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PAR Par Technology

Filed: 24 Jun 21, 4:18pm

Exhibit 99.1

PUNCHH, INC.
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 2020


PUNCHH, INC.
TABLE OF CONTENTS




Page

 
INDEPENDENT AUDITOR’S REPORT1

 
CONSOLIDATED FINANCIAL STATEMENTS 

 

Consolidated Balance Sheet2


 

Consolidated Statement of Operation3


 

Consolidated Statement of Stockholders’ Equity4


 

 Consolidated Statement of Cash Flows5


 

Notes to Consolidated Financial Statements6-28


INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of
Punchh, Inc.
San Mateo, California

Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Punchh, Inc. and its subsidiaries (the “Company), which comprise the balance sheet as of December 31, 2020, the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Punchh, Inc. and its subsidiaries as of December 31, 2020, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter
As discussed in Note 3 to the financial statements, the 2019 consolidated financial statements have been restated to correct a misstatement. Our opinion is not modified with respect to this matter.

As discussed in Note 3 to the consolidated financial statements, the Company adopted new accounting guidance ASC Topic 606, Revenue from Contracts with Customers. Our opinion is not modified with respect to this matter.

/s/ SingerLewak LLP
April 20, 2021
San Jose, California

1

PUNCHH, INC.
CONSOLIDATED BALANCE SHEET
December 31, 2020



ASSETS   

 2020
 
Current assets   
Cash and cash equivalents
 $27,917,028 
Accounts receivable, net  3,412,380
 
Prepaid expenses and other current assets
  724,899
 
Deferred commission costs
  814,501
 
Deferred implementation costs
  2,704,119
 

    
Total current assets
  35,572,927
 

    
Property and equipment, net
  561,925 
Deferred commission costs, less current portion  461,992 
Deferred implementation costs, less current portion  2,758,364 
Other assets  
481,581
 
     
Total assets $39,836,789 
     
LIABILITIES AND STOCKHOLDERS’ EQUITY    

    
Current liabilities    
Notes payablecurrent portion
 $2,434,626 
Accounts payable  
2,964,997
 
Accrued payroll  3,469,831 
Accrued sales tax liability
  
1,791,325
 
Accrued liabilities
  
1,232,516
 
Deferred rent
  
60,858
 
Deferred revenue
  
3,792,213
 
     
Total current liabilities
  15,746,366
 
     
Long-term liabilities    
Notes payableless current portion
  
1,122,425
 
Deferred revenueless current portion
  
2,325,486
 

    
Total liabilities
  19,194,277 

    
Commitments and contingencies (Note 9)    

    
Stockholdersequity    
Convertible Series C preferred stock, $0.0001 par value; 3,521,999 shares authorized ; 3,458,608 shares issued and outstanding ($39,250,013 liquidation preference)
  346
 
Convertible Series B preferred stock, $0.0001 par value; 3,281,264 shares authorized ; 3,281,264 shares issued and outstanding ($18,800,002 liquidation preference)
  328
 
Convertible Series A-1 preferred stock, $0.0001 par value; 4,525,635 shares authorized; 4,525,635 shares issued and outstanding ($4,161,512 liquidation preference)
  453
 
Convertible Series A preferred stock$0.0001 par value; 6,718,085 shares authorized; 6,718,085 shares issued and outstanding ($6,177,548 liquidation preference)
  672
 
Common stock$0.0001 par value31,520,000 shares authorized; 7,308,815 shares issued and outstanding
  731
 
Additional paid-in capital
  71,044,037
 
Note receivable from stockholder  (512,934)
Accumulated deficit  (49,891,121)

    
Total stockholdersequity
  20,642,512 

    
Total liabilities and stockholdersequity
 $39,836,789 
 
See notes to financial statements.
2

PUNCHH, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2020



  
2020
 
     
Net revenues $27,228,644 
     
Cost of revenues  10,108,987 
     
Gross profit  17,119,657 
     
Operating expenses    
Research and development  8,947,813 
Sales and marketing  11,410,234 
General and administrative expense  9,671,151 
     
Total operating expenses  30,029,198 
     
Loss from operations  (12,909,541)
     
Interest and other income (expense), net    
Interest income  169,812 
Interest expense  (63,233)
Other expense  (5,066)
     
Total other income  101,513 
     
Net loss $(12,808,028)

See notes to financial statements.
3

PUNCHH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Year Ended December 312020





  
Convertible
Preferred Stock
  
Common Stock
  
Additional
Paid-In
  
Note
Receivable
from
  
Accumulated
  
Total
Stockholders’
 
  
Shares  Amount  Shares  
Amount
  
Capital
  
Stockholder
  
Deficit
  
Equity
 
BalanceDecember 312019 (restated)
                                
Restated balance prior to adoption of new accounting standard
  
17,983,592
   
1,799
   
6,988,034
   699   
70,395,994
   
(397,624
)
  
(43,516,804
)  
26,484,064
 
Adoption of new accounting standard (Note 3)
  -
   -
   -
   -
   -
   -
   6,433,711   6,433,711 
BalanceJanuary 12020 (restated including adoption of new accounting standard)
  
17,983,592
   
1,799
   
6,988,034
   699   
70,395,994
   
(397,624
)  
(37,083,093
)  
32,917,775

                                 
Exercise of stock options
  -
   -
   
320,781
   32   
153,805
   -
   -
   
153,837
 
                                 
Advances to stockholder
   -    -   -
   -
   -
   
(124,000
)   -   
(124,000
)
                                 
Employee stock-based compensation
   -    -    -    -   
494,238
    -    -   
494,238
 
                                 
Interest on note receivable from stockholder
   -    -    -    -    -   
(11,277
)   -   
(11,277
)
                                 
Repayment of note receivable from stockholder
   -    -    -    -    -   
19,967
    -   
19,967
 
                                 
Net loss for the year
   -    -    -    -    -    -   
(12,808,028
)  
(12,808,028
)
                                 
BalanceDecember 312020
  
17,983,592
  $
1,799
   
7,308,815
  $731  $
71,044,037
  $
(512,934
) $
(49,891,121
) $
20,642,512
 

See notes to financial statements.
4

PUNCHH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2020



  
2020
 
Cash flows from operating activities
   
Net loss
 $
(12,808,028
)
Adjustments to reconcile net loss to net cash used in operating activities:
    
Depreciation  
346,050
 
Provision for bad debts
  
53,548
 
Stock-based compensation  
494,238
 
Noncash interest income  
(11,277
)
Changes in operating assets and liabilities
    
Accounts receivable  
(1,585,937
)
Prepaid expenses and other current assets
  
15,270
 
Deferred commission costs  
450,162
 
Deferred implementation costs  (755,427)
Other assets
  (59,496)
Accounts payable  287,449 
Accrued payroll  
1,737,851
 
Accrued sales tax liability
  
698,595
 
Accrued liabilities
  
33,031
 
Deferred rent
  
(17,588
)
Deferred revenue  
941,579
 
Net cash used in operating activities  
(10,179,980
)
     
Cash flows from investing activities    
Purchase of property and equipment
  
(157,101
)
Repayment of note receivable from stockholder
  
19,967
 
Advance to stockholder  
(124,000
)
     
Net cash used in investing activities
  
(261,134
)
     
Cash flows from financing activities
    
Proceeds from notes payable
  
3,314,627
 
Repayment of notes payable  
(333,334
)
Repurchase of common stock    
Proceeds from exercise of stock options
  
153,837
 
Proceeds from sale of series C convertible preferred stock for cash, net of issuance costs
  -
 
     
Net cash provided by financing activities
  
3,135,130
 
     
Net decrease in cash and cash equivalents
  
(7,305,984
)
     
Cash and cash equivalents, beginning of year  
35,223,012
 
     
Cash and cash equivalents, end of year $27,917,028 
     
Supplemental cash flow information    
Cash paid for interest
 $55,554 
Cash paid for income taxes $14,035 
Noncash investing and financing activities:    
Receipt of note receivable for exercise of stock option $124,000
 

See notes to financial statements.
5

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - HISTORY, ORGANIZATION AND OPERATIONS

Punchh, Inc. (the Company), is a Delaware corporation, that was originally incorporated under the General Incorporation Law of the State of Delaware on April 16, 2010. The Company offers a mobile phone-based referral and loyalty program that allows users to win rewards at restaurants for their loyalty and referrals.

Punchh Tech India Private Limited is a private India company incorporated on September 13, 2013. It is a wholly-owned subsidiary of Punchh, Inc. and provides the Company a customer support and research and development team that works on current and future product offerings.

Punchh Canada, Inc. is a Canadian corporation established on February 7, 2019. The entity is a wholly-owned subsidiary of Punchh, Inc. The subsidiary provides a research and development team to provide technical services for future products.

The Company was acquired on April 8, 2021 (See Note 11).

NOTE 2 - LIQUIDITY

As shown in the accompanying consolidated financial statements, the Company has suffered net operating losses and negative cash flows from operations and as of December 31, 2020, had an accumulated deficit of $49,891,121.

Since inception, the Company has incurred net losses and cash flow deficits from operations. Management believes that operating losses and negative cash flows from operations will continue into the foreseeable future as the Company continues to devote significant efforts to growing the Companys customer base and developing its software as a service platform. Management plans to continue to finance the Companys operations with a combination of equity issuances, debt arrangements and revenue. However, there is no assurance that such additional capital can be raised and at terms that are advantageous to the Company. The consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. The Company was acquired on April 8, 2021 (See Note 11).

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Basis of Presentation
The accompanying consolidated financial statements were prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

6

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Principles of Consolidation
The accompanying consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries in India and Canada, Punchh Tech India Private Limited and Punchh Canada, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

Restatement
In 2020, the Company determined that it did not fully identify all states in which the Company should have been collecting sales tax from customers for 2020 and prior years. Although it was unable to collect the required sales tax from its customers, the Company is still required to pay the required sales tax. Accordingly, the Company recorded accrued sales tax and the related penalties and interest.

The total sales tax due by each year are as follows:

2020 $583,310 
2019  509,498 
2018 and prior years  421,732 
     
Total

$
1,514,540
 

The total penalties and interest accrued by year are as follows:

2020 $115,285 
2019  96,678 
2018 and prior years  64,822 
     
Total
 $
276,785
 

7

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Restatement (Continued)
The following table summarize the corrections on each of the affected financial statement line items for the year ended December 31, 2019.

Balance sheet
         

 
Previously
Reported
  
Adjustment
  
As Restated
 
Accrued sales tax liability $-
  $1,092,730  $1,092,730 
Total liabilities  11,439,337   1,092,730   12,532,067 
Accumulated deficit  (42,424,074)  (1,092,730)  (43,516,804)
Total stockholdersequity
 $27,576,794  $(1,092,730) $26,484,064 

Statement of operations
 
         
  
Previously
Reported
  Adjustment  As Restated 
Sales tax expense $-
  $606,176  $606,176 
Total operating expenses  33,109,188   606,176   33,715,364 
Net loss $(19,972,682) $(606,176) $(20,578,858)

Statement of cash flows
 
         
  
Previously
Reported
  Adjustment  As Restated 
Net loss $(19,972,682) $(606,176) $(20,578,858)
Change in accrued sales tax liability $
-
  
606,176  $606,176 

8

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Foreign Currency Translation
The functional currency of the Companys subsidiaries in India and Canada is the U.S. dollar. The Company remeasures their foreign assets and liabilities to U.S. dollars. Nonmonetary assets and liabilities are translated at historical exchange rates and monetary assets and liabilities are translated at period end exchange rates. Revenues and expenses are translated at the average exchange rate for the period. The gains and losses from foreign currency remeasurement are recorded in the consolidated statement of operations as part of other expense.

Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The companys most significant estimates relate to valuation of its common stock and stock options, estimates of customer life used in recognizing custom services revenue, amortizing deferred commissions and implementation costs, deferred tax assets and the related valuation allowance and the Company’s evaluation of the Company’s ability to continue as a going concern.

Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents.

Accounts Receivable
Accounts receivable are recorded at the invoiced amount are unsecured and do not bear interest. The allowance for doubtful accounts is based on managements best estimate of the amount of probable credit losses in existing accounts receivable. The Company writes off accounts receivable against the allowance once all efforts at collection have been exhaustedThe provision for doubtful accounts was $659,571 as of December 31, 2020.

Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents. The Companys cash and cash equivalents consist of cash deposits with high credit-quality financial institutions in the United States of America and in India. As of December 31, 2020, the Company’s cash balance exceeded the federally insured limit. It is the opinion of management that there is little risk related to these cash concentrations due to the creditworthiness of the financial institutions where the cash balances are maintained.

9

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years. Repairs and maintenance are charged to expense as incurred. Upon the sale or retirement of property and equipment, the accounts are relieved of the cost and the related accumulated depreciation, with any resulting gain or loss included in the consolidated statements of operations.

Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or the fair value less costs to sell. No such impairments have been identified in 2020 and 2019.

Internal-use Software
The Company develops internal-use software as required to support its operations. Costs incurred to develop internal-use software during the application development stage are capitalized and reported at cost, subject to an impairment test. Application development stage costs generally include costs associated with software configuration, coding, installation, and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. Capitalized costs are amortized using the straight-line method over three years. The Company assesses the potential impairment of capitalized internal-use software whenever events or changes in circumstances indicate that the carrying value of the internal-use software may not be recoverable. As of December 31, 2020, there were no capitalized internal-use software costs.

10

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

2020 Revenue Recognition
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, Topic 606 (ASC 606). The core principle of the guidance is that an entity should recognize revenue 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 Company adopted this accounting standard on January 1, 2020 using the modified retrospective method applying the standard to uncompleted contracts at the date of adoption. The effect of adoption on revenue recognition was not significant. The principal effects of adoption were due to the deferral and amortization of costs to obtain and fulfill contracts. There was no significant difference in 2020 between revenue recognized under ASC 606 and the legacy revenue recognition guidance under ASC 605.

The Company provides subscription software licensing on its online software-as-a-service (SAAS) platform to assist its customers with customers acquisition, customer retention and marketing programs. The term of the subscriptions generally range from 12 to 36 months and the Companys revenue arrangements are documented in contractual arrangements that typically include a master services agreement and associated statements of work. The Company’s contracts typically include a fixed initial term with renewal provisions and cancellation for convenience after the initial contractual term. Payment arrangements generally require an up-front payment related to implementation and customization and monthly payments for the SAAS and third-party services and certain contracts include a fixed annual fee. Payment terms are net 30. In multiple-year contracts payment terms can be spread over several years. The Company has concluded that such multi-year payment terms do not represent a significant financing component as the payments align with the Companys performance under the contract.

The Company’s SAAS offering generally include the following elements:


Access to the Company’s SAAS platform

Implementation and customization of the SAAS platform

Maintenance and support of the SAAS platform

Third-party services

Professional services

The Companys has concluded that the SAASimplementation and customization and maintenance and support of its platform are a single combined performance obligation as these elements are highly integrated and interrelated and the third-party services and professional services are separate performance obligations as the customer can benefit from the SAAS with our without these services. The professional services historically have not been significant. The Company allocates contract consideration between these performance obligations based upon the stand-alone selling price of each element.

11

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

The Company’s contracts include variable consideration related to the number of customer locations each month and monthly transaction-based fees from the third-party services. The variable consideration in each of these contracts resets each month. The Company has concluded that such forms of variable consideration meet the variable consideration allocation exception as each month’s variable fees relate specifically to the Company’s efforts to satisfy the performance obligation for that discrete monthly period, meets the overall allocation objective of the revenue standard and the SAAS service represents a series of distinct monthly service periods which form a part of the overall SAAS performance obligation. The Company’s contracts also contain variable consideration in the form of service/uptime credits. Such variable consideration has historically not been significant.

For third-party services the Company presents such revenue on a gross basis with the cost of such third-party services included in cost of revenues. The Company concluded that they control the third-party services prior to delivery to customers.

The Company excludes from revenue sales taxes the Company bills and collects from customers. The Company recognizes revenue as follows:

 Implementation and customization fees- these fees are deferred and recognized ratably over the estimated customer life.
 SAAS monthly and annual fees are recognized ratably over the contract term.
 Third-party fees are recognized each month based upon the transactions occurring each month.
 
Professional services are recognized monthly as services are rendered.

All of the Company’s 2020 revenues were recognized over time.

The table below summarizes contract assets and liabilities as of December 31, 2020 and January 1, 2020 (adoption date of ASC 606):

  December 31, 2020  January 1, 2020 
Deferred commissions $1,276,493  $1,726,655 
Deferred implementation costs $5,462,483  $4,707,056 
Deferred revenue $6,117,699  $5,176,120 

12

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Below summarizes by financial statement line items the effects of adoption as of January 1, 2020 and for the year ended December 31, 2020:

January 1, 2020
    
Increase in deferred commissions $1,726,655 
Increase in deferred implementation costs $4,707,056 
     
December 31, 2020 (change from adoption date)
 
Decrease in deferred commissions $450,162 
Increase in deferred implementation costs
 $755,427 

Year ended December 31, 2020
 
  
 

 
Expense under ASC 606
  
Expense under ASC 605
 
Commission expense
 $1,105,335  $655,173 
Implementation costs $2,183,800  $2,939,227 

Costs to obtain and fulfill contracts
The Company capitalizes certain contract acquisition costs, consisting primarily of commissions and related payroll taxes, when customer contracts are signed (deferred commission). The Company also capitalizes certain contract fulfillment costs, consisting primarily of the portion of the payroll and fringe benefits of the Company’s professional services team that relates directly to performing the implementation and customization services for new and existing customers and certain other related costs (deferred implementation costs”).

The deferred costs to obtain and fulfill contracts are amortized over the expected period of benefit, which the Company has determined to be approximately 36 months. This expected period of benefit takes into consideration the duration of the Company’s customer contracts, historical contract renewal rates, the underlying technology and other factors. Amortization expense for deferred commission costs is included in sales and marketing expense in the accompanying consolidated statement of operations. Amortization expense for deferred implementation costs is included in cost of sales in the accompanying consolidated statements of operation. There were no impairment losses related to costs capitalized in 2020.

The Company classifies deferred costs to obtain and fulfill contracts as current or non-current based on the timing of when the related amortization expense is expected to be recognized.

13

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Cost of Revenues
Cost of revenues consists primarily of costs related to providing subscription services to customers, including employee compensation and other employee-related costs for customer service staff, hosting costs, licensed data costs, networking expenses and the cost of third-party services, and amortization of deferred implementation costs.

Advertising Costs
Advertising costs are expensed as incurred. Advertising costs for the year ended December 31, 2020 was insignificant.

Research and Development Costs
Research and development costs are expensed as incurred.

Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on fair value of the award, determined using the Black-Scholes option pricing model, and is recognized as expense over the applicable vesting period of the stock award using the straight-line method for awards that are expected to vest.

Fair Value of Financial Instruments
U.S. GAAP clarifies fair value as an exit price, establishes a hierarchal disclosure framework for measuring fair value, and requires extended disclosures about fair value measurements. U.S. GAAP applies to all financial assets and liabilities measured at fair value.

As defined by U.S. GAAP, fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

14

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Fair Value of Financial Instruments (Continued)
As a basis for considering these assumptions, U.S. GAAP defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

 Level 1 –Quoted prices in active markets for identical assets or liabilities.

 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 markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 Level 3 –Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s only financial instrument measured at fair value in these consolidated financial statements is its cash balances which are measured using Level 1 inputs.

Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax basis of the Company’s assets and liabilities and the financial statement reported amounts. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and tax credit carryforwards. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that is more likely than not to be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. U.S. GAAP requires that realization of an uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the consolidated financial statements. The guidance further prescribes the benefit to be realized assumes a review by tax authorities having all relevant information and applying current conventions. The interpretation also clarifies the financial statement classification of tax related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as income tax expense.

15

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)

Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases(Topic 842). The guidance in this update supersedes the leasing guidance in Topic 840, LeasesUnder the new guidance, lessees are required to recognize lease assets and lease liabilities in the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for annual periods beginning after December 15, 2021. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the effect of this new standard on the Companys financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of ASC Topic 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. The amendments in ASU 2018-07 are effective for the Company beginning on January 1, 2020. Early adoption is permitted but not prior to adopting ASC 606, Revenue from Contracts with Customers. The impact of adoption was not significant to the financial statements.

NOTE 4 - BALANCE SHEET ACCOUNTS

Property and Equipment
Property and equipment consisted of the following as of December 31,:

  2020 
     
Computer equipment $801,790 
Furniture, fixtures and equipment  216,760 
Software and website  111,397 
Mobile  7,293 
   1,137,240 
Accumulated depreciation  (575,315)
     
  $561,925 

16

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - BALANCE SHEET ACCOUNTS (Continued)

Accrued Payroll
Accrued payroll consisted of the following as of December 31,:

   2020
 
     
Accrued payroll for India subsidiary $174,937 
Accrued vacation  310,548 
Accrued employee benefits  762,179 
Accrued bonus  2,222,167 







$
3,469,831


Accrued Liabilities
Accrued liabilities consisted of the following as of December 31,:


 2020 
     
Accrued cost of sales $1,023,669 
Accrued interest  30,133 
Accrued other expenses  178,714 
     
  $1,232,516 

NOTE 5 - NOTES PAYABLE

SVB Term Loan and Growth Capital Line
In October 2016, the Company entered into a Term Loan agreement with SVB bank in the amount of up to $1,000,000. The Term Loan availability end date was August 31, 2017. The Company shall make monthly payments of interest only commencing on the first day of the month following the month in which the funding date occurs and continuing thereafter on the first day of each successive calendar month through August 31, 2017. Commencing on September 1, 2017 and continuing thereafter on the first day of each successive calendar month through its maturity date, the Company shall make 33 monthly payments of equal principal, plus accrued interest. The Term Loan bears a floating interest rate equal to the Prime rate and matures at its 33rd Term Loan payment date, but no later than May 1, 2020. The Term Loan is subject to the terms and conditions of the agreement and the occurrence of certain equity and performance milestones.

17

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - NOTES PAYABLE (Continued)

SVB Term Loan and Growth Capital Line
In May 2017, the Term Loan with SVB bank was amended to include a Growth Capital Line with a borrowing capacity of $2,000,000. Borrowing against the Growth Capital Line was made available through May 31, 2018. The Company shall make monthly payments of interest only commencing on the first day of the month following the month in which the funding date occurs and continuing thereafter on the first day of each successive calendar month through May 31, 2018. Commencing on June 1, 2018 and continuing thereafter on the first day of each successive calendar month through its maturity date, the Company shall make 33 monthly payments of equal principal, plus accrued interest. The Growth Capital Line bears a floating interest rate equal to the Prime rate and matures at its 33rd term loan payment date, but no later than February 1, 2021. The Term Loan and Growth Line are subject to the terms and conditions of the credit agreement.

As of December 31, 2020 the total balance of the Term Loan and Growth Capital Line was $242,424. As of December 31, 2020, the interest rates was 3.25%.

For the Term Loan and Capital Growth Line, the, Final Payment”, a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) is due on the earlier of (a) its maturity date or (b) the prepayment or acceleration of such Term Loan and Capital Growth Line, equal to the original principal amount of such Term Loan or Capital Growth Line multiplied by 4%. The Company is accruing this final payment as interest expense over the term of the loan and is included in accrued liabilities in the accompanying consolidated balance sheets.

Concurrently on the effective date of the Term Loan agreement, the Company issued to the bank a warrant to purchase 38,543 shares of common stock, at an exercise price of $0.20 per share with an expiration date of October 31, 2026. On May 18, 2017, the Company issued to the bank a warrant to purchase an additional 19,506 shares of common stock, at an exercise price of $0.193 per share with an expiration date of May 18, 2027. The value of these warrants was not significant at the date of issuance.

This credit facility is secured by substantially all assets of the Company. The term loans and the growth capital credit line have certain financial reporting requirements of which the Company was in compliance as of and during the year ended December 31, 2020, with the exception of requirements to deliver annual projections and board decks.

18

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - NOTES PAYABLE (Continued)

Payroll Protection Program Loan
In April 2020, the Small Business Administration approved the Companys application for the Payroll Protection Program of the Coronavirus Aid, Relief and Economic Security Act for $3,314,627. This loan program provides critical funding in the form of forgivable loans to companies adversely economically impacted by the current global corona medical crisis. The loan under this program covers 2.5 times monthly payroll costsfor the last 12 months up to an annual rate of $100,000 per employee. Loans may not exceed $10 million. The portion of the loan used to cover payroll costs, interest on mortgages, rent and utilities over an eight-week period from loan origination will be forgiven. The amount of loan forgiveness is reduced by any reductions in employees’ wages (in excess of 25%) or reduction in the number of employees, unless the employer eliminates the salary reduction or rehires employees by June 30, 2020. Any loan amounts not forgiven is carried forward as an ongoing loan amount with a maturity of 2 years and an interest rate of 1% subject to complete repayment. There is an initial payback deferral on the loan of 6-12 months. As of December 31, 2020, the outstanding balance for this loan was $3,314,627.

In June 2020, the legislation was updated to allow current PPP borrowers to extend the eight-week period to 24 weeks. Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. The previous deadline for restoring workforce levels and wages of June 30, 2020 was extended to December 31, 2020. The payroll expenditure requirement dropped from 75% to 60%. However, borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%. The updated legislation also allows businesses that took a PPP loan to also delay payment of their payroll taxes.

Following are the future minimum principal payments under the Term Loan and Growth Capital Line agreements and Payroll Protection Program Loans as of December 31, 2020:

  
For the Year Ending
December 31,
 
    
2021  2,434,626 
2022  1,122,425 
     
Total $3,557,051 

19

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - STOCKHOLDERS’ EQUITY

At December 31, 2020, the authorized capital stock of the Company consisted of 49,566,983 shares as outlined in the Restated Articles of Incorporation dated June 16, 2019. The capital stock authorized is comprised of 31,520,000 shares of common stock with a par value of $0.0001 per share and 18,046,983 shares of preferred stock with a par value of $0.0001 per share.

Convertible Preferred Stock
At December 31, 2020 and 2019, preferred stock consisted of the following:

  
Shares
Authorized
  
Shares
 Issued and
Outstanding
  
Issuance
Value per
Share
 
Series A  6,718,085   6,718,085  $0.91954 
Series A-1  4,525,635   4,525,635   0.91954 
Series B  3,281,264   3,281,264   5.72950 
Series C  3,521,999   3,458,608   11.34850 
Total  18,046,983   17,983,592     

As of December 31, 2020, the rights and preferences, privileges and restrictions of the Series C, Series B, Series A and Series A-1 convertible preferred stock are set forth in the Company’s Restated Articles of Incorporation and summarized as follows:

Non-Cumulative Preferred Stock Dividend Preference
The Corporation shall not pay or set aside any dividends on shares of any other class or series of capital stock of the Company in any calendar year unless the holders of the Preferred Stock then outstanding shall first receiveor simultaneously receive, out of the funds legally available therefore, a dividend on each outstanding share of Preferred Stock in an amount equal to 8% of the Original Issue Price per share of such Preferred Stock.

Liquidation Preference
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or any deemed liquidation events, before any payment shall be made to the holders of common stock by reason of their ownership thereof, the holders of shares of preferred stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the applicable original issue price for such series of preferred stock, plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution, winding up or deemed liquidation event of the Company, the funds and assets available for distribution to the stockholders of the Company shall be insufficient to pay the holders of shares of preferred stock the full amount to which they are entitled, the holders of shares of preferred stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of preferred stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.


20

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - STOCKHOLDERS’ EQUITY (Continued)

Convertible Preferred Stock (Continued)
Liquidation Preference (Continued)
After all the payment of all preferential amounts required to be paid to the holders of shares of preferred stock as provided above, the remaining funds and assets available for distribution to the stockholders of the Company shall be distributed among the holders of shares of common stock, pro rata based on the number of shares held by each such holder.

Protective Rights
For so long as at least 3,631,000 shares of preferred stock remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without written consent, or affirmative vote at a meeting and evidenced in writing, of the holders of a majority of the then outstanding shares of preferred stock, consenting or voting together as a single class on an as-converted basis, and any of the following without such consent or vote shall be null and of no force or effect:


a)authorize or create any new class or series of capital stock having rights, powers or preferences that are senior to or on a parity with any series of preferred stock;

b)declare or pay any dividend or otherwise make a distribution to holders of preferred stock or common stock except as expressly authorized herein;

c)redeem or repurchase any shares of common stock or preferred stock, other than pursuant to an agreement with an employee, consultant, director or other service provider, or an exercise of a right of first refusal in favor of the Corporation pursuant to an agreement with any service provider approved by the Board;

d)effect any Deemed Liquidation Event;

e)increase or decrease the authorized number of shares of convertible preferred stock;

f)amend the Restated Certificate or the Bylaws of the Corporation;

g)increase or decrease the size of the Board;

h)increase the aggregate number of shares of common stock subject to issuance under the Company’s equity incentive plan or any similar stock option plan or arrangement.

Conversion Rights
Each share of preferred stock shall be convertible, at the option of the holder at any time, into such number of fully paid and nonassessable shares of common stock as is determined by dividing the original issue price by the conversion price in effect on the date the certificate is surrendered for conversion. The conversion price is subject to adjustment as specified in the articles of incorporation.

21

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - STOCKHOLDERS’ EQUITY (Continued)

Convertible Preferred Stock (Continued)
Conversion Rights (Continued)
Each share of Series C, Series B, Series A-1 and A convertible preferred stock shall automatically be converted into shares of common stock at the then effective conversion price upon the earlier of (i) the date, or occurrence of an event, specified by the vote or written consent of the holders of a majority of outstanding shares of preferred stock, or (ii) the closing of a public offering that results in gross proceeds of not less than $50,000,000 at a price per share to the public of at least $22.697. The conversion price is subject to adjustment upon certain diluting issuances, stock dividends, combinations or subdivisions of common stock, recapitalizations and reorganizations.

Voting Rights
Each holder of the convertible preferred stock shall be entitled to a number of votes equal to the number of shares of common stock into which such shares of convertible preferred stock could be converted.

Redemption
The convertible preferred shares are not redeemable.

Common Shares Reserved
The Company has reserved shares of Common Stock for the following as of December 31, 2020:

Series C Preferred Stock  3,458,608 
Series B Preferred Stock  3,281,264 
Series A-1 Preferred Stock  4,525,635 
Series A Preferred Stock  6,718,085 
Warrants  58,049 
Outstanding options  2,655,643 
Options available under Option Plan 2020 for future issuance  1,947,108 
     
Total  
22,644,392
 

22

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - STOCK-BASED COMPENSATION

In 2010, the Company adopted the 2010 Stock Incentive Plan (the 2010 Plan”), which was approved by the Company’s Board of Directors in June 2010. In May 2020the Company terminated the 2010 Stock Incentive Plan and approved the 2020 Equity Incentive Plan (the 2020 Plan”). The purpose of this Plan is to provide incentives to attract, retain and motivate eligible personnel by offering eligible personnel an opportunity to participate in the Company’s future performance through awards of options and restricted stock. Option granted under the Plan include Incentive Stock Options (ISOs) and Nonqualified Stock Options (NQSOs). A Restricted Stock Award is an offer by the Company to sell to eligible personnel shares that are subject to certain specified restrictions. ISOs may be granted only to employees including officers and directors who are also employees. NQSOs and Restricted Stock Awards maybe granted to employees, officers, directors and consultants. As of December 31, 2020, there was 1,947,108 shares reserved for issuance under the Plan. Options granted under the 2020 Plan may be either incentive stock options (“ISOs) or non-statutory stock options (NSOs), stock appreciation rights, restricted stock and restricted stock units.

Options under the 2020 Plan may be granted for periods of up to ten years. The exercise price of an option shall not be less than 100% of the estimated fair market value of the shares on the date of grant, as determined by the Board of Directors.

The per share exercise price will be no less than one hundred ten percent 110% of the fair market value per share on the date of grant for any incentive stock option granted to an employee who owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company. To date, options granted generally vest over four years and vest at a rate of 25% upon the first anniversary of the issuance date and 1/48th per month thereafter.

If an option expires or is cancelled, it is surrendered pursuant to an Exchange Program, or, is forfeited or repurchased by the Company due to the failure to vest, the unexercised shares which were subject thereto will become available for future grant or sale under the Plan.

23

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - STOCK-BASED COMPENSATION (Continued)

As of December 31, 2020, 1,947,108 shares were available for future issuance under the Plan, respectivelyThere were 2,655,643 options outstanding under the Plan as of December 31, 2020.

For the year ended December 31, 2020, the Company recorded stock-based compensation expense of $494,238.

Stock option activity for year ended December 31, 2020 is as follows:



Number of
Options


Weighted
Average
Exercise Price


Weighted
Average
Remaining
Contractual
Life (Years)

Balance, December 31, 2019  3,222,453   1.16   7.78 

            
Granted  
492,439
   
2.72
     
Exercised  (320,781)  0.55     
Cancelled/Expired/Forfeited
  (738,468)  0.75     
Balance, December 31, 2020  2,655,643   1.51   7.41 

            
Vested and expected to vest at December 31, 2020  
2,497,698
  $1.40   
7.21
 
             
Exercisable at December 31, 2020  1,479,322  $0.92   6.20 

24

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - STOCK-BASED COMPENSATION (Continued)

The weighted-average grant date fair value per share of options granted during the year ended December 31, 2020 was $1.04. As of December 31, 2020, unamortized compensation costs related to these stock options totaled $769,548 and will be recognized over a weighted average period of 2.54 years. The fair value of shares vested during the year ended December 31, 2020 was $520,300. The intrinsic value for the options exercised during 2020 was zero.

The calculated value of option grants during the year ended December 31, 2020 was estimated using the Black-Scholes option pricing model with the following ranges of assumptions:

Expected dividend yield (1)0%
Risk-free interest rate (2)0.34% - 1.68%
Expected volatility (3)35.34% - 41.14%
Expected life (in years) (4)3.48 - 6.08


(1)The Company has no history or expectation of paying cash dividends on its common stock.

(2)The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant.

(3)The expected volatility of the Company’s share price based on the share price volatility of similar publicly traded entities.

(4)The expected life represents the period of time that options granted are expected to be outstanding.

Restricted Stock Award
During 2019, the Company granted an option on 487,161 shares of common stock options, of which 434,734 shares were Non-qualified Stock Options (NSOs) and 52,427 shares were Incentive Stock Options (ISOs) to a Company officer. The stock options were fully vested at issuance, at an exercise price of $1.15 per share with a ten-year term. In 2019, the Company cancelled the NSO portion of the option and replaced it with a fully vested restricted stock award on 434,734 shares with a purchase price of $1.15 per share with such purchase price being fully paid by services already rendered. At the date of grant, the fair value of the original award was $195,149, which was fully expensed at the date of issuance of the restricted stock.

Receivable from Stockholder
In March 2019 and August 2020, an officer issued a secured partial recourse promissory note in two advances totaling $508,000 related to the exercise of his stock options and personal income taxes paid on his behalf by the Company. The promissory note has an interest rate of 2.59% per annum and shall be payable in full in March 2027. The promissory note shall be become immediately due and payable upon any event of acceleration, as defined.

25

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - INCOME TAXES

Deferred tax assets consisted of the following as of December 31,:

  2020 
    
Net operating loss carryforwards $11,748,306 
Research and development credits  3,775,020 
Deferred implementation costs  (1,407,204)
Deferred commission costs  (328,841)
Other  519,060 
     
Total deferred tax assets  
14,306,341
 
Less: Valuation allowance
  (14,306,341)
     
Net deferred tax assets $-
 

As of December 31, 2020, the Company had federal and state net operating loss carryforwards (NOLS) of approximately $53,145,264 and $30,214,509, respectively. The 2017 and prior years federal and state NOLS expire at various times through 2037. Federal NOL carryforwards generated in 2020, 2019 and 2018 totaling $11,274,837, $20,145,830 and $10,119,596, respectively, have an unlimited carryforward period.

As of December 31, 2020, the Company had federal and state tax credit carryforwards of $1,963,121 and $1,811,898, respectively. The federal tax carryforward credits expire at various times through 2040, and the state credits have an unlimited carryforward period.

Due to uncertainties surrounding realization of the Company’s net deferred tax assets, the Company has recorded a full valuation allowance against its net deferred tax assets.

The change in the valuation allowance was an increase of $1,937,606 for the year ended December 31, 2020.

The Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. Due to ownership changes since inception, the Company’s net operating losses may be limited as to their usage. In the event the Company has additional changes in ownership, utilization of the carryforwards could be further restricted.

The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study and the fact that there may be additional such ownership changes in the future.

26

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - INCOME TAXES (Continued)

The difference between the provision for income taxes and the income tax determined by applying the statutory federal income tax of 21% to income before taxes, is primarily due to increases in the valuation allowance and state taxes.

The Companys tax returns since inception in 2010 are subject to examination by federal and state taxing authorities.

As of December 31, 2020, there were no potential accrued interest and penalties related to unrecognized tax benefits.

NOTE 9 - COMMITMENTS AND CONTINGENCES

Operating Leases
The Companys leases various offices with lease terms expiring through January 2026. Monthly rent payments range from $ 5,876 to $43,472.

Rent expense totaled $1,253,457 for the year ended December 31, 2020. Future minimum lease payments due under these operating leases are as follows:

  
For the Years Ending
December 31,
 
    
2021 $1,193,071 
2022  628,529 
2023  479,741 
2024  494,179 
2025 and after  552,444 
     
Total
 $3,347,964
 

Legal Proceedings
From time to time, the Company becomes involved in legal proceedings arising in the ordinary course of business. As of December 31, 2020, management is not aware of any legal matters that could have a material adverse effect on the Companys financial position or results of operations.

27

PUNCHH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10 - RELATED PARTY TRANSACTIONS

Operating Lease
The Company rents its facility in Jaipur, India, from one of the executive management members of the Company under a lease which expires November 31, 2021. Terms include rent payments of $6,813 per month through November 31, 2021. The Company is responsible for all maintenance and property taxes. Rent payments to the executive management member totaled $81,758 for the year ended December 31, 2020.

Related Party Payable
One of the Companys major vendors in providing software services is owned by one of the executive management members of the Company in India. As of December 31, 2020, the Company had zero payable to the related party vendor. Expenses paid to this related party vendor totaled $184,706 for the year ended December 31, 2020.

NOTE 11 - SUBSEQUENT EVENTS

In April 2021, the Company paid off the outstanding balance of the Term Loan and Growth Capital Line and the Payroll Protection Program Loan.

On April 8, 2021, the Company was acquired by PAR Technology Corporation.

The Company has evaluated subsequent events for potential recognition and disclosure through April 20, 2021, which is the date these consolidated financial statements were available to be issued.


28