~~Delaware~~

Delaware	16-1434688
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, New York		13413-4991
(Address of principal executive offices)		(Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒þ No ☐

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

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



Large Accelerated Filer ☐	Accelerated Filer ☐þ
Non Accelerated Filer ☐ ~~(Do not check if a smaller reporting company)~~	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

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



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

As of ~~November 10, 2017, 16,007,447~~May 1, 2019, 16,252,648 shares of the registrant’s common stock, $0.02 par value, were outstanding.

PAR TECHNOLOGY CORPORATION

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION



Item Number		Page

Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheets at March 31, 2019 and December 31, 2018 (unaudited)	1

	Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016~~March 31, 2018 (unaudited)	1 3

	Consolidated Statements of Comprehensive (Loss) Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016~~March 31, 2018 (unaudited)	2 4

	Consolidated ~~Balance Sheets at September 30, 2017~~Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2019 and ~~December~~March 31, ~~2016~~2018 (unaudited)	35

	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016~~March 31, 2018 (unaudited)	46

	Notes to Unaudited Interim Consolidated Financial Statements	57

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14 17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22 20

Item 4.	Controls and Procedures	22 21

PART II
OTHER INFORMATION

Item 1.	Legal Proceedings	23 21

Item 1A.	Risk Factors	23 21

Item 2.	Unregistered Sales of Equity Securities and Use Of Proceeds	23

Item 6.	Exhibits	24 23

Signatures		25

~~Exhibit Index~~25		26

~~Table of Contents~~

PART I – FINANCIAL INFORMATION



Item 1.	Financial Statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)



Assets	March 31, 2019			December 31, 2018
Current assets:
Cash and cash equivalents	$	4,142		$	3,485
Accounts receivable-net	29,311			26,219
Inventories-net	22,639			22,737
Other current assets	5,099			3,251
Total current assets	61,191			55,692
Property, plant and equipment – net	13,169			12,575
Goodwill	11,051			11,051
Intangible assets – net	11,176			10,859
Operating lease right-of-use assets	3,697			—
Other assets	4,764			4,504
Total Assets	$	105,048		$	94,681
Liabilities and Shareholders’ Equity
Current liabilities:
Borrowings of line of credit	$	16,139		$	7,819
Accounts payable	14,794			12,644
Accrued salaries and benefits	5,145			5,940
Accrued expenses	2,223			2,113
Operating lease liabilities - current portion	1,540			—
Customer deposits and deferred service revenue	11,540			9,851
Other current liabilities	—			2,550
Total current liabilities	51,381			40,917
Operating lease liabilities - net of current portion	2,177			—
Deferred service revenue	4,807			4,407
Other long-term liabilities	3,198			3,411
Total liabilities	61,563			48,735
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized	—			—
Common stock, $.02 par value, 29,000,000 shares authorized; 17,956,318 and 17,879,761 shares issued, 16,248,209 and 16,171,652 outstanding at March 31, 2019 and December 31, 2018, respectively	357			357
Capital in excess of par value	50,529			50,251
Retained earnings	2,698			5,427
Accumulated other comprehensive loss	(4,263		)	(4,253		)
Treasury stock, at cost, 1,708,109 shares	(5,836		)	(5,836		)
Total shareholders’ equity	43,485			45,946
Total Liabilities and Shareholders’ Equity	$	105,048		$	94,681

See accompanying notes to unaudited interim consolidated financial statements

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
Net revenues:
Product $ 20,706 $ 25,757 $ 90,594 $ 69,285
Service 13,317 12,620 42,694 36,128
Contract 14,915 23,115 43,776 64,042
48,938 61,492 177,064 169,455
Costs of sales:
Product 15,861 18,433 67,822 51,012
Service 10,102 8,969 29,753 25,787
Contract 13,608 21,490 39,264 59,002
39,571 48,892 136,839 135,801
Gross margin 9,367 12,600 40,225 33,654
Operating expenses:
Selling, general and administrative 9,054 8,672 27,581 23,271
Research and development 2,668 2,866 9,521 8,421
Amortization of identifiable intangible assets 241 241 724 724
11,963 11,779 37,826 32,416
Operating (loss) income from continuing operations (2,596 ) 821 2,399 1,238
Other expense, net (70 ) (38 ) (264 ) (318 )
Interest expense, net (39 ) (12 ) (84 ) 20
(Loss) income from continuing operations before provision for income taxes (2,705 ) 771 2,051 940
Benefits (provision) for income taxes 1,188 (253 ) (327 ) (306 )
(Loss) income from continuing operations (1,517 ) 518 1,724 634
Discontinued operations
Income (loss) from discontinued operations (net of tax) - - 183 (26 )
Net (loss) income $ (1,517 ) $ 518 $ 1,907 $ 608
Basic Earnings per Share:
(Loss) income from continuing operations (0.10 ) 0.03 0.11 0.04
(Loss) income from discontinued operations (0.00 ) (0.00 ) 0.01 (0.00 )
Net (loss) income $ (0.10 ) $ 0.03 $ 0.12 $ 0.04
Diluted Earnings per Share:
(Loss) income from continuing operations (0.10 ) 0.03 0.11 0.04
(Loss) income from discontinued operations (0.00 ) (0.00 ) 0.01 (0.00 )
Net (loss) income $ (0.10 ) $ 0.03 $ 0.12 $ 0.04
Weighted average shares outstanding
Basic 15,976 15,770 15,949 15,670
Diluted 15,976 15,822 16,260 15,730



	Three Months Ended March 31,
	2019			2018
Net revenues:
Product	$	15,517		$	26,324
Service	14,043			13,196
Contract	15,122			16,141
	44,682			55,661
Costs of sales:
Product	11,241			19,440
Service	10,027			9,547
Contract	13,650			14,827
	34,918			43,814
Gross margin	9,764			11,847
Operating expenses:
Selling, general and administrative	8,564			8,600
Research and development	3,060			2,868
Amortization of identifiable intangible assets	241			241
	11,865			11,709
Operating (loss) income	(2,101		)	138
Other (expense) income, net	(430		)	49
Interest expense, net	(146		)	(41		)
(Loss) income before provision for income taxes	(2,677		)	146
Provision for income taxes	(52		)	(78		)
Net (loss) income	$	(2,729	)	$	68
Basic Earnings per Share:
Net (loss) income	$	(0.17	)	$	—
Diluted Earnings per Share:
Net (loss) income	$	(0.17	)	$	—
Weighted average shares outstanding
Basic	16,044			15,948
Diluted	16,044			16,286

See accompanying notes to unaudited interim consolidated financial statements

~~Table of Contents~~

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
Net (loss) income $ (1,517 ) $ 518 $ 1,907 $ 608
Other comprehensive (loss) income, net of applicable tax:
Foreign currency translation adjustments 75 (148 ) (81 ) (298 )
Comprehensive (loss) income $ (1,442 ) $ 370 $ 1,826 $ (310 )



	Three Months Ended March 31,
	2019			2018
Net (loss) income	$	(2,729	)	$	68
Other comprehensive (loss) income, net of applicable tax:
Foreign currency translation adjustments	(10		)	423
Comprehensive (loss) income	$	(2,739	)	$	491

See accompanying notes to unaudited interim consolidated financial statements

~~Table of Contents~~

PAR TECHNOLOGY ~~CORPORATIONAND~~CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(in ~~thousands, except share amounts)~~thousands)

(Unaudited)

Assets
September 30,
2017

December 31,
2016

Current assets:
Cash and cash equivalents $ 1,173 $ 9,055
Accounts receivable-net 28,392 30,705
Inventories-net 26,716 26,237
Note receivable - 3,510
Income taxes receivable 144 261
Other current assets 4,048 4,027
Assets of discontinued operations - 462
Total current assets 60,473 74,257
Property, plant and equipment – net 9,999 7,035
Deferred income taxes 17,002 17,417
Goodwill 11,051 11,051
Intangible assets – net 12,366 10,966
Other assets 3,842 3,785
Total Assets $ 114,733 $ 124,511
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt $ 195 $ 187
Borrowings of line of credit 1,450 -
Accounts payable 9,448 16,687
Accrued salaries and benefits 5,911 5,470
Accrued expenses 3,820 4,682
Customer deposits and deferred service revenue 12,496 19,814
Total current liabilities 33,320 46,840
Long-term debt 233 379
Other long-term liabilities 7,797 7,712
Total liabilities 41,350 54,931
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized - -
Common stock, $.02 par value, 29,000,000 shares authorized; 17,715,556 and 17,479,454 shares issued, 16,007,447 and 15,771,345 outstanding at September 30, 2017 and December 31, 2016, respectively 354 350
Capital in excess of par value 48,176 46,203
Retained earnings 34,264 32,357
Accumulated other comprehensive loss (3,575 ) (3,494 )
Treasury stock, at cost, 1,708,109 shares (5,836 ) (5,836 )
Total shareholders’ equity 73,383 69,580
Total Liabilities and Shareholders’ Equity $ 114,733 $ 124,511



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

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

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

See accompanying notes to unaudited interim consolidated financial statements

~~Table of Contents~~

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Nine Months Ended
September 30,

2017 2016
Cash flows from operating activities:
Net income $ 1,907 $ 608
(Income) loss from discontinued operations (183 ) 26
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation, amortization and accretion 2,805 3,214
Provision for bad debts 302 522
Provision for obsolete inventory 1,543 1,891
Equity based compensation 301 398
Deferred income tax 415 317
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 2,011 (3,840 )
Inventories (2,022 ) (10,177 )
Income tax receivable/(payable) 117 (749 )
Other current assets 441 (1,379 )
Other assets (57 ) (119 )
Accounts payable (7,239 ) 7,540
Accrued salaries and benefits 441 34
Accrued expenses (862 ) (1,650 )
Customer deposits and deferred service revenue (7,318 ) 1,076
Other long-term liabilities 85 (81 )
Deferred tax equity based compensation - (12 )
Net cash (used in) operating activities-continuing operations (7,313 ) (2,381 )
Net cash (used in) operating activities-discontinued operations - (436 )
Net cash (used in) provided by operating activities (7,313 ) (2,817 )
Cash flows from investing activities:
Capital expenditures (3,947 ) (1,770 )
Capitalization of software costs (3,276 ) (1,949 )
Acquisition related consideration paid - (977 )
Net cash used in investing activities (7,223 ) (4,696 )
Cash flows from financing activities:
Payments of long-term debt (138 ) (151 )
Payments of other borrowings (16,700 ) (162,322 )
Proceeds from other borrowings 18,150 167,117
Proceeds from stock options 1,675 26
Proceeds from note receivable 3,794 -
Payments for deferred acquisition obligations - (2,000 )
Net cash provided by financing activities 6,781 2,670
Effect of exchange rate changes on cash and cash equivalents (127 ) (298 )
Net decrease in cash and cash equivalents (7,882 ) (5,141 )
Cash and cash equivalents at beginning of period 9,055 8,024
Cash and equivalents at end of period 1,173 2,883
Less cash and cash equivalents of discontinued operations at end of period - -
Cash and cash equivalents of continuing operations at end of period $ 1,173 $ 2,883

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 102 49
Income taxes, net of refunds 432 798



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

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

See accompanying notes to unaudited interim consolidated financial statements

~~Table of Contents~~

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of presentation

The accompanying unaudited interim consolidated financial statements of PAR Technology Corporation (the “Company” or “PAR”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Article 8 of Regulation S-X pertaining to interim financial statements. Accordingly, they do not include all information and footnotes required by GAAP for annual financial statements. In the opinion of management, such unaudited interim consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the results for the interim periods included in this Quarterly Report on Form 10-Q (“Quarterly Report”). Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 are not necessarily indicative of the results of operations that may be expected for any future period. ~~Certain amounts for prior periods have been reclassified to conform to the current period classification.~~

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

The unaudited interim consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, filed with the Securities and Exchange Commission (“SEC”) on ~~April 17, 2017.~~March 18, 2019.

Note 2 ~~— Divestiture and Discontinued Operations~~- Revenue Recognition

~~On November 4, 2015,~~Beginning on January 1, 2018, the Company ~~sold substantially all~~recognizes revenue under ASC 606, Revenue from Contracts with Customers. The principle of the ~~assets~~revenue standard is that a company should recognize revenue to depict the transfer of ~~its hotel/spa technology business operated by PAR Springer-Miller Systems, Inc., Springer-Miller International, LLC,~~promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company applies the five-step model, as described in ASU 2014-09 Revenue from Contracts with Customers, to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and ~~Springer-Miller Canada, ULC (collectively, “PSMS”) pursuant~~services transferred to an asset purchase agreement (the “PSMS APA”) dated on even date therewith among PSMS and Gary Jonas Computing Ltd., SMS Software Holdings LLC, and Jonas Computing (UK) Ltd. (the “Purchasers”). Accordingly, the ~~results of operations of PSMS have been classified as discontinued operations~~customer. The following steps are applied to achieve that principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the Consolidated Statements of Operations (unaudited) and Consolidated Statements of Cash Flows (unaudited) in accordance with Accounting Standards Codification (“ASC”) ASC 205-20 (Presentation of Financial Statements – Discontinued Operations). Additionally,contract

Step 3: Determine the ~~assets and associated liabilities have been classified as discontinued operations~~transaction price

Step 4: Allocate the transaction price to the performance obligations in the ~~Consolidated Balance Sheets (unaudited). Total consideration to be received from~~contract

Step 5: Recognize revenue when the ~~sale is $16.6 million in cash (the “Base Purchase Price”), with $12.1 million paid~~company satisfies a performance obligation

The Company’s performance obligations are satisfied at the closing of the asset sale and up to $4.5 million payable 18 months following the closing (the “Holdback Amount”). On May 5, 2017, the Company received payment of $4.2 million of the Holdback Amount, the unpaid balance is reflective of a negative purchase price adjustment based on the net tangible asset calculation provided under the PSMS APA. In addition to the Base Purchase Price, contingent consideration of up to $1.5 million (the “Earn-Out”) could bepoint in time when products are shipped or services are received by the ~~Company based on~~customer, which is when the ~~achievement~~customer has the title and has assumed the significant risks and rewards of ~~certain agreed-upon~~ownership.

Performance Obligations Outstanding

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



	As of March 31, 2019
	Current - under one year	Non-current - over one year
Restaurant	11,198	4,807
Government	337	—
TOTAL	11,535	4,807



	As of December 31, 2018
	Current - under one year	Non-current - over one year
Restaurant	9,320	4,407
Government	325	—
TOTAL	9,645	4,407

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

During the three months ended March 31, 2019, we recognized revenue of $5.7 million that was included in contract liabilities at the beginning of the period.

Disaggregated Revenue

We disaggregate revenue from contracts from customers by major product group for each of the reporting segments as we believe it best depicts how the nature, amount, timing and uncertainty of revenue and earnings targets for calendar years 2016, 2017 and 2018 (up to $500,000 per calendar year), subject to setoff for PSMS and ParTech, Inc. indemnification obligations thereunder and unresolved claims. The Company received no Earn-Out payment for calendar year 2016 and, ascash flows are affected by economic factors. Disaggregation of ~~September 30, 2017, the Company did not record any amount associated with calendar years 2017 and 2018, as the Company does not believe achievement of the related~~ revenue ~~and earnings targets is probable.~~

~~Table of Contents~~

~~Summarized financial position~~ for the ~~Company’s discontinued operations~~three months ended March 31, 2019 and March 31, 2018 is as follows (in thousands):

September 30,
2017

December, 31
2016

Assets
Other current assets $ - $ 462
Assets of discontinued operations $ - $ 462



	Three months ended March 31, 2019
	Restaurant/Retail - Point in Time	Restaurant/Retail - Over Time	Government - Over Time
Restaurant	22,336	5,790	—
Grocery	490	944	—
Mission Systems	—	—	8,546
ISR Solutions	—	—	6,576
TOTAL	22,826	6,734	15,122



	Three months ended March 31, 2018
	Restaurant/Retail - Point in Time	Restaurant/Retail - Over Time	Government - Over Time
Restaurant	32,164	5,857	—
Grocery	753	746	—
Mission Systems	—	—	8,334
ISR Solutions	—	—	7,807
TOTAL	32,917	6,603	16,141

~~Summarized financial operating results for the Company’s discontinued operations is as follows (in thousands):~~Practical Expedients and Exemptions

Three Months
Ended September 30,

Nine Months
Ended September 30,

2017 2016 2017 2016
Operations
Total revenues $ - $ - $ - $ -

Income (loss) from discontinued operations before income taxes $ - $ - $ 284 $ (38 )
(Provision for) benefit from income taxes - - (101 ) 12
Income (loss) from discontinued operations, net of taxes $ - $ - $ 183 $ (26 )

We generally expense sales commissions when incurred because the amortization period is less than one year or the total amount of commissions is immaterial. We record these costs within selling, general and administrative expenses.

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

Note 3 — Leases

Adoption

Effective January 1, 2019, the Company adopted the new lease accounting standard, ASC 842, Leases, using the modified retrospective method of applying the new standard at the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry forward the historical lease classification. Adoption of this standard resulted in the recording of operating lease right-of-use (ROU) assets and corresponding operating lease liabilities of approximately $4.0 million. The Company's financial position for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance.

A significant portion of our operating and finance lease portfolio includes corporate offices, research and development facilities, information technology (IT) equipment, and automobiles. The majority of our leases have remaining lease terms of 1 year to 5 years. Substantially all lease expense is presented within selling, general and administrative expenses on the Consolidated Statements of Operations.



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

Supplemental cash flow information related to leases was as follows:



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

Supplemental balance sheet information related to leases was as follows:



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

Future minimum lease payments are as follows:



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

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



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

Note 4 — Accounts Receivable

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

September 30,
2017

December 31,
2016

Government segment:
Billed $ 7,465 $ 6,779
Advanced billings (1,344 ) (1,599 )
6,121 5,180

Restaurant/Retail segment: 22,271 25,525
Accounts receivable - net $ 28,392 $ 30,705



	March 31, 2019			December 31, 2018
Government reporting segment:
Billed	$	10,428		$	9,100
Advanced billings	(243		)	(563		)
	10,185			8,537

Restaurant/Retail reporting segment:	19,126			17,682
Accounts receivable - net	$	29,311		$	26,219

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company ~~had~~ recorded allowances for doubtful accounts of ~~$1.2~~$1.4 million and ~~$0.9~~$1.3 million, respectively, against Restaurant/Retail reporting segment accounts receivable.

~~Table of Contents~~

Note 45 — Inventories

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

September 30,
2017

December 31,
2016

Finished goods $ 11,282 $ 9,423
Work in process 742 443
Component parts 8,378 10,386
Service parts 6,314 5,985
$ 26,716 $ 26,237



	March 31, 2019		December 31, 2018
Finished goods	$	11,312	$	12,472
Work in process	452		67
Component parts	4,522		4,716
Service parts	6,353		5,482
	$	22,639	$	22,737

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company ~~had~~ recorded inventory reserves of ~~$9.0~~$10.4 million and ~~$9.2~~$9.8 million, respectively, against Restaurant/Retail reporting segment inventories, which ~~relates~~relate primarily to service parts.

Note 56 — Identifiable Intangible Assets and Goodwill

~~The Company’s identifiable~~Identifiable intangible assets represent intangible assets acquired by the Company in connection with ~~the~~its acquisition of Brink Software Inc. ~~acquisition~~ in 2014 ("Brink Acquisition") and ~~internally developed~~ software development costs. The Company capitalizes certain software development costs ~~related to the development of computer~~for software used in its Restaurant/Retail reporting segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. The technological feasibility of a ~~computer~~ software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility for software sold as a perpetual license, as defined within ASC 985-20 (Software – Costs of Software to be sold, Leased, or Marketed) ~~and for software as a service (“SAAS”), as defined within ASC-350-40 (Intangibles – Goodwill and Other – Internal – Use Software)~~ are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Software development is also capitalized in accordance with ASC 350-40, “Intangibles - Goodwill and Other - Internal - Use Software,” and is amortized over the expected benefit period, which generally ranges from three to seven years. Software development costs capitalized within continuing operations during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and March 31, 2018 were $1.0 million and $1.1 million, ~~and $3.3 million,~~ respectively. ~~Software costs capitalized within continuing operations during the three and nine months ended September 30, 2016 were $0.7 million and $1.9 million, respectively.~~

Annual amortization, charged to cost of sales ~~when a product is available for general release to customers,~~ is computed using the greater of (a) the straight-line method over the remaining estimated economic life of the product, generally three to seven years or (b) the ratio that current gross revenues for the product bear to the total of current and anticipated future gross revenues for the product. Amortization of capitalized software development

costs from continuing operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and 2018 were ~~$0.4 million and $1.1 million, respectively. Amortization of capitalized software costs from continuing operations for the three and nine months ended September 30, 2016 were $0.3~~$0.5 million and $0.8 million, respectively.

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

~~Table of Contents~~

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

September 30,
2017

December 31,
2016

Estimated
Useful Life

Acquired and internally developed software costs $ 19,152 $ 15,884 3 - 7 years
Customer relationships 160 160 7 years
Non-competition agreements 30 30 1 year
19,342 16,074
Less accumulated amortization (7,376 ) (5,508 )
$ 11,966 $ 10,566
Trademarks, trade names (non-amortizable) 400 400 N/A
$ 12,366 $ 10,966



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

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

2017 $ 618
2018 2,379
2019 1,905
2020 1,487
2021 1,031
Thereafter 4,546
Total $ 11,966



2019	$	2,046
2020	2,653
2021	1,549
2022	649
2023	365
Thereafter	3,514
Total	$	10,776

The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment. The Company operates in two ~~reportable business~~reporting segments, Restaurant/Retail and Government. Goodwill impairment testing is performed at the reporting ~~segment~~unit level. Goodwill is assigned to a specific reporting unit at the date the goodwill is initially recorded. Once goodwill has been assigned to a specific reporting unit, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill. The amount of goodwill carried by the Restaurant/Retail and Government reporting ~~segments~~units is $10.3 million and ~~$0.7~~$0.8 million, respectively, at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018. No impairment charges were recorded for the periods ended March 31, 2019 and December 31, 2018.

Note 67 — Stock Based Compensation

The Company applies the fair value recognition provisions of ASC Topic 718. The Company recorded stock based compensation of ~~$63,000 and $301,000~~$0.2 million for each of the three month periods ended March 31, 2019 and ~~nine months ended September 30, 2017, respectively. The Company recorded stock based compensation of $190,000 and $398,000 for the three and nine months ended September 30, 2016, respectively.~~March 31, 2018. The amount recorded for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 was ~~recorded~~ net of benefits of ~~$1,000~~$27,000 and ~~$11,000, respectively, as a~~March 31, 2018 was zero which was the result of forfeitures of unvested stock awards prior to completion of the requisite service period and/or failure to achieve performance criteria. The amount recorded for the three and nine months ended September 30, 2016 was recorded net of benefits of $0 and $48,000, respectively, as a result of forfeitures of unvested stock awards prior to completion of the requisite service period and /or failure to achieve performance criteria. At ~~September 30, 2017,~~March 31, 2019, the aggregate unrecognized compensation expense related to ~~non-vested~~unvested equity awards was ~~$0.3~~$1.9 million (net of estimated forfeitures), which is expected to be recognized as compensation expense in fiscal years ~~2017~~2019 through ~~2019.~~2021.

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

~~Table of Contents~~

Note 78 — Net (loss) income per share

Earnings per share are calculated in accordance with ASC Topic 260, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS). It requires the presentation of basic and diluted EPS. Basic EPS excludes all dilution and is based upon the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that would occur if convertible securities or other contracts to issue common stock were ~~exercised or converted into common stock. As there were losses for~~exercised. For the three months ended ~~September 30, 2017 no common share equivalents are included in the diluted per share computation. For the nine months ended September 30, 2017~~March 31, 2019, there were no486,000 anti-dilutive stock options ~~outstanding. For the three and nine months ended September 30, 2016 there were 914,000 and 470,000 anti-dilutive stock options outstanding.~~outstanding compared to none as of March 31, 2018.

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

Three Months
Ended September 30,

2017 2016
Net (loss) income from continuing operations $ (1,517 ) $ 518

Basic:
Shares outstanding at beginning of period 15,907 15,770
Weighted average shares issued during the period, net 69 -
Weighted average common shares, basic 15,976 15,770
Net (loss) income from continuing operations per common share, basic $ (0.10 ) $ 0.03
Diluted:
Weighted average common shares, basic 15,976 15,770
Dilutive impact of stock options and restricted stock awards - 52
Weighted average common shares, diluted 15,976 15,822
Net (loss) income from continuing operations per common share, diluted $ (0.10 ) $ 0.03

Nine Months
Ended September 30,

2017 2016
Net income from continuing operations $ 1,724 $ 634

Basic:
Shares outstanding at beginning of period 15,771 15,645
Weighted average shares issued during the period, net 178 25
Weighted average common shares, basic 15,949 15,670
Net income from continuing operations per common share, basic $ 0.11 $ 0.04
Diluted:
Weighted average common shares, basic 15,949 15,670
Dilutive impact of stock options and restricted stock awards 311 60
Weighted average common shares, diluted 16,260 15,730
Net income from continuing operations per common share, diluted $ 0.11 $ 0.04



	Three Months Ended March 31,
	2019			2018
Net (loss) income	$	(2,729	)	$	68

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

Note 89 — Contingencies

The Company is subject to legal proceedings, which arise in the ordinary course of business. Additionally, U.S. Government contract costs are subject to periodic audit and adjustment. ~~The Company is investigating~~In the third quarter of 2016, the Company's Audit Committee commenced an internal investigation into conduct at the Company's China and Singapore offices to determine whether certain import/export and sales documentation activities ~~at the Company’s China and Singapore offices~~ were improper and in ~~possible~~ violation of the U.S. Foreign Corrupt Practices Act ~~(“FCPA”~~("FCPA") and other applicable laws and certain ~~company~~Company policies. ~~The~~In the fourth quarter of 2016, the Company voluntarily notified ~~and is fully cooperating with,~~ the SEC and the U.S. Department of Justice ~~(“DOJ”~~("DOJ") of ~~these activities. On~~the internal investigation, and on May 1, 2017 the Company received a document subpoena from the SEC for documents relating to the ~~Company’s~~internal investigation. ~~The SEC’s~~Following the conclusion of the Audit Committee's internal investigation, the Company voluntarily reported the relevant findings of the investigation to the China and Singapore authorities and is ~~a non-public, fact-finding inquiry~~fully cooperating with these authorities. During the three months ended March 31, 2019, we recorded $0.2 million of expenses relating to the internal investigation, including expenses of outside legal counsel and ~~it is not clear what action, if any,~~forensic accountants, compared to $0.3 million for the three months ended March 31, 2018.

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

~~Table of Contents~~

Note 910 — Segment and Related Information

The Company ~~is organized~~operates in two ~~reportable business~~distinct reporting segments, Restaurant/Retail and Government. The Company’s chief operating decision maker is the Company’s Chief Executive Officer. ~~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 reporting segment offers point-of-sale ("POS") and management technology solutions to restaurants and retail, including in the fast casual, quick serve and table service restaurant categories, and specialty retail outlets. These offerings include hardware and cloud and on-premise software applications utilized at the point-of-sale, back of store and corporate office, includes the Brink cloud-based point-of-sale software and the SureCheck solution, which provides food safety monitoring and intelligent checklist management."categories. This segment also offers customer support including field service, installation, Advanced Exchange, and ~~twenty-four-hour~~twenty-four-

hour telephone support and depot repair. The Government reporting segment performs complex technical studies, analysis, and experiments, develops innovative solutions, and provides on-site engineering in support of advanced defense, security, and aerospace systems. This segment also provides expert on-site services for operating and maintaining U.S. Government-owned communication assets.

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

Information as to the Company’s reporting segments is set forth ~~below. Amounts~~ below ~~exclude discontinued operations~~ (in thousands).

Three Months
Ended September 30,

Nine Months
Ended September 30,

2017 2016 2017 2016
Revenues:
Restaurant/Retail $ 34,023 $ 38,377 $ 133,288 $ 105,413
Government 14,915 23,115 43,776 64,042
Total $ 48,938 $ 61,492 $ 177,064 $ 169,455

Operating (loss) income:
Restaurant/Retail $ (3,559 ) $ 1,091 $ 603 $ (209 )
Government 1,267 1,417 4,364 4,720
Other (304 ) (1,687 ) (2,568 ) (3,273 )
(2,596 ) 821 2,399 1,238
Other expense, net (70 ) (38 ) (264 ) (318 )
Interest (expense) income, net (39 ) (12 ) (84 ) 20
(Loss) income before provision for income taxes $ (2,705 ) $ 771 $ 2,051 $ 940

Depreciation, amortization and accretion:
Restaurant/Retail $ 886 $ 740 $ 2,481 $ 2,228
Government 5 10 16 29
Other 62 861 308 957
Total $ 953 $ 1,611 $ 2,805 $ 3,214

Capital expenditures including software costs:
Restaurant/Retail $ 1,121 $ 787 $ 3,452 $ 2,437
Government - 47 7 86
Other 457 681 3,764 1,196
Total $ 1,578 $ 1,515 $ 7,223 $ 3,719

Revenues by country:
United States $ 44,418 $ 58,092 $ 163,606 $ 155,882
Other Countries 4,520 3,400 13,458 13,573
Total $ 48,938 $ 61,492 $ 177,064 $ 169,455



	Three Months Ended March 31,
	2019			2018
Revenues:
Restaurant/Retail	$	29,560		$	39,520
Government	15,122			16,141
Total	$	44,682		$	55,661

Operating (loss) income:
Restaurant/Retail	$	(2,982	)	$	(608	)
Government	1,363			1,266
Other	(482		)	(520		)
	(2,101		)	138
Other (expense) income, net	(430		)	49
Interest expense, net	(146		)	(41		)
(Loss) income before provision for income taxes	$	(2,677	)	$	146

Depreciation, amortization and accretion:
Restaurant/Retail	$	868		$	908
Government	19			5
Other	125			149
Total	$	1,012		$	1,062

Capital expenditures including software costs:
Restaurant/Retail	$	1,063		$	1,139
Government	176			—
Other	684			531
Total	$	1,923		$	1,670

Revenues by country:
United States	$	41,925		$	52,678
Other Countries	2,757			2,983
Total	$	44,682		$	55,661

~~Table of Contents~~

The following table represents identifiable assets by ~~business segment. Amounts below exclude discontinued operations~~reporting segment (in thousands).

September 30,
2017

December 31,
2016

Restaurant/Retail $ 79,004 $ 87,672
Government 7,679 6,504
Other 28,050 29,873
Total $ 114,733 $ 124,049



	March 31, 2019		December 31, 2018
Restaurant/Retail	$	73,255	$	68,004
Government	13,487		9,867
Other	18,306		16,810
Total	$	105,048	$	94,681

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

September 30,
2017

December 31,
2016

United States $ 100,932 $ 110,369
Other Countries 13,801 13,680
Total $ 114,733 $ 124,049



	March 31, 2019		December 31, 2018
United States	$	95,105	$	84,652
Other Countries	9,943		10,029
Total	$	105,048	$	94,681

The following table represents goodwill by reporting ~~segment. Amounts below exclude discontinued operations~~unit (in thousands).

September 30,
2017
December 31,
2016

Restaurant/Retail $ 10,315 $ 10,315
Government 736 736
Total $ 11,051 $ 11,051



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

~~Table of Contents~~

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

Three Months
Ended September 30,

Nine Months
Ended September 30 ,

2017 2016 2017 2016
Hospitality segment:

McDonald’s Corporation 23 % 26 % 35 % 23 %
Yum! Brands, Inc. 17 % 10 % 14 % 11 %
Government segment:

U.S. Department of Defense 31 % 38 % 25 % 38 %
All Others 29 % 26 % 26 % 28 %
100 % 100 % 100 % 100 %



	Three Months Ended March 31,
	2019		2018
Restaurant/Retail reporting segment:
McDonald’s Corporation	10	%	27	%
Yum! Brands, Inc.	13	%	11	%
Government reporting segment:
U.S. Department of Defense	34	%	29	%
All Others	43	%	33	%
	100	%	100	%

No other customer within All Others represented more than 10% of the Company’s total revenue for the three ~~and nine~~ months ended ~~September 30, 2017 or 2016.~~March 31, 2019 and 2018.

Note ~~10 —~~11 Fair Value of Financial Instruments

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

~~Level 1 −~~

Level 1 — quoted prices in active markets for identical assets or liabilities (observable)

~~Level 2 −~~

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 −~~

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 ~~primarily~~ of cash and cash equivalents, trade receivables, trade payables, debt instruments and deferred compensation assets and liabilities. ~~For~~The carrying amounts of cash and cash equivalents, trade receivables and trade payables ~~the carrying amounts of these financial instruments~~ as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 were considered representative of their fair values. The estimated fair value of the Company’s long-term debt and line of credit ~~at September 30, 2017~~on March 31, 2019 and December 31, ~~2016~~2018 was based on variable and fixed interest rates ~~at September 30, 2017 and December 31, 2016, respectively, for new issues with similar remaining maturities~~on such respective dates and approximates ~~the~~their respective carrying values at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.

The deferred compensation assets and liabilities primarily relate to the Company’s deferred compensation plan, which allows for pre-tax salary deferrals for certain key employees. Changes in the fair value of the deferred compensation liabilities are derived using quoted prices in active markets of the asset selections made by the participants. The deferred compensation liabilities are classified within Level 2, the fair value classification as defined under ~~U.S. GAAP,~~FASB ASC 820, "Fair Value Measurements", because their inputs are derived principally from observable market data by correlation to the hypothetical investments. The Company holds insurance investments to partially offset the Company’s liabilities under its deferred compensation plan, which are recorded at fair value each period using the cash surrender value of the insurance investments.

The ~~Company has obligations,~~amounts owed to ~~be paid~~employees participating in ~~cash,~~the Deferred Compensation Plan at March 31, 2019 was $3.2 million compared to ~~the former owners of Brink Software Inc., based~~$3.6 million at December 31, 2018 and is included in other long-term liabilities on the ~~achievement of certain conditions defined in~~consolidated balance sheets.

Under the ~~September 18, 2014~~ stock purchase agreement governing the Brink ~~Software, Inc. acquisition.~~Acquisition, in the event certain defined revenues were determined to have been achieved in 2015, 2016, 2017 and 2018 ("contingent consideration period"), the Company would be obligated to pay additional purchase price consideration ("Brink Earn Out"). The fair value of ~~this contingent consideration payable~~the Brink Earn Out was estimated using a discounted cash flow method, with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820, Fair Value Measurements and Disclosures. The significant inputs in the Level 3 measurement not supported by market activity included the Company’s probability assessments of expected future cash flows related to the Company’s acquisition of Brink Software Inc. during the contingent consideration period, appropriately discounted considering the uncertainties associated with the ~~obligation, and calculated in accordance with the terms of the definitive agreement.~~obligation. Any change in the fair value adjustment ishad been recorded in the earnings of that ~~period. Changes in the fair value of the~~ contingent consideration ~~obligations may result from changes~~period. For the $2.6 million of Brink Earn Out targets achieved during the 2018 period, the Company paid the amount in ~~probability assumptions with respect to~~full in March 2019. No Brink Earn Out targets had been achieved for the ~~likelihood of achieving the various contingent payment obligations. Significant increases~~2015, 2016, or ~~decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurements.~~2017 years.

~~Table of Contents~~

The following table presents a summary of changes in fair value of the Company’s Level 3 assets and liabilities that are measured at fair value on a recurring basis, ~~(in thousands),~~ and are recorded as a component of other long-term liabilities on the consolidated balance ~~sheet:~~sheet (in thousands):

Level 3 Inputs
Liabilities
Balance at December 31, 2016 $ 4,000
New level 3 liability -
Total gains (losses) reported in earnings -
Transfers into or out of Level 3 -
Balance at September 30, 2017 $ 4,000



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

Note 1112 — Related Party Transactions

The Company ~~leases~~leased its corporate wellness facility to related parties at a ~~current~~ rate of $9,775 per month. The Company ~~receives a~~received complimentary ~~membership~~memberships to this facility which iswere provided to ~~all~~local employees. Expenses incurred by the Company relating to the facility amounted to $0 and $55,000 during the three months ended March 31, 2019 and 2018, respectively. The Company ~~received~~did not recognize any rental income ~~amounting to $29,325 and $87,975 for each of~~from the related party during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016.~~recognized $29,325 for the three month period ended March 31, 2018. Additionally, the Company did not have any rent receivable from the related party for the periods ended March 31, 2019 or December 31, 2018.

~~In October 2016,~~

Note 13 — Subsequent Events

Convertible Notes

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

The Company received net proceeds from its sale of the notes, including net proceeds from the option to purchase additional notes, of approximately ~~$1.0 million~~$75.2 million. A portion of ~~expenses~~the proceeds was used to ~~Xpanxion, LLC~~repay in full amounts outstanding under the ~~SOW.~~Credit Agreement, dated June 5, 2018, among the Company, as borrower, with certain of its U.S. subsidiaries, and Citizens Bank, N.A., as lender (as amended by the First Amendment thereto, dated March 4, 2019, the “Credit Agreement), which were approximately $16.1 million as of March 31, 2019, and terminate the Credit Agreement. the Company intends to use the remaining proceeds for general corporate purposes, including funding investment in the Company’s Brink business and for other working capital needs. The Company ~~did not incur~~may also use a portion of the proceeds to acquire or invest in other assets complementary to its business. The notes are senior, unsecured obligations of the Company and bear interest at a rate equal to 4.500% per year. Interest on the notes is payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2019. Interest will accrue on the notes from the last date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from April 15, 2019. Unless earlier converted, redeemed or repurchased, the notes will mature on April 15, 2024.

The notes are convertible, at the option of the holder, at any ~~expenses~~time prior to ~~Xpanxion~~the close of business on the business day immediately preceding October 15, 2023, but only in the following circumstances: (1) during any calendar quarter commencing after the ~~nine month period ended September 30, 2016. Until his retirement~~calendar quarter ending on June 30, ~~2017, Paul Eurek,~~2019 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on such trading day; (2) during the five consecutive business day period immediately after any five consecutive trading day period (the five consecutive trading day period being referred to as the ‘‘measurement period’’) in which the trading price (as defined in the offering memorandum) per $1,000 principal amount of the notes, as determined following a ~~director~~request by a holder of the notes, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; (3) upon the occurrence of certain specified corporate events; or (4) if the Company has called the notes for redemption. In addition, regardless of the foregoing circumstances, holders may convert their notes at any time on or after October 15, 2023 until the close of business on the second business day immediately preceding the maturity date. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of the Company ~~was President~~common stock or a combination of ~~Xpanxion LLC.~~cash and shares of the Company common stock, at its election.

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

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

Termination of Citizens Bank Credit Agreement

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

Internal Investigation

On April 10, 2019, the SEC notified the Company that based on current information, it did not intend to recommend enforcement against the Company; shortly, thereafter, the DOJ advised that it did not intend to proceed.

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

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature, but rather are predictive of our future operations, financial condition, business strategies and prospects. Forward-looking statements are generally identified by words such as “anticipate”, “believe,” “belief,” “continue,” “could”, “expect,” “estimate,” “intend,” “may,” “opportunity,” “plan,” “should,” “will,” “would,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: delays in new product development and/or product introduction; changes in customer base; because a significant portion of our revenue is derived from two customers, a significant fluctuation in our product or service offerings to, one or both of these customers; product and service demands and competition; risks associated with the ongoing investigation into possible violations of the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar laws, including the cost of such investigation and any sanctions, fines or remedial measures that may be imposed by the U.S. Department of Justice (“DOJ”) or the U.S. Securities and Exchange Commission (“SEC”); expenses related to remedial measures; risks associated with our identified material weaknesses in internal control over financial reporting and any other failure to maintain effective internal controls; and the other risk factorsthose discussed in our ~~most recent~~ Annual Report on Form 10-K ~~and other filings with the SEC.~~as filed on March 18, 2019. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

Overview

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

We are a leading provider of POS solutions to restaurants and retail outlets and we expect our Brink line of business, including our Brink POS SaaS software solution, inclusive of related hardware, installation and technical support and other customer services, to be the primary focus and driver of growth in the Restaurant/Retail ~~segment features cloud~~reporting segment. Our ability to grow and ~~on-premise~~expand our presence as a cloud-based, software ~~applications, hardware platforms,~~solutions leader requires that we strategically and effectively distribute and invest our capital in areas that will drive long-term growth, including product development, consisting primarily of expenses in software engineering and related ~~installation, technical,~~personnel costs; sales and ~~maintenance~~marketing, consisting primarily of advertising, marketing, general promotional expenditures and strategic partnerships; and customer support, ~~services tailored for the needs~~consisting primarily of ~~restaurants and retailers.~~ help-desk.

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

Our products sold in the Restaurant/Retail segment are utilized in a wide range of applications by customers worldwide. We face competition across all categories in the Restaurant/Retail segment in which we compete based on product design, innovative features and functionality, quality and reliability, price, customer service, and delivery capability. Our strategy is to provide complete integrated management technology solutions, supported by industry leading customer service. Our research and development efforts are focused on timely identifying changes in customer needs and/or relevant technologies, to rapidly and effectively develop innovative new products and enhancements to our existing products that meet and exceed customer requirements.

Our strategy is to expand our Restaurant/Retail business by continuing to invest in our existing products - Brink POS and SureCheck - including the development of enhancements to our existing software applications and hardware platforms and the development of new and innovative cloud based software applications. To support the growth of our products, we continue to expand our direct sales force and third-party channel partners.

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Currently, PAR’s primary market is the quick serve restaurant category and hardware sales to tier one customers in that category. Consistent with our strategy to expand our product offerings beyond the restaurant/retail markets, we continue to focus on growing and expanding our software offerings, including our cloud software as a service (SaaS) and related hardware and support services. As we implement our strategies, we continuously monitor the trends in the markets within which we currently operate and the markets in which we intend to operate. We know POS hardware is becoming a commodity, as more POS devices (tablets, kiosks and bring your own device) are introduced, competition will continue to increase, driven by pricing, scalability, functionality, and economies of scale, resulting in smaller margins. Our strategy acknowledges this trend, and we intend to grow our recurring revenues from software contracts, specifically SaaS, reducing the impact of this commoditization of POS hardware.

The strategy for our ~~PAR~~ Government reporting segment is to build on our sustained ~~outstanding~~ performance ofon existing service contracts, coupled with investments in enhanced business development capabilities. We believe we are well positioned to realize continued renewals of expiring contracts and extensions of existing contracts, and secure service and solution contracts in expanded areas within the U.S. Department of Defense and other federal agencies. We believe our highly relevant technical competencies, intellectual property, and investments in new technologies provide opportunities to offer systems integration, products, and highly-specialized service solutions to the U.S. Department of Defense and other federal agencies. The general uncertainty in U.S. defense total workforce policies (military, civilian, and contract), procurement cycles, and spending levels for the next several years are factors we monitor as we develop and implement our business strategy for the ~~PAR~~ Government reporting segment.

Internal ~~Investigation;~~Investigation Update.

~~As previously disclosed, our Audit Committee has been overseeing an internal investigation by outside counsel into certain import/export and sales documentation activities~~

We recorded $0.2 million for the three months ended March 31, 2019 compared to $0.3 million for the three months ended March 31, 2018 of post-investigation expenses relating to conduct at our China and Singapore offices, including outside legal counsel and whether these activities were improper and in violation of the FCPA and other applicable laws, and certain of our policies, including our Code of Business Conduct and Ethics. We voluntarily notified, and we are fully cooperating with, the SEC and the DOJ of these activities. On May 1, 2017, we received a subpoena from the SEC for documents relatingforensic accountant fees. See Note 9 - Contingencies, to the investigation. The SEC’s investigation is a non-public, fact-finding inquiry. During the nine months ended September 30, 2017, we recorded $2.3 million of expenses relating to our internal investigation and the SEC subpoena. It is not clear what action, if any, the SEC intends to take with respectunaudited interim consolidated financial statements, for additional information concerning such expenses; see also, Note 13 - Subsequent Events, to the information it gathers pursuant to its subpoena. If the SEC, or the DOJ or other governmental agency (including foreign governmental agencies) determine that violations of certain laws or regulations occurred, then we could be exposed to a broad range of civil and criminal sanctions, including injunctive relief, disgorgement, fines, penalties, modifications to our business practices, including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee our future compliance. While we cannot currently reasonably estimate the potential liability arising out of the China and Singapore matters or the SEC investigation, the imposition of sanctions, fines or remedial measures could have a material adverse effect on our business, prospects, reputation,unaudited interim consolidated financial ~~condition, liquidity, results of operations or cash flows.~~statements.

Results of Operations —

Three Months Ended ~~September 30, 2017~~March 31, 2019 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2018

We reported revenues of ~~$48.9~~$44.7 million for the quarter ended ~~September 30, 2017,~~March 31, 2019, a decrease of ~~20.4%~~19.7% from ~~the $61.5~~$55.7 million reported for the quarter ended ~~September 30, 2016.~~March 31, 2018. Our net loss from ~~continuing~~ operations was ~~$1.5~~$2.7 million or ~~($0.10)~~$0.17 per diluted share for the ~~third~~first quarter of ~~2017~~2019 versus net income of ~~$0.5~~$0.1 million or ~~$0.03~~$0.00 per diluted share for the same period in ~~2016.~~2018.

Operating segment revenues for the quarter ended March 31, 2019 were $29.6 million for Restaurant/Retail, a decrease of 25.2% from $39.5 million reported for the quarter ended March 31, 2018 and $15.1 million for Government, a decrease of 6.3% from $16.1 million reported for the quarter ended March 31, 2018. Restaurant/Retail revenue for the quarter ended March 31, 2019 by business line consisted of $18.7 million for our line of business comprised of non-Brink customers, primarily focused on hardware and respective services ("CORE"), $9.5 million for Brink, and $1.4 million for SureCheck, compared to revenue for the quarter end March 31, 2018 by business line of $32.2 million for CORE, $5.8 million for Brink, and $1.5 million for SureCheck. Government revenue for the quarter ended March 31, 2019 by business line consisted of $6.3 million for Intelligence, Surveillance, and Reconnaissance (“ISR”), $8.5 million for Mission Systems, and $0.3 million for Product Sales, compared to revenue for the quarter end March 31, 2018 by business line of $7.8 million for ISR, $8.3 million for Mission Systems, and $0.0 million for Product Sales.

Product revenues were ~~$20.7~~$15.5 million for the quarter ended ~~September 30, 2017,~~March 31, 2019, a decrease of ~~19.6%~~41.1% from ~~the $25.8~~$26.3 million recorded for the same period in ~~2016. This decrease was~~2018, primarily ~~driven by a wind down of major project installations for our~~due to reduced hardware ~~solutions,~~projects with a tier ~~one~~1 customer in ~~our Restaurant/Retail segment.~~the first quarter of 2018. Product revenue related to Brink was $4.5 million, an increase of 71% from $2.6 million for the same period in 2018.

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Service revenues were ~~$13.3~~$14.0 million for the quarter ended ~~September 30, 2017, an~~March 31, 2019, a increase of ~~5.5%~~6.3% from ~~the $12.6~~$13.2 million reported for the same period in ~~2016,~~2018, primarily due to Brink service revenue of $5.0 million, an increase of 58% from $3.1 million for the same period in ~~installation services driven by~~2018. Brink service revenue includes SaaS revenue of $3.1 million, an increase of 64% from $1.9 million for the same period in ~~tier one product revenue and continued deployments of our Brink POS software.~~2018.

Contract revenues were ~~$14.9~~$15.1 million for the quarter ended ~~September 30, 2017, compared to $23.1~~March 31, 2019, a decrease of 6.2% from $16.1 million reported for the same period in ~~2016, a decrease of 35.5%.~~2018. The decrease reflects ~~the execution~~a reduction in ISR due to contract funding and ceiling limitations largely attributable to one of our transition away from high revenue, low margin awards associated with Project Management Office (“PMO”) contracts to move value-added contracts within the Intelligence, Surveillance, and Reconnaissance (“ISR”) line of business.ISR's programs that is currently undergoing an organizational funding transition.

Product margins for the quarter ended ~~September 30, 2017~~March 31, 2019 were ~~23.4%~~27.6%, compared to ~~28.4%~~26.2% for the same period in ~~2016.~~2018. Product margins for the quarter ~~included inventory reserve adjustments of $0.7 million, unfavorably impacting margins by 360 basis points.~~improved slightly due to favorable sales mix.

Service margins for the quarter ended ~~September 30, 2017~~March 31, 2019 were ~~24.1%~~28.6%, compared to ~~28.9%~~27.7% recorded for the same period in ~~2016.~~2018. Service margins for the quarter ended ~~September 30, 2017 included an adjustment~~March 31, 2019 was primarily due to ~~service costs~~favorable product mix due with the growth of ~~$0.4 million unfavorably impacting margin by 316 basis points.~~Brink SaaS.

Contract margins for the quarter ended ~~September 30, 2017~~March 31, 2019 were ~~8.8%~~9.7%, compared to ~~7.0%~~8.1% for the same period in ~~2016. Our favorable~~2018 due primarily to improved ISR profitability and high margin ~~rate was primarily driven by a continued shift~~Product Sales revenue included in ~~revenues from PMO to the higher value added product offerings by our Government segment of ISR and Mission Support.~~

2019 contract mix.

Selling, general and administrative (SG&A) expenses remained consistent for each of the quarters ended March 31, 2019 and 2018 at $8.6 million. The Company increased investment in Brink sales and marketing by $0.3 million while offsetting G&A and sales costs in other business lines. SG&A expenses associated with the internal investigation for the quarter ended ~~September 30, 2017~~March 31, 2019 were ~~$9.1~~$0.2 million ~~an increase of 4.4%~~as compared to ~~the $8.7~~$0.3 million for the quarter ended September 30, 2016. The increase is primarily due to investment in personnel to support the current and future growth in our Brink & SureCheck products. SG&A expenses for the quarter ended September 30, 2017 included $0.7 million related to the investigation of conduct at our China and Singapore officesMarch 31, 2018.

Research and development (R&D) expenses were ~~$2.7~~$3.1 million for the quarter ended ~~September 30, 2017, a decrease~~March 31, 2019, an increase of ~~6.9%~~6.7% from $2.9 million for the same period in ~~2016.~~2018 primarily driven by increased spending in Brink software development.

~~During~~For each of the quarters ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016,~~March 31, 2018, we recorded $0.2 million of amortization expense associated with ~~acquired~~ identifiable intangible assets ~~from~~acquired in the ~~2014 acquisition of~~ Brink ~~Software Inc.~~Acquisition.

Other ~~expense,~~(expense) income, net, was ~~$70,000~~($430,000) for the quarter ended ~~September 30, 2017,~~March 31, 2019, compared to other ~~expense,~~(expense) income, net, ~~of $38,000~~of$49,000 for the same period in ~~2016.~~2018. Other ~~income/expense~~(expense), net, primarily includes, fair market value fluctuations of our deferred compensation plan, rental income, and foreign currency fair value adjustments. For the quarter ended March 31, 2019, a $0.2 million adjustment was made in connection with the conclusion of the Brink Acquisition.

Interest expense, net, ~~was interest expense~~ of ~~$39,000~~$146,000 for the quarter ended ~~September 30, 2017~~March 31, 2019 compared to ~~$12,000~~$41,000 for quarter ended ~~September 30, 2016.~~March 31, 2018 was due to increased borrowings on the revolving line of credit under our Credit Agreement.

The Company's effective tax rate benefit for the third quarter was impacted by a reduction in the forecasted effective tax rate for the year due to losses in the quarter, resulting in a reversal in the third quarter of the excess rate recorded through the second quarter. Additionally, the Company recorded a discrete benefit in its tax provision for the third quarter associated with stock based compensation.

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~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

We reported total revenues of $177.1 million for the nine months ended September 30, 2017, an increase of 4.5% from the $169.5 million reported for the nine months ended September 30, 2016. Net income from continuing operations was $1.7 million or $0.11 per diluted share for the nine months ended September 30, 2017 versus $0.6 million or $0.04 per diluted share for the same nine-month period in 2016.

Product revenues were $90.6 million for the nine months ended September 30, 2017, an increase of 30.8% from the $69.3 million recorded for the same nine-month period in 2016. This increase was driven by high volume of sales to our tier one customers in our domestic operations and new accounts won through deployments of Brink POS and related hardware. The increase was offset by lower sales volume by our channel partners selling our Pixel Point product.

Service revenues were $42.7 million for the nine months ended September 30, 2017, an increase of 18.2% from the $36.1 million reported for the same nine-month period in 2016. This increase is primarily due to an increase in installation services driven by an increase in tier one product revenue, continued deployment of our Brink POS, and an increase in our depot repair services.

Contract revenues were $43.8 million for the nine months ended September 30, 2017, compared to $64.0 million reported for the same nine-month period in 2016, a decrease of 31.6%. The decrease reflects the execution of our transition away from high revenue, low margin awards associated with PMO contracts to move value-added contracts within the Government segment’s ISR line of business.

~~Product margins for the nine months ended September 30, 2017 were 25.1%, compared to 26.4 % for the same nine-month period in 2016.~~

Service margins were 30.3% for the nine months ended September 30, 2017, compared to 28.6% for the same nine-month period in 2016. This increase was primarily driven by favorable fixed cost absorption on increased volume and continued revenue shifting to our SaaS offering.

Contract margins for the nine months ended September 30, 2017 were 10.3%, compared to 7.9% for the same nine-month period in 2016. This increase was primarily driven by a shift in revenue from PMO to higher volume added product offerings of ISR and Mission Support in our Government segment. In addition, on a year to date basis, Mission Support and PMO showed improved margins in comparison to the prior year due to revenue mix within those respective product lines.

Selling, general and administrative (SG&A) expenses were $27.6 million for the nine months ended September 30, 2017, an increase of 18.5%, compared to the $23.3 million for the nine months ended September 30, 2016. This increase is due to costs driven by investments in sales & marketing and corporate support including information technology, finance and management.

Research and development (R&D) expenses were $9.5 million for the nine months ended September 30, 2017, an increase of 13.1% compared to the $8.4 million for the same period in 2016. The increase was primarily due to our increased investment in software development costs for products associated with our Brink POS and SureCheck software applications in the Restaurant/Retail segment.

For each of the nine months ended September 30, 2017 and 2016, the Company recorded $724,000 of amortization expense associated with acquired identifiable intangible assets from the acquisition of Brink Software Inc.

Other expense, net, was $264,000 for the nine months ended September 30, 2017 and $318,000 for the same period in 2016. Other expense/income primarily includes, fair market value fluctuations of our deferred compensation plan, rental income, and foreign currency fair value adjustments.

Interest (expense) income, net, was interest expense of $84,000 for the nine months ended September 30, 2017 compared to interest income of $20,000 for the nine months ended September 30, 2016. The 2016 interest income represents interest recorded on the note receivable related to the sale of PSMS’ assets in November 2015, offset by interest charged on our short-term borrowings and from long-term debt.

~~The Company’s effective tax rate for the nine months (year-to-date) was 15.9% due to a discrete tax benefit associated with stock based compensation.~~

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Liquidity and Capital Resources

Our primary sources of liquidity have been cash ~~flow~~ from operations and borrowings on our the revolving line of credit under ~~our~~the Credit ~~Facility with JP Morgan Chase Bank, N.A.~~Agreement. Cash used in operating activities ~~from continuing operations~~ was ~~$7.3~~$3.2 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, compared to ~~cash used in operating activities from continuing operations of $2.4~~$2.5 million for the same period in 2016. This increase in cash used in operating activities was primarily driven by third quarter hardware deployed during 2017 associated with customer deposits received in the fourth quarter of 2016 from one of our tier one accounts and a reduction in accounts payable. For the nine months ended September 30, 2016 cash used in operations was mostly due to changes in working capital requirements, primarily associated with increases in inventory procurement and offset by an increase in accounts payable.2018.

Cash used in investing activities ~~from continuing operations~~ was ~~$7.2~~$1.9 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 versus ~~$4.7~~$1.7 million ~~used in investing activities from continuing operations~~ for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2018. In the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, our capital expenditures of ~~$3.9~~$0.9 million were primarily related to the implementation of our enterprise resource planning system ~~and capital improvements made~~compared to ~~our owned and leased properties.~~$0.6 million in the three months ended March 31, 2018. We capitalized ~~$3.3~~$1.0 million in costs associated with investments in our Restaurant/Retail reporting segment software ~~platforms. In~~platforms during the ~~nine~~three months ended ~~September 30, 2016, our capital expenditures of $1.8~~March 31, 2019 compared to $1.1 million were primarily related to our enterprise resource planning system, capital improvements to leased properties, as well as purchases of computer equipment associated with our software support service offerings. We capitalized $1.9 million in costs associated with investments in our Restaurant/Retail segment software platforms. Additionally,for the ~~Company made an agreed upon working capital payment of $1.0 million in regard to the sale of the hotel/spa technology business unit.~~three months ended March 31, 2018.

Cash provided by financing activities ~~from continuing operations~~ was ~~$6.8~~$5.8 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 versus cash provided by financing activities of ~~continuing operations of $2.7~~$3.0 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2018. This change was a result of borrowings on our revolving line of credit under our Credit ~~Facility, proceeds from stock options, and receipt~~Agreement net of ~~$4.2~~$2.6 million distribution related to the ~~2015 sale~~final payment related to the conclusion of ~~hotel/spa technology business. See Note 2 - Divestiture and Discontinued Operations - of our unaudited interim consolidated financial statements.~~the Brink Acquisition.

On ~~November 29, 2016, we, together with certain of our U.S. subsidiaries~~June 5, 2018, the Company entered into a ~~three-year credit agreement~~Credit Agreement (the “Credit Agreement”) with ~~JPMorgan Chase~~certain of its U.S. subsidiaries and Citizens Bank, N.A. (“~~JPMorgan Chase”~~Citizens Bank”)~~. The Credit Agreement provides for~~ providing the Company with a revolving ~~loans in~~line of credit up to an aggregate principal amount of ~~up to $15.0~~$25.0 million ~~with availability thereunder equal to~~(or the lesser of (i) $15.0 million and (ii) a borrowing base (equal to the sum of 80% eligible accounts, 50% eligible raw materials inventory and 35% eligible finished goods inventory, with no more than 50% of total eligible inventory included in the borrowing base), less the aggregate principal amount outstanding (the “Credit Facility”)Borrowing Base, during any Borrowing Base Period). Interest accrues on outstanding principal balances at an applicable rate per annum determined, as of the end of each fiscal quarter, by reference to the CBFR Spread or the Eurodollar Spread based on the Company’s consolidated indebtedness ratio as at the determination date. The Credit Agreement, ~~contains customary affirmative and negative covenants, including covenants that restrict~~was amended by an Amendment to Credit Agreement, dated March 4, 2019 (the “Amendment”). Among the ~~ability of~~relief provided by the Company and its subsidiaries to incur additional indebtedness, incur or permit to exist liens on assets, make investments, loans, advances, guarantees and acquisitions, consolidate or merge, pay dividends and make distributions, and financial covenants, requiring that the Company’s consolidated indebtedness ratio not exceed 3.0 to 1.0 and, a fixed charge coverage ratio of not less than 1.25 to 1.0 for each fiscal quarter. In August 2017, we entered into an Omnibus Amendment, ~~Number 1 to Loan Documents with JPMorgan Chase to provide the Company with more flexibility in its use of its assets and~~was a waiver of ~~any default relating to~~ the ~~location of certain collateral. We were~~Company's noncompliance with the financial covenants contained in ~~compliance with~~the Credit Agreement and temporary relief from these financial covenants until the fiscal quarter ending September 30, 2019. There was a $16.1 million outstanding balance under the Credit Agreement as of ~~September 30, 2017. On September 30, 2017, there was $1.5~~March 31, 2019.

As described in Note 13 - Subsequent Events, to the unaudited interim consolidated financial statements, on April 15, 2019, the Company sold an aggregate principal amount of $80.0 million ~~outstanding~~4.5% Convertible Senior Notes due 2024 (“notes”) and upused a portion of the proceeds to ~~$13.5 million available~~repay in full all amounts outstanding under the Credit ~~Agreement.~~

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~~In addition to~~Agreement, as amended, and, in connection therewith, terminated the Credit Facility, the Company has a mortgage loan, collateralized by certain real estate, with a balance of $0.4 million and $0.6 million as of September 30, 2017 and 2016, respectively. This loan matures on November 1, 2019. Interest is fixed at 4.00% through maturity. The annual loan payment, including interest through November 1, 2019, is $0.2 million.Agreement.

We expect our operating cash flows and ~~available capacity under our Credit Facility~~net proceeds from the notes will be sufficient to meet our operating needs for the next 12 months. Our actual cash needs will depend on many factors, including our rate of revenue growth, including 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 potential fines and penalties that, while currently inestimable, could be material (see Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for further discussion about the potential adverse effect of such fines and penalties on our business). If we are required or otherwise elect to seek additional funding, we cannot be certain that such additional funding will be available on terms and conditions acceptable to us, if at all.material.

Critical Accounting Policies and Estimates

Our unaudited interim consolidated financial statements are based on the application of U.S. generally accepted accounting principles (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis. Primary areas where financial information is subject to the use of estimates, assumptions and the application of judgment include revenue recognition, accounts receivable, inventories, accounting for business combinations, contingent consideration, equity compensation, goodwill and intangible assets, and taxes. Our critical accounting policies have not changed materially from the discussion of those policies included under “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018 except as it relates to leases as a result of the adoption of ASC 842 as discussed in Note 3 - Leases, to the unaudited interim consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The new guidance will be effective for the Company beginning January 1, 2018.

The standard permits the use of either the full retrospective or modified retrospective transition method. The Company expects to adopt the standard under the modified retrospective transition method, which may result in an adjustment to retained earnings for the cumulative effect, if any, of applying the standard to active contracts as of the adoption date. As this method does not result in recast of the prior year financial statements, ASC 606 requires the Company to provide additional disclosures during the year of adoption for the amount by which each financial statement line item is affected by adoption of the new standard and explanation of the reasons for significant changes.

~~Table of Contents~~

In 2017, the Company has prioritized the evaluation of the impact of the new standard on its revenue contracts, including consideration of the application of the new standard’s five-step model on the Company’s current revenue contracts, evaluating the new enhanced disclosure requirements and the data required to prepare such disclosures, and identifying appropriate changes to business processes, information technology systems, and internal controls, where necessary, to support revenue recognition and disclosure requirements under the new guidance. We have been evaluating the impact of applying the new standard’s five-step model on our Restaurant/Retail and Government revenue contracts, including identifying the distinct performance obligations within such arrangements and evaluating the best-estimate of selling prices and the timing of recognizing revenue for such performance obligations. We continue to evaluate the potential quantitative impacts of adoption of the standard to the cumulative adjustment to be recorded on January 1, 2018, as well as to our continuing operations in 2018; however, we currently do not believe there will be effects that significantly alter the timing of revenue recognition. We believe the most significant impacts of adoption of the new standard will be the expanded qualitative and quantitative disclosures required. The Company has made progress in its assessment of the impact of the new revenue recognition standard; however, efforts to quantify the impact upon adoption remain ongoing.

~~In February~~June 2016, the FASB issued ASU ~~2016-02 impacting~~2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date, based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016-13 amends the accounting for ~~leases intending to increase transparency~~credit losses on available-for-sale debt securities and ~~comparability of organizations by requiring balance sheet presentation of leased~~purchased financial assets ~~and increased financial statement disclosure of leasing arrangements.~~with credit deterioration. The revised standard will require entities to recognize a liability for its lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term. Lease obligations are to be measured at the present value of lease payments and accounted for using the effective interest method. The accounting for the leased asset will differ slightly depending on whether the agreement is deemed to be a financing or operating lease. For finance leases, the leased asset is depreciated on a straight-line basis and recorded separately from the interest expense in the income statement resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. The ASU requires that assets and liabilities be presented or disclosed separately and classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The new standardamendment is effective for the Company beginning ~~in the first quarter of 2019. We are currently evaluating the impact of these amendments on our consolidated financial statements.~~

~~In January 2017, the FASB issued ASU 2017-01 clarifying the definition of a business~~ with ~~the objective of adding guidance to assist entities with evaluating whether transactions should be accounted~~its fiscal year ending December 31, 2019, however early application is permitted for ~~as acquisitions (or disposals) of assets or businesses. The amendments in this update affect all~~ reporting entities that must determine whether they have acquired or sold a business. This guidance clarifies that to be a business there must also be at least one substantive process, and narrows the definition of outputs by more closely aligning it with how outputs are described in the new revenue recognition standard. The amendments in this update should be applied prospectively on or after the annual periods beginning after December 15, ~~2017, including interim periods within those periods.~~2018. The ~~adoption of this standards update is~~Company does not ~~expected to~~anticipate ASU 2016-13 will have a material impact ~~on our~~to the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, ~~intended to simplify~~“Intangibles - Goodwill and Other (Topic 350) - Simplifying the ~~subsequent measurement of goodwill. The amendments in this Update modify the concept of impairment~~Test for Goodwill Impairment.” ASU 2017-04 eliminates Step 2 from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment ~~by calculating~~test which required entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by ~~assigning~~comparing the fair value of a reporting unit ~~to all~~with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of ~~its assets and liabilities as if~~goodwill allocated to that reporting ~~unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill~~unit. ASU 2017-04 will be effective for ~~impairment. The standards update is effective~~us on ~~a prospective basis for annual and interim goodwill impairment testing performed in fiscal years beginning after December 15, 2019. The~~January 1, 2020, with earlier adoption ~~of this standards update~~permitted; it is not expected to have a material impact on ~~our~~the Company's unaudited interim consolidated financial statements.

~~Table of Contents~~

In ~~May 2017,~~August 2018, the FASB issued ~~an accounting standards update which provides guidance about which changes~~ASU 2018-13, “Disclosure Framework-Changes to the ~~terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This update requires modification only if~~Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the fair value ~~vesting conditions or~~measurements disclosures with the ~~classification~~primary focus to improve effectiveness of disclosures in the ~~award~~notes to the financial statements that is most important to the users. The new guidance modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes ~~as a result of the change~~ in ~~terms or conditions. This guidance~~measurements applied. ASU 2018-13 is effective for the Company beginning with and including its fiscal ~~years beginning after~~year ending December ~~15, 2017,~~31, 2019 and ~~interim periods therein, with early~~each quarterly period thereafter. Early adoption is permitted. The Company is currently assessing the impact this new guidance may have on the Company’s unaudited interim consolidated financial statements and footnote disclosures.

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

Recently Adopted Accounting Pronouncements

In ~~March~~February 2016, the Financial Accounting Standards Board (FASB) issued ASU ~~2016-09 to simplify several aspects of~~2016-02, "Leases (Topic 842)", impacting the accounting for ~~employee share-based payment transactions~~leases intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. The revised standard ~~including~~will require entities to recognize a liability for its lease obligations and a corresponding asset representing the ~~classification~~right to use the underlying asset over the lease term. Lease obligations are to be measured at the present value of ~~excess tax benefits~~lease payments and ~~deficiencies and~~accounted for using the effective interest method. The accounting for ~~employee forfeitures.~~the leased asset will differ slightly depending on whether the agreement is deemed to be a financing or operating lease. For finance leases, the leased asset is depreciated on a straight-line basis and recorded separately from the interest expense in the income statement resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. The ~~guidance~~ASU requires that assets and liabilities be presented or disclosed separately and classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The new standard was effective for the Company beginning ~~in the quarter ended March 31, 2017 2017 at which time we adopted this new standard. The updates~~January 1, 2019 (see Note 3 - Leases, to the ~~accounting standard include the following:~~

Excess tax benefits and deficiencies no longer are recognized as a change in additional paid-in-capital in the equity section of the balance sheet, instead they are recognized in the income statement as a tax expense or benefit. In the statement of cash flows, excess tax benefits and deficiencies are no longer classified as a financing activity, instead they are classified as an operating activity.

Entities have the option to continue to reduce share-based compensation expense during the vesting period of outstanding awards for estimated future employee forfeitures or they may elect to recognize the impact of forfeitures as they actually occur. The Company will continue to reduce the share based compensation expense during the vesting period of outstanding rewards for estimated future forfeitures.

The ASU also provides new guidance to other areas of the standard including minimum statutory tax withholding rules and the calculation of diluted common shares outstanding. The adoption of this provision will be reflected prospectively in the financial statements and did not have a material impact.

~~The adoption of the new standard in the first quarter of 2017 did not have a significant impact on our~~ unaudited interim consolidated financial ~~statements.~~statements).

In November 2015, the FASB issued new guidance related to the balance sheet classification of deferred taxes. This standard requires an entity to classify all deferred tax assets, along with any valuation allowance, as noncurrent on the balance sheet. As a result, each jurisdiction will have one net noncurrent deferred tax asset or liability. The Company adopted this standard in the first quarter of 2017, which resulted in the Company’s reclassification of deferred tax assets from current assets to non-current assets in the amount of $7.8 million for the nine months ended September 30, 2017 and December 31, 2016.

In July 2015, the FASB issued new guidance related to the measurement of inventory. This standard changes the inventory valuation method from the lower of cost or market to the lower of cost or net realizable value for inventory valued under the first-in, first-out or average cost methods. The implementation of the amended accounting guidance did not have a significant impact on our consolidated financial statements.

~~Table of Contents~~



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Not ~~required.~~Required.



Item 4.	Controls and Procedures

~~Internal Investigation; Material Weaknesses~~

As previously disclosed, our Audit Committee has been overseeing an internal investigation by outside counsel focused on whether certain import/export and sales documentation activities at our China and Singapore offices were improper and in possible violation of the FCPA and other applicable laws, and certain of our policies, including our Code of Business Conduct and Ethics. Based on the investigation findings to date, we discovered that certain members of our China and Singapore staff participated in or were aware of improper activities in China and Singapore, involving the improper bypassing of applicable customs laws of various countries. Such activities in China and Singapore included the failure to properly label items for import into various non-U.S. countries and the failure to properly document the declared value of certain items exported to various non-U.S. countries, as well as questionable payments made to customs officials in China without sufficient documentation to evidence or confirm the legitimacy of their purpose. The investigation also revealed that certain members of upper management knew or should have known of the questionable conduct, but failed to take action to prevent or correct such conduct.

Notwithstanding remedial actions taken through September 30, 2017, our management concluded that the material weaknesses identified as a result of the investigation and described below, continue to exist as of September 30, 2017. Specifically,

we did not maintain a control environment that effectively promoted, maintained, and/or supported the control consciousness of employees or a culture of adequate and prompt reporting of information internally;

~~we failed to maintain sufficient monitoring activities to ensure compliant and consistent global practices and procedures and timely detection of deviations, allowing for timely corrective action; and~~

our policies, procedures, and training were insufficient as to procurement and sales activities, including insufficient documentation involving arrangements with third parties, knowledge of, and compliance with, import/export, customs and similar laws and regulations of international jurisdictions and the FCPA, including deficiencies in our training.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the ~~design and operating~~ effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of ~~September 30, 2017.~~March 31, 2019. Based on that evaluation, ~~and as a result of the material weaknesses in our internal control over financial reporting previously reported and described above,~~ our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ~~not~~ effective as of ~~September 30, 2017. However, it has been determined that no material adjustments, restatements, or other amendments to our previously issued financial statements are required.~~

~~Remediation Efforts to Address Material Weaknesses~~March 31, 2019..

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

~~Table of Contents~~

As we previously disclosed, we have developed and we have begun to implement changes in our internal control over financial reporting to remediate our material weaknesses; and, we are currently implementing our comprehensive compliance program which is focused on both domestic and international anti-bribery, trade control, and other laws, rules, and regulations, and includes new and revised policies. These additional measures are intended to address the above deficiencies and ensure a continuous and effective control environment that not only encourages, but demands compliance and provides processes and procedures for the timely reporting of necessary and/or required information to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We caution that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Controls Over Financial Reporting.

In evaluating whether there were any reportable changes in our internal control over financial reporting during the quarter ended September 30, 2017, we determined that, other than the changes described above under “Remediation Efforts to Address Material Weaknesses”, thereThere were no changes in internal control over financial reporting during the quarter ended ~~September 30, 2017~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~However, we do anticipate further changes will be implemented to remedy the material weaknesses identified above.~~

Part II - Other Information



Item 1.	Legal Proceedings

The information in Note 89 – Contingencies, to the unaudited interim consolidated financial statements, is responsive to this Item and is incorporated by reference herein.



Item 1A.	Risk Factors

~~There have been no material changes in our risk factors from~~Our financial condition and results of operations are subject to various risks and uncertainties, including those ~~disclosed~~described in Part I, Item ~~1A. Risk Factors,~~1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2018, as filed with the SEC on March 18, 2019. As disclosed above under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”, on April ~~17, 2017, as supplemented by~~15, 2019, we sold an aggregate principal amount of $80.0 million 4.5% Convertible Senior Notes due 2024 (“notes”). In addition to the ~~disclosure in Part II, Item 1A~~ Risk Factors discussed in our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the fiscal year ended December 31, 2018, consideration should be given to the following risk factors.

Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt.Our ability to make scheduled payments of the principal of, to pay interest on or to refinance the notes and any future indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt because of factors beyond our control. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

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

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

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

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

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

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

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

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

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

We are subject to laws and regulations governing the protection of personally identifiable information; we are also subject to cyber-attacks. A failure to comply with applicable privacy or data protection laws or a cyber-attack could harm our reputation and have a material adverse effect on our business.We collect, process, transmit, and/or store (on our operating systems and those of third-party providers) customer transactional data and their customers’ and employees' personally identifiable information and/or other data and information. Personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions; moreover, what constitutes personally identifiable information and what other data and/or information is subject to the privacy laws continues to evolve and the laws that do reference data privacy continue to be interpreted by the courts and their applicability and reach are therefore uncertain. Our failure and/or the failure of our customers, vendors and service providers to comply with applicable privacy and data protection laws and regulations could damage our reputation, discourage current and potential customers from using our products and services, result in fines and/or proceedings by governmental agencies, complaints by private individuals, and/or the payment of penalties to consumers, any one or all of which could adversely affect our business, financial condition and results of operations. Compliance with these laws and regulations, or changes in these laws and regulations, may be onerous and expensive and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance. Moreover, allegations of non-compliance whether or not true could be costly, time consuming, distracting to management, and cause reputational harm. Illustrative of this risk, on March ~~31, 2017,~~21, 2019, Kandice Neals on behalf of herself and others similarly situated filed ~~May 15, 2017.~~a complaint against us in the Circuit Court of Cook County, Illinois County Department, Chancery Division. The complaint asserts that the Company violated the Illinois Biometric Information Privacy Act in the alleged collection, use and storage of her and others’ biometric data derived from fingerprint scans taken for authentication purposes on point-of-sales systems. While we believe the lawsuit is without merit and intend to defend it vigorously, even if we are ultimately successful in our defense, we will need to spend money, time and attention to defend against the complaint. Our operating systems, and those of our third-party providers, could become subject to cyber-attacks, including using computer viruses, credential harvesting, dedicated denial of services attacks, malware, social engineering and other means for obtaining unauthorized access to or disrupting the operation of our systems and those of our third-party providers. Any failure or interruption of our operating systems or those of our third-party providers could result in operational disruptions or misappropriation of information, including interruption of systems availability or denial of access to and misuse of applications or information required by our customers to conduct their business. Any operational disruptions or misappropriation of information (including personally identifiable information or personal data) could harm our relationship with our customers and could have a material adverse effect on our business, financial condition, and results of operations.



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

Under our equity incentive plans, recipients of restricted stock grants must pay us, in cash, the par value for each share granted. If the vesting requirements are not satisfied, we will repurchase the forfeited shares at par value. In addition, employees may elect to have us withhold shares to satisfy minimum statutory federal, state and local tax withholding obligations arising from the vesting of their restricted stock. When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld, which could be deemed a purchase of shares by us on the date of withholding. For the ~~nine~~three months ended ~~September 30, 2017, 1,714~~March 31, 2019, 3,349 shares were purchased at an average price of ~~$9.67~~$24.92 per share.

~~Table of Contents~~



Item 5.	Other Information

Not Applicable.



Item 6.	Exhibits



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

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

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

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

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

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

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

101.INS	XBRL Instance Document			Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document			Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document			Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document			Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document			Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document			Filed herewith

~~Exhibit Index~~

Exhibit
Number

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

10.1 Omnibus Amendment Number 1 to Loan Documents dated August 10, 2017 among PAR Technology Corporation, ParTech, Inc., Ausable Solutions, Inc., PAR Government Systems Corporation, Rome Research Corporation, Brink Software, Inc and JPMorgan Chase Bank, N.A.
Quarterly Report
on Form 10-Q
10.4 8/14/2017

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

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

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

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

101.INS XBRL Instance Document Filed herewith

101.SCH XBRL Taxonomy Extension Schema Document Filed herewith

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith

101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed herewith

101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed herewith

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith

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

~~Table of Contents~~

SIGNATURES

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



		PAR TECHNOLOGY CORPORATION
		(Registrant)

Date: ~~November 13, 2017~~	May 7, 2019	/s/ Bryan A. Menar
		Bryan A. Menar
		Chief Financial and Accounting Officer
		(Principal Financial ~~and Accounting~~ Officer)

~~Table of Contents~~

~~Exhibit Index~~

Exhibit
Number

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

10.1 Omnibus Amendment Number 1 to Loan Documents dated August 10, 2017 among PAR Technology Corporation, ParTech, Inc., Ausable Solutions, Inc., PAR Government Systems Corporation, Rome Research Corporation, Brink Software, Inc and JPMorgan Chase Bank, N.A.
Quarterly Report
on Form 10-Q
10.4 8/14/2017

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

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

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

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

101.INS XBRL Instance Document Filed herewith

101.SCH XBRL Taxonomy Extension Schema Document Filed herewith

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith

101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed herewith

101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed herewith

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net revenues:
Product	$	20,706		$	25,757		$	90,594		$	69,285
Service		13,317			12,620			42,694			36,128
Contract		14,915			23,115			43,776			64,042
		48,938			61,492			177,064			169,455
Costs of sales:
Product		15,861			18,433			67,822			51,012
Service		10,102			8,969			29,753			25,787
Contract		13,608			21,490			39,264			59,002
		39,571			48,892			136,839			135,801
Gross margin		9,367			12,600			40,225			33,654
Operating expenses:
Selling, general and administrative		9,054			8,672			27,581			23,271
Research and development		2,668			2,866			9,521			8,421
Amortization of identifiable intangible assets		241			241			724			724
		11,963			11,779			37,826			32,416
Operating (loss) income from continuing operations		(2,596	)		821			2,399			1,238
Other expense, net		(70	)		(38	)		(264	)		(318	)
Interest expense, net		(39	)		(12	)		(84	)		20
(Loss) income from continuing operations before provision for income taxes		(2,705	)		771			2,051			940
Benefits (provision) for income taxes		1,188			(253	)		(327	)		(306	)
(Loss) income from continuing operations		(1,517	)		518			1,724			634
Discontinued operations
Income (loss) from discontinued operations (net of tax)		-			-			183			(26	)
Net (loss) income	$	(1,517	)	$	518		$	1,907		$	608
Basic Earnings per Share:
(Loss) income from continuing operations		(0.10	)		0.03			0.11			0.04
(Loss) income from discontinued operations		(0.00	)		(0.00	)		0.01			(0.00	)
Net (loss) income	$	(0.10	)	$	0.03		$	0.12		$	0.04
Diluted Earnings per Share:
(Loss) income from continuing operations		(0.10	)		0.03			0.11			0.04
(Loss) income from discontinued operations		(0.00	)		(0.00	)		0.01			(0.00	)
Net (loss) income	$	(0.10	)	$	0.03		$	0.12		$	0.04
Weighted average shares outstanding
Basic		15,976			15,770			15,949			15,670
Diluted		15,976			15,822			16,260			15,730

Assets	September 30, 2017			December 31, 2016
Current assets:
Cash and cash equivalents	$	1,173		$	9,055
Accounts receivable-net		28,392			30,705
Inventories-net		26,716			26,237
Note receivable		-			3,510
Income taxes receivable		144			261
Other current assets		4,048			4,027
Assets of discontinued operations		-			462
Total current assets		60,473			74,257
Property, plant and equipment – net		9,999			7,035
Deferred income taxes		17,002			17,417
Goodwill		11,051			11,051
Intangible assets – net		12,366			10,966
Other assets		3,842			3,785
Total Assets	$	114,733		$	124,511
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	195		$	187
Borrowings of line of credit		1,450			-
Accounts payable		9,448			16,687
Accrued salaries and benefits		5,911			5,470
Accrued expenses		3,820			4,682
Customer deposits and deferred service revenue		12,496			19,814
Total current liabilities		33,320			46,840
Long-term debt		233			379
Other long-term liabilities		7,797			7,712
Total liabilities		41,350			54,931
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized		-			-
Common stock, $.02 par value, 29,000,000 shares authorized; 17,715,556 and 17,479,454 shares issued, 16,007,447 and 15,771,345 outstanding at September 30, 2017 and December 31, 2016, respectively		354			350
Capital in excess of par value		48,176			46,203
Retained earnings		34,264			32,357
Accumulated other comprehensive loss		(3,575	)		(3,494	)
Treasury stock, at cost, 1,708,109 shares		(5,836	)		(5,836	)
Total shareholders’ equity		73,383			69,580
Total Liabilities and Shareholders’ Equity	$	114,733		$	124,511

	September 30, 2017		December, 31 2016
Assets
Other current assets	$	-	$	462
Assets of discontinued operations	$	-	$	462

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017			2016
Operations
Total revenues	$	-	$	-	$	-		$	-

Income (loss) from discontinued operations before income taxes	$	-	$	-	$	284		$	(38	)
(Provision for) benefit from income taxes		-		-		(101	)		12
Income (loss) from discontinued operations, net of taxes	$	-	$	-	$	183		$	(26	)

	September 30, 2017			December 31, 2016
Government segment:
Billed	$	7,465		$	6,779
Advanced billings		(1,344	)		(1,599	)
		6,121			5,180

Restaurant/Retail segment:		22,271			25,525
Accounts receivable - net	$	28,392		$	30,705

2017	$	618
2018		2,379
2019		1,905
2020		1,487
2021		1,031
Thereafter		4,546
Total	$	11,966

	Three Months Ended September 30,						Nine Months Ended September 30 ,
	2017			2016			2017			2016
Hospitality segment:
McDonald’s Corporation		23	%		26	%		35	%		23	%
Yum! Brands, Inc.		17	%		10	%		14	%		11	%
Government segment:
U.S. Department of Defense		31	%		38	%		25	%		38	%
All Others		29	%		26	%		26	%		28	%
		100	%		100	%		100	%		100	%

	Level 3 Inputs
	Liabilities
Balance at December 31, 2016	$	4,000
New level 3 liability		-
Total gains (losses) reported in earnings		-
Transfers into or out of Level 3		-
Balance at September 30, 2017	$	4,000