards Codification (“ASC”) Topic 606: Revenue from Contracts with Customers requires the 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.

The Company evaluated the potential performance obligations within its Restaurant/Retail segment and evaluated whether each performance obligation met the ASC Topic 606 criteria to be considered a distinct performance obligation. Revenue in the Restaurant/Retail segment is recognized at a point in time for licensed 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 segment relating to SaaS, the Company's Advanced Exchange hardware service program, its 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. The Company’s support services are stand-ready obligations that are provided over the life of the contract, generally 12 months. The Company offers installation services to its customers for hardware and software for which the Company primarily hires third-party contractors to install the equipment on the Company's behalf. The Company pays third party contractors an installation service fee based on an hourly rate agreed to by the Company and contractor. When third party installers are used, the Company determines whether the nature of its performance obligations is to provide the specified goods

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or services itself (principal) or to arrange for a third-party to provide the goods or services (agent). In the Company's customer arrangements, the Company is primarily responsible for providing a good or service, has inventory risk before the good or service is transferred to the customer, and discretion in establishing prices; as a result, the Company has concluded that it is the principal in the arrangement and records installation revenue on a gross basis.

The support services associated with hardware and software sales are “stand-ready obligations” 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 contract 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, depending on the Company's terms with the customer. The primary method used to estimate a stand-alone selling price, is the price that the Company charges for the particular good or service sold by the Company separately under similar circumstances to similar customers. The Company determines stand-alone selling prices as follows: hardware, software and software activation (one-time fee at the initial offering of 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 (referred to as Advanced Exchange), installation, maintenance, licensed software upgrades, and professional services (project management) is recognized by using an expected cost plus margin.

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The Company's revenue in the Government segment is recognized over time as control is generally transferred continuously to its customers. Revenue generated by the Government segment is predominantly related to services; provided, however, revenue is also generated through the sale of materials, software, hardware, and maintenance. For the Government segment cost plus fixed fee contract portfolio, revenue is recognized over time using costs incurred to date to measure progress toward satisfying the Company's performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and general 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 involve the use of judgment to estimate the total contract revenue and costs. For long-term fixed price contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete the contract, and recognize that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include: labor productivity and availability; the complexity of the work to be performed; and the performance of subcontractors. Revenue and profit in future periods of contract performance are recognized using the aforesaid assumptions, and adjusting the estimate of costs to complete a contract. Once the services provided are determined to be distinct or not distinct, the Company evaluates how to allocate the transaction price. Generally, the Government segment does not sell the same good or service to similar customers and the contract performance obligations are unique to each government solicitation. The performance obligations are typically not distinct. In cases where there are distinct performance obligations, the transaction price would be allocated to each performance obligation on a 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 the Government segment, when determining revenue recognition, the Company analyzes whether its performance obligations under Government contracts are satisfied over a period of time or at a point in time. In general, 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.

The Company usually expects payment within 30 to 90 days from satisfaction of its performance ~~obligation.~~obligations. None of ~~the Company's~~its contracts as of ~~June 30,~~March 31, 2022 or March 31, 2021 ~~or June 30, 2020~~ contained a significant financing component.

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Performance Obligations Outstanding

The Company's performance obligations outstanding represent the transaction price of firm, non-cancellable orders, with expected delivery dates to customers after ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, for work that has not yet been performed. The activity of outstanding performance obligations as it relates to customer deposits and deferred service revenue is as follows:


(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Beginning balance - January 1	Beginning balance - January 1	$	11,082	$	12,486	Beginning balance - January 1	$	20,046	$	11,082
Acquired deferred revenue (Note 3)		11,125		0

Recognition of deferred revenue	Recognition of deferred revenue	(11,437)		(7,727)		Recognition of deferred revenue	(9,941)		(2,603)
Deferral of revenue	Deferral of revenue	7,321		7,268		Deferral of revenue	10,857		2,597
Ending balance - June 30		$	18,091	$	12,027
Ending balance - March 31						Ending balance - March 31	$	20,962	$	11,076

The above table excludes customer deposits of ~~$1.7~~$1.9 million and ~~$1.5~~$1.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The majority of the deferred revenue balances above relate to professional services, maintenance agreements, and software licenses. These balances are recognized on a straight-line basis over the life of the contract, with the majority of the balance ~~to be~~being recognized within the next twelve months.

In the Restaurant/Retail segment most performance obligations relate to service and support contracts, approximately ~~71%~~69% of which the Company expects to fulfill within ~~one year.~~12 months. The Company expects to fulfill 100% of support and service contracts within 60 months. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, transaction prices allocated to future performance obligations were ~~$18.1~~$21.0 million and ~~$11.1~~$20.0 million, respectively.

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During the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company recognized revenue ~~of $8.8 million and $3.6 million, respectively, which are~~ included in contract liabilities at the beginning of each ~~such period. During the six months ended June 30, 2021 and 2020, the Company recognized revenue~~respective period of ~~$11.4~~$4.5 million and ~~$7.7 million, respectively, which are included in contract liabilities at the beginning of each such period.~~$2.6 million.

In the Government segment, the value of existing contracts at ~~June 30, 2021,~~March 31, 2022, net of amounts relating to work performed to that date, was approximately ~~$141.2~~$195.7 million, of which ~~$32.1~~$42.4 million was funded, and at December 31, ~~2020,~~2021, the value of existing contracts, net of amounts relating to work performed to that date, was approximately ~~$150.5~~$195.3 million, of which ~~$27.8~~$38.6 million was funded. The value of existing contracts in the Government segment, net of amounts relating to work performed at ~~June 30, 2021, are~~March 31, 2022, is expected to be recognized as revenue over time as follows (in thousands):


Next 12 ~~Months~~months	$	~~67,995~~93,962
Months 13-24	~~39,101~~57,185
Months 25-36	~~22,647~~33,086
Thereafter	~~11,464~~11,422
~~TOTAL~~Total	$	~~141,207~~195,655

Disaggregated Revenue

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

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~~Disaggregation of~~Disaggregated revenue is as ~~follows (in thousands):~~follows:


		Three months ended June 30, 2021							Three Months Ended March 31, 2022
		Restaurant/Retail point in time		Restaurant/Retail over time		Government over time
(in thousands)								(in thousands)	Restaurant/Retail point in time		Restaurant/Retail over time		Government over time
Hardware	Hardware	$	23,355	$	0	$	0	Hardware	$	24,653	$	—	$	—
Software	Software	294		14,806		0		Software	34		19,313		—
Service	Service	5,462		7,207		0		Service	5,520		9,326		—
Mission Systems		0		0		9,284
ISR Solutions		0		0		8,338
Mission systems								Mission systems	—		—		8,915
Intelligence, surveillance, and reconnaissance solutions								Intelligence, surveillance, and reconnaissance solutions	—		—		12,290
Product	Product	0		0		204		Product	—		—		234
TOTAL		$	29,111	$	22,013	$	17,826
Total								Total	$	30,207	$	28,639	$	21,439

Three months ended June 30, 2020
Restaurant/Retail
point in time Restaurant/Retail
over time Government
over time
Hardware $ 12,104 $ 0 $ 0
Software 624 7,232 0
Service 2,170 5,503 0
Mission Systems 0 0 8,087
ISR Solutions 0 0 9,742
Product 0 0 229
TOTAL $ 14,898 $ 12,735 $ 18,058

The Company has reclassified the prior year information in the above table to conform to the current year presentation; Restaurant/Retail of $27.6 million is presented across hardware, software and service, and ISR solutions of $9.9 million is presented across ISR solutions and product.

Six months ended June 30, 2021
Restaurant/Retail
point in time Restaurant/Retail
over time Government
over time
Hardware $ 41,190 $ 0 $ 0
Software 537 22,439 0
Service 8,874 14,668 0
Mission Systems 0 0 18,831
ISR Solutions 0 0 16,469
Product 0 0 409
TOTAL $ 50,601 $ 37,107 $ 35,709

Six months ended June 30, 2020
Restaurant/Retail
point in time Restaurant/Retail
over time Government
over time
Hardware $ 30,241 $ 0 $ 0
Software 1,186 14,618 0
Service 7,112 11,885 0
Mission Systems 0 0 16,535
ISR Solutions 0 0 18,514
Product 0 0 332
TOTAL $ 38,539 $ 26,503 $ 35,381

The Company has reclassified the prior year information in the above table to conform to the current year presentation; Restaurant/Retail of $65.0 million is presented across hardware, software and service, and ISR solutions of $18.8 million is presented across ISR solutions and product.


	Three Months Ended March 31, 2021
(in thousands)	Restaurant/Retail point in time		Restaurant/Retail over time		Government over time
Hardware	$	17,835	$	—	$	—
Software	243		7,633		—
Service	3,412		7,461		—
Mission systems	—		—		9,547
Intelligence, surveillance, and reconnaissance solutions	—		—		8,131
Product	—		—		205
Total	$	21,490	$	15,094	$	17,883

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Practical Expedients and Exemptions

The Company generally expenses sales commissions when incurred because the amortization period would be less than one year or the total amount of commissions is immaterial. Commissions are recorded in selling, general and administrative expenses. The Company elected to exclude from measurement of the transaction price, ~~measurement,~~ all taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (for example, sales, use, value added, and some excise taxes).

~~Note 3 — Acquisition~~

NOTE 3: ACQUISITIONS

During the three months ended March 31, 2022, ParTech, Inc. ("ParTech"), acquired substantially all the assets and liabilities of a privately held restaurant technology company (the "Q1 2022 Acquisition"). The transaction was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations, resulting in an increase to goodwill of $1.2 million. The Company determined that the preliminary fair values of all other assets acquired and liabilities assumed relating to the transaction did not materially affect the Company's financial condition; this determination included the preliminary valuations of identified intangible assets.

On April 8, 2021 (the “Closing Date”), 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, solely in its capacity as the initial Stockholder Representative. 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 (“Punchh Acquisition”). Punchh is a leader in SaaS-based customer loyalty and engagement solutions. With this acquisition, the Company offers its customers a unified commerce cloud platform with Brink POS cloud software for front-of-house, Data Central for back-office cloud software, PAR Pay and PAR Payment Services for payment solutions, and Punchh for loyalty and engagement software.

In connection with the Merger, the Company paid former Punchh equity holders approximately $509.6 million (including holders of vested options and warrants) consisting of approximately (i) $400.9 million in cash (the “Cash Consideration”), and (ii) 1,493,130 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. An additional 101,072 shares of the Company's common stock are reserved for options granted as replacement awards for fully vested unexercised awards assumed in connection with the Merger. Further, the Company incurred acquisition related expenses of approximately $3.4 million. Consideration for total common shares issued and reserved of 1,594,202 was determined using a fair value share price of $68.00 (“Equity Consideration”), representing total Equity Consideration of $108.7 million. Approximately $1.1 million of the Cash Consideration had not yet settled as of June 30, 2021.

In connection with, and to partially fund the Cash Consideration for, the Merger, on April 8, 2021, the Company, together with certain of its U.S. Subsidiaries, as guarantors, entered into a credit agreement with the lenders party thereto, and Owl Rock First Lien Master Fund, L.P., as administrative agent and collateral agent (the “Owl Rock Credit Agreement”), that provides for a term loan in an initial aggregate principal amount of $180.0 million; and (ii) securities purchase agreements (the “Purchase Agreements”) with each of PAR Act III, LLC (“Act III”), and certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as investment adviser (such funds and accounts being collectively referred to herein as “TRP”), to raise approximately $160.0 million through a private placement of the Company's common stock. The Company also issued to Act III a warrant (the “Warrant”) to purchase 500,000 shares of the Company's common stock with an exercise price of $76.50 per share and five year exercise period.

Additionally, on the Closing Date approximately $6.0 million of the Cash Consideration was deposited into a third party escrow fund, to be held for up to 18-months following the Closing Date, to fund (i) potential payment obligations of Punchh equity holders with respect to post-closing adjustments to the Cash and Equity Consideration and (ii) potential post-closing indemnification obligations of Punchh equity holders, in each case in accordance with the terms of the Merger Agreement. The Company recognized indemnification assets and liabilities of approximately $6.0 million to other assets and other long-term liabilities, respectively, to account for amounts deposited into the third party escrow fund.

Allocation of Acquisition Consideration — Punchh Acquisition

The Punchh Acquisition was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. Accordingly, assets acquired and liabilities assumed in the Punchh Acquisition were accounted for at their ~~preliminarily~~final determined respective fair values as of April 8, 2021. The ~~preliminary~~final fair value determinations were based on management's best estimates and assumptions, and through the use of independent valuation and tax consultants. ~~Identified~~

During the first quarter of 2022, the preliminary fair values ~~are subject~~of assets and liabilities as of April 8, 2021 were finalized to ~~measurement period~~reflect final acquisition valuation analysis procedures. These adjustments ~~within~~included a $0.8 million reduction of deferred revenue and $0.3 million of other adjustments, resulting in a reduction to goodwill of $1.1 million during the ~~permitted measurement period (up to one year from~~three months ended March 31, 2022. Indemnification assets and liabilities were reduced by $0.1 million during the ~~acquisition date)~~three months ended March 31, 2022, with $2.1 million remaining in escrow as ~~independent consultants finalize their procedures and net working capital adjustments are agreed upon and settled.~~of March 31, 2022.

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The following table presents management's ~~preliminary~~final purchase price ~~allocation:~~allocation for the Punchh Acquisition:


(in thousands)	Purchase price allocation
Cash	$	22,714
Accounts receivable	10,214
Property and equipment	592
~~Right of use lease~~Lease right-of-use assets	2,473
Developed technology	~~88,200~~84,600
Customer relationships	7,500
Indemnification assets	~~5,950~~2,109
Trade name	5,800
Prepaid and other acquired assets	2,764
Goodwill	~~417,559~~415,055
Total assets	~~563,766~~553,821
Accounts payable and accrued expenses	~~15,827~~15,617
Deferred revenue	~~11,125~~10,298
Loan payables	3,508
~~Right of use lease~~Lease liabilities	2,787
Indemnification liabilities	~~5,950~~2,109
Deferred taxes	~~14,930~~11,794
Consideration paid	$	~~509,639~~507,708

~~Intangible Assets~~

The Company identified three acquired intangible assets in the Punchh Acquisition: developed technology; customer relationships; and, the Punchh trade name. The preliminary fair value of developed technology and customer relationship intangible assets were determined utilizing the “multi-period excess earnings method”, which is predicated upon the calculation of the net present value of after-tax net cash flows respectively attributable to each asset. The preliminary fair value of the Punchh trade name intangible was determined utilizing the “relief from royalty” approach, which is a form of the income approach that attributes savings incurred from not having to pay a royalty for the use of an asset. The estimated useful life of these identifiable intangible assets was preliminarily determined to be indefinite for the Punchh trade name and seven years for both the developed technology and customer relationships intangible assets.

~~Goodwill~~

Goodwill represents the excess of consideration transferred for the fair value of net identifiable assets acquired and is tested for impairment at least annually. It is not deductible for income tax purposes.

~~Deferred Revenue~~

Deferred revenue acquired in the Punchh Acquisition was fair valued to determined allocation of consideration transferred to assume the liability. The preliminary fair value was determined utilizing the “bottom-up” approach, which is a form of the income approach that measures the liability as the direct, incremental costs to fulfill the legal obligation, plus a reasonable profit margin for the services being delivered.

~~Loans Payable~~

Loan liabilities assumed in the Punchh Acquisition were primarily comprised of Punchh's $3.3 million CARES Act Paycheck Protection Program loan. The Company extinguished all assumed loan payables, including the assumed CARES Act loan, through repayment of the loans on the Closing Date.

~~Right-of-Use Lease Assets and Liabilities~~

The Company assumed real property leases in the Punchh Acquisition related to office space in California, Texas and India and have accounted for these leases as Operating Leases in accordance with ASC 842,
~~Leases.~~ The assumed leases have lease terms that run through 2021 to 2026. Valuation specialists were utilized by the Company to appraise the assumed leases against competitive market rates to determine the fair value of the lease liabilities assumed, which identified a $0.3 million unfavorable

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~~lease liability that the Company recognized as part of the lease right of use asset. The income approach was applied to value the identified unfavorable lease liability.~~

~~Deferred Taxes~~

~~The Company determined the deferred tax position to be recorded at the time of the Punchh Acquisition in accordance with ASC 740,~~ ~~Income Taxes,~~ resulting in recognition of deferred tax liabilities for future reversing of taxable temporary differences primarily for intangible assets and deferred tax assets primarily relating to net operating losses as of the Closing Date. A valuation allowance was also recorded against certain recognized deferred tax assets based on an evaluation of the realizability of the identified assets. These recognized deferred tax assets, liabilities and valuation allowance resulted in a preliminary net deferred tax liability of $14.9 million relating to the Punchh Acquisition.

The net deferred tax liability relating to the Punchh Acquisition was determined by the Company to provide future taxable temporary differences that allow for the Company to utilize certain previously fully reserved deferred tax assets. Accordingly, the Company recognized a reduction to its valuation allowance in the three months ended June 30, 2021, resulting in a net tax benefit of $12.4 million for the period.

Unaudited Pro Forma Financial Information

For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, the Punchh Acquisition resulted in additional revenues of ~~$8.1~~$11.2 million. ~~The~~Punchh results are monitored by the Company as part of the broader Restaurant/Retail segment and as a result the Company determined it impractical to report net loss for the Punchh Acquisition for the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022. The unaudited pro forma results of operations are not necessarily indicative of the results that would have occurred had the Punchh Acquisition been consummated at ~~the beginning of the periods presented,~~January 1, 2021, nor are they necessarily indicative of any future consolidated operating results.

The following table summarizes the Company's unaudited pro forma operating ~~results:~~results for the three months ended March 31:

Three months ended June 30, Six months ended June 30,
(in thousands) 2021 2020 2021 2020
Total revenue $ 69,602 $ 51,727 $ 132,137 $ 112,829
Net loss $ (10,355) $ (11,592) $ (21,447) $ (26,197)



(in thousands)	2021
Total revenue	$	62,535
Net loss	$	(11,092)

The unaudited pro forma results presented above are for illustrative purposes only and do not reflect the realization of potential cost savings, and any related integration costs. Certain cost savings may result from the Punchh Acquisition; however, there can be no assurance that these cost savings will be achieved. The unaudited pro forma results do not purport to be indicative of the results that would have been obtained, or to be a projection of results that may be obtained in the future.

~~Note 4 — Accounts Receivable, Net~~

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NOTE 4: ACCOUNTS RECEIVABLE, NET

The Company’s net accounts receivables ~~consists of (in thousands):~~consist of:


		June 30, 2021		December 31, 2020
(in thousands)						(in thousands)	March 31, 2022		December 31, 2021
Government segment:	Government segment:					Government segment:
Billed	Billed	$	10,809	$	11,225	Billed	$	17,335	$	11,667
Advanced billings		0		(948)

		10,809		10,277			17,335		11,667

Restaurant/Retail segment:	Restaurant/Retail segment:	34,439		32,703		Restaurant/Retail segment:	37,236		38,311
Accounts receivable - net	Accounts receivable - net	$	45,248	$	42,980	Accounts receivable - net	$	54,571	$	49,978

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had current expected credit loss of ~~$1.9~~$1.5 million and ~~$1.4~~$1.3 million, respectively, against accounts receivable for the Restaurant/Retail segment.

Changes in the current expected credit loss were as ~~follows:~~follows for the three months ended March 31:

(in thousands) 2021 2020
Beginning Balance - January 1 $ 1,416 $ 1,849
Provisions 922 972
Write-offs (394) (773)
Recoveries (15) 0
Ending Balance - June 30 $ 1,929 $ 2,048


(in thousands)	2022		2021
Beginning Balance - January 1	$	1,306	$	1,416
Provisions (reductions)	326		(18)
Write-offs	(88)		(129)
Recoveries	—		(15)
Ending Balance - March 31	$	1,544	$	1,254

Accounts receivables recorded as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 represent unconditional rights to payments from customers.

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~~Note 5 — Inventories, Net~~NOTE 5: INVENTORIES

Inventories are used in the manufacture and service of Restaurant/Retail products. The components of inventory, ~~net of~~adjusted for reserves, consisted of the following:

(in thousands) June 30, 2021 December 31, 2020
Finished goods $ 15,482 $ 12,747
Work in process 238 16
Component parts 11,484 6,105
Service parts 2,743 2,770
Inventories, net $ 29,947 $ 21,638


(in thousands)	March 31, 2022		December 31, 2021
Finished goods	$	23,412	$	17,528
Work in process	577		688
Component parts	14,915		14,880
Service parts	2,026		1,982
Inventories	$	40,930	$	35,078

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had excess and obsolescence reserves of ~~$12.4~~$10.2 million and ~~$12.0~~$10.8 million, respectively, against inventories.

~~Note 6 — Identifiable Intangible Assets and Goodwill~~NOTE 6: IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL

The Company's identifiable intangible assets represent intangible assets acquired ~~from~~in acquisitions and software development costs. The Company capitalizes certain costs related to the development of its software 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~~seven 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

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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 condensed 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 the Company can change the manner in which new features and functionalities are developed and tested related to its software 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 the Company capitalizes and amortizes could change in future periods.

Included in identifiable intangible assets are approximately ~~$3.0~~$3.5 million and ~~$6.5~~$3.4 million of costs related to software products that ~~have~~did not ~~satisfied~~satisfy the general release threshold as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. These software products will be ready for their intended use within the next 12 months. Software costs placed into service during the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$2.7~~$1.5 million and ~~$2.6~~$4.8 million, respectively. ~~Software costs placed into service during the six months ended June 30, 2021 and 2020 were $7.5 million and $4.3 million, respectively.~~

Annual amortization charged to cost of sales is computed using the straight-line method over the remaining estimated economic life of the product, generally three ~~to five~~ years. Amortization of ~~capitalized~~acquired developed technology for the three months ended March 31, 2022 and 2021 were $3.7 million and $0.9 million, respectively. Amortization of internally developed software ~~development~~ costs for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$5.0~~$1.6 million and ~~$1.5~~$1.2 million, respectively. ~~Amortization of capitalized software development costs for the six months ended June 30, 2021 and 2020 were $7.0 million and $3.1 million, respectively.~~

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The components of identifiable intangible assets are:


(in thousands)	(in thousands)	June 30, 2021		December 31, 2020		Estimated useful life	(in thousands)	March 31, 2022		December 31, 2021		Estimated Useful Life	Weighted-Average Amortization Period
Acquired and internally developed software costs		$	135,875	$	40,170	3 - 7 years
Acquired developed technology							Acquired developed technology	$	109,100	$	109,100	3 - 7 years	5 years
Internally developed software costs							Internally developed software costs	27,255		25,735		3 years	2.92 years
Customer relationships	Customer relationships	12,360		4,860		7 years	Customer relationships	12,360		12,360		7 years	5 years
Trade names	Trade names	1,410		1,410		2 - 5 years	Trade names	1,410		1,410		2 - 5 years	3 years
Non-competition agreements	Non-competition agreements	30		30		1 year	Non-competition agreements	30		30		1 year	1 year
		149,675		46,470				150,155		148,635
Less accumulated amortization	Less accumulated amortization	(28,127)		(20,265)			Less accumulated amortization	(45,244)		(39,479)
		121,548		26,205				104,911		109,156
Internally developed software costs not yet ready for its intended use		2,978		6,516
Internally developed software costs not meeting general release threshold							Internally developed software costs not meeting general release threshold	3,468		3,407
Trademarks, trade names (non-amortizable)	Trademarks, trade names (non-amortizable)	6,200		400			Trademarks, trade names (non-amortizable)	6,200		6,200		Indefinite
		$	130,726	$	33,121			$	114,579	$	118,763

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

2021, remaining $ 11,630
2022 21,889
2023 19,881
2024 17,281
2025 16,857
Thereafter 34,010
Total $ 121,548


(in thousands)
2022, remaining	$	16,922
2023	20,667
2024	17,947
2025	16,534
2026	16,091
Thereafter	16,750
Total	$	104,911

The Company operates in 2 reporting segments, Restaurant/Retail and Government, which are ~~also~~ the ~~Company's~~ identified reporting units for purposes of evaluating goodwill impairment. The Company tests goodwill for impairment

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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, are available to support the value of the goodwill.

Goodwill carried by the Restaurant/Retail and Government segments is as follows:


(in thousands)
Beginning balance - December 31, ~~2020~~2021	$	~~41,214~~457,306
~~Punchh~~Q1 2022 Acquisition	~~417,559~~ 1,212
ASC 805 measurement period adjustment	(1,085)
Ending balance - ~~June 30, 2021~~March 31, 2022	$	~~458,773~~ 457,433
Refer to “Note 3 — Acquisitions”, for additional information on goodwill from the Q1 2022 Acquisition.

~~Note 7 — Debt~~NOTE 7: DEBT

The following table summarizes information about the net carrying amounts of long-term debt as of March 31, 2022:


(in thousands)	2024 Notes		2026 Notes		2027 Notes		Total
Principal amount of notes outstanding	$	13,750	$	120,000	$	265,000	$	398,750
Unamortized debt issuance cost	(391)		(3,003)		(7,675)		(11,069)

Total long-term portion of notes payable	$	13,359	$	116,997	$	257,325	$	387,681

The following table summarizes information about the net carrying amounts of long-term debt as of December 31, 2021:


(in thousands)	2024 Notes		2026 Notes		2027 Notes		Total
Principal amount of notes outstanding	$	13,750	$	120,000	$	265,000	$	398,750
Unamortized debt issuance cost	(334)		(2,440)		(5,984)		(8,758)
Unamortized discount	(1,570)		(19,413)		(63,164)		(84,147)
Total long-term portion of notes payable	$	11,846	$	98,147	$	195,852	$	305,845

Refer to "Recently Adopted Accounting Pronouncements" within "Note 1 - Basis of Presentation" for additional information relating to impact to discount due to implementation of ASU 2020-06.

Convertible Senior Notes

On ~~April 15, 2019,~~September 17, 2021, the Company sold ~~$80.0~~$265.0 million in aggregate principal amount of ~~4.500%~~1.500% Convertible Senior Notes due ~~2024~~2027 (the ~~“2024~~“2027 Notes”). The ~~2024~~2027 Notes were ~~sold~~issued pursuant to an indenture, dated ~~April 15, 2019,~~September 17, 2021, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the ~~“2024~~“2027 Indenture”). The ~~2024~~2027 Notes ~~pay~~bear interest at a rate ~~equal to 4.500%~~of 1.500% per year, which is payable semiannually in arrears on April 15 and October 15 of each year, beginning ~~October~~April 15, ~~2019.~~2022. Interest accrues on the ~~2024~~2027 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.~~September 17, 2021. Unless earlier converted, redeemed or repurchased, the ~~2024~~2027 Notes mature on October 15, 2027. The Company used net proceeds from the sale, in conjunction with net proceeds from the September 2021 sale of common stock (Refer to “Note 8 — Common Stock” for additional information), to repay in full the principal amount of $180.0 million outstanding as of September 17, 2021 (the “Owl Rock Term Loan”) under the credit agreement entered into on April ~~15, 2024.~~8, 2021 by the Company and certain of its U.S. subsidiaries, as guarantors, with the lenders party thereto and Owl Rock First Lien Master Fund, L.P. as administrative agent and collateral agent (the “Owl Rock Credit Agreement”). The Company intends to use the remaining net proceeds from the sale for general corporate purposes, including continued investment in the growth of the Company’s businesses and for other working capital needs. The Company may also use a portion of the net proceeds to acquire or invest

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in other assets complementary to the Company’s businesses or for repurchases of the Company’s other indebtedness.

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” ~~and, together with the 2024 Notes, the “Notes”~~). The 2026 Notes were ~~sold~~issued pursuant to an indenture, dated February 10, 2020 (the “2026 Indenture” ~~and, together with the 2024 Indenture, the “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. Interest accrues on the 2026 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 February 10, 2020. Unless earlier converted, redeemed or repurchased, the 2026 Notes mature on April 15, 2026.

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” and, together with the 2026 Notes and the 2027 Notes, the “Notes”). The 2024 Notes were issued pursuant to an indenture, dated April 15, 2019, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “2024 Indenture” and, together with the 2026 Indenture and the 2027 Indenture, the “Indentures”). 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.

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 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 equity, 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~~loss on extinguishment of debt in the Company’s unaudited interim condensed consolidated 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~~Prior to the Company adopting ASU 2020-06 on January 1, 2022, the carrying amount of the liability component of the Notes 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, 2026 Notes, and ~~2026~~2027 Notes was 10.2%, 7.3%, and ~~7.3%,~~6.5% respectively.

The Notes are senior, unsecured obligations of the Company. The 2024 Notes, the 2026 Notes, and the ~~2026~~2027 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, and April 15, 2027, 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, and the 2027 Notes are convertible into Company common stock at an initial conversion rate of 12.9870 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.

InPrior to the Company adopting ASU 2020-06 on January 1, 2022, in accordance with ASC Topic 470-20 Debt with Conversion and Other Options — Beneficial Conversion Features, at respective issuance dates, 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 into additional paid in capital of $17.6 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 into additional paid in capital of $26.2 million; and, the initial measurement of the 2027 Notes at fair value resulted in a

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liability of $199.2 million and implied value of the convertible feature recognized to additional paid in capital of $65.8 million. Issuance costs for the Notes amounted to $4.9 million, $4.2 million, and ~~$4.2~~$8.3 million for the 2024 Notes, 2026 Notes, and ~~2026~~2027 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 $3.3 million and $0.9 million to the debt and equity components, respectively. For the 2027 Notes, this amounted to $6.2 million and $2.1 million to the debt and equity components, respectively. Refer to 'Recently Adopted Accounting Pronouncements' in Note 1 for a summary of the Company's January 1, 2022 adoption of 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).

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~~Prior to the ~~sale of the 2026 Notes,~~Company adopting ASU 2020-06 on January 1, 2022, the Company recorded an income tax ~~benefit~~liability of ~~$4.4~~$15.6 million in ~~the first six months of 2020 as a result of the creation of a deferred tax liability~~2021 associated with the portion of the ~~2026~~2027 Notes that was classified within shareholders' equity. ~~While~~ GAAP requires the offset of the deferred tax liability to be ~~recorded in additional paid in capital,~~classified within shareholders' equity, consistent with the equity portion of the ~~2026 Notes, the~~2027 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~~$14.9 million, ~~reflected as an income tax benefit in the first six months of 2020.~~that was also classified within shareholders' equity pursuant to ASU 2019-12.

Credit Facility

In connection with, and to partially fund the ~~Cash Consideration~~approximately $397.5 million in cash paid to former Punchh equity holders (the "Cash Consideration") for the Punchh Acquisition, on April 8, 2021, the Company entered into the Owl Rock Credit Agreement. ~~The Owl Rock Credit Agreement provides for a term loan in the initial aggregate principal amount of $180.0 million (the “Credit Facility” and, the loans thereunder, the “Term Loan”).~~ Issuance costs, which included a 2% Original Issue Discount, amounted to $9.3 million with net proceeds amounting to $170.7 million. ~~The Credit~~

~~Facility may be increased by up to $25.0 million, plus an additional unlimited amount subject to compliance with a first lien net annual recurring revenue leverage ratio test of 2.10 to 1.00.~~

The Company used net proceeds from the sale of the 2027 Notes and its concurrent sale of common stock (refer to “Note 8 — Common Stock” for additional information about the sale) to repay in full the Owl Rock Term Loan, ~~matures on April 8, 2025~~including $1.8 million accrued interest and bear interest at a rate equal to either a base rate plus a margin of 3.75% or a Eurocurrency rate plus a margin of 4.75%, as selected by the Company. Voluntary prepayments of the Term Loan, as well as certain mandatory prepayments of the Term Loan, require payment of a$3.6 million prepayment premium, ~~of 2.0% during the first year of the Credit Facility and 1.0% during the second and third year of the Credit Facility. The Term Loan is secured by a first lien~~ on ~~substantially all of the Company's and the subsidiary guarantors' assets.~~

~~Under~~September 17, 2021. Following its repayment, the Owl Rock Credit Agreement ~~the Company~~was terminated. The transaction resulted in a loss on settlement of notes of $11.9 million, which is ~~required to maintain liquidity~~recorded as a loss on extinguishment of ~~at least $20.0 million and a first lien net annual recurring revenue leverage ratio of no greater than the level set forth~~debt in the ~~Credit Facility for~~Company’s unaudited interim condensed consolidated statements of operations. The loss represents the ~~relevant quarter, which starts~~difference between (i) reacquisition price, including prepayment premium, and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at ~~2.60 to 1.00 and declines over~~the time ~~to 1.30 to 1.00.~~

~~The Owl Rock Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including covenants that restrict the Company and certain~~ of its subsidiaries ability to incur additional indebtedness, incur or permit to exist liens on assets, make investments and acquisitions, consolidate or merge, engage in asset sales and pay dividends, of which the Company was in compliance for the three months ended June 30, 2021. Obligations under the Owl Rock Credit Agreement may be accelerated upon certain customary events of default (subject to grace or cure periods, as appropriate).

settlement.

The following table ~~summarizes information about the net carrying amounts of the Notes and the Credit Facility as of June 30, 2021:~~

(in thousands) 2024 Notes 2026 Notes Owl Rock Credit Agreement
Principal amount of notes outstanding $ 13,750 $ 120,000 $ 180,000
Unamortized discount and unamortized debt issuance cost (2,271) (23,962) (8,789)
Total long-term portion of notes payable $ 11,479 $ 96,038 $ 171,211

~~The following tables~~ summarizes interest expense recognized on the Notes and on the Credit Facility:

Three months ended June 30,
(in thousands) 2021 2020
Contractual interest expense $ 3,196 $ 1,000
Amortization of debt issuance costs and discount 1,737 1,102
Total interest expense $ 4,933 $ 2,102


		Six months ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Contractual interest expense	Contractual interest expense	$	4,213	$	2,015	Contractual interest expense	$	(2,003)	$	(1,017)
Amortization of debt issuance costs and discount		2,917		2,059
Amortization of debt issuance costs						Amortization of debt issuance costs	$	(486)	$	(142)
Amortization of discount						Amortization of discount	—		(1,032)
Total interest expense	Total interest expense	$	7,130	$	4,074	Total interest expense	$	(2,489)	$	(2,191)

In connection with the acquisition of AccSys, LLC ~~(otherwise known as “Restaurant Magic”)~~ in December 2019, the Company entered into a $2.0 million subordinated promissory note. The note bears interest at 5.75% per annum, with monthly payments of principal and interest in the amount of $60.6 thousand payable beginning January 15, 2020 through maturity on December 15, 2022. As of ~~June 30, 2021,~~March 31, 2022, the outstanding balance of the subordinated promissory note was ~~$1.0~~$0.5 million, of which ~~$0.7 million~~ was recorded in the current portion of long-term debt.

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The following table summarizes the future principal payments as of ~~June 30, 2021 (in thousands):~~March 31, 2022:


2021, remaining		$	338
2022		705
(in thousands)				(in thousands)
2022, remaining				2022, remaining	$	533
2023	2023	0		2023	—
2024	2024	13,750		2024	13,750
2025	2025	180,000		2025	—
2026				2026	120,000
Thereafter	Thereafter	120,000		Thereafter	265,000
Total	Total	$	314,793	Total	$	399,283

~~Note 8 — Common Stock~~NOTE 8: COMMON STOCK

On September 17, 2021, the Company completed a public offering of its common stock in which the Company issued and sold 982,143 shares of common stock at a public offering price of $56.00 per share. The Company received net proceeds of $52.5 million, after deducting underwriting discounts, commissions and other offering expenses.

In connection with, and to partially fund the Cash Consideration of the Punchh Acquisition, on April 8, 2021, the Company entered into ~~the Purchase Agreements~~securities purchase agreements (the "Purchase Agreements") with each of PAR Act III, LLC ("Act III") and ~~TRP~~T. Rowe Price Associates, Inc., acting as investment adviser (such funds and accounts being collectively referred to herein as "TRP") to raise approximately $160.0 million through a private placement of the Company's common stock. Pursuant to the Purchase Agreements, the Company issued and sold (i) 73,530 shares of its common stock to Act III for a gross purchase price of approximately $5.0 million ($68.00 per share), and (ii) 2,279,412 shares of common stock to TRP for a gross purchase price of approximately $155.0 million ($68.00 per share) for an aggregate of 2,352,942 shares. The Company incurred $4.3 million of issuance costs in connection with the sale of its common stock. ~~The Company also issued to Act III a warrant to purchase 500,000 shares of common stock with an exercise price of $76.50 per share and~~ ~~five~~ ~~year exercise period (the “Warrant”). The Warrant is accounted for as an equity instrument pursuant to ASC 815,~~ ~~Derivatives and Hedging,~~ due to the Warrant contractually permitting only settlement in non-redeemable common shares upon exercise. Issuance date fair value of the Warrant was determined to be $14.3 million based on using the Black-Scholes model with the following assumptions:


~~Expected term~~	~~5.0 years~~
~~Risk free interest rate~~	~~0.85~~		%
~~Expected volatility~~	~~53.78~~		%
~~Expected dividend yield~~	~~None~~
~~Fair value (per warrant)~~	$	~~28.65~~

The Company also issued 1,493,130 of its common stock as part of the ~~Equity Consideration of~~consideration paid to former Punchh equity holders in connection with the Punchh Acquisition. ~~See~~Refer to “Note 3 — ~~Acquisition”~~Acquisitions” for additional information about the Punchh Acquisition.

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 9 — Stock-Based Compensation~~NOTE 9: STOCK-BASED COMPENSATION

The Company applies the fair value recognition provisions of ASC Topic 718: Stock Compensation. Stock-based compensation expense, net of forfeitures of ~~$64.0 thousand and $27.0 thousand~~$0.6 million for the three months ended ~~June 30, 2021 and 2020, respectively, and stock-based compensation expense, net of forfeitures of $107.0 thousand and $32.0 thousand for six months ended June 30, 2021 and 2020, respectively,~~March 31, 2022, was recorded in the following line items in the condensed consolidated statements of ~~operations~~operations. Forfeitures were not material for the three ~~and six~~ months ended ~~June 30:~~March 31, 2021.


		Three months ended June 30,				Six months ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020
(in thousands)										(in thousands)	2022		2021
Cost of sales - contracts	Cost of sales - contracts	$	116	$	101	$	184	$	199	Cost of sales - contracts	$	49	$	67
Selling, general and administrative	Selling, general and administrative	4,135		1,022		5,387		2,013		Selling, general and administrative	3,487		1,253
Total stock-based compensation expense	Total stock-based compensation expense	$	4,251	$	1,123	$	5,571	$	2,212	Total stock-based compensation expense	$	3,536	$	1,320

At ~~June 30, 2021,~~March 31, 2022, the aggregate unrecognized compensation expense related to unvested equity awards was ~~$39.2~~$29.6 million, which is expected to be recognized as compensation expense in fiscal years ~~2021~~2022 through ~~2024.~~2025.

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A summary of stock option activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is below:

(in thousands, except for exercise price) Options outstanding Weighted
average
exercise price
Outstanding at January 1, 2021 957 $ 14.29
Granted 563 7.79
Exercised (54) 10.70
Canceled/forfeited (63) 13.64
Outstanding at June 30, 2021 1,403 $ 11.83


(in thousands, except for weighted average exercise price)	Options outstanding	Weighted average exercise price
Outstanding at January 1, 2022	1,306	$	11.95

Exercised	(96)	7.43
Canceled/forfeited	(68)	8.97
Outstanding at March 31, 2022	1,142	$	12.52

~~The fair value of options at the date of the grant was estimated using the Black-Scholes model with the following assumptions for the six months ended June 30, 2021:~~

Weighted average expected term 3.1 years
Weighted average risk-free interest rate 0.4 %
Weighted average expected volatility 56.5 %
Expected dividend yield None
Estimated fair value (per share) $ 60.47

A summary of unvested restricted stock awards activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is below:

(in thousands, except for award value) Restricted Stock Awards Weighted
average
award value
Outstanding at January 1, 2021 61 $ 25.62
Granted 2 22.36
Vested (34) 24.81
Canceled/forfeited (1) 20.94
Outstanding at June 30, 2021 28 $ 26.51


(in thousands, except for weighted average award value)	Restricted Stock Awards	Weighted average award value
Outstanding at January 1, 2022	27	$	25.42

Vested	(27)	25.42

Outstanding at March 31, 2022	—	0

A summary of unvested restricted stock units ~~(“RSU”)~~ activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is below:


(in thousands, except for award value)		RSU Awards	Weighted average award value
Outstanding at January 1, 2021		427	$	15.46
(in thousands, except for weighted average award value)					(in thousands, except for weighted average award value)	Restricted Stock Unit Awards	Weighted average award value
Outstanding at January 1, 2022					Outstanding at January 1, 2022	418	$	34.08
Granted	Granted	149	67.24		Granted	309	38.34
Vested	Vested	(115)	17.08		Vested	(71)	26.36
Canceled/forfeited	Canceled/forfeited	(4)	66.82		Canceled/forfeited	(49)	46.39
Outstanding at June 30, 2021		457	$	31.39
Outstanding at March 31, 2022					Outstanding at March 31, 2022	607	$	36.02

~~Note 10 — Net Loss Per Share~~NOTE 10: NET LOSS PER SHARE

~~Earnings~~Net loss per share is calculated in accordance with ASC Topic 260: Earnings per Share, which specifies the computation, presentation and disclosure requirements for earnings per share (“EPS”). It requires the presentation of basic and diluted EPS. Basic EPS excludes all dilution and is based upon the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that would occur if convertible securities or other contracts to issue common stock were exercised. At ~~June 30, 2021,~~March 31, 2022, there were ~~1,403,000~~1,142,000 anti-dilutive stock options outstanding compared to ~~928,000~~894,000 as of ~~June 30, 2020.~~March 31, 2021. At ~~June 30, 2021~~March 31, 2022 there were ~~457,000~~607,000 anti-dilutive restricted stock units compared to ~~427,000~~414,000 as of ~~June 30, 2020.~~March 31, 2021.

The potential effects of the 2024 Notes, 2026 Notes, and ~~2026~~2027 Notes conversion features were excluded from the diluted net loss per share as of ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. Potential shares from 2024 Notes, 2026 Notes, and ~~2026~~2027 Notes conversion features at respective maximum

conversion rates of 46.4037 per share, 30.8356 per share, and ~~30.8356~~17.8571 per share are approximately 638,051, 3,700,272, and ~~3,700,272,~~4,732,132 respectively. ~~See~~Refer to “Note 7 — Debt” for additional information about the Notes.

AsIn connection with the Punchh Acquisition as discussed in “Note 3 — ~~Acquisition”,~~Acquisitions” and “Note 8 — Common Stock,” the Company issued to Act III a ~~Warrant~~warrant to purchase 500,000 shares of common stock with an exercise price of $76.50 per share and ~~were~~a five-year exercise period (the "Warrant"). The Warrant was excluded from the diluted net loss per share as of ~~June 30, 2021~~March 31, 2022 due to ~~their~~its anti-dilutive impact.

~~Note 11 — Contingencies~~

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NOTE 11: COMMITMENTS AND 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.

On March 21, 2019, Kandice Neals on behalf of herself and others similarly situated (the “Neals Plaintiff”) filed a complaint against PAR Technology Corporation in the Circuit Court of Cook County, Illinois County Department, Chancery Division. The complaint asserted that 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 lawsuit was removed to the Federal District Court for the Northern District of Illinois (the “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 that this lawsuit is without merit. The Company’s estimated liability for this complaint is not material and related contingencies are not expected to have a material effect on the 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”) 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. The Company was recently notified that the Singaporean authority has determined not to assess further penalties. The Company is unable to predict what actions the Chinese agencies might take.

~~Note 12 — Segment and Related Information~~

NOTE 12: SEGMENT AND RELATED INFORMATION

The Company is organized in 2 segments, Restaurant/Retail and Government. Management views the Restaurant/Retail and Government segments separately in operating its business, as the products and services are different for each segment.

The Restaurant/Retail segment is a provider of software, ~~systems~~hardware and services to the restaurant and retail industries. The Restaurant/Retail segment provides multi-unit and individual restaurants, franchisees, and enterprise customers in the three major restaurant categories (fast casual, quick serve, and table service) ~~a fully~~with operational efficiencies, offering them an integrated cloud solution with ~~its~~ Brink POS cloud software ~~and POS hardware~~ for ~~the~~ front-of-house, ~~its~~Data Central back-office cloud ~~software Data Central~~solution, PAR Pay and PAR Payment Services for ~~the back-of-house, its~~payment solutions, and Punchh loyalty and ~~customer~~ engagement ~~platform - Punchh, and its wireless headsets for drive-thru order taking.~~solution, all of which are on the Company's unified commerce cloud platform. This segment also offers ~~a comprehensive portfolio of services to~~customer support, ~~its customer' technology~~including field service, installation, depot repair, and ~~hardware requirements before, during and after software and/or hardware deployments.~~24-hour telephone support. The Government segment ~~performs complex~~provides technical ~~studies, analysis, experiments, develops innovative solutions,~~expertise and ~~provides on-site engineering in support~~development of advanced ~~defense, security~~systems and ~~aerospace systems.~~software solutions for the DoD, the intelligence community and other federal agencies. This segment also provides ~~expert on-site~~support services for ~~operating~~satellite command and ~~maintaining U.S. Government-owned~~control, communication, ~~assets.~~and IT systems at several DoD facilities worldwide.

Information noted as “Other” primarily relates to the Company’s corporate operations.

Information as to the Company’s segments is set forth in the tables below:

~~Information as to the Company’s segments (continued):~~

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(in thousands)	Three Months Ended March 31,
	2022		2021
Net revenues:
Restaurant/Retail	$	58,846	$	36,584
Government	21,439		17,883
Total	$	80,285	$	54,467

Operating (loss) income:
Restaurant/Retail	$	(5,181)	$	(9,285)
Government	1,547		1,190
Other	(9,175)		2,074
Total	(12,809)		(6,021)
Other expense, net	(368)		(51)
Interest expense, net	(2,463)		(2,160)

Loss before provision for income taxes	$	(15,640)	$	(8,232)

Depreciation, amortization and accretion:
Restaurant/Retail	$	5,910	$	2,429
Government	109		36
Other	867		1,525
Total	$	6,886	$	3,990

Capital expenditures including software costs:
Restaurant/Retail	$	1,547	$	1,517
Government	44		152
Other	257		—
Total	$	1,848	$	1,669

(in thousands) Three months ended
June 30, Six months ended
June 30,
2021 2020 2021 2020
Net Revenues:
Restaurant/Retail $ 51,124 $ 27,633 $ 87,708 $ 65,042
Government 17,826 18,058 35,709 35,381
Total $ 68,950 $ 45,691 $ 123,417 $ 100,423
Operating loss:
Restaurant/Retail $ (15,968) $ (7,697) $ (25,252) $ (13,767)
Government 1,405 1,349 2,595 2,528
Other (2,412) 630 (339) 66
Total (16,975) (5,718) (22,996) (11,173)
Other expense, net (341) (139) (392) (764)
Interest expense, net (4,937) (2,111) (7,097) (4,083)
Loss on extinguishment of debt 0 0 0 (8,123)
Loss before benefit from income taxes $ (22,253) $ (7,968) $ (30,485) $ (24,143)
Depreciation, amortization and accretion:
Restaurant/Retail $ 5,527 $ 1,951 $ 7,956 $ 3,806
Government 197 40 233 56
Other 2,073 1,567 3,598 2,838
Total $ 7,797 $ 3,558 $ 11,787 $ 6,700
Capital expenditures including software costs:
Restaurant/Retail $ 2,965 $ 2,783 $ 3,697 $ 4,490
Government 302 223 453 434
Other 231 0 288 122
Total $ 3,498 $ 3,006 $ 4,438 $ 5,046
Revenues by country:
United States $ 64,127 $ 44,626 $ 114,730 $ 97,257
Other Countries 4,823 1,065 8,687 3,166
Total $ 68,950 $ 45,691 $ 123,417 $ 100,423


(in thousands)	Three Months Ended March 31,
	2022		2021



























Revenues by country:
United States	$	75,593	$	50,603
International	4,692		3,864
Total	$	80,285	$	54,467

The following table represents assets by reporting segment.


(in thousands)	(in thousands)	June 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Restaurant/Retail	Restaurant/Retail	$	706,141	$	140,606	Restaurant/Retail	$	681,911	$	674,032
Government	Government	13,775		13,150		Government	21,080		14,831
Other	Other	77,759		189,993		Other	168,705		199,286
Total	Total	$	797,675	$	343,749	Total	$	871,696	$	888,149

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The following table represents identifiable long-lived tangible assets by country based on the location of the assets.


(in thousands)	(in thousands)	June 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
United States	United States	$	189,129	$	250,275	United States	$	858,071	$	871,184
Other Countries	Other Countries	14,268		16,570		Other Countries	13,625		16,965
Total	Total	$	203,397	$	266,845	Total	$	871,696	$	888,149

The following table represents goodwill by reporting segment.


(in thousands)	(in thousands)	June 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Restaurant/Retail	Restaurant/Retail	$	458,037	$	40,478	Restaurant/Retail	$	456,697	$	456,570
Government	Government	736		736		Government	736		736
Total	Total	$	458,773	$	41,214	Total	$	457,433	$	457,306

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,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Restaurant/Retail reporting segment:	Restaurant/Retail reporting segment:									Restaurant/Retail reporting segment:
Dairy Queen		6	%	11	%	7	%	14	%

Yum! Brands, Inc.	Yum! Brands, Inc.	11	%	10	%	11	%	11	%	Yum! Brands, Inc.	10	%	12	%

McDonald’s Corporation										McDonald’s Corporation	10	%	7	%

Government reporting segment:	Government reporting segment:									Government reporting segment:
U.S. Department of Defense	U.S. Department of Defense	26	%	40	%	29	%	35	%	U.S. Department of Defense	27	%	33	%
All Others	All Others	57	%	39	%	53	%	40	%	All Others	53	%	48	%
		100	%	100	%	100	%	100	%		100	%	100	%

No other customer within All Others represented 10% or more of the Company’s total revenue for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 or ~~2020.~~2021.

~~Note 13 — Fair Value of Financial Instruments~~

NOTE 13: 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, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were considered representative of their fair ~~values.~~values because of their short-term nature. The estimated fair value of the 2024 Notes, ~~and~~ 2026 Notes, and 2027 Notes at ~~June 30, 2021~~March 31, 2022 was ~~$33.7~~$22.5 million, $144.6 million, and ~~$217.5~~$230.6 million respectively. The valuation techniques used to determine the fair value of the 2024 Notes, 2026 Notes, and the ~~2026~~2027 Notes are classified within Level 2 of the fair value hierarchy. The estimated fair value of the Owl Rock Credit Agreement at June 30, 2021 was $177.1 million. The valuation techniques used to determine the fair value of the Owl Rock Credit Agreement 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 plan

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participants. The deferred compensation liabilities are classified within Level 2, the fair value classification as defined under FASB ASC Topic 820: Fair Value Measurements, because their inputs are derived principally from observable market data by correlation to the hypothetical investments. The Company holds insurance investments to partially offset the Company’s liabilities under its deferred compensation plan, which are recorded at fair value each period using the cash surrender value of the insurance investments.

The amounts owed to employees participating in the deferred compensation plan at ~~June 30, 2021~~March 31, 2022 was ~~$2.6~~$2.1 million compared to ~~$2.8~~$2.4 million at December 31, ~~2020~~2021 and isare included in other long-term liabilities on the condensed consolidated balance sheets.

~~The Company's Level 3 contingent consideration liability had a fair value of $0 at June 30, 2021 and December 31, 2020.~~

The following table provides quantitative information associated with the fair value measurement of the Company’s Level 3 liability for contingent consideration at June 30, 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


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

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 the “Company”, “PAR”, “we”, “us” or “our Company” 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 "Financial Statements (unaudited)" of this Quarterly Report and our audited consolidated financial ~~statement~~statements and the notes thereto included under Part II, Item 8 "Financial Statements and Supplementary Data" of the ~~Company's~~2021 Annual ~~Report on Form 10-K for~~Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the ~~fiscal year ended December 31, 2020 filed~~results contemplated by these forward-looking statements due to a number of factors we describe in our filings with the SEC, ~~on March 16, 2021 (“2020 Annual Report”). See also,~~including under “Forward-Looking Statements”. in this Quarterly Report.

~~Overview~~OVERVIEW

We, through our wholly owned subsidiaries - ParTech and PAR ~~Technology~~Government Systems Corporation ~~operates~~- operate in two distinct reporting ~~segments:~~segments, Restaurant/Retail and Government. ~~Our Restaurant/Retail segment provides point-of-sale (“POS”) software and hardware, back-office software, and integrated technical solutions~~

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

Our Restaurant/Retail segment is a leading provider of ~~POS~~ software, ~~systems,~~hardware, and services to the restaurant and retail ~~industries. Our promise is to deliver the solutions that connect people to the restaurants, meals,~~industries, with more than 500 customers currently using our software products and ~~moments they love.~~more than 50,000 active restaurant locations. We provide ~~multi-unit and individual~~enterprise restaurants, franchisees, and ~~enterprise customers~~other restaurant outlets in the three major restaurant categories, a fully integrated cloud solution. In April 2021, we acquired Punchh Inc. (“Punchh”), a leader in SaaS-based customer loyalty and engagement solutions. With this acquisition, we offer our customers a unified commerce cloud platform, empowering quick service, fast casual, and table service, ~~restaurants~~ with operational efficiencies, offering them an integrated cloud solution by combining our Brink POS cloud software for front-of-house, our Data Central back-office cloud ~~software,~~solution, our PAR Pay and PAR Payment Services for payment solutions, and ~~now~~our Punchh loyalty ~~software. Our~~and engagement solution onto a unified commerce cloud platform. This unified commerce cloud platform ~~is further extended with our compatible point-of-sale hardware~~delivers an integrated suite of modern solutions that are extensible and ~~drive-thru solutions. Our~~built on open ~~API also allows for integration with~~application programming interfaces that retain flexibility and the ~~world's leading restaurant technology platforms.~~market optionality of an open platform.

~~PAR's~~Our Government segment provides technical expertise ~~in contract~~and development of advanced systems and software solutions for the DoD and other ~~Federal~~federal agencies, as well as satellite command and control, communication, and IT mission systems ~~support~~ at ~~a number of U.S. Government~~several DoD facilities ~~both in the U.S. and~~ worldwide. The Government segment is focused on ~~two~~three principal offerings, ~~intelligence~~Intelligence, Surveillance, and Reconnaissance ("ISR") solutions and mission systems ~~contract support,~~operations and maintenance, with additional revenue from a small number of licensed software products for use in analytic and operational environments that leverage geospatial intelligence data. ~~We believe~~

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RESULTS OF OPERATIONS

Consolidated Results:



	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Revenues, net:
Product	$	25,073	$	18,556	31.2	%	34.1	%	35.1	%
Service	33,773		18,028		42.1	%	33.1	%	87.3	%


Contract	21,439		17,883		26.7	%	32.8	%	19.9	%
Total revenues, net	$	80,285	$	54,467	100.0	%	100.0	%	47.4	%

Gross margin
Product	$	5,076	$	3,671	6.3	%	6.7	%	38.3	%
Service	13,977		5,333		17.4	%	9.8	%	162.1	%


Contract	1,560		1,196		1.9	%	2.2	%	30.4	%
Total gross margin	$	20,613	$	10,200	25.7	%	18.7	%	102.1	%

Operating expenses
Selling, general and administrative	$	22,368	$	14,537	27.9	%	26.7	%	53.9	%
Research and development	10,841		5,809		13.5	%	10.7	%	86.6	%
Amortization of identifiable intangible assets	213		275		0.3	%	0.5	%	(22.5)	%

Gain on insurance proceeds	—		(4,400)		—	%	(8.1)	%	(100.0)	%
Total operating expenses	$	33,422	$	16,221	41.6	%	29.8	%	106.0	%

Loss from operations	$	(12,809)	$	(6,021)	(16.0)	%	(11.1)	%	112.7	%
Other expense, net	(368)		(51)		(0.5)	%	(0.1)	%	> 200%
Interest expense, net	(2,463)		(2,160)		(3.1)	%	(4.0)	%	14.0	%
Loss on extinguishment of debt	—		—		—	%	—	%	—	%
Loss before benefit from income taxes	(15,640)		(8,232)		(19.5)	%	(15.1)	%	90.0	%
Provision for income taxes	(10)		(39)		—	%	(0.1)	%	(74.4)	%
Net loss	$	(15,650)	$	(8,271)	(19.5)	%	(15.2)	%	89.2	%

Revenues, Net


	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Product	$	25,073	$	18,556	31.2	%	34.1	%	35.1	%
Service	33,773		18,028		42.1	%	33.1	%	87.3	%


Contract	21,439		17,883		26.7	%	32.8	%	19.9	%
Total revenues, net	$	80,285	$	54,467	100.0	%	100.0	%	47.4	%

Product revenue includes our ~~highly relevant technical competencies, intellectual property,~~hardware and ~~investments in new technologies provide opportunities to offer systems integration, products,~~software license revenue. Service revenue includes SaaS, hardware and ~~highly-specialized service solutions to the U.S. DoD~~software maintenance, payments processing, 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 implementprofessional services revenue. Contract revenue is revenue derived from contracts associated with our ~~business strategy for our~~ Government reporting segment.

~~COVID-19 Update~~For the three months ended March 31, 2022 compared to the three months ended March 31, 2021

The COVID-19 pandemic continues to present challenges to our Restaurant/Retail segment that we continue to monitor and respond to with actions to mitigate disruption to our operations and to protect our profitability. The operations and results of our Government business has not been materially impacted by the COVID-19 pandemic.

~~Recent Developments~~

•On April 8, 2021, we acquired Punchh for approximately $509.6 million (“Purchase Consideration”). We financed a portion of the cash Purchase Consideration through a combination of equity and debt, which included proceeds from the sale of $160.0 million of the Company's common stock and a $180.0 million senior secured term loan under a credit agreement. See “Note 3 — Acquisition”, for a description of the Punchh Acquisition. The “Liquidity and Capital Resources” section of Management's Discussion and Analysis of Financial Condition and Results of Operations provide additional information about how we financed the Punchh Acquisition.

~~Condensed Consolidated Results of Operations —~~

~~Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020~~

~~We reported consolidated~~Total revenues ~~of $69.0~~were $80.3 million for the ~~quarter~~three months ended ~~June 30, 2021,~~March 31, 2022, an increase of ~~$23.3 million from $45.7 million recorded for the quarter ended June 30, 2020. Our net loss was $10.0 million, or $0.39 per diluted share, for the second quarter of 2021,~~47.4% compared to ~~a net loss of $9.0 million, or $0.49 per diluted share, for~~ the ~~second quarter of 2020.~~three months ended March 31, 2021.

Product revenues were ~~$23.9~~$25.1 million for the ~~quarter~~three months ended ~~June 30, 2021,~~March 31, 2022, an increase of ~~94.1% from the $12.3 million recorded for the quarter ended June 30, 2020. This was our strongest quarter~~ 35.1%

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compared to the ~~prior trailing twelve quarters starting with the quarter~~three months ended ~~June 30, 2018.~~March 31, 2021. The strong growth was primarily driven by ~~multiple factors including continued growth in drive-thru and kitchen display systems,~~ hardware refresh investments (in part from delayed hardware refreshes due to COVID-19) by ~~some of~~ our domestic and international Tier 1 accounts ~~and hardware revenue associated with our rollout of Brink POS to new customers. The increase versus the quarter ended June 30, 2020 was also driven by low sales volumes~~ during the ~~quarter~~three months ended ~~June 30, 2020 as a result of COVID-19 related restrictions at our customers' locations.~~March 31, 2022.

Service revenues were ~~$27.2~~$33.8 million for the ~~quarter~~three months ended ~~June 30, 2021,~~March 31, 2022, an increase of ~~77.8% from~~87.3% compared to the ~~$15.3 million recorded for the quarter~~three months ended ~~June 30, 2020,~~March 31, 2021. This large growth was primarily driven by revenues from the ~~operations~~Punchh acquisition in April 2021 of ~~Punchh of $8.1~~$11.2 million, ~~and~~ increases of ~~$1.7~~$2.4 million from ~~implementations,~~hardware related services and ~~$1.7~~$2.2 million from other software ~~revenue.~~and services.

Contract revenues were ~~$17.8~~$21.4 million for the ~~quarter~~three months ended ~~June 30, 2021, a decrease~~March 31, 2022, an increase of ~~1.7% or $0.3 million from $18.1 million recorded for~~19.9% compared to the ~~quarter~~three months ended ~~June 30, 2020.~~March 31, 2021. The ~~decrease~~increase in contract revenues was driven by a ~~$0.5~~$2.7 million ~~decrease~~increase in our ISR solutions product line ~~partially offset by~~and a ~~$0.3~~$0.8 million increase in our ~~mission systems~~Mission Services product line.

~~Product margins for~~Gross Margin


	Three Months Ended March 31,				Gross Margin Percentage				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Product	$	5,076	$	3,671	20.2	%	19.8	%	38.3	%
Service	13,977		5,333		41.4	%	29.6	%	162.1	%


Contract	1,560		1,196		7.3	%	6.7	%	30.4	%
Total gross margin	$	20,613	$	10,200	25.7	%	18.7	%	102.1	%

For the ~~quarter~~three months ended ~~June 30, 2021 were 22.8%, compared to 19.1%, recorded for the quarter ended June 30, 2020. The increase in margin was primarily due to more effective absorption of overhead fixed costs,~~March 31, 2022 compared to the ~~quarter~~three months ended ~~June 30, 2020 which experienced historically low~~March 31, 2021

Total gross margin as a percentage of revenue ~~volume. The favorable impact from absorption~~during the three months ended March 31, 2022 was ~~partially offset by higher material costs.~~25.7% compared to 18.7% during the three months ended March 31, 2021.

Product margin was 20.2% during the three months ended March 31, 2022, compared to 19.8% during the three months ended March 31, 2021.

Service ~~margins for~~margin was 41.4% during the ~~quarter~~three months ended ~~June 30, 2021 were 30.3%,~~March 31, 2022, compared to ~~35.2% recorded for~~29.6% during the ~~quarter~~three months ended ~~June 30, 2020,~~March 31, 2021, primarily driven by ~~an increase in amortization expense for acquired developed technology~~a higher mix of ~~$2.9 million recognized as a result of~~SaaS software from the Punchh Acquisition and ~~incremental~~cost improvement initiatives relating to managing our hosting costs ~~incurred while transitioning our field operations organization.~~and customer support service. Service margin during the three months ended March 31, 2022 included $3.7 million of amortization of acquired intangible assets compared to $0.9 million of amortization of acquired intangible assets during the three months ended March 31, 2021. Excluding the amortization of acquired intangible assets, service margin was52.1% during the three months ended March 31, 2022, compared to 34.1% during the three months ended March 31, 2021.

Contract ~~margins for~~margin was 7.3% during the ~~quarter~~three months ended ~~June 30, 2021 were 7.9%,~~March 31, 2022, compared to ~~7.4% for~~6.7% during the ~~quarter~~three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to ~~productivity improvements on existing contracts.~~improved margins for our mission systems product lines.

Selling, General Administrative Expenses


	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Selling, general and administrative	$	22,368	$	14,537	27.9	%	26.7	%	53.9	%

For the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Selling, general, and administrative expenses ~~increased to $22.9~~were $22.4 million for the ~~quarter~~three months ended ~~June 30, 2021 from $10.0~~March 31, 2022, compared to $14.5 million for the ~~quarter~~three months ended ~~June 30, 2020,~~March 31, 2021, an increase of ~~128.4%~~53.9%. The increase was primarily driven by ~~$9.5~~$6.6 million in total Punchh ~~related~~operational expenses of which ~~$2.7~~$1.4 million ~~are acquisition related costs and $6.8 million are operational expenses. Punchh operational expenses included $2.5 million for~~is stock-based compensation. Other drivers included increases of $0.8 million ~~for sales and marketing, $0.6 million from variable compensation, a $0.7 million increase in internal technology infrastructure costs, and a $0.6 million increase~~ in corporate ~~management expenses.~~expenses of which $0.4 million is stock-based compensation.

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Research and Development Expenses


	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Research and development	$	10,841	$	5,809	13.5	%	10.7	%	86.6	%

For the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Research and development expenses were ~~$8.6~~$10.8 million for the ~~quarter~~three months ended ~~June 30,~~March 31, 2022, compared to $5.8 million for the three months ended March 31, 2021, an increase of ~~$4.1 million from $4.5 million for the quarter ended June 30, 2020,~~86.6%. The increase was driven primarily by ~~$2.9~~$3.4 million for ~~Punchh~~Punchh-related research and ~~$0.9~~development and $1.6 million related to additional investments in our existing product development organization.

Other Operating Expenses: Amortization of Intangible Assets / Insurance Proceeds


	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Amortization of identifiable intangible assets	$	213	$	275	0.3	%	0.5	%	(22.5)	%
Gain on insurance proceeds	$	—	$	(4,400)	—	%	(8.1)	%	(100.0)	%

For the ~~quarters~~three months ended ~~June 30,~~March 31, 2022 compared to the three months ended March 31, 2021

For the three months ended March 31, 2022 and ~~2020,~~2021, we recorded ~~$0.5~~$0.2 million and ~~$0.2~~$0.3 million, respectively, of amortization expense associated with ~~acquired identifiable non-developed technology~~other intangible assets. ~~The increase was driven by intangible assets recognized as part of the Punchh Acquisition.~~

~~In other expense, net, we recorded $0.3 million for the quarter ended June 30, 2021, compared to other expense, net, of $0.1 million recorded for the quarter ended June 30, 2020.~~

For the quarter ended June 30, 2021 interest expense, net, was $4.9 million, compared to $2.1 million recorded for the quarter ended June 30, 2020. The increase in interest expense was primarily driven by the Term Loan under the Owl Rock Credit Agreement. Interest expense, net includes $1.7 million of non-cash accretion of debt discount and amortization of issuance costs for the three months ended June 30, 2021 compared with $1.1 million for the same period last year.

Net tax benefit of $12.3 million for the three months ended June 30, 2021 is driven by a $12.3 million partial release of the Company's deferred taxed asset valuation allowance resulting from the deferred tax liabilities recognized in conjunction with the Punchh Acquisition. Net tax provision of $1.0 million for the three months ended June 30, 2020 was driven by a $1.0 million adjustment to the deferred tax benefit recorded in the quarter ended March 31, 2020 for the 2026 Notes issuance.

~~Segment Revenue by Product Line are set forth below:~~

Three Months Ended June 30, $ %
(in thousands) 2021 2020 variance variance
Restaurant/Retail
Hardware $ 23,355 $ 12,129 $ 11,226 93 %
Software 15,100 5,977 9,123 153 %
Services 12,669 9,527 3,142 33 %
Total Restaurant Retail $ 51,124 $ 27,633 $ 23,491 85 %
Government
Intelligence, Surveillance, and Reconnaissance $ 9,284 $ 9,741 $ (457) (5) %
Mission Systems 8,338 8,088 250 3 %
Product Services 204 229 (25) (11) %
Total Government $ 17,826 $ 18,058 $ (232) (1) %
Total Net Revenue $ 68,950 $ 45,691 $ 23,259 51 %

~~Condensed Consolidated Results of Operations —~~

~~Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020~~

We reported consolidated revenues of $123.4 million for the six months ended June 30, 2021, an increase of $23.0 million from $100.4 million recorded for the six months ended June 30, 2020. Our net loss was $18.2 million, or $0.77 per diluted share, for the six months ended June 30, 2021, compared to a net loss of $19.9 million, or $1.10 per diluted share, for the six months ended June 30, 2020.

Product revenues were $42.5 million for the six months ended June 30, 2021, an increase of 37.1% from the $31.0 million recorded for the six months ended June 30, 2020. The increase was driven by continued growth in drive-thru and kitchen display systems, hardware refresh investments by some of our Tier 1 legacy accounts and hardware revenue associated with our rollout of Brink POS to new customers. Another driver of the increase was the low sales volumes during the six months ended June 30, 2020 as a result of COVID-19 related restrictions at our customers' locations.

Service revenues were $45.2 million for the six months ended June 30, 2021, an increase of 32.6% from the $34.1 million recorded for the six months ended June 30, 2020, primarily driven by revenues from the operations of Punchh of $8.3 million and increases of $0.7 million for repair services, $2.5 million for other software revenue.

Contract revenues were $35.7 million for the six months ended June 30, 2021, an increase of 0.8% or $0.3 million from $35.4 million recorded for the six months ended June 30, 2020, driven by ISR solutions product line revenues.

Product margins for the six months ended June 30, 2021 were 21.5%, compared to 19.6%, recorded for the six months ended June 30, 2020. The increase is primarily due to more effective absorption of overhead fixed costs as we experienced low volumes during the quarter ended June 30, 2020 as a result of COVID-19 related restrictions at our customers' locations. The favorable impact from absorption was partially offset by higher material costs.

~~Service margins for the six months ended June 30, 2021 were 30.0%,~~compared to 33.8% recorded for the six months ended June 30, 2020, primarily driven by a $5.5 million increase in software related costs including $2.9 million of amortization from acquired developed technology as a result of the Punchh Acquisition and incremental costs incurred while transitioning our field operations organization.

Contract margins for the six months ended June 30, 2021 were 7.3%, compared to 7.1% for the six months ended June 30, 2020, primarily due to productivity improvements on existing ISR contracts and improved margins in Product Services.

Selling, general, and administrative expenses increased to $37.5 million for the quarter ended June 30, 2021 from $21.5 million for the six months ended June 30, 2020, an increase of 74.5%. The increase was primarily driven by $10.2 million in total Punchh related expenses of which $3.4 million are acquisition related costs and $6.8 million are operational expenses. Punchh operational expenses included $2.5 million for stock-based compensation. Other drivers included increases of $0.6 million for

~~sales and marketing, $1.1 million from variable compensation, a $1.0 million increase in internal technology infrastructure costs, and a $1.1 million increase in corporate management expenses.~~

Research and development expenses were $14.5 million for the six months ended June 30, 2021, an increase of $5.1 million from $9.4 million for the six months ended June 30, 2020, driven primarily by $2.8 million for Punchh and $2.0 million related to additional investments in our existing software product development.

For the six months ended June 30, 2021 and 2020, we recorded $0.8 million and $0.4 million, respectively of amortization expense associated with acquired identifiable non-developed technology intangible assets. The increase was driven by intangible assets recognized as part of the Punchh Acquisition.

Also included in operating expense for the ~~six~~three months ended ~~June 30,~~March 31, 2021 was a $4.4 million gain on insurance proceeds received in connection with ~~our~~the settlement of a legacy claim. There was no comparable reduction to expense for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2022.

Other Expense, Net


	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Other expense, net	$	(368)	$	(51)	(0.5)	%	(0.1)	%	> 200%

For the three months ended March 31, 2022 compared to the three months ended March 31, 2021

In other expense, net, we recorded $0.4 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to other expense, net, of ~~$0.8~~$0.1 million recorded for the ~~six~~quarter ended March 31, 2021. The increase is primarily driven by currency revaluation and other miscellaneous expenses.

Interest Expense, Net


	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Interest expense, net	$	(2,463)	$	(2,160)	(3.1)	%	(4.0)	%	14.0	%

For the three months ended ~~June 30, 2020.~~March 31, 2022 compared to the three months ended March 31, 2021

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022 interest expense, net, was ~~$7.1~~$2.5 million, as compared to $4.1 million recorded for the six months ended June 30, 2020. This increase was primarily driven by the Term Loan under the Owl Rock Credit Agreement. Interest expense, net includes $2.9 million of non-cash accretion of debt discount and amortization of issuance costs for the six months ended June 30, 2021 compared with $2.1$2.2 million for the ~~same period last year.~~three months ended March 31, 2021. The increase is driven by an increase in debt with the issuance of the 2027 Notes in September 2021, partially offset by a reduction of accretion resulting from our January 1, 2022 adoption of ASU 2020-06. Prior to our adoption, accounting for the convertible feature of our Notes was presented

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within equity, resulting in non-cash accretion over the life of the respective Notes of an implied debt discount; this accretion was presented within interest expense. As a result of adoption, the accounting for our Notes is no longer bifurcated between debt and equity (refer to "Note 1 - Basis of Presentation" for additional information).

~~Net tax benefit of $12.3 million for~~Taxes


	Three Months Ended March 31,				Percentage of total revenue				Increase (decrease)
in thousands	2022		2021		2022		2021		2022 vs 2021
Provision for income taxes	$	(10)	$	(39)	—	%	(0.1)	%	(74.4)	%

For the ~~six~~three months ended ~~June 30,~~March 31, 2022 compared to the three months ended March 31, 2021 ~~is driven by~~

There was a ~~$12.3 million partial release of the Company's deferred taxed asset valuation allowance resulting from the deferred tax liabilities recognized in conjunction with the Punchh Acquisition. The~~ net tax benefit of ~~$4.3 million~~$10.0 thousand for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2022. There was ~~driven by the $4.4 million deferred~~a net tax benefit ~~impact~~of $39.0 thousand for the three months ended March 31, 2021.

Key Performance Indicators and Non-GAAP Financial Measures:

We monitor certain operating and non-GAAP financial measures in the evaluation and management of our business; certain key operating data and non-GAAP financial measures are provided in this Quarterly Report as we believe they are useful in facilitating period-to-period comparisons of our business performance. Operating data and non-GAAP financial measures do not reflect and should be viewed independently of our financial performance determined in accordance with GAAP. Operating data and non-GAAP financial measures are not forecasts or indicators of future or expected results and should not have undue reliance placed upon them by investors.

Annual Recurring Revenue ("ARR")


	Three Months Ended March 31,				Increase (decrease)
In thousands	2022		2021		2022 vs 2021
Brink POS*	35,518		25,647		38.5	%
Data Central	8,703		8,968		(3.0)	%
Punchh	50,220		—		N/A
Total	$	94,441	$	34,615	172.8	%

*Brink POS includes PAR Payment Services

ARR is the annualized revenue from SaaS and related revenue of our software products. We calculate ARR by annualizing the monthly recurring revenue for all active sites as of the ~~2026 Notes issuance.~~last day of each month for the respective reporting period. ARR also includes recurring payment processing services revenue, net of expenses. We charge a per-transaction fee each time a customer payment is processed electronically.

Active Sites


	Three Months Ended March 31,		Increase (decrease)
In thousands	2022	2021	2022 vs 2021
Brink POS*	16.9	12.1	39.6	%
Data Central	6.0	6.0	—	%
Punchh	58.8	—	N/A

*Brink POS includes PAR Payment Services

Active sites represent locations active on our SaaS software as of the last day of the respective reporting period. Punchh active sites for the fiscal year ended March 31, 2021 are included in the table above to highlight year-over-year comparison.

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Segment Revenue by Product Line as Percentage of Total Revenue


	Three Months Ended March 31,
					Percentage of total revenue				Increase (decrease)
In thousands	2022		2021		2022		2021		2022 vs 2021
Hardware	$	24,653	$	17,835	30.7	%	32.7	%	38.2	%
Software	19,347		7,876		24.1	%	14.5	%	145.6	%
Services	14,846		10,873		18.5	%	20.0	%	36.5	%
Total Restaurant/Retail	58,846		36,584		73.3	%	67.2	%	60.9	%

ISR	12,290		9,547		15.3	%	17.5	%	28.7	%
Mission systems	8,915		8,131		11.1	%	14.9	%	9.6	%
Product services	234		205		0.3	%	0.4	%	14.1	%
Total Government	21,439		17,883		26.7	%	32.8	%	19.9	%

Total revenue	$	80,285	$	54,467	100.0	%	100.0	%	47.4	%

The above table includes 2022 Punchh revenues of $9.9 million for software and $1.3 million for services.

Recurring and Non-Recurring Revenue as Percentage of Total Revenue


	Three Months Ended March 31,
					Percentage of total revenue				Increase (decrease)
In thousands	2022		2021		2022		2021		2022 vs 2021
Recurring revenue	$	29,171	$	15,195	36.3	%	27.9	%	92.0	%
Non-recurring revenue	29,675		21,389		37.0	%	39.3	%	38.7	%
Total Restaurant/Retail	$	58,846	$	36,584	73.3	%	67.2	%	60.9	%

Total Government	$	21,439	$	17,883	26.7	%	32.8	%	19.9	%

Total revenue	$	80,285	$	54,467	100.0	%	100.0	%	47.4	%

The above table includes 2022 Punchh revenues of $10.8 million for recurring revenue and $0.4 million for non-recurring revenue within the Restaurant/Retail segment.

Recurring revenue represents all revenue from contracts where there is a predictable revenue pattern occurring in regular intervals with a relatively high degree of probability. This includes SaaS, hardware and software maintenance, and payment processing revenue.

Adjusted EBITDA and Adjusted Net Loss/Adjusted Diluted Net Loss Per Share

We use the non-GAAP measures: EBITDA, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share net of tax because we believe these measures provide useful information to investors as indicators of the strength and performance of our ongoing business operations and relative comparisons to prior periods.

As used in this Quarterly Report, EBITDA represents net loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude certain non-cash and non-recurring charges, including stock-based compensation, acquisition expenses, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance; and adjusted net loss/adjusted diluted net loss per share, net of tax represents the exclusion of amortization of acquired intangible assets, certain non-cash and non-recurring charges, including stock-based compensation, acquisition expense, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance.

EBITDA, adjusted EBITDA, adjusted net loss net of tax, and adjusted diluted net loss per share net of tax are ~~set forth below:~~not measures of financial performance or liquidity under GAAP and should not be considered as alternatives to

Six Months Ended June 30, $ %
(in thousands) 2021 2020 variance variance
Restaurant/Retail
Hardware $ 41,190 $ 30,266 $ 10,924 36 %
Software 22,976 12,921 10,055 78 %
Services 23,542 21,855 1,687 8 %
Total Restaurant Retail* $ 87,708 $ 65,042 $ 22,666 35 %
Government
Intelligence, Surveillance, and Reconnaissance $ 18,831 $ 18,514 $ 317 2 %
Mission Systems 16,469 16,535 (66) — %
Product Services 409 332 77 23 %
Total Government $ 35,709 $ 35,381 $ 328 1 %
Total Net Revenue $ 123,417 $ 100,423 $ 22,994 23 %

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net income (loss) or cash flow from operating activities as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies. The tables below provide reconciliations between net loss and EBITDA, adjusted EBITDA and adjusted net loss net of tax.


	Three Months Ended March 31,
(in thousands)	2022		2021
Reconciliation of EBITDA and adjusted EBITDA:
Net loss	$	(15,650)	$	(8,271)
Provision for income taxes	10		39
Interest expense	2,463		2,160
Depreciation and amortization	6,384		2,810
EBITDA	$	(6,793)	$	(3,262)
Stock-based compensation expense (1)	3,537		1,320
Regulatory matter (2)	—		275
Litigation expense (3)	—		475
Acquisition and integration costs (4)	—		686
Gain on insurance proceeds (5)	—		(4,400)
Other expense – net (6)	368		51
Adjusted EBITDA	$	(2,888)	$	(4,855)


1			Adjustments reflect stock-based compensation expense within selling, general and administrative expenses and cost of contracts of $3.5 million and $1.3 million for the three months ended March 31, 2022 and 2021, respectively.
2			Adjustment reflects the expenses related to our efforts to resolve a regulatory matter and other non-recurring charges of $0.3 million for the three months ended March 31, 2021.
3			Adjustment reflects the expenses accrued for a legal matter of $0.5 million for the three months ended March 31, 2021.
4			Adjustment reflects the expenses incurred in the acquisition and integration of Punchh of $0.7 million for the three months ended March 31, 2021.
5			Adjustment represents the gain on insurance proceeds stemming from a legacy claim of $4.4 million for the three months ended March 31, 2021.
6			Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations.


(in thousands)	Three Months Ended March 31,
Reconciliation of adjusted net loss/diluted loss per share:	2022				2021
Net loss/diluted loss per share	$	(15,650)	$	(0.58)	$	(8,271)	$	(0.38)

Non-cash interest expense (1)	486		0.02		1,174		0.06
Acquired intangible assets amortization (2)	4,114		0.15		1,139		0.05
Stock-based compensation expense (3)	3,537		0.13		1,320		0.06
Regulatory matter (4)	—		—		275		0.01
Litigation expense (5)	—		—		475		0.02
Acquisition and integration costs (6)	—		—		686		0.03
Gain on insurance proceeds (7)	—		—		(4,400)		(0.20)
Other expense – net (8)	368		0.01		51		0.01
Adjusted net loss/adjusted diluted loss per share	$	(7,145)	$	(0.26)	$	(7,551)	$	(0.34)

Adjusted weighted average common shares outstanding	26,970				21,929

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1			Adjustment reflects non-cash accretion of interest expense and amortization of issuance costs related to the Notes of $0.5 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively.
2			Adjustment amortization expense of acquired developed technology within gross margin of $3.7 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively; and amortization expense of acquired intangible assets of $0.5 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively.
3			Adjustments reflect stock-based compensation expense within selling, general and administrative expenses and cost of contracts of $3.5 million and $1.3 million for the three months ended March 31, 2022 and 2021, respectively.
4			Adjustment reflects the expenses related to our efforts to resolve a regulatory matter and other non-recurring charges of $0.3 million for the three months ended March 31, 2021.
5			Adjustment reflects the expenses accrued for a legal matter of $0.5 million for the three months ended March 31, 2021.
6			Adjustment reflects the expenses incurred in the acquisition and integration of Punchh of $0.7 million for the three months ended March 31, 2021.
7			Adjustment represents the gain on insurance proceeds stemming from a legacy claim of $4.4 million for the three months ended March 31, 2021.
8			Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations.

~~Liquidity and Capital Resources~~LIQUIDITY AND CAPITAL RESOURCES

For the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 our primary source of liquidity was existing cash and cash equivalents generated through financing transactions in ~~2020~~2022 and 2021. Cash used in operating activities was ~~$33.1~~$21.2 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~$13.6~~$3.4 million for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Cash used for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 was primarily driven by an increase in net ~~operating losses,~~loss, net of non-cash charges and additional net working capital requirements ~~primarily driven by~~largely resulting from an increase in inventory, ~~of $8.8 million and~~ an increase in ~~other current assets~~accounts receivable related to the Government segment, and the payout of ~~$11.0 million. The increase in other current assets reflected an increase in our prepaid assets.~~annual cash bonuses.

Cash used in investing activities was ~~$381.7~~$3.1 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$4.6~~$1.7 million for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Investing activities during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 included ~~$377.3~~$1.2 million of cash consideration ~~in connection with~~for the ~~Punchh~~Q1 2022 Acquisition ~~(net of cash acquired)~~ and capital expenditures of ~~$3.8~~$1.6 million for

developed technology costs associated with our Restaurant/Retail segment software platforms compared to ~~$4.6~~$1.5 million for software platforms for the ~~quarter~~three months ended ~~June 30, 2020.~~March 31, 2021.

Cash ~~provided from~~used in financing activities was ~~$319.3~~$1.4 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~cash provided by financing activities of $49.1~~$2.1 million for the ~~six~~three months ended ~~June 30, 2020. During~~March 31, 2021. Cash used in financing activities for the ~~six months ended June 30, 2021, we received net proceeds of $155.7 million from the private placement of our common~~respective periods was driven by stock to PAR Act III, LLC and certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as the investment advisor and net proceeds of $170.7 million from the Term Loan under the Owl Rock Credit Agreement. During the six months ended June 30, 2020, we received net proceeds of $49.7 million from the $120.0 million issuance of the 2026 Notes offset by the repurchase of a majority of the 2024 Notes.based compensation related transactions. We do not have any off-balance sheet arrangements or obligations.

We expect our available cash and cash equivalents will be sufficient to meet our operating needs for at least 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 Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report ~~for the fiscal period ended June 30, 2021,~~ and in the ~~2020~~2021 Annual Report and our other filings with the SEC.

~~Off-Balance Sheet Arrangements~~

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

~~Contractual Obligations~~

~~As of June 30, 2021, we had the following 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 $ 5,186 $ 1,864 $ 2,541 $ 781 $ —
Other purchase obligations 32,207 31,592 615 — —
Debt obligations 367,435 13,519 40,633 313,283 —
$ 404,828 $ 46,975 $ 43,789 $ 314,064 $ —

~~Critical Accounting Policies and Estimates~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our condensed consolidated financial statements are based on the application of accounting principles generally accepted in the United States of ~~America (“GAAP”).~~America. 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~~Significant items subject to ~~the use of~~such estimates ~~assumptions~~ and ~~the application of judgment~~assumptions include revenue recognition, ~~accounts receivable, inventories, accounting for~~stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations ~~contingent consideration, goodwill~~at fair value, the carrying amount of property, plant and equipment including right-to-use assets and liabilities, identifiable intangible assets and ~~taxes.~~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 these estimates. Our estimates are subject to uncertainties, including those associated with market conditions, risks and trends and the

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ongoing COVID-19 pandemic. Our critical accounting policies have not changed materially from the discussion of those policies included under “Critical Accounting Policies and Estimates” in the ~~2020~~2021 Annual Report.


~~Item 3.~~			~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

Our primary exposures relate to certain non-dollar denominated sales and operating expenses in Canada, Europe and Asia. These primary currencies are the Great British Pound, the Euro, the Australian dollar, the Singapore dollar, the Canadian dollar, the Indian Rupee 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 ~~June 30, 2021,~~March 31, 2022, the impact of foreign currency exchange rate changes on our revenues and net income (loss) ~~have~~were not ~~been~~ material. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.

Interest Rate Risk

As of ~~June 30, 2021,~~March 31, 2022, we had $13.8 million, $120.0 million, and ~~$180.0~~$265.0 million in aggregate principal amount outstanding of the 2024 Notes, the 2026 Notes, and the ~~Owl Rock Credit Agreement outstanding,~~2027 Notes, respectively.

We carry the Notes at face value less amortized ~~discount~~debt issuance costs on the condensed consolidated balance ~~sheet.~~sheets. 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 common stock fluctuates or interest rates change.

~~The Owl Rock Credit Agreement contains a variable interest rate with a floor of 5.25%, presenting interest rate exposure in an increasing rate environment.~~


~~Item 4~~.			~~Controls and Procedures~~

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), 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, 2021.~~March 31, 2022. Based on that evaluation, our ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer~~CFO concluded that our disclosure controls and procedures were not effective as of such date due to the continuing material weaknesses in our internal control over financial reporting previously identified in Part II, Item 9A. “Controls and Procedures” of our ~~2020~~2021 Annual Report.

Remediation Efforts to Address the Material Weaknesses

Our remediation efforts, which we previously identified in Part II, Item 9A. “Controls and Procedures” of our ~~2020~~2021 Annual Report, to address the identified material weaknesses are ongoing as we continue to implement and document necessary policies, procedures, and internal controls. While we believe the steps taken to date and those planned for future implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation ~~efforts.~~efforts and cannot conclude that the material weaknesses have been remediated. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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Changes in Internal Control Over Financial Reporting.

~~During the three months ended June 30, 2021, the~~The Company's internal controls over financial reporting ~~expanded to include~~included those inherited from the Punchh Acquisition, which ~~are currently under evaluation~~have been evaluated by ~~management.~~management and supplemented where deemed appropriate. There were no additional 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, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION


~~Item 1.~~			~~Legal Proceedings~~

Item 1. LEGAL PROCEEDINGS

Theinformationin“Note11– ~~Contingencies,~~ CommitmentsandContingencies”tothefinancialstatementsis ~~responsive to~~incorporated into this Item ~~and is incorporated~~1. Legal Proceedings by ~~reference herein.~~

reference. We do not believe that we have any pending litigation that would have a material adverse effect on our financial condition or results of operations.


~~Item 1A.~~			~~Risk Factors~~

Item 1A. RISK FACTORS

~~The risks described~~There have been no material changes to the risk factors disclosed in ~~the “Risk Factors” section~~Part I, Item 1A. Risk Factors of our ~~2020~~2021 Annual Report, as amended and supplemented by the risks described in the “Risk Factors” section of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, remain current in all material respects, and are amended and further supplemented by this Quarterly Report.

~~Risks Associated with the COVID-19 Pandemic~~

~~The COVID-19 pandemic has had and is expected to continue to have an adverse effect on our business, operations, and financial results for the foreseeable future~~.

The COVID-19 pandemic continues to present significant risk to our business, operations, and financial results. The extent of the impact of the COVID-19 pandemic on our business, operations, and financial results, including our ability to execute our near-term and long-term business strategies and initiatives, will depend on future developments, which are uncertain and cannot be predicted. Even as governmental restrictions are being lifted and markets reopen, there are resurgences of COVID-19 outbreaks, including the new Delta variant, in certain U.S. states and in other countries. The extent to which the U.S., individual states, or other countries will reinstitute or issue new restrictions in response to these resurgences or how consumers will respond is unclear; and, whether our business, operations, and financial results and those of our customers will again be faced with challenges similar to those in 2020, including store closures or reduced services, delayed or canceled store implementations, decreased product adoptions and bookings, new or extended shelter-in-place orders, travel restrictions, and mandated business closures, payment delays or defaults and bankruptcies is uncertain.

The COVID-19 pandemic has resulted in global supply chain shortages, that we expect to continue in the foreseeable future, which could have a material adverse effect on our business, results of operations, and financial results.

As we have previously cautioned, we source certain of our hardware products and related materials, product assemblies, and components from third parties, including sole-source suppliers for certain of our assembly components and hardware products. We did take steps early in the COVID-19 pandemic (and we continue to take steps) to mitigate its impact on our supply chain; however, the global causal linkage of the COVID-19 pandemic has created an unprecedented demand for materials and component parts used in our hardware products, which has led to significant global supply change shortages for such materials and components and associated escalating prices. Compounding the impact of the supply shortages is reduced ground and air transportation capacities. We have experienced significant price increases for materials and component parts and in associated transportation costs. Late in the quarter ended June 30, 2021, we increased our hardware product prices to offset some of the increased costs. These price increases could make us less competitive, result in reduced sales, loss of potential new customers, and cause damage to our reputation and relationships with our current customers, which could have a negative impact on our business, results of operations and financial results. Moreover, we may not be able to source materials or component parts when required, expanding the impact of the supply shortage and possibly resulting in longer lead times for delivery, which could negatively impact our ability to satisfactorily and timely complete our customer obligations. We could also incur additional costs and delays in addressing this type of problem.

~~Risks Associated with the Growth of our Business~~

~~The Punchh Acquisition involves a number of risks that could adversely affect our business, financial condition, and results of operations.~~

On April 8, 2021, we acquired Punchh Inc., a leader in SaaS-based customer loyalty and engagement solutions, pursuant to the terms of an Agreement and Plan of Merger Agreement dated on even date therewith. In addition to the factors described in Part I, Item 1A, “Risk Factors - ~~Our inability to identify and complete future acquisitions and/or integrate acquired businesses could have a material adverse effect on our business, financial condition, and results of operations” of our 2020 Annual Report, the Punchh Acquisition involves certain risks and uncertainties, including~~

•~~Difficulties and/or delays in integrating Punchh’s operations, technologies, and systems;~~

•The distraction and/or diversion of resources and management’s attention to transition or integration activities involving Punchh, could delay or impede our execution of other business strategies and our and Punchh’s in-process research and development and product innovations;

•~~Difficulty providing bundled or complementary products to our and Punchh’s customers and expanding our customer base;~~

•~~Being subject to unfavorable revenue recognition or other accounting treatment as a result of Punchh’s business practices;~~

•~~Incurring a significant amount of debt to finance the Punchh Acquisition, which increased our debt service requirements, expense, and leverage; and~~

•~~The assumption of equity awards granted by Punchh pre-merger, which may more rapidly deplete shares of the Company’s common stock available under our equity incentive plans.~~

Our failure to successfully integrate and operate Punchh and realize the expected benefits of the Punchh Acquisition, due to these or other factors, could have a material adverse effect on our business, financial condition, and results of operations.

~~Risks Associated with our Convertible Senior Notes and Indebtedness~~

Servicing the additional indebtedness incurred in connection with the Punchh Acquisition will require a significant amount of cash, and we may not have sufficient cash flow from our operating subsidiaries to pay our debt.

The additional indebtedness we incurred in connection with the Punchh Acquisition will require a significant amount of cash, which could adversely affect our financial condition and results of operations. We acquired Punchh for $509.6 million (the “Purchase Consideration”); $180.0 million of the Purchase Consideration was funded with proceeds from a senior secured term loan, the “Term Loan”, under a credit agreement, dated April 8, 2021, with Owl Rock First Lien Master Fund, L.P., as administrative and collateral agent, and the other lenders party thereto from time to time. As of June 30, 2021, we had $314.8 million aggregate amount of debt, $180.0 million aggregate principal amount outstanding under the Term Loan and $134.8 million aggregate principal amount of the 2024 and 2026 Notes outstanding. Our ability to make scheduled payments on the principal of, to pay interest on, or to refinance our debt, including the 2024 Notes and the 2026 Notes and now, the Term Loan, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Moreover, our aggregate indebtedness, together with other financial obligations or contractual commitments, could have other significant consequences, including:

•~~increasing the impact of adverse changes in the U.S. and global markets - generally, and in our industries, on our business, financial condition and operating results;~~

•~~restricting or limiting our agility to plan and react to changes in our business and our industries;~~

•~~placing us at a disadvantage compared to our competitors who have less debt; and~~

•~~limiting our ability to borrow additional amounts to fund acquisitions, for working capital, and for other general corporate purposes.~~


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

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF 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 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 ~~six~~three months ended ~~June 30, 2021, 7,136~~March 31, 2022, 44,659 shares were ~~withheld at an average price~~withheld.

The table below presents information regarding the Company's purchases of ~~$69.65 per share.~~its equity securities for the time periods presented.


Period	Total Number of Shares Withheld	Average Price Paid Per Share
January 1, 2022 - January 31, 2022	—	$	—
February 1, 2022 - February 28, 2022	1,160	$	45.93
March 1, 2022 - March 31, 2022	43,499	$	45.93
Total	44,659

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~~Item 6~~.			~~Exhibits~~

Item 6. EXHIBITS

Exhibit
Number
Incorporated by reference into
this Quarterly Report on Form 10-Q
Date
Filed or
Furnished
Exhibit Description Form Exhibit No.
2.1*
Agreement and Plan of Merger, dated April 8, 2021, by and among PAR Technology Corporation, ParTech, Inc., Sliver Merger Sub Inc., Punchh Inc. and Fortis Advisors LLC.
Form 8-K (File No. 001-09720) 2.1 4/8/2021
3.1
Certificate of Incorporation, as amended, of PAR Technology Corporation
10-K 3.1 3/16/2021
3.2
Bylaws, as amended, of PAR Technology Corporation
10-Q 4.1 5/11/2020
10.1
Credit Agreement, dated April 8, 2021, by and among PAR Technology Corporation, its subsidiaries party thereto as guarantors and Owl Rock First Lien Master Fund, L.P., as administrative agent.
Form 8-K (File No. 001-09720) 10.1 4/8/2021
10.2*
Securities Purchase Agreement, dated April 8, 2021, between PAR Technology Corporation and PAR Act III, LLC.
Form 8-K (File No. 001-09720) 10.2 4/8/2021
10.3*
Securities Purchase Agreement, dated April 8, 2021, among PAR Technology Corporation and certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as investment adviser.
Form 8-K (File No. 001-09720) 10.3 4/8/2021
10.4
Common Stock Purchase Warrant, dated April 8, 2021, in favor of PAR Act III, LLC. of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
Form 8-K (File No. 001-09720) 10.7 4/8/2021
10.5
Punchh Inc. 2010 Equity Incentive Plan
S-8 (File No. 333-255214) 99.1 4/13/2021
10.6
Punchh Inc. 2020 Equity Incentive Plan
S-8 (File No. 333-255214) 99.2 4/13/2021
10.7
Form of Stock Option Award Agreement under Punchh Inc. 2010 Equity Incentive Plan
S-8 (File No. 333-255214) 99.3 4/13/2021
10.8
Form of Stock Option Award Agreement under Punchh Inc. 2020 Equity Incentive Plan
S-8 (File No. 333-255214) 99.4 4/13/2021
10.9
PAR Technology Corporation 2021 Employee Stock Purchase Plan
S-8 (File No. 333-256915) 99.5 6/9/2021
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 Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350
Furnished herewith
32.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350
Furnished herewith
101.INS XBRL Instance Document Filed herewith
101.SCH XBRL Taxonomy Extension Schema Document Filed herewith
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith
101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed herewith
101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed herewith
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith
104 Cover Page Interactive Data File (embedded within the Inline XBRL document) Filed herewith

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

Exhibit
Number

Incorporated by reference into

this Quarterly Report on Form 10-Q

Date
Filed or
Furnished

Exhibit Description

Form

Exhibit No.

3.1

Restated Certificate of Incorporation, dated November 20, 2020

Form 10-K (File No. 001-09720)

3.1

3/16/2021

3.2

Bylaws, as adopted on March 29, 2020

Form 10-Q (File No. 001-09720)

5/11/2020

10.1

Amendment to Employment Letter between PAR Technology Corporation and Savneet Singh, dated March 16, 2022

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 Executive 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

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 Inline XBRL document)

Filed herewith

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SIGNATURES

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


		PAR TECHNOLOGY CORPORATION
		(Registrant)

Date:	~~August 9, 2021~~May 10, 2022	/s/ Bryan A. Menar
		Bryan A. Menar
		Chief Financial and Accounting Officer
		(Principal Financial Officer)


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Cash paid for interest	$	3,724	$	1,262
Cash taxes paid, net of refunds	58		10
Capitalized software recorded in accounts payable	73		245
Capital expenditures in accounts payable	20		0
Tax withholding in accrued salaries and benefits related to treasury stock acquired from employees	482		0
Common stock issued for acquisition	108,659		0
Acquisition consideration not yet settled	1,001		0


	Three months ended June 30, 2020
	Restaurant/Retail point in time		Restaurant/Retail over time		Government over time
Hardware	$	12,104	$	0	$	0
Software	624		7,232		0
Service	2,170		5,503		0
Mission Systems	0		0		8,087
ISR Solutions	0		0		9,742
Product	0		0		229
TOTAL	$	14,898	$	12,735	$	18,058


	Six months ended June 30, 2021
	Restaurant/Retail point in time		Restaurant/Retail over time		Government over time
Hardware	$	41,190	$	0	$	0
Software	537		22,439		0
Service	8,874		14,668		0
Mission Systems	0		0		18,831
ISR Solutions	0		0		16,469
Product	0		0		409
TOTAL	$	50,601	$	37,107	$	35,709


	Six months ended June 30, 2020
	Restaurant/Retail point in time		Restaurant/Retail over time		Government over time
Hardware	$	30,241	$	0	$	0
Software	1,186		14,618		0
Service	7,112		11,885		0
Mission Systems	0		0		16,535
ISR Solutions	0		0		18,514
Product	0		0		332
TOTAL	$	38,539	$	26,503	$	35,381


2021, remaining	$	11,630
2022	21,889
2023	19,881
2024	17,281
2025	16,857
Thereafter	34,010
Total	$	121,548


Weighted average expected term	3.1 years
Weighted average risk-free interest rate	0.4		%
Weighted average expected volatility	56.5		%
Expected dividend yield	None
Estimated fair value (per share)	$	60.47


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


(in thousands)	Payments due by period
	Total		Less Than 1 Year		1-3 Years		4-5 Years		More Than 5 Years
Operating lease obligations	$	5,186	$	1,864	$	2,541	$	781	$	—
Other purchase obligations	32,207		31,592		615		—		—
Debt obligations	367,435		13,519		40,633		313,283		—
	$	404,828	$	46,975	$	43,789	$	314,064	$	—