UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 20202021
OR
☐ TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From __________ to __________
Commission File Number: 1-09720

par-20210930_g1.jpg
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware16-1434688
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York 13413-4991
(Address of principal executive offices, including zip code)
(315) 738-0600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.02 par valuePARNew York Stock Exchange

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

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

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

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



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

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

As of November 1, 2020, 21,616,7482, 2021, 26,864,741 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.
2
   
 
2
   
 
3
   
 
4
   
5
 
7
   
 
9
   
Item 2.
2327
   
Item 3.
2942
   
Item 4.
2943
PART II
OTHER INFORMATION
Item 1.
3143
   
Item 1A.
3143
   
Item 2.
3144
   
Item 6.
3344
   
 
3446

"“PAR," "Brink” “Brink POS®," "PixelPoint®” “PixelPoint®," "PAR” “PAR EverServ®," "Restaurant” “Restaurant Magic®"”, “Data Central®”, and "Data Central®"“Punchh®” are trademarks of PAR Technology Corporation. This report may also contain trade names and trademarks of other companies. Our use of or reference to such other companies' trade names or trademarks is not intended to imply any endorsement or sponsorship by these companies of PAR Technology Corporation or its products or services.


Table of Contents
Forward-Looking StatementsFORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 ("2021 (“Quarterly Report"Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (“Exchange(the “Exchange Act”), Section 27A of the Securities Act of 1933, as amended ("Securities Act"(the “Securities Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature, but rather are predictive of our future operations, financial condition, financial results, 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“anticipate,” “believe,” “belief,” “continue,” “could,” “expect,” “estimate,” “intend,” “may,” “opportunity,” “plan,” “should,” “will,” “would,” “will likely result,"” and similar expressions, andexpressions. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from those expressed in or implied by the forward-looking statements, including forward-looking statements relating to and our expectations regarding our acquisition of Punchh Inc. and the anticipated benefits of such acquisition or any other acquisition that we may make in the future, as well as the impact of the COVID-19 pandemic, including the Delta variant, on our business, operations, and financial results. While we have taken and continue to take precautionary measures intended to minimize the impact of COVID-19 to our employees and to our business, there can be no assurances that these actions are sufficient and that additional actions will not be required. Factors that have adversely affected and may continue to adversely affect, and that could subsequently adversely impact, our business, operations and financial results due to the COVID-19 pandemic include: customer store closures,closures; significant reductions or volatility in demand for our products and services,services; shortages of hardware materials and components, shipping delays and increased costs; canceled or delayed or canceled store implementations, decreased product adoptions and bookings,bookings; reduced or delayed software or hardware deployments and a reprioritization of investments in technology or point-of-sale infrastructure; delayed payments or payment defaults by customers; our ability to be agile in executing our business and strategies and our management of business continuity risks, due to our work-from-home arrangements and travel restrictions, including increased exposure to potential cybersecurity breaches and attacks, disruptions or delays in product assembly and fulfillment and associated costs, and limitations on our selling and marketing efforts; our ability to execute our business and growth strategies; the impact on our corporate culture and ability tosuccessfully attract, hire and retain necessary qualified employees to develop and expand our business; and the possible impairment of goodwill and other intangible assets in the event of a significant decline in our financial performance. The extent to which the COVID-19 pandemic will continue to impact our business, operations, and financial results is uncertain and cannot be predicted, and there can be no assurance that the COVID-19 pandemic will not continue to have a material and adverse effect on our business, operations and financial results during any quarter or year in which we are affected. Other factors, risks, trends, and uncertainties that could cause our actual results to differ materially from those expressed in or implied by forward-looking statements are described below in thisunder Part I, Item 2. "Management's“Management's Discussion and Analysis of Financial Condition and Results of Operations"Operations”, Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report, and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with2020, in our Quarterly Reports on Form 10-Q for the Securitiesquarters ended June 30, 2021 and Exchange Commission ("SEC") on March 16, 2020,31, 2021, and in our other filings with the SEC. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

1

Table of Contents
PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (unaudited)
Item 1.
Financial Statements (unaudited)
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, inIn thousands, except share and per share amounts)
AssetsSeptember 30, 2020December 31, 2019
Current assets:  
Cash and cash equivalents$55,755 $28,036 
Accounts receivable – net40,106 41,774 
Inventories – net27,113 19,326 
Other current assets3,438 4,427 
Total current assets126,412 93,563 
Property, plant and equipment – net13,810 14,351 
Goodwill41,214 41,386 
Intangible assets – net34,247 32,948 
Lease right-of-use assets2,351 3,017 
Other assets3,767 4,347 
Total Assets$221,801 $189,612 
Liabilities and Shareholders’ Equity  
Current liabilities:  
Current portion of long-term debt$657 $630 
Accounts payable16,372 16,385 
Accrued salaries and benefits9,730 7,769 
Accrued expenses2,549 3,176 
Lease liabilities - current portion1,132 2,060 
Customer deposits and deferred service revenue11,067 12,084 
Total current liabilities41,507 42,104 
Lease liabilities - net of current portion1,300 1,021 
Deferred service revenue – non current1,646 3,916 
Long-term debt104,867 62,414 
Other long-term liabilities5,706 7,310 
Total liabilities155,026 116,765 
Commitments and contingencies
Shareholders’ Equity:  
Preferred stock, $.02 par value, 1,000,000 shares authorized0 0 
Common stock, $.02 par value, 58,000,000 and 29,000,000 shares authorized, 19,315,272 and 18,360,205 shares issued, 18,263,416 and 16,629,177 outstanding at September 30, 2020 and December 31, 2019, respectively386 367 
Additional paid in capital109,772 94,372 
Accumulated deficit(33,741)(10,144)
Accumulated other comprehensive loss(5,059)(5,368)
Treasury stock, at cost, 1,051,856 shares and 1,731,028 shares at September 30, 2020 and December 31, 2019, respectively(4,583)(6,380)
Total shareholders’ equity66,775 72,847 
Total Liabilities and Shareholders’ Equity$221,801 $189,612 
(Unaudited)
AssetsSeptember 30, 2021December 31, 2020
Current assets:  
Cash and cash equivalents$200,293 $180,686 
Accounts receivable – net48,902 42,980 
Inventories – net33,988 21,638 
Other current assets13,111 3,625 
Total current assets296,294 248,929 
Property, plant and equipment – net13,831 13,856 
Goodwill459,195 41,214 
Intangible assets – net123,057 33,121 
Lease right-of-use assets4,138 2,569 
Other assets9,877 4,060 
Total assets$906,392 $343,749 
Liabilities and Shareholders’ Equity  
Current liabilities:  
Current portion of long-term debt$695 $666 
Accounts payable23,846 12,791 
Accrued salaries and benefits14,841 13,190 
Accrued expenses3,887 2,606 
Lease liabilities – current portion1,698 1,200 
Customer deposits and deferred service revenue15,498 9,506 
Total current liabilities60,465 39,959 
Lease liabilities – net of current portion2,824 1,462 
Deferred service revenue – noncurrent6,799 3,082 
Long-term debt302,336 105,844 
Other long-term liabilities9,287 4,997 
Total liabilities381,711 155,344 
Commitments and contingencies (Note 11)00
Shareholders’ equity:  
Preferred stock, $.02 par value, 1,000,000 shares authorized— — 
Common stock, $.02 par value, 58,000,000 shares authorized, 28,017,033 and 22,982,955 shares issued, 26,855,578 and 21,917,357 outstanding at September 30, 2021 and December 31, 2020, respectively560 459 
Additional paid in capital634,895 243,575 
Accumulated deficit(96,866)(46,706)
Accumulated other comprehensive loss(3,992)(3,936)
Treasury stock, at cost, 1,161,455 shares and 1,065,598 shares at September 30, 2021 and December 31, 2020, respectively(9,916)(4,987)
Total shareholders’ equity524,681 188,405 
Total Liabilities and Shareholders’ Equity$906,392 $343,749 

See accompanying notes to unaudited interim condensed consolidated financial statements
2

Table of Contents
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, inIn thousands, except per share amounts)
(Unaudited)

Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
202020192020Three Months Ended
September 30,		Nine Months Ended
September 30,
Net revenues:    
2021202020212020
Revenues, net:Revenues, net:  
ProductProduct$20,470 $15,904 $51,437 $46,149 Product$30,291 $20,470 $72,786 $51,437 
ServiceService16,877 13,937 50,952 41,514 Service29,530 16,877 74,743 50,952 
ContractContract17,500 15,539 52,881 46,646 Contract18,039 17,500 53,748 52,881 
54,847 45,380 155,270 134,309 
Total revenues, netTotal revenues, net77,860 54,847 201,277 155,270 
Costs of sales:Costs of sales:    Costs of sales:  
ProductProduct15,995 12,259 40,882 34,912 Product22,786 15,995 56,158 40,882 
ServiceService11,252 9,482 33,810 29,868 Service20,792 11,252 52,427 33,810 
ContractContract15,929 14,643 48,781 42,679 Contract16,068 15,929 49,175 48,781 
43,176 36,384 123,473 107,459 
Total cost of salesTotal cost of sales59,646 43,176 157,760 123,473 
Gross marginGross margin11,671 8,996 31,797 26,850 Gross margin18,214 11,671 43,517 31,797 
Operating expenses:Operating expenses:    Operating expenses:  
Selling, general and administrativeSelling, general and administrative10,512 9,539 31,988 27,162 Selling, general and administrative21,662 10,512 59,145 31,988 
Research and developmentResearch and development4,210 3,448 13,613 9,233 Research and development10,122 4,210 24,574 13,613 
Amortization of identifiable intangible assetsAmortization of identifiable intangible assets257 0 677 0 Amortization of identifiable intangible assets539 257 1,303 677 
Adjustment to contingent consideration liabilityAdjustment to contingent consideration liability(2,310)0 (2,310)0 Adjustment to contingent consideration liability— (2,310)— (2,310)
12,669 12,987 43,968 36,395 
Gain on insurance proceedsGain on insurance proceeds— — (4,400)— 
Total operating expensesTotal operating expenses32,323 12,669 80,622 43,968 
Operating lossOperating loss(998)(3,991)(12,171)(9,545)Operating loss(14,109)(998)(37,105)(12,171)
Other expense, netOther expense, net(486)(401)(1,250)(1,205)Other expense, net(539)(486)(931)(1,250)
Interest expense, netInterest expense, net(2,235)(1,588)(6,318)(2,978)Interest expense, net(5,406)(2,235)(12,503)(6,318)
Loss on extinguishment of debtLoss on extinguishment of debt0 0 (8,123)0 Loss on extinguishment of debt(11,916)— (11,916)(8,123)
Loss before benefit from income taxesLoss before benefit from income taxes(3,719)(5,980)(27,862)(13,728)Loss before benefit from income taxes(31,970)(3,719)(62,455)(27,862)
Benefit from income taxesBenefit from income taxes8 78 4,265 3,988 Benefit from income taxes37 8 12,295 4,265 
Net lossNet loss$(3,711)$(5,902)$(23,597)$(9,740)Net loss$(31,933)$(3,711)$(50,160)$(23,597)
Basic Earnings per Share:    
Net loss$(0.20)$(0.36)$(1.30)$(0.61)
Diluted Earnings per Share:
Net loss$(0.20)$(0.36)$(1.30)$(0.61)
Weighted average shares outstanding:    
Basic18,250 16,300 18,145 16,086 
Diluted18,250 16,300 18,145 16,086 
Net loss per share (basic and diluted)Net loss per share (basic and diluted)$(1.23)$(0.20)$(2.05)$(1.30)
Weighted average shares outstanding (basic and diluted)Weighted average shares outstanding (basic and diluted)25,99818,25024,48518,145

See accompanying notes to unaudited interim condensed consolidated financial statements

3
Table of Contents

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, inIn thousands)
(Unaudited)

Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended September 30,Nine Months Ended September 30,
20202019202020192021202020212020
Net lossNet loss$(3,711)$(5,902)$(23,597)$(9,740)Net loss$(31,933)$(3,711)$(50,160)$(23,597)
Other comprehensive (loss) income, net of applicable tax:    
Other comprehensive income loss, net of applicable tax:Other comprehensive income loss, net of applicable tax:
Foreign currency translation adjustmentsForeign currency translation adjustments(50)(357)309 (236)Foreign currency translation adjustments(109)(50)(56)309 
Comprehensive lossComprehensive loss$(3,761)$(6,259)$(23,288)$(9,976)Comprehensive loss$(32,042)$(3,761)$(50,216)$(23,288)

See accompanying notes to unaudited interim condensed consolidated financial statements
4

Table of Contents
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited, inIn thousands)
Common StockAdditional Paid in CapitalAccumulated deficitAccumulated
Other
Comprehensive
Loss		Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 201918,360 $367 $94,372 $(10,144)$(5,368)1,731 $(6,380)$72,847 
Net loss— — — (10,910)— — — (10,910)
Issuance of common stock upon the exercise of stock options2 — 30 — — — 30 
Net issuance of restricted stock awards21 — — — — — 0 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 38 (524)(524)
Issuance of restricted stock for acquisition908 19 — — — — — 19 
Equity component of redeemed 2024 convertible notes (net of deferred taxes of $1.8 million)(7,988)(722)2,435 (5,553)
Equity component of issued 2026 convertible notes (net of deferred taxes of $6.2 million and issuance costs of $0.9 million)— — 19,097 — — — — 19,097 
Stock-based compensation— — 1,089 — — — — 1,089 
Foreign currency translation adjustments— — — — 201 — — 201 
Balances at March 31, 202019,291 $386 $106,600 $(21,054)$(5,167)1,047 $(4,469)$76,296 
Net loss— — — (8,976)— — — (8,976)
Issuance of common stock upon the exercise of stock options4 — 12 — — — — 12 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — (195)— — 3 192 (3)
Stock-based compensation— — 1,123 — — — — 1,123 
Foreign currency translation adjustments— — — — 158— — 158 
Balances at June 30, 202019,295 $386 $107,540 $(30,030)$(5,009)1,050 $(4,277)$68,610 
Net loss— — — (3,711)— — — (3,711)
Issuance of common stock upon the exercise of stock options20 — 394 — — — — 394 
Net issuance of restricted awards— — 833 — — — — 833 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 2 (306)(306)
Stock-based compensation— — 1,005 — — — — 1,005 
Foreign currency translation adjustments— — — — (50)— — (50)
Balances at September 30, 202019,315 $386 $109,772 $(33,741)$(5,059)1,052 $(4,583)$66,775 
(Unaudited)
See accompanying notes to unaudited interim condensed consolidated financial statements
5

Common StockAdditional
Paid in
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 202022,983 $459 $243,575 $(46,706)$(3,936)1,066 $(4,987)$188,405 
Issuance of common stock upon the exercise of stock options34 1 408 — — — — 409 
Net issuance of restricted stock units87 2 263 — — — — 265 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 76 (3,974)(3,974)
Stock-based compensation— — 1,320 — — — — 1,320 
Foreign currency translation adjustments— — — — (302)— — (302)
Net loss— — — (8,271)— — — (8,271)
Balances at March 31, 202123,104 $462 $245,566 $(54,977)$(4,238)1,142 $(8,961)$177,852 
Issuance of common stock upon the exercise of stock options20 — 209 — — — — 209 
Net issuance of restricted stock units28 1 — — — — — 1 
Issuance of common stock for acquisition1,493 30 108,629��— — — — 108,659 
Issuance of common stock, net of issuance costs of $4.3 million2,353 47 155,640 — — — — 155,687 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 7 (497)(497)
Stock-based compensation— — 4,251 — — — — 4,251 
Foreign currency translation adjustments— — — — 355 — — 355 
Net loss— — — (9,956)— — — (9,956)
Balances at June 30, 202126,998 $540 $514,295 $(64,933)$(3,883)1,149 $(9,458)$436,561 
Issuance of common stock upon the exercise of stock options22 1 199 — — — — 200 
Equity component of issuance of 2027 convertible notes, net of deferred taxes of $0.6 million and issuance costs of $2.1 million— — 63,068 — — — — 63,068 
Issuance of common stock, net of issuance costs of $2.5 million982 19 52,467 — — — — 52,486 
Net issuance of restricted stock15 — — — — — — — 
Issuance of common stock for acquisition— — 1,081 — — — — 1,081 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 12 (458)(458)
Stock-based compensation— — 3,785 — — — — 3,785 
Foreign currency translation adjustments— — — — (109)— — (109)
Net loss— — — (31,933)— — — (31,933)
Balances at September 30, 202128,017 $560 $634,895 $(96,866)$(3,992)1,161 $(9,916)$524,681 
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited, in thousands)
Common StockAdditional paid in capitalRetained
Earnings (accumulated deficit)		Accumulated
Other
Comprehensive
Loss		Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 201817,878 $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 options78 — 30 — — — — 30 
Stock-based compensation— — 248 — — — — 248 
Foreign currency translation adjustments— — — — (10)— — (10)
Balances at March 31, 201917,956 $357 $50,529 $2,698 $(4,263)1,708 $(5,836)$43,485 
Net loss— — — (1,109)— — — (1,109)
Issuance of common stock upon the exercise of stock options79 3 210 — — — — 213 
Stock-based compensation— — 602 — — — — 602 
Foreign currency translation adjustments— — — — 131 — — 131 
Convertible notes conversion discount (net of deferred taxes of $4.1 million and issuance costs of $1.1 million)— — 12,465 — — — — 12,465 
Balances at June 30, 201918,035 $360 $63,806 $1,589 $(4,132)1,708 $(5,836)$55,787 
Net loss— — — (5,902)— — — (5,902)
Issuance of common stock upon the exercise of stock options18 2 38 — — — — 40 
Stock-based compensation— — 988 — — — — 988 
Foreign currency translation adjustments— — — — (357)— — (357)
Balances at September 30, 201918,053 $362 $64,832 $(4,313)$(4,489)1,708 $(5,836)$50,556 

See accompanying notes to unaudited interim condensed consolidated financial statements

5
Table of Contents
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
(In thousands)
(Unaudited)
Common StockAdditional
Paid in
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 201918,360 $367 $94,372 $(10,144)$(5,368)1,731 $(6,380)$72,847 
Issuance of common stock upon the exercise of stock options2 — 30 — — — 30 
Net issuance of restricted stock awards21 — — — — — — 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 38 (524)(524)
Issuance of restricted stock for acquisition908 19 — — — — — 19 
Equity component of redeemed 2024 convertible notes (net of deferred taxes of $1.8 million)(7,988)(722)2,435 (5,553)
Equity component of issued 2026 convertible notes (net of deferred taxes of $6.2 million and issuance costs of $0.9 million)— — 19,097 — — — — 19,097 
Stock-based compensation— — 1,089 — — — — 1,089 
Foreign currency translation adjustments— — — — 201 — — 201 
Net loss— — — (10,910)— — — (10,910)
Balances at March 31, 202019,291 $386 $106,600 $(21,054)$(5,167)1,047 $(4,469)$76,296 
Issuance of common stock upon the exercise of stock options4 — 12 — — — — 12 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — (195)— — 3 192 (3)
Stock-based compensation— — 1,123 — — — — 1,123 
Foreign currency translation adjustments— — — — 158 — — 158 
Net loss— — — (8,976)— — — (8,976)
Balances at June 30, 202019,295 $386 $107,540 $(30,030)$(5,009)1,050 $(4,277)$68,610 
Issuance of common stock upon the exercise of stock options20 — 394 — — — — 394 
Net issuance of restricted awards— — 833 — — — — 833 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 2 (306)(306)
Stock-based compensation— — 1,005 — — — — 1,005 
Foreign currency translation adjustments— — — — (50)— — (50)
Net loss— — — (3,711)— — — (3,711)
Balances at September 30, 202019,315 $386 $109,772 $(33,741)$(5,059)1,052 $(4,583)$66,775 

See accompanying notes to unaudited interim condensed consolidated financial statements
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PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, inIn thousands)
Nine Months Ended
September 30,
 20202019
Cash flows from operating activities:  
Net loss$(23,597)$(9,740)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation, amortization and accretion10,152 4,993 
Current expected credit losses912 693 
Provision for obsolete inventory2,158 1,240 
Stock-based compensation3,217 1,838 
Loss on debt extinguishment8,123 0 
Adjustment to contingent consideration liability(2,310)0 
Deferred income tax(4,372)(4,065)
Changes in operating assets and liabilities:  
Accounts receivable756 (3,318)
Inventories(9,945)1,466 
Other current assets989 (1,934)
Other assets597 158 
Accounts payable(655)(3,715)
Accrued salaries and benefits2,794 1,479 
Accrued expenses(627)2,936 
Customer deposits and deferred service revenue(3,287)1,107 
Other long-term liabilities706 (2,758)
Net cash used in operating activities(14,389)(9,620)
Cash flows from investing activities:  
Acquisitions, net of cash acquired0 (7,000)
Settlement of working capital for acquisitions191 0 
Capital expenditures(692)(2,352)
Capitalization of software costs(6,369)(2,283)
Net cash used in investing activities(6,870)(11,635)
Cash flows from financing activities:  
Payments of long-term debt(471)0 
Payment of contingent consideration0 (2,550)
Payments of bank borrowings0 (17,459)
Proceeds from bank borrowings0 9,640 
Payments for the extinguishment of notes payable(66,250)0 
Proceeds from notes payable, net of issuance costs115,786 75,039 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock(829)0 
Proceeds from exercise of stock options
436 283 
Net cash provided by financing activities48,672 64,953 
Effect of exchange rate changes on cash and cash equivalents306 (236)
Net increase in cash and cash equivalents27,719 43,462 
Cash and cash equivalents at beginning of period28,036 3,485 
Cash and equivalents at end of period$55,755 $46,947 
(Unaudited)
Nine Months Ended
September 30,
20212020
Cash flows from operating activities:
Net loss$(50,160)$(23,597)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization15,069 6,946 
Accretion of debt in interest expense5,035 3,206 
Current expected credit losses992 912 
Provision for obsolete inventory19 2,158 
Stock-based compensation9,356 3,217 
Loss on debt extinguishment11,916 8,123 
Adjustment to contingent consideration liability— (2,310)
Deferred income tax(12,522)(4,372)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable3,189 756 
Inventories(12,377)(9,945)
Other current assets(7,575)989 
Other assets(2,774)597 
Accounts payable7,849 (655)
Accrued salaries and benefits(2,605)2,794 
Accrued expenses(7,418)(627)
Customer deposits and deferred service revenue(1,402)(3,287)
Other long-term liabilities(211)706 
Net cash used in operating activities(43,619)(14,389)
Cash flows from investing activities:
Settlement of working capital for acquisitions— 191 
Cash paid for acquisition, net of cash acquired(374,653)— 
Capital expenditures(928)(692)
Capitalization of software costs(5,471)(6,369)
Net cash used in investing activities(381,052)(6,870)
Cash flows from financing activities:
Principal payments of long-term debt(4,004)(471)
Payments for the extinguishment of notes payable(183,618)(66,250)
Proceeds from common stock issuance215,000 — 
Payments for common stock issuance costs(6,827)— 
Proceeds from debt issuance, net of original issue discount441,385 120,000 
Payments for debt issuance costs(13,998)(4,214)
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock(4,477)(829)
Proceeds from exercise of stock options819 436 
Net cash provided by financing activities444,280 48,672 
Effect of exchange rate changes on cash and cash equivalents(2)306 
Net increase in cash and cash equivalents19,607 27,719 
Cash and cash equivalents at beginning of period180,686 28,036 
Cash and equivalents at end of period$200,293 $55,755 
See accompanying notes to unaudited interim condensed consolidated financial statements
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PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited, inIn thousands)
Nine Months Ended
September 30,
20202019
Supplemental disclosures of cash flow information:
Cash paid for interest1,339 153 
Income taxes, net of refunds184 125 
Capital expenditures recorded in accounts payable295 0 
Capitalized software recorded in accounts payable347 0 
(Unaudited)

Nine Months Ended
September 30,
20212020
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest$6,337 $1,339 
Taxes, net of refunds— 184 
Master development agreement with related party (refer to Note 1)813 — 
Capitalized software recorded in accounts payable— 295 
Capital expenditures in accounts payable88 347 
Tax withholding in accrued salaries and benefits related to treasury stock acquired from employees451 — 
Common stock issued for acquisition109,740 — 
Acquisition consideration recorded in accounts payable121 — 
Master development agreement expenditures with related party in accounts payable163 — 

See accompanying notes to unaudited interim condensed consolidated financial statements

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PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
Note 1 — Basis of presentation

NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements ("(“financial statements"statements”) of PAR Technology Corporation andthrough its consolidated subsidiaries (collectively, the “Company”, “PAR”, "we"“we”, "us"“us” or "our Company"“our Company”) have been prepared in accordance with U.S.accounting principles generally accepted accounting principlesin the United States of America (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements as promulgated by the Securities and Exchange Commission ("SEC"(“SEC”). In the opinion of management, the Company's financial statements include all normal and recurring adjustments necessary in order to make the financial statements not misleading and to provide a fair presentation of ourthe Company's financial results for the interim period included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (this “Quarterly Report”). Interim results are not necessarily indicative of results for the full year or any future periods. The information included in this Quarterly Report should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020 filed with the SEC on March 16, 2021 (“2020 ("2019 Annual Report"Report”).

The preparation of the financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant and equipment including right-to-use assets and liabilities, identifiable intangible assets and goodwill, the measurement of liabilities and equity recognized for outstanding convertible notes, valuation allowancescurrent expected credit losses for receivables, net realizable value for inventories, and measurement of contingent consideration at fair value. Actual results could differ from these estimates. The Company's estimates are subject to uncertainties, including those estimates.associated with market conditions, risks and trends and the ongoing COVID-19 pandemic.

The Company operates in 2 distinct reporting segments, Restaurant/Retail and Government. The Company’s chief operating decision maker is the Company’s Chief Executive Officer. The Restaurant/Retail reporting segment provides point-of-sale (POS)(“POS”) software and hardware, back-office software, customer loyalty software, and integrated technical solutions to the restaurantretail and retailrestaurant industries. The Government reporting segment provides intelligence, surveillance, and reconnaissance solutions and mission systems support to the United States Department of Defense and other Federalfederal agencies. In addition, theThe financial statements also include corporate operations, which are comprised of enterprise-wide functional departments.

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

The Company maintained bank balances that, at times, exceeded the Company has reclassified certain costs and expenses infederally insured limit during the condensed consolidated statement of operations for the three and nine months ended September 30, 2019, amounting to $0.2 million2021. The Company has not experienced losses relating to these deposits and $0.7 million, respectively, from amortization of intangible assetsmanagement does not believe that the Company is exposed to cost of serviceany significant credit risk with respect to conform to current period presentation. These reclassifications had no effect on previously reported total costs and operating expenses or net losses.these amounts.

UseCash and cash equivalents consist of Estimatesthe following (in thousands):
September 30, 2021December 31, 2020
Cash and cash equivalents
Cash$70,186 $59,700 
Money market funds130,107 120,986 
Total cash and cash equivalents$200,293 $180,686 

Preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic; the extent to which the COVID-19 pandemic will continue to impact these estimates is uncertain and cannot be predicted, and there can be no assurance that the COVID-19 pandemic will not have a material and adverse effectGain on these estimates.Insurance Proceeds

During the first quarter of 2021, the Company received $4.4 million of insurance proceeds in connection with the settlement of a legacy claim; no other insurance proceeds were received during the three or nine months ended September 30, 2021.

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Other Long-Term Liabilities

Other long-term liabilities represent amounts owed to employees that participate in the Company’s deferred compensation plan and the long-term portion of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) deferred payroll taxes. The amount owed to employees participating in the deferred compensation plan was $2.6 million and $2.8 million at September 30, 2021 and December 31, 2020, respectively. Additionally, indemnification and net deferred tax liabilities resulting from the Punchh Acquisition of approximately $2.2 million and $1.8 million, respectively, are presented within other long-term liabilities. Refer to “Note 3 — Acquisition” for additional information.

Under the CARES Act employers can defer payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. As permitted under the CARES Act, the Company deferred payment of the employer portion of social security taxes through the end of 2020. As of September 30, 2021 and December 31, 2020, the Company deferred a total of $3.4 million of payroll taxes during 2020, to be paid equally in the fourth quarters of 2021 and 2022. The current portion of the deferred payroll taxes was $1.7 million at September 30, 2021 and December 31, 2020 and included within accrued salaries and benefits; the non-current portion of $1.7 million was included within other long-term liabilities on the consolidated balance sheet.

Related Party Transactions

A Company subsidiary has a master development agreement with Act III Management LLC (“Act III Management”), pursuant to which Act III Management performs software development services. Mr. Keith Pascal, a Company director, is an employee of Act III Management, and serves as its vice president and secretary. Mr. Pascal was initially appointed to the Company's board of directors in April 2021 pursuant to the Investor Rights Agreement entered into by the Company with an affiliate of Act III Management on April 8, 2021. The Company does not believe the terms of the master development agreement have been significantly affected by the fact that the Company and Act III Management are deemed to be related parties. As of September 30, 2021, the Company had $0.2 million of accounts payable owed to Act III Management and in the nine months ended September 30, 2021, a total of $0.8 million has been paid to Act III Management for services performed under this master development agreement.

Recently Adopted Accounting Pronouncements

In June 2016,December 2019, the Financial Accounting Standards Board (the FASB)(“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date, based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company adopted ASU 2016-13 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and nine months ended September 30, 2020.

9

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates Step 2 from the goodwill impairment test which requires entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company adopted ASU 2017-04 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and nine months ended September 30, 2020.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the fair value measurement disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. ASU 2018-13 modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. The Company adopted ASU 2018-13 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and nine months ended September 30, 2020.

In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other (Topic 350) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 provides guidance on the measurement of costs for internal-use software during the design, development, and implementation stages for customers in a cloud hosting arrangement. ASU 2018-15 also requires the capitalized costs associated with the design, development and implementation of cloud hosted arrangements to be amortized over the term of the hosting arrangement. The Company adopted ASU 2018-15 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and nine months ended September 30, 2020.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, "IncomeIncome Taxes (Topic 740): Simplifying the Accounting for Income Taxes"Taxes, which is intended to simplify various requirements related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 is effective for fiscal years,January 1, 2021. In the three and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently assessingnine months ended September 30, 2021, application of the impactstandard to the Company's September 2021 convertible note offering resulted in classification to shareholders' equity of this standard on its financial statements.a $15.3 million partial release of the Company's deferred tax asset valuation adjustment. Refer to “Note 7 — Debt”.

Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, “DebtDebt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”, which is intended to reduce the number of accounting models for convertible debt instruments and convertible preferred stock, and amend guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company expects to adopt ASU 2020-06 in the first quarter of 2022 and is currently assessingevaluating the impact of this standardadoption on its financial statements.

With the exception of the new standards discussed above, there were no other recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30, 20202021 that are of significance or potential significance to the Company, as compared to the recent accounting pronouncements described in the 2019 Annual Report.Company.
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NOTE 2: REVENUE RECOGNITION

Note 2 - Revenue Recognition

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

WeThe Company evaluated the potential performance obligations within ourits Restaurant/Retail reporting segment and evaluated whether each performance obligation met the ASC Topic 606 criteria to be considered a distinct performance obligations.obligation. Revenue in the Restaurant/Retail reporting segment is recognized at a point in time for licensed software, hardware and installations. Revenue on these items are recognized when the customer obtains control of the asset. This generally occurs upon delivery and acceptance by the customer or upon installation or delivery to a third party carrier for onward delivery to customer. Additionally, revenue in the Restaurant/
10

Retail reporting segment relating to SaaS, ourthe Company's Advanced Exchange hardware Advanced Exchange,service program, its on-site support and other services is recognized over time as the customer simultaneously receives and consumes the benefits of the Company’s performance obligations. OurThe Company’s support services are stand-ready obligations that are provided over the life of the contract, generally 12 months. We offerThe Company offers installation services to ourits customers for hardware and software for which wethe Company primarily hirehires third-party contractors to install the equipment on ourthe Company's behalf. We pay third-partyThe Company pays third party contractors an installation service fees at mutuallyfee based on an hourly rate agreed rates.to by the Company and contractor. When third-partythird party installers are used, we determinethe Company determines whether the nature of ourits performance obligations is to provide the specified goods or services ourselvesitself (principal) or to arrange for a third-party to provide the goods or services (agent). In directthe Company's customer arrangements, we have discretion over our pricing; we arethe Company is primarily responsible for providing a good or service; and we haveservice, has inventory risk before the good or service is transferred to the customer. Ascustomer, and discretion in establishing prices; as a result, we havethe Company has concluded that we areit is the principal in the arrangement and recordrecords installation revenue on a gross basis.

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

OurThe Company's revenue in the Government reporting segment is generally recognized over time as control of products or services is generally transferred continuously to ourits customers. While revenueRevenue generated by the Government reporting segment is predominantly related to services, we do generateservices; provided, however, revenue from salesis also generated through the sale of materials, software, hardware, and maintenance. For the Government reporting segment cost plus fixed fee contract portfolio, revenue is recognized over time using costs incurred as of a determinationto date to measure progress toward satisfying ourthe Company's performance obligations. Incurred costs representcost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and general and administrative expenses. Profit is recognized on the fixed fee portion of the contract as costs are incurred and invoiced. Long-term fixed price contracts and programs involve the use of various techniquesjudgment to estimate the total contract revenue and costs. For long-term fixed price contracts, we estimatethe Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete athe contract, and recognize itthat profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include: labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors. Revenue and profit in future periods of contract performance are recognized using the sameaforesaid assumptions, adjusted for estimatedand adjusting the estimate of costs to complete a contract. Once the services provided are determined to be distinct or not distinct, we evaluatethe Company evaluates how to allocate the transaction price. Generally, the Government reporting segment does not sell the same good or service to similar customers and the contract performance obligations are unique to each government contract.solicitation. The performance obligations are typically not distinct; however, indistinct. In cases where there are distinct performance obligations, the transaction price iswould be allocated usingto each performance obligation on a ratable basis based upon the relative stand-alone selling price method, which is based upon the standalone selling price of each respective performance obligation. Cost plus margin is used for the cost plus fixed fee contract portfolios as well as the fixed price and time and materials contracts portfolios to determine the stand-alone selling price.
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In the Government segment, when determining when to recognize revenue we analyzerecognition, the Company analyzes whether ourits performance obligations in ourunder Government contracts are satisfied over a period of time or at a point in time. In general, ourthe Company's performance obligations are satisfied over a period of time. However,time; however, there may be circumstances where the latter or both scenarios could apply to a contract.

We generally anticipate receipt ofThe Government segment expects payment within 30 to 90 days from satisfaction of aits performance obligation.obligations. None of ourthe Government contracts as of December 31, 2019September 30, 2021 or September 30, 2020 contained a significant financing component.
 
Performance Obligations Outstanding

The Company's performance obligations outstanding represent the transaction price of firm, non-cancellable orders, with expected delivery dates to customers after September 30, 20202021 and September 30, 2019,2020, respectively, for work that has not yet been performed. The activity of outstanding performance obligations as isit relates to customer deposits and deferred service revenue is as follows:

(in thousands)20212020
Beginning balance - January 1$11,082 $12,486 
Acquired deferred revenue (Note 3)11,125 — 
Recognition of deferred revenue(15,846)(9,922)
Deferral of revenue14,257 8,881 
Ending balance - September 30$20,618 $11,445 
11The above table excludes customer deposits of $1.7 million and $1.3 million for the nine months ended September 30, 2021 and 2020, respectively. The majority of the deferred revenue balances above relate to professional services, maintenance agreements, and software licenses. These balances are recognized on a straight-line basis over the life of the contract, with the majority of the balance to be recognized within the next twelve months.

(in thousands)20202019
Beginning balance - January 116,000 14,258 
Change in deferred revenue(4,677)828 
Changes in customer deposits1,390 (115)
Ending balance - September 3012,713 14,971 
In the Restaurant/Retail reporting segment most performance obligations over one year are relatedrelate to service and support contracts, approximately 87%66% of which we expectthe Company expects to fulfill within one yearyear. The Company expects to fulfill 100% of support and 100%service contracts within 60 months. At September 30, 20202021 and December 31, 2019,2020, transaction prices allocated to future performance obligations were $9.9$20.6 million and $10.9$11.1 million, respectively.

During the three months ended September 30, 2021 and 2020, and September 30, 2019, wethe Company recognized revenue of $2.4 million and $2.2 million, respectively, which are included in contract liabilities as of January 1, 2021 and $2.12020, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized revenue of $7.5 million and $9.9 million, respectively, which are included in contract liabilities at the beginning of each such period. During the nine months ended September 30, 2020 and September 30, 2019, we recognized revenue of $9.9 million and $8.6 million, respectively, which are included in contract liabilities at the beginning of the respective period.

TheIn the Government segment, the value of existing contracts in the Government reporting segment at September 30, 2021, net of amounts relating to work performed to that date, was approximately $192.0 million, of which $38.0 million was funded, and at December 31, 2020, net of amounts relating to work performed to that date, was approximately $162.5$150.5 million, of which $36.0 million was funded, and at December 31, 2019, net of amounts relating to work performed to that date, was approximately $148.7 million, of which $32.8$27.8 million was funded. The value of existing contracts in the Government segment, net of amounts relating to work performed at September 30, 20202021, are expected to be recognized as revenue over time as follows (in thousands):

Next 12 Monthsmonths$66,66626,310 
Months 13-2443,36171,209 
Months 25-3631,15652,910 
Thereafter21,27241,551 
TOTALTotal$162,455191,980 

Disaggregated Revenue

Disaggregated Revenue
The Company disaggregates revenue from customer contracts with customers by major product groupline for each of its reporting segment. Thesegments because the Company believes this methodit best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Disaggregation of revenue for the three and nine months ended September 30, 2020 and September 30, 2019 is as follows:
(in thousands)Three months ended September 30, 2020
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$29,739 $7,608 $0 
Mission Systems$0 $0 $8,084 
ISR Solutions$0 $0 $8,943 
Product$0 $0 $473 
TOTAL$29,739 $7,608 $17,500 

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(in thousands)Three months ended September 30, 2019
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$23,599 $5,508 $0 
Grocery335 399 0 
Mission Systems0 0 8,444 
ISR Solutions0 0 7,057 
Product0 0 38 
TOTAL$23,934 $5,907 $15,539 
Disaggregation of revenue is as follows (in thousands):
(in thousands)Nine months ended September 30, 2020
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$77,373 $25,016 $0 
Mission Systems0 0 24,620 
ISR Solutions0 0 27,457 
Product0 0 804 
TOTAL$77,373 $25,016 $52,881 
Three Months Ended September 30, 2021
Restaurant/Retail
point in time		Restaurant/Retail
over time		Government
over time
Hardware$29,669 $— $— 
Software290 16,878 — 
Service5,150 7,834 — 
Mission systems— — 9,619 
Intelligence, surveillance, and reconnaissance solutions— — 8,237 
Product— — 183 
Total$35,109 $24,712 $18,039 

(in thousands)Nine months ended September 30, 2019
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$65,849 $18,718 $0 
Grocery1,067 2,029 0 
Mission Systems0 0 25,177 
ISR Solutions0 0 20,603 
Product0 0 866 
TOTAL$66,916 $20,747 $46,646 


Three Months Ended September 30, 2020
Restaurant/Retail
point in time		Restaurant/Retail
over time		Government
over time
Hardware$20,149 $— $— 
Software371 6,418 — 
Service3,490 6,919 — 
Mission systems— — 8,084 
Intelligence, surveillance, and reconnaissance solutions— — 8,943 
Product— — 473 
Total$24,010 $13,337 $17,500 
The Company has reclassified certain revenue for the three and nine months ended September 30, 2019, amounting to $0.1 million and $0.9 million, respectively, from Mission Systems and ISR Solutions to Productprior year information in the above table to conform to the current period presentation. These reclassifications had no effect on previously reported total "Government - Over Time" revenue.year presentation; Restaurant/Retail of $37.3 million is presented across hardware, software and service.
Nine Months Ended September 30, 2021
Restaurant/Retail
point in time		Restaurant/Retail
over time		Government
over time
Hardware$70,858 $— $— 
Software827 39,318 — 
Service14,024 22,502 — 
Mission Systems— — 28,450 
Intelligence, surveillance, and reconnaissance solutions— — 24,706 
Product— — 592 
Total$85,709 $61,820 $53,748 

Intelligence, surveillance, and reconnaissance solutions
Nine Months Ended September 30, 2020
Restaurant/Retail
point in time		Restaurant/Retail
over time		Government
over time
Hardware$50,390 $— $— 
Software1,153 18,547 — 
Service11,006 21,293 — 
Mission Systems— — 24,620 
Intelligence, surveillance, and reconnaissance solutions— — 27,457 
Product00804 
Total$62,549 $39,840 $52,881 
The Company has reclassified the prior year information in the above table to conform to the current year presentation; Restaurant/Retail of $102.4 million is presented across hardware, software and service.
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Practical Expedients and Exemptions

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

Weexpenses. The Company elected to exclude from the transaction price measurement, all taxes assessed by a governmental authorityauthorities 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 — AcquisitionsNOTE 3: ACQUISITION

Drive-Thru AcquisitionOn April 8, 2021 (the “Closing Date”), the Company, ParTech, Inc., and Sliver Merger Sub, Inc., a wholly owned subsidiary of ParTech, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Punchh Inc. (“Punchh”), and Fortis Advisors LLC, solely in its capacity as the initial Stockholder Representative. Pursuant to the Merger Agreement, on April 8, 2021, Merger Sub merged with and into Punchh (the “Merger”), with Punchh surviving the Merger and becoming a wholly owned subsidiary of the Company (“Punchh Acquisition”). Punchh is a leader in SaaS-based customer loyalty and engagement solutions.

Effective September 30, 2019,In connection with the Merger, the Company through its wholly-owned subsidiary ParTech, Inc. ("ParTech"paid former Punchh equity holders approximately $507.2 million (including holders of vested options and warrants) consisting of approximately (i) $397.5 million in cash (the “Cash Consideration”), acquired assetsand (ii) 1,493,130 shares of 3Mthe Company's Drive-Thru Communications Systems business, includingcommon stock, which in each case reflects and continues to be subject to certain adjustments (including customary adjustments for Punchh cash, debt, debt-like items, and net working capital at closing), for 100% of the XT-1 and G5 headset systems, contracts and intellectual property associatedequity interests in Punchh. Consideration of common shares issued was determined using an average share price of $68.00, representing consideration paid of $101.5 million. An additional 112,204 shares of the Company's common stock are reserved for options granted as replacement awards for fully vested unexercised option awards assumed in connection with the business, for a purchase price of $8.4 million (totalMerger. The fair value of assetsfully vested option awards was $8.4determined using a Black-Scholes model to be $8.2 million
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including as of acquisition date. As a result, the total fair value of common shares issued and reserved of 1,594,202 (“Equity Consideration”) was determined to be $109.7 million. Further, the Company incurred acquisition related expenses of approximately $1.2 million of developed technology, $3.6 million of customer relationships, and $2.4 million of goodwill, net of warranty liability of $1.4 million, resulting in cash paid of $7.0 million) (the "Drive-Thru Acquisition").$3.5 million.

Restaurant Magic AcquisitionIn connection with, and to partially fund the Cash Consideration for, the Merger, on April 8, 2021, the Company, together with certain of its U.S. Subsidiaries, as guarantors, entered into a credit agreement with the lenders party thereto, and Owl Rock First Lien Master Fund, L.P., as administrative agent and collateral agent (the “Owl Rock Credit Agreement”), that provided for a term loan in an initial aggregate principal amount of $180.0 million (the “Owl Rock Term Loan”); and (ii) securities purchase agreements (the “Purchase Agreements”) with each of PAR Act III, LLC (“Act III”), and certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as investment adviser (such funds and accounts being collectively referred to herein as “TRP”), to raise approximately $160.0 million through a private placement of the Company's common stock. The Company also issued to Act III a warrant to purchase 500,000 shares of common stock with an exercise price of $76.50 and a five year exercise period (the “Warrant”). In connection with the Company's September 2021 public offering of its common stock, as a result of anti-dilution provisions of the Warrant, an additional 3,975 shares of common stock are available for purchase under the Warrant, and an exercise price of $75.90 per share. Refer to “Note 8 — Common Stock”, for additional information about the offering.

Effective December 18, 2019,Additionally, on the Closing Date approximately $6.0 million of the Cash Consideration was deposited into a third party escrow fund, to be held for up to 18-months following the Closing Date, to fund (i) potential payment obligations of Punchh equity holders with respect to post-closing adjustments to the Cash and Equity Consideration and (ii) potential post-closing indemnification obligations of Punchh equity holders, in each case in accordance with the terms of the Merger Agreement. During the third quarter, $3.8 million was distributed from the escrow accounts, of which, $3.5 million was received by the Company through ParTech, acquired 100%from the settlement of post-closing obligations of the limited liability company interestsPunchh equity holders resulting in a reduction of AccSys LLC (f/k/a AccSys, Inc.,the Cash Consideration paid for the acquisition, and otherwise known as Restaurant Magic) in base consideration$0.3 million was released to former Punchh shareholders. As of September 30, 2021, the Company recorded remaining indemnification assets and liabilities of approximately $42.8$2.2 million to other assets and other long-term liabilities, respectively, to account for amounts deposited into the third party escrow fund.
Allocation of which approximately $12.8 millionAcquisition Consideration
The Punchh Acquisition was paid in cash, which reflects a $0.2 million favorable working capital adjustment recognized in the second quarter of 2020, $27.5 million was paid in restricted shares of Company common stock (issued in January 2020) and $2.0 million was paid by delivery of a subordinated promissory note (the "Restaurant Magic Acquisition"). The sellers of Restaurant Magic have the opportunity, through 2022, to earn additional purchase price consideration, subject to the achievement of certain post-closing revenue focused milestones (the “Earn-Out”). As of December 31, 2019, the value of the Earn-Out based on a Monte Carlo simulation was $3.3 million. During the three-months ended September 30, 2020, a $2.3 million fair value adjustment was recorded to earnings to reflect a reduction in the fair value of the Earn-Out to $1.0 million; see "Note 13 - Fair Value of Financial Instruments"accounted for additional information. The adjustment was recorded as a component of Operating expense for the nine months ended September 30, 2020. The Earn-Out, if any, will be payable 50%business combination in cash or subordinated promissory notes, or a combination of both, at the Company's election, and 50% in restricted shares of Company common stock; the equity component of the Earn-Out is classified as a liability on the Company's balance sheet as the quantity of restricted shares is variable subject to the final value of the Earn-out. The Earn-Out has no maximum payment.

The Company issued restricted stock units in connectionaccordance with its assumption of awards granted by Restaurant Magic to its employees and contractors prior to the closing of the acquisition.
ASC Topic 805,
Business Combinations
The fair values assigned to the. Accordingly, assets acquired and liabilities assumed in the Drive-ThruPunchh Acquisition and the Restaurant Magic Acquisition and presented in the table belowwere accounted for at their preliminarily determined respective fair values as of April 8, 2021. The preliminary fair value determinations were based on management's best estimates and assumptions, atand through the conclusionuse of independent valuation and tax consultants. Identified preliminary fair values are subject to measurement period adjustments within the permitted measurement period (up to one year from the acquisition date) as management finalizes its procedures and net working capital adjustments are agreed upon and settled.
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During the third quarter, the preliminary fair values of assets and liabilities as of April 8, 2021 were adjusted to reflect the ongoing acquisition valuation analysis procedures and agreed upon net working capital adjustments. These adjustments included a $3.5 million reduction of Cash Consideration paid due to the release from escrow accounts. Additionally, the fair value of Equity Consideration increased $1.0 million as a result of the measurement periodfinalization of the number of fully vested options granted as replacement awards for each respective transaction:fully vested unexercised awards assumed in connection with the Merger. Further, the fair value of developed technology was reduced by $3.6 million to reflect changes in the underlying fair value assumptions. The related change to amortization expense was not material to the results of the third quarter. The reduction to developed technology also resulted in a $0.8 million reduction to the preliminary net deferred tax liability recorded in purchase accounting. These adjustments resulted in a combined increase to goodwill of $0.4 million during the three months ended September 30, 2021.
The following table presents management's preliminary purchase price allocation:
(in thousands)Purchase price allocation
Developed technologyCash$16,40022,714 
Accounts receivable10,214 
Property and equipment592 
Lease right-of-use assets2,473 
Developed technology84,600 
Customer relationships1,1007,500 
Indemnification assets2,224 
Trade name9005,800 
TangiblePrepaid and other acquired assets1,3442,764 
Goodwill27,773417,981 
Total assets47,517556,862 
Accounts payable and accrued expenses62915,827 
Deferred revenue71511,125 
Earn-Out liabilityLoan payables3,3403,508 
Lease liabilities2,787 
Indemnification liabilities2,224 
Deferred taxes14,162 
Consideration paid$42,833507,229 
Intangible Assets
The Company identified 3 acquired intangible assets in the Punchh Acquisition: developed technology; customer relationships; and, the Punchh trade name. The preliminary fair value of developed technology and customer relationship intangible assets were determined utilizing the “multi-period excess earnings method”, which is predicated upon the calculation of the net present value of after-tax net cash flows respectively attributable to each asset. The preliminary fair value of the Punchh trade name intangible was determined utilizing the “relief from royalty” approach, which is a form of the income approach that attributes savings incurred from not having to pay a royalty for the use of an asset. The estimated useful life of these identifiable intangible assets was preliminarily determined to be indefinite for the Punchh trade name and seven years for both the developed technology and customer relationships intangible assets.
Goodwill
Goodwill represents the excess of consideration transferred for the fair value of net identifiable assets acquired and is tested for impairment at least annually. It is not deductible for income tax purposes.
Deferred Revenue
Deferred revenue acquired in the Punchh Acquisition was fair valued to determined allocation of consideration transferred to assume the liability. The preliminary fair value was determined utilizing the “bottom-up” approach, which is a form of the income approach that measures the liability as the direct, incremental costs to fulfill the legal obligation, plus a reasonable profit margin for the services being delivered.
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Loans Payable
Loan liabilities assumed in the Punchh Acquisition were primarily comprised of Punchh's $3.3 million CARES Act Paycheck Protection Program loan. The Company extinguished all assumed loan payables, including the assumed CARES Act loan, through repayment of the loans on the Closing Date.
Right-of-Use Lease Assets and Lease Liabilities
The Company assumed real property leases in the Punchh Acquisition related to office space in California, Texas and India and have accounted for these leases as Operating Leases in accordance with ASC 842, Leases. The assumed leases have lease terms that run through 2021 to 2026. Valuation specialists were utilized by the Company to appraise the assumed leases against competitive market rates to determine the fair value of the lease liabilities assumed, which identified a $0.3 million unfavorable lease liability that the Company recognized as part of the lease right-of-use asset. The income approach was applied to value the identified unfavorable lease liability.
Deferred Taxes

The Company determined the deferred tax position to be recorded at the time of the Punchh Acquisition in accordance with ASC 740, Income Taxes, resulting in recognition of deferred tax liabilities for future reversing of taxable temporary differences primarily for intangible assets and deferred tax assets primarily relating to net operating losses as of the Closing Date. A valuation allowance was also recorded against certain recognized deferred tax assets based on an evaluation of the realizability of the identified assets. These recognized deferred tax assets, liabilities and valuation allowance resulted in a preliminary net deferred tax liability of $14.2 million relating to the Punchh Acquisition.
The net deferred tax liability relating to the Punchh Acquisition was determined by the Company to provide future taxable temporary differences that allow for the Company to utilize certain previously fully reserved deferred tax assets. Accordingly, the Company recognized a reduction to its valuation allowance in the nine months ended September 30, 2021, resulting in a net tax benefit of $12.5 million for the period.
Unaudited Pro Forma Financial Information

For the three and nine months ended September 30, 2020,2021, the Drive-Thru Acquisition and the Restaurant MagicPunchh Acquisition resulted in additional revenues of $5.7$9.7 million and $2.2$17.8 million, respectively. ForPunchh results are monitored by the nine months ended September 30, 2020,Company as part of the Drive-Thru Acquisitionbroader Restaurant/Retail segment and as a result the Restaurant Magic Acquisition resulted in additional revenues of $13.2 million and $6.2 million, respectively. The Company determined it is impractical to report net loss for the Drive-Thru Acquisition and the Restaurant MagicPunchh Acquisition for the three and nine months ended September 30, 2020.2021. The following unaudited pro forma financial information presents our results as if both acquisitionsof operations are not necessarily indicative of the results that would have occurred had the Punchh Acquisition been consummated at January 1, 2019:
(in thousands)Three months ended September 30, 2019Nine months ended September 30, 2019
Total revenue$51,938 $154,211 
Net loss$(5,990)$(5,209)
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Note 4 — Divestiture

Sale2020, nor are they necessarily indicative of SureCheck

During the second quarter of 2019, ParTech entered into an asset purchase agreement to sell substantially all of the assets relating to the SureCheck product group within the Company's Restaurant/Retail reporting segment. The sale does not qualify for treatment as a discontinued operation, and therefore, the SureCheck product group is included in the Company’s continuing operations for all periods presented.

Note 5 — Accounts Receivable, Netany future consolidated operating results.

The following table summarizes the Company's unaudited pro forma operating results:
Three Months
Ended September 30,		Nine Months Ended
September 30,
(in thousands)202020212020
Total revenue$61,483 $209,997 $174,312 
Net loss$(5,876)$(53,440)$(32,073)
NOTE 4: ACCOUNTS RECEIVABLE, NET
The Company’s net accounts receivable, net,receivables consists of:of (in thousands):
(in thousands)September 30, 2020December 31, 2019
September 30, 2021December 31, 2020
Government segment:Government segment:  Government segment:  
BilledBilled$8,460 $11,608 Billed$10,919 $11,225 
Advanced billingsAdvanced billings(600)(608)Advanced billings— (948)
7,860 11,000  10,919 10,277 
Restaurant/Retail segment:Restaurant/Retail segment:32,246 30,774 Restaurant/Retail segment:37,983 32,703 
Accounts receivable - netAccounts receivable - net$40,106 $41,774 Accounts receivable - net$48,902 $42,980 

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At September 30, 20202021 and December 31, 2019,2020, the Company had current, expected credit loss of $1.9$1.7 million and $1.8$1.4 million, respectively, against accounts receivable for the Restaurant/Retail reporting segment.

Changes in the current, expected credit loss duringwere as follows for the nine months ended September 30, 2020 were as follows:
(in thousands)20202019
Beginning Balance - January 1$1,849 $1,351 
Provisions912 975 
Write-offs(881)(321)
Recoveries0 0 
Ending Balance - September 30$1,880 $2,005 
30:

(in thousands)20212020
Beginning Balance - January 1$1,416 $1,849 
Provisions992 912 
Write-offs(692)(881)
Recoveries(15)— 
Ending Balance - September 30$1,701 $1,880 

AllAccounts receivables recorded as of September 30, 20202021 and December 31, 20192020 represent unconditional rights to payments from customers.

Note 6 — Inventories

NOTE 5: INVENTORIES, NET
Inventories are primarily used in the manufacture maintenance and service of products within the Restaurant/Retail reporting segment.products. The components of inventories,inventory, net consistof reserves, consisted of the following:
(in thousands)(in thousands)September 30, 2020December 31, 2019(in thousands)September 30, 2021December 31, 2020
Finished goodsFinished goods$14,055 $8,320 Finished goods$18,379 $12,747 
Work in processWork in process527 16 
Component partsComponent parts7,681 6,768 Component parts12,534 6,105 
Service partsService parts5,377 4,238 Service parts2,548 2,770 
$27,113 $19,326 
Inventories, netInventories, net$33,988 $21,638 

At September 30, 20202021 and December 31, 2019,2020, the Company had inventoryexcess and obsolescence reserves of $12.1$11.9 million and $9.6$12.0 million, respectively, against inventories used in the Restaurant/Retail reporting segment, which primarily relate to service parts.inventories.

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Note 7 — Identifiable Intangible Assets and GoodwillNOTE 6: IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL

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

The Company exercises judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized. To the extent the Company can change the manner in which new features and functionalities are developed and tested related to its software platform, assessing the ongoing value of capitalized assets or determining the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs 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 ("R&D") costs. The technological feasibility of a software product is established when the Company has completed all planning, designing, coding,capitalizes and testing activities necessary to establish that the software product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing the technological feasibility of software sold as a perpetual license, as defined within ASC 985-20, "Software – Costs of Software to be sold, Leased, or Marketed", are capitalized and amortized on a product-by-product basis when the software product is available for general release to customers. amortizes could change in future periods.

Included in identifiable intangible assets are approximately $5.3$3.0 million and $2.5$6.5 million of costs related to software products that have not satisfied the general release threshold as of September 30, 20202021 and December 31, 2019,2020, respectively. These software products are expected to satisfy the general release thresholdwill be ready for their intended use within the next 12 months. Software development costs capitalizedplaced into service during the three months ended September 30, 2021 and 2020 and September 30, 2019 were $2.4$1.6 million and $0.7$2.4 million, respectively. Software development costs capitalizedplaced into service during the nine months ended September 30, 2021 and 2020 were $9.1 million and September 30, 2019 were $6.7 million, and $2.3 million, respectively. Annual
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Annual amortization charged to cost of sales is computed using the straight-line method over the remaining estimated economic life of software products,the product, generally three to fiveseven years.

Amortization of capitalized software development costs from continuing operationsacquired developed technology for the three months ended September 30, 2021 and 2020 and September 30, 2019 were $1.7$3.7 million and $0.5$0.9 million, respectively. Amortization of capitalizedinternally developed software development costs from continuing operationsfor the three months ended September 30, 2021 and 2020 were $1.3 million and $0.8 million, respectively. 

Amortization of acquired developed technology for the nine months ended September 30, 2021 and 2020 and September 30, 2019 were $4.9$8.3 million and $1.5$2.6 million, respectively. 

For the three month period ended September 30, 2020, $1.6 million and $0.3 millionAmortization of amortization of identifiable intangible assets was recorded in cost of service and amortization of intangible assets, respectively, compared to $0.7 million in cost of service for the three months ended September 30, 2019. For the nine month period ended September 30, 2020, $4.7 million and $0.7 million of amortization of identifiable intangible assets was recorded in cost of service and amortization of intangible assets, respectively, compared to $2.4 million in cost of serviceinternally developed software costs for the nine months ended September 30, 2019. There was no comparable amortization recorded in amortization of intangible assets for the three or nine months ended September 30, 2019.2021 and 2020 were $3.8 million and $2.3 million, respectively. 

The components of identifiable intangible assets are:
(in thousands)(in thousands)September 30, 2020December 31, 2019Estimated
Useful Life		(in thousands)September 30, 2021December 31, 2020Estimated
useful life
Acquired and internally developed software costs$40,011 $36,137 3 - 5 years
Acquired developed technologyAcquired developed technology$109,100 $24,500 3 - 7 years
Internally developed software costsInternally developed software costs24,735 15,670 3 years
Customer relationshipsCustomer relationships4,860 4,860 7 yearsCustomer relationships12,360 4,860 7 years
Trade namesTrade names1,410 1,410 2 - 5 years
Non-competition agreementsNon-competition agreements30 30 1 yearNon-competition agreements30 30 1 year
44,901 41,027   147,635 46,470  
Less accumulated amortizationLess accumulated amortization(17,806)(12,389) Less accumulated amortization(33,756)(20,265) 
$27,095 $28,638   113,879 26,205  
Internally developed software costs not meeting general release threshold5,342 2,500 
Internally developed software costs not yet ready for its intended useInternally developed software costs not yet ready for its intended use2,978 6,516 
Trademarks, trade names (non-amortizable)Trademarks, trade names (non-amortizable)1,810 1,810 Trademarks, trade names (non-amortizable)6,200 400 
$34,247 $32,948     $123,057 $33,121 

The expected future amortization of intangible assets, assuming straight-line amortization of capitalized software development costs and acquisition related intangibles, excluding software costs not meeting the general release threshold, is as follows (in thousands):
2020, remaining$1,818 
20216,808 
20225,582 
20233,581 
20243,186 
Thereafter6,120 
Total$27,095 
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2021, remaining$6,043 
202221,796 
202319,800 
202417,056 
202516,343 
Thereafter32,841 
Total$113,879 

The Company operates in 2 reporting segments, Restaurant/Retail and Government, which are also the Company's identified reporting units for purposes of evaluating goodwill impairment. The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment of goodwill. Goodwill is assigned to a specific reporting unit at the date the goodwill is initially recorded; once assigned, goodwill no longer retains its association with a particular acquisition and all of the activities within the reporting unit, whether acquired organically or from a third-party, are available to support the value of the goodwill. The amount of goodwill

Goodwill carried by the Restaurant/Retail and Government segments were $41.2 million and $41.4 million at September 30, 2020 and December 31, 2019, respectively. The Company recognized additions to goodwillis as part of the Drive-Thru Acquisition and the Restaurant Magic Acquisition as indicated in Note 3 - Acquisitions; in June 2020, a $0.2 million favorable working capital adjustment was recognized related to the Restaurant Magic Acquisition. NaN impairment charges were recorded for the periods ended September 30, 2020 or September 30, 2019.follows:

(in thousands)
Beginning balance - December 31, 2020$41,214 
Punchh Acquisition417,559 
ASC 805 measurement period adjustment422 
Ending balance - September 30, 2021$459,195 
Refer to “Note 3 — Acquisition”, for additional information on goodwill from the Punchh Acquisition.
Note
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NOTE 7: DEBT

The following table summarizes information about the net carrying amounts of long-term debt as of September 30, 2021:
(in thousands)2024 Notes2026 Notes2027 NotesTotal
Principal amount of notes outstanding$13,750 $120,000 $265,000 $398,750 
Unamortized discount and unamortized debt issuance cost(2,089)(22,918)(71,587)(96,594)
Total notes payable$11,661 $97,082 $193,413 $302,156 
The following table summarizes information about the net carrying amounts of long-term debt as of December 31, 2020:
(in thousands)2024 Notes2026 NotesTotal
Principal amount of notes outstanding$13,750 $120,000 $133,750 
Unamortized discount and unamortized debt issuance cost(2,619)(25,986)(28,605)
Total notes payable$11,131 $94,014 $105,145 
Convertible Senior Notes

On September 17, 2021, the Company sold $265.0 million in aggregate principal amount of 1.50% Convertible Senior Notes due 2027 (the “2027 Notes”). The 2027 Notes were issued pursuant to an indenture, dated September 17, 2021, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “2027 Indenture”). The 2027 Notes bear interest at a rate of 1.50% per year, which is payable semiannually in arrears on April 15 and October 15 of each year, beginning April 15, 2022. Interest accrues on the 2027 Notes from the last date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from September 17, 2021. Unless earlier converted, redeemed or repurchased, the 2027 Notes mature on October 15, 2027. The Company used net proceeds from the offering, in conjunction with net proceeds from the September 2021 common stock offering (Refer to “Note 8 — DebtCommon Stock”), to repay in full the Owl Rock Term Loan, which had a principal amount of $180.0 million outstanding as of September 17, 2021. The Company intends to use the remaining net proceeds from the offering for general corporate purposes, including continued investment in the growth of the Company’s businesses and for other working capital needs. The Company may also use a portion of the net proceeds to acquire or invest in other assets complementary to the Company’s businesses or for repurchases of the Company’s other indebtedness.

On February 10, 2020, the Company sold $120.0 million in aggregate principal amount of 2.875% Convertible Senior Notes due 2026 (the “2026 Notes”) 2026 Notes were issued pursuant to an indenture, dated February 10, 2020 (the “2026 Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. The 2026 Notes pay interest at a rate equal to 2.875% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2020. Interest accrues on the 2026 Notes from the last date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from February 10, 2020. Unless earlier converted, redeemed or repurchased, the 2026 Notes mature on April 15, 2026.

On April 15, 2019, the Company sold $80.0 million in aggregate principal amount of 4.500% Convertible Senior Notes due 2024 (the "2024 Notes"“2024 Notes” and, together with the 2026 Notes and the 2027 Notes, the “Notes”). The 2024 Notes were soldissued pursuant to an indenture, dated April 15, 2019, (the "2024 Indenture"), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee.Trustee (the “2024 Indenture” and, together with the 2026 Indenture and the 2027 Indenture, the “Indentures”). The 2024 Notes pay interest at a rate equal to 4.500% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2019. Interest accrues on the 2024 Notes from the last date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from April 15, 2019. Unless earlier converted, redeemed or repurchased, the 2024 Notes mature on April 15, 2024.

On February 10, 2020, the Company sold $120.0 million in aggregate principal amount of 2.875% Convertible Senior Notes due 2026 (the "2026 Notes" and, together with the 2024 Notes, the "Notes"). The 2026 Notes were sold pursuant to an indenture, dated February 10, 2020 (the "2026 Indenture" and, together with the 2024 Indenture, the "Indentures"), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. The 2026 Notes pay interest at a rate equal to 2.875% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2020. Interest accrues on the 2026 Notes from the last date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from April 15, 2020. Unless earlier converted, redeemed or repurchased, the 2026 Notes mature on April 15, 2026.

The Company used approximately $66.3 million (excluding cash payments relating to accrued interest and fractional shares) from its sale of the 2026 Notes and issued 722,423 shares of common stock at $32.43 per share out of treasury stock with an average cost basis of $3.37 per share to repurchase approximately $66.3 million in aggregate principal amount of the 2024 Notes through individually negotiated transactions. Of the total price paid for the 2024 Notes, $59.0 million was allocated to the 2024 Notes settlement, $30.8 million was allocated to the equity, component, and $1.0 million was used to pay off accrued interest on the 2024 Notes. The consideration transferred was allocated to the liability and equity components of the 2024 Notes using the equivalent rate that reflected the borrowing rate for a similar non-convertible debt instrument immediately prior to settlement. The transaction resulted in a loss on settlement of convertible notes of $8.1 million, which is recorded as a Lossloss on extinguishment of debt in the Company’s unaudited interim condensed consolidated statementstatements of operations. The loss
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represents the difference between (i) the fair value of the liability component and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.

The carrying amount of the liability component of the Notes was calculated by estimating the fair value of similar notes that do not have associated convertible features. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the fair value amount of the Notes. The valuation model used in determining the fair value of the liability component for the Notes includes inputs, such as the implied debt yield within the nonconvertible borrowing rate. The implied estimated effective rate of the liability component of the 2024 Notes, and 2026 Notes, is 10.24% and 7.33%2027 Notes was 10.2%, 7.3%, and 6.5% respectively.

The Notes are senior, unsecured obligations of the Company. The 2024 Notes, the 2026 Notes, and the 20262027 Notes are convertible, in whole or in part, at the option of the holder, upon the occurrence of specified events or certain fundamental changes set forth in the Indentures prior to the close of business on the business day immediately preceding October 15, 2023, and October 15, 2025, and April 15, 2027, respectively; and, thereafter, at any time until the close of business on the second business day immediately preceding maturity. The 2024 Notes are convertible into Company common stock at an initial conversion rate of 35.0217 shares per $1,000 principal amount, and the 2026 Notes are convertible into Company common stock at an initial conversion rate of 23.2722 shares per $1,000 principal amount, and the 2027 Notes are convertible into Company common stock at an initial conversion rate of 12.9870 shares per $1,000 principal amount. Upon conversion, the Company may elect to settle by paying or delivering either solely cash, shares of Company common stock or a combination of cash and shares of Company common stock.

In accordance with ASC Topic 470-20 "Debt Debt with Conversion and Other Options — Beneficial Conversion Features"Features, the initial measurement of the 2024 Notes at fair value resulted in a liability of $62.4 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in Additional Paidadditional paid in Capitalcapital of $17.6 million; and the initial
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measurement of the 2026 Notes at fair value resulted in a liability of $93.8 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in Additional Paidadditional paid in Capitalcapital of $26.2 million; and the initial measurement of the 2027 Notes at fair value resulted in a liability of $199.2 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in additional paid in capital of $65.8 million. Issuance costs for the Notes amounted to $4.9 million, $4.2 million, and $4.2$8.3 million for the 2024 Notes, 2026 Notes, and 20262027 Notes, respectively. These costs were allocated to debt and equity components on a ratable basis. For the 2024 Notes this amounted to $3.8 million and $1.1 million to the debt and equity components, respectively. For the 2026 Notes this amounted to $3.3 million and $0.9 million to the debt and equity components, respectively. For the 2027 Notes this amounted to $6.2 million and $2.1 million to the debt and equity components, respectively.

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

As a resultThe Company recorded an income tax liability of $15.9 million in the first nine months of 2021 associated with the portion of the changes2027 Notes that was classified within shareholders' equity. GAAP requires the offset of the deferred tax liability to be classified within shareholders' equity, consistent with the equity componentsportion of the 2027 Notes. The creation of the deferred tax liability produced evidence of recoverability of the Company's net deferred tax assets, which resulted in the release of a valuation allowance, totaling $15.3 million, that was also classified within shareholders' equity pursuant to ASU 2019-12.

In connection with the sale of the 2026 Notes, the Company recognized a deferredrecorded an income tax benefit of $4.4 million duringin the first nine months ended September 30,of 2020 as a result of the creation of a deferred tax liability associated with the portion of the 2026 Notes that was classified within shareholders' equity. The creation of the deferred tax liability produced evidence of recoverability of the Company's net deferred tax assets which resulted in the release of a valuation allowance, totaling $4.4 million, reflected as an income tax benefit in the first nine months of 2020.

Credit Facility

In connection with, and to partially fund the Cash Consideration for the Punchh Acquisition, on April 8, 2021, the Company entered into the Owl Rock Credit Agreement. The following table summarizes information aboutOwl Rock Credit Agreement provides for a term loan in the initial aggregate principal amount of $180.0 million, the “Owl Rock Term Loan”. Issuance costs, which included a 2% Original Issue Discount, amounted to $9.3 million with net carrying amounts of the Notes as of September 30, 2020:
(in thousands)2024 Notes2026 Notes
Principal amount of notes outstanding$13,750 $120,000 
Unamortized discount (including unamortized debt issuance cost)(2,787)(26,968)
Total long-term portion of notes payable$10,963 $93,032 
proceeds amounting to $170.7 million.

The Company used net proceeds from its offering of the 2027 Notes and its concurrent common stock offering (see “Note 8 — Common Stock”) to repay in full the Owl Rock Term Loan, including $1.8 million accrued interest and $3.6 million prepayment premium, on September 17, 2021. Following its repayment, the Owl Rock Credit Agreement was terminated. The transaction resulted in a loss on settlement of notes of $11.9 million, which is recorded as a loss on extinguishment of debt in the Company’s unaudited interim condensed consolidated statements of operations. The loss represents the difference between
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(i) reacquisition price, including prepayment premium, and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.
The following tabletables summarizes interest expense recognized on the Notes forand on the three and nine months ended September 30, 2020 and 2019:Credit Facility:
Three Months
Ended September 30,
(in thousands)(in thousands)Three Months Ended September 30,(in thousands)20212020
20202019
Contractual interest expenseContractual interest expense$1,017 $900 Contractual interest expense$3,284 $1,017 
Amortization of debt issuance costs and discountAmortization of debt issuance costs and discount1,126 882 Amortization of debt issuance costs and discount2,118 1,126 
Total interest expenseTotal interest expense$2,143 $1,782 Total interest expense$5,402 $2,143 
(in thousands)Nine Months Ended September 30,
20202019
Contractual interest expense$3,009 $1,650 
Amortization of debt issuance costs and discount3,205 1,628 
Total interest expense$6,214 $3,278 

The following table summarizes the future principal payments for the Notes as of September 30, 2020 (in thousands):
2020, remaining$0 
20210 
20220 
20230 
202413,750 
Thereafter120,000 
Total$133,750 
Nine Months Ended
September 30,
(in thousands)20212020
Contractual interest expense$7,497 $3,009 
Amortization of debt issuance costs and discount5,035 3,205 
Total interest expense$12,532 $6,214 

In connection with the Restaurant Magic Acquisition (see "Note 3 - Acquisitions"acquisition of AccSys, LLC (otherwise known as “Restaurant Magic”), in December 2019, the Company entered into a $2.0 million of the purchase price was paid by delivery of a subordinated promissory note. The note bears interest at 4.5%5.75% per annum, with monthly payments of principal and interest in the amount of $60,391$60.6 thousand payable beginning January 15, 2020 through maturity on December 15, 2022. As of September 30, 2020,2021, the outstanding balance of the subordinated promissory note was $1.5$0.9 million of which $0.7 million was in the current portion of long-term debt.

The Company'sfollowing table summarizes the future minimum principal payments as of September 30, 2021 (in thousands):
2021, remaining$170 
2022705 
2023— 
202413,750 
2025— 
Thereafter385,000 
Total$399,625 
NOTE 8: COMMON STOCK

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

In connection with, and to partially fund the Cash Consideration of the Punchh Acquisition, on April 8, 2021, the Company entered into the Purchase Agreements with Act III and TRP to raise approximately $160.0 million through a private placement of the Company's common stock. Pursuant to the Purchase Agreements, the Company issued and sold (i) 73,530 shares of its common stock to Act III for a gross purchase price of approximately $5.0 million ($68.00 per share), and (ii) 2,279,412 shares of common stock to TRP for a gross purchase price of approximately $155.0 million ($68.00 per share) for an aggregate of 2,352,942 shares. The Company incurred $4.3 million of issuance costs in connection with the sale of its common stock. The Company also issued to Act III a Warrant purchase 500,000 shares of common stock with an exercise price of $76.50 per share and a five year exercise period. In connection with the Company's September 2021 public offering of its common stock, as a result of anti-dilution provisions of the Warrant, an additional 3,975 shares of common stock are $0.1available for purchase under the Warrant, and an exercise price of $75.90 per share. The Warrant is accounted for as an equity instrument pursuant to ASC 815, Derivatives and Hedging, due to the Warrant contractually permitting only settlement in non-redeemable common shares upon exercise. Refer to “Note 7 — Debt” for additional information about the convertible note offering.

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Issuance date fair value of the Warrant was determined to be $14.3 million $0.7 million and $0.7 million forbased on using the remainder of 2020, 2021 and 2022, respectively.Black-Scholes model with the following assumptions:


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Note 9 — Stock Based Compensation
Expected term5.0 years
Risk free interest rate0.85 %
Expected volatility53.78 %
Expected dividend yieldNone
Fair value (per warrant)$28.65 

The Company also issued 1,493,130 of its common stock as part of the Equity Consideration of the Punchh Acquisition. Refer to “Note 3 — Acquisition” for additional information about the Punchh Acquisition.

On October 5, 2020, the Company completed a public offering of its common stock in which the Company issued and sold 3,616,022 shares of common stock at a public offering price of $38.00 per share. The Company received net proceeds of $131.4 million after deducting underwriting discounts, commissions, and other offering expenses.

NOTE 9: STOCK-BASED COMPENSATION

The Company applies the fair value recognition provisions of ASC Topic 718: "Stock Compensation"718: Stock Compensation. The Company recorded stock-basedStock-based compensation expense, net of $3.2 millionforfeitures of $308.0 thousand and $1.8 million$21.0 thousand for the nine month periodsthree months ended September 30, 2021 and 2020, respectively, and stock-based compensation expense, net of forfeitures of $415.0 thousand and $53.0 thousand for nine months ended September 30, 2019, respectively. The Company2021 and 2020, respectively, was recorded stock-based compensationin the following line items in the condensed consolidated statements of $1.0 million and $0.9 millionoperations for the three month periodsand nine months ended September 30, 2020 and September 30, 2019, respectively. 30:
Three Months
Ended September 30,		Nine Months Ended
September 30,
2021202020212020
Cost of sales - contracts$72 $79 $256 $278 
Selling, general and administrative3,713 926 9,100 2,939 
Total stock-based compensation expense$3,785 $1,005 $9,356 $3,217 
At September 30, 2020,2021, the aggregate unrecognized compensation expense related to unvested equity awards was $9.1$34.1 million, (net of estimated forfeitures), which is expected to be recognized as compensation expense in fiscal years 20202021 through 2023.2024.

AIn connection with the Punchh Acquisition, the Company issued replacement stock option awards. Those awards are included in the summary of stock option activity for the nine months ended September 30, 20202021 is below:
(in thousands, except for exercise price)(in thousands, except for exercise price)Options OutstandingWeighted
Average
Exercise Price		(in thousands, except for exercise price)Options outstandingWeighted
average
exercise price
Outstanding at January 1, 2020410 $14.50 
Outstanding at January 1, 2021Outstanding at January 1, 2021957 $14.29 
GrantedGranted619 13.82 Granted563 7.79 
ExercisedExercised(25)10.29 Exercised(76)10.92 
Canceled/forfeitedCanceled/forfeited(15)19.02 Canceled/forfeited(80)13.02 
Outstanding at September 30, 2020989 $14.11 
Outstanding at September 30, 2021Outstanding at September 30, 20211,364 $11.87 

A summaryThe fair value of unvested restricted stock activityoptions at the date of the grant was estimated using the Black-Scholes model with the following assumptions for the nine months ended September 30, 2020 is below:2021:
(in thousands, except for award value)Restricted Stock AwardsWeighted
Average
Award Value
Outstanding at Balance at January 1, 2020171 $23.53 
Granted21 29.19 
Vested(28)24.37 
Forfeited and cancelled(77)24.16 
Outstanding at September 30, 202087 $24.09 

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Weighted average expected term3.1 years
Weighted average risk-free interest rate0.4 %
Weighted average expected volatility56.5 %
Expected dividend yieldNone
Estimated fair value (per share)$60.47

A summary of unvested restricted stock units ("RSU"(“RSU”) activity for the nine months ended September 30, 20202021 is below:
(in thousands, except for award value)(in thousands, except for award value)RSU AwardsWeighted
Average
Award Value		(in thousands, except for award value)Restricted Stock
Unit Awards		Weighted
average
award value
Outstanding at Balance at January 1, 20200 $0 
Outstanding at January 1, 2021Outstanding at January 1, 2021427 $15.46 
GrantedGranted375 13.24 Granted197 66.24 
VestedVested0 0 Vested(130)16.63 
Forfeited and cancelled0 0 
Outstanding at September 30, 2020375 $13.24 
Canceled/forfeitedCanceled/forfeited(27)71.87 
Outstanding at September 30, 2021Outstanding at September 30, 2021467 $33.24 
NOTE 10: NET LOSS PER SHARE

Note 10 — Net loss per share

Earnings per share is calculated in accordance with ASC Topic 260: "EarningsEarnings per Share"Share, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS)(“EPS”). It requires the presentation of basic and diluted EPS. Basic EPS excludes all dilution and is based upon the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that would occur if convertible securities or other contracts to issue common stock were exercised. At September 30, 2020,2021, there were 989,0001,364,000 anti-dilutive stock options outstanding compared to 590,000989,000 as of September 30, 2019.2020. At September 30, 20202021 there were 375,000468,000 anti-dilutive restricted stock units compared to 0375,000 as of September 30, 2019.2020.

The potential effects of the 2024 Notes, 2026 Notes, and 20262027 Notes conversion features (See "Note 8 - Debt") were excluded from the diluted net loss per share as of September 30, 20202021 and September 30, 2019.2020. Potential shares from 2024 Notes, 2026 Notes, and 20262027 Notes conversion features at respective maximum conversion rates of 46.4046.4037 per share, 30.8356 per share, and 30.8417.8571 per share are approximately 638,051, 3,700,272, and 4,732,132 respectively. Refer to “Note 7 — Debt” for additional information about the Notes.

As discussed in “Note 3 — Acquisition” and “Note 8 — Common Stock” the Company also issued to Act III a warrant to purchase 500,000 shares of common stock with an exercise price of $76.50 per $1,000 principal amountshare and a five year exercise period. In connection with the Company's September 2021 public offering of Notesits common stock, as a result of anti-dilution provisions of the Warrant, an additional 3,975 shares of common stock are approximately 638,051available for purchase under the Warrant, and 3,700,272, respectively.
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the exercise price of $75.90 per share. The Warrant was excluded from the diluted net loss per share as of September 30, 2021 due to its anti-dilutive impact.
Note 11 — ContingenciesNOTE 11: COMMITMENTS AND CONTINGENCIES

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

The Company is a party to a proceeding filed byOn March 21, 2019, Kandice Neals on behalf of herself and others similarly situated (the "Neals Plaintiff"“Neals Plaintiff”) filed a complaint against the Company on March 21, 2019PAR Technology Corporation in the Circuit Court of Cook County, Illinois County Department, Chancery Division. The complaint asserted that the CompanyPAR Technology Corporation violated the Illinois Biometric Information Privacy Act in the alleged collection, use, and storage of her and others' biometric data derived from fingerprint scans taken for authentication purposes on point-of-sale systems. The Neals lawsuit was removed to the Federal District Court for the Northern District of Illinois (the District Court"“District Court”) and was subsequently dismissed on December 19, 2019 without prejudice. On January 15, 2020, the Neals Plaintiff filed an amended complaint against ParTech, Inc. with the District Court. On January 29, 2020, ParTech, Inc. filed its answer and affirmative defenses to the amended complaint. The Company believes the Nealsthat this lawsuit is without merit. The Company doesCompany’s estimated liability for this complaint is not currently believe an accrual is appropriate, but will continuematerial and related contingencies are not expected to monitorhave a material effect on the lawsuit to provide for probable and estimable losses.
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Company’s financial statements.

In 2016, the Company's Audit Committee commenced an internal investigation into conduct at the Company's China and Singapore offices and voluntarily notified the SEC and the U.S. Department of Justice ("DOJ"(“DOJ”) of the internal investigation. Following the conclusion of the Audit Committee's internal investigation, the Company voluntarily reported the relevant findings of the investigation to the China and Singapore authorities. In early April 2019, the SEC notified the Company that based on current information, it did not intend to recommend an enforcement action against the Company; shortly thereafter, the DOJ advised that it did not intend to separately proceed. Based on discussions withIn July 2021, the Singaporean authority a penalty related to this matter is probable;notified the Company’s estimated liability for this penalty isCompany that it would not material and related contingencies are not expected to have a material effect on the Company’s financial statements.

assess further penalties.
Note 12 — SegmentNOTE 12: SEGMENT AND RELATED INFORMATION
The Company is organized in 2 segments, Restaurant/Retail and Related InformationGovernment. Management views the Restaurant/Retail and Government segments separately in operating its business, as the products and services are different for each segment.

The Company operates in 2 distinct reporting segments, Restaurant/Retail segment is a provider of software, systems and Government. The Company’s chief operating decision maker is the Company’s Chief Executive Officer. The Restaurant/Retail reporting segment provides point-of-sale (POS) software and hardware, back-office software, and integrated technical solutionsservices to the restaurant and retail industries. The Government reportingRestaurant/Retail segment provides intelligence, surveillance,multi-unit and reconnaissanceindividual restaurants, franchisees, and enterprise customers in the three major restaurant categories (fast casual, quick serve, and table service) a fully integrated cloud solution with its Brink POS cloud software and POS hardware for the front-of-house, its back-office cloud software Data Central for the back-of-house, its loyalty and customer engagement platform - Punchh, and its wireless headsets for drive-thru order taking. This segment also offers a comprehensive portfolio of services to support its customer' technology and hardware requirements before, during and after software and/or hardware deployments. The Government segment performs complex technical studies, analysis, experiments, develops innovative solutions, and mission systemsprovides on-site engineering in support to the United States Department of Defenseadvanced defense, security and other Federal agencies. In addition, the financial statements include corporate operations, which are comprised of enterprise-wide functional departments.aerospace systems. This segment also provides expert on-site services for operating and maintaining U.S. Government-owned communication assets.

Information as to the Company's reporting segments is set forth in the tables below; information noted as “Other” primarily relates to the Company’s corporate operations.

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

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(in thousands)(in thousands)Three Months
Ended September 30,		Nine Months Ended
September 30,		(in thousands)Three Months
Ended September 30,		Nine Months Ended
September 30,
2020201920202019 2021202020212020
Net Revenues:    
Net revenues:Net revenues:  
Restaurant/RetailRestaurant/Retail$37,347 $29,841 $102,389 $87,663 Restaurant/Retail$59,821 $37,347 $147,529 $102,389 
GovernmentGovernment17,500 15,539 52,881 46,646 Government18,039 17,500 53,748 52,881 
TotalTotal$54,847 $45,380 $155,270 $134,309 Total$77,860 $54,847 $201,277 $155,270 
Operating loss:    
Operating (loss) income:Operating (loss) income:
Restaurant/RetailRestaurant/Retail$(2,763)$(4,432)$(16,530)$(12,029)Restaurant/Retail$(15,642)$(2,763)$(40,894)$(16,530)
GovernmentGovernment1,774 809 4,302 3,690 Government1,960 1,774 4,555 4,302 
OtherOther(9)(368)57 (1,206)Other(427)(9)(766)57 
TotalTotal(998)(3,991)(12,171)(9,545)Total(14,109)(998)(37,105)(12,171)
Other expense, netOther expense, net(486)(401)(1,250)(1,205)Other expense, net(539)(486)(931)(1,250)
Interest expense, netInterest expense, net(2,235)(1,588)(6,318)(2,978)Interest expense, net(5,406)(2,235)(12,503)(6,318)
Loss on extinguishment of debtLoss on extinguishment of debt0 0 (8,123)0 Loss on extinguishment of debt(11,916)— (11,916)(8,123)
Loss before benefit from income taxes$(3,719)$(5,980)$(27,862)$(13,728)
Loss before provision for income taxesLoss before provision for income taxes$(31,970)$(3,719)$(62,455)$(27,862)
Depreciation, amortization and accretion:Depreciation, amortization and accretion:    Depreciation, amortization and accretion:
Restaurant/RetailRestaurant/Retail$1,984 $824 $5,790 $2,893 Restaurant/Retail$5,833 $1,984 $13,789 $5,790 
GovernmentGovernment80 17 136 54 Government30 80 263 136 
OtherOther1,388 1,031 4,226 2,046 Other2,453 1,388 6,051 4,226 
TotalTotal$3,452 $1,872 $10,152 $4,993 Total$8,316 $3,452 $20,103 $10,152 
Capital expenditures including software costs:Capital expenditures including software costs:    Capital expenditures including software costs:
Restaurant/RetailRestaurant/Retail$1,324 $838 $5,814 $2,679 Restaurant/Retail$1,645 $1,324 $5,342 $5,814 
GovernmentGovernment415 0 849 176 Government139 415 592 849 
OtherOther276 480 398 1,780 Other177 276 465 398 
TotalTotal$2,015 $1,318 $7,061 $4,635 Total$1,961 $2,015 $6,399 $7,061 
Revenues by country:    
United States$51,036 $44,380 $148,293 $127,962 
Other Countries3,811 1,000 6,977 6,347 
Total$54,847 $45,380 $155,270 $134,309 


(in thousands)Three Months
Ended September 30,		Nine Months Ended
September 30,
 2021202020212020
Revenues by country:
United States$71,595 $51,036 $186,325 $148,293 
Other Countries6,265 3,811 14,952 6,977 
Total$77,860 $54,847 $201,277 $155,270 

The following table represents identifiable long-lived tangible assets by reporting segment.
(in thousands)September 30, 2020December 31, 2019
Restaurant/Retail$1,822 $1,987 
Government226 272 
Other11,762 12,093 
Total$13,810 $14,352 

(in thousands)September 30, 2021December 31, 2020
Restaurant/Retail$681,344 $140,606 
Government14,906 13,150 
Other210,142 189,993 
Total$906,392 $343,749 

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The following table represents identifiable long-lived tangible assets by country based on the location of the assets.
(in thousands)September 30, 2020December 31, 2019
United States$13,736 $14,260 
Other Countries74 92 
Total$13,810 $14,352 

(in thousands)September 30, 2021December 31, 2020
United States$305,757 $250,275 
Other Countries14,245 16,570 
Total$320,002 $266,845 

The following table represents goodwill by reporting segment.
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(in thousands)(in thousands)September 30, 2020December 31, 2019(in thousands)September 30, 2021December 31, 2020
Restaurant/RetailRestaurant/Retail$40,478 $40,650 Restaurant/Retail$458,459 $40,478 
GovernmentGovernment736 736 Government736 736 
TotalTotal$41,214 $41,386 Total$459,195 $41,214 

Customers comprising 10% or more of the Company’s total revenues by reporting segment are summarized as follows:
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Restaurant/Retail reporting segment:    
Dairy Queen13 %5 %13 %7 %
Yum! Brands, Inc.11 %14 %10 %14 %
McDonald’s Corporation6 %10 %7 %10 %
Government reporting segment: 
U.S. Department of Defense32 %34 %34 %35 %
All Others38 %37 %36 %34 %
 100 %100 %100 %100 %

Three Months
Ended September 30,		Nine Months Ended
September 30,
 2021202020212020
Restaurant/Retail reporting segment:  
Dairy Queen6 %13 %7 %13 %
Yum! Brands, Inc.11 %11 %12 %10 %
McDonald’s Corporation12 %6 %11 %7 %
Government reporting segment:
U.S. Department of Defense23 %32 %27 %34 %
All Others48 %38 %43 %36 %
 100 %100 %100 %100 %

No other customer within All Others represented 10% or more of the Company’s total revenue for the three and nine months ended September 30, 20202021 or 2019. The above table should be read in conjunction with the revised table presented in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 11, 2020.

Note 13 — Fair Value of Financial Instruments

NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments have been recorded at fair value using available market information and valuation techniques. The fair value hierarchy is based upon three levels of input, which are:

Level 1 — quoted prices in active markets for identical assets or liabilities (observable)
Level 2 — inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable market data for essentially the full term of the asset or liability (observable)
Level 3 — unobservable inputs that are supported by little or no market activity, but are significant to determining the fair value of the asset or liability (unobservable)

The Company’s financial instruments primarily consist of cash and cash equivalents, trade receivables, trade payables, debt instruments and deferred compensation assets and liabilities. The carrying amounts of cash and cash equivalents, trade receivables and trade payables as of September 30, 20202021 and December 31, 20192020 were considered representative of their fair values. The estimated fair value of the 2024 Notes, 2026 Notes, and 20262027 Notes at September 30, 20202021 was $20.7$30.5 million, $197.2 million, and $144.7$285.1 million respectively. The valuation techniques used to determine the fair value of the 2024 Notes, 2026 Notes, and 2026the 2027 Notes are classified within Level 2 of the fair value hierarchy.

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

The amounts owed to employees participating in the deferred compensation plan at September 30, 20202021 was $3.0$2.6 million compared to $3.2$2.8 million at December 31, 20192020 and is included in other long-term liabilities on the balance sheets.

In connection with the Company's December 2019 acquisition of AccSys, LLC, the sellers have the opportunity through 2022 to earn additional purchase price consideration subject to the achievement of certain post-closing revenue focused milestones (“Earn-Out”). The Earn-Out, if any, will be payable 50% in cash or subordinated promissory notes, or a combination of both, at the Company's election, and 50% in restricted shares of Company usescommon stock; the Earn-Out has no maximum payment. The Company's Level 3 contingent consideration liability related to the Restaurant Magic Earn-Out had a Monte-Carlo simulation to determine the fair value of the Earn-Out liability associated with the Restaurant Magic Acquisition. This simulation uses probability distribution for each significant input to produce hundreds or
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thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring, as such it is classified as Level 3. Significant increases or decreases to these inputs in isolation could result in a significantly higher or lower liability. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities. The Restaurant Magic Acquisition resulted in a liability for the contingent consideration being recorded in the amount of $3.3 million during 2019. The liability for the contingent consideration was established$0 at the time of the acquisition and is evaluated quarterly based on additional information as it becomes available. During the three and nine months ended September 30, 2020, an adjustment of $2.3 million was recognized to reduce the contingent consideration liability to $1.0 million. Any change in the fair value adjustment is recorded in the earnings for that period as a component of Operating expense in the condensed consolidated financial statements.

2021 and December 31, 2020.
The following table presents a summary of changes inprovides quantitative information associated with the fair value measurement of the Company’s Level 3 assetsliability for contingent consideration at September 30, 2021 and liabilities that are measured at fair value on a recurring basis, and are recorded as a component of other long-term liabilities on the consolidated balance sheet:December 31, 2020.
(in thousands)Level 3 Inputs
Liabilities
Balance at December 31, 2019$3,340 
New level 3 liability0 
Total gains reported in earnings2,310 
Settlement of Level 3 liabilities0 
Balance at September 30, 2020$1,030 
Contingency TypeMaximum Payout
(undiscounted) (in thousands)		Fair ValueValuation TechniqueUnobservable InputsWeighted Average or Range
Revenue-based payments$1,965 $— Monte CarloRevenue volatility25.0 %
Discount rate14.0 %
Projected year(s) of payment2021-2022

Note 14 — Subsequent Events

On October 5, 2020, the Company completed an underwritten public offering (the "offering"), pursuant to the Company's universal shelf registration statement filed with the SEC on September 30, 2020 (Registration No. 333-249142), of 3,350,000 shares of common stock at a price to the public of $38.00 per share, resulting in $121.7 million of proceeds, net of underwriting discounts and commissions and offering expenses payable by the Company. In connection with the offering, the Company granted Jeffries LLC, the underwriter of the offering, a 30 day option to purchase up to an additional 502,500 shares of common stock at the same public offering price, less underwriting discounts and commissions. On November 3, 2020, Jeffries, LLC partially exercised its option and purchased 266,022 shares of common stock, resulting in an additional $9.6 million of proceeds, net of underwriting discounts and commissions and offering expenses payable by the Company.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When used in this Quarterly Report on Form 10-Q ("(“Quarterly Report”), the terms the “Company”, “PAR”, “Company,” “we,”“we”, “us” and “our” meanor “our Company” refers to PAR Technology Corporation and its consolidated subsidiaries, unless the context indicates otherwise. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto included under Part I, Item 1 of this Quarterly Report and our audited consolidated financial statement and the notes thereto included under Part II, Item 8 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 filed with the SEC on March 16, 2021 (“2020 ("2019 Annual Report"Report”). See also, “Forward-Looking Statements”.

OverviewOVERVIEW

We, through our wholly owned subsidiaries - ParTech, Inc. and PAR TechnologyGovernment Systems Corporation operates- operate in two distinct reporting segments: oursegments, Restaurant/Retail and Government. Our Restaurant/Retail segment which provides point-of-sale (POS)(“POS”) software, and hardware back-office software, and integrated technical solutions to the restaurant and retail and restaurant industries, and ourindustries. Our Government segment which provides intelligence, surveillance, and reconnaissance solutions and mission systems support to the U.S. Department of Defense ("DoD"(“DoD”) and other Federalfederal agencies.

Our Restaurant/Retail segment is a leading provider of POS software, systems, and hardwareservices to the restaurant and retail industries.industries, with more than 500 customers currently using our software products and more than 50,000 active restaurant locations. Our promise is to deliver the solutions that connect people to the restaurants, meals, and moments they love. We provide multi-unit and individual restaurants, franchisees, and enterprise customers in the three major restaurant categories: fast casual, quick serve, and table service,categories a fully integrated cloud solution,solution. We offer quick service, fast casual, and table service restaurants with operational efficiencies, by combining our leading Brink POS cloud software andfor front-of-house, our point-of-sale hardware for the front-of-house, and our leadingData Central back-office cloud software, - Data Central - for the back-of-house.
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The Brink POS solution offers customers an integration ecosystem, providing access to industry trendsour Punchh loyalty and features, including mobile/on-line ordering, self-ordering kiosks, loyalty programs, kitchen video systems, guest surveys, enterprise reporting,engagement software and other features relevant to our customers’ businesses, including Restaurant Magic's cloud, SaaS back-office applications - Data Central. Data Central provides restaurants with the necessary tools to achieve peak operationalPAR Pay and financial efficiency and integrates information from POS, inventory, supply, payroll, and accounting systems to provide a comprehensive view of a restaurant's operations.

Our POS integrated solutions also includes a comprehensive offering of wireless headsets for drive-thru order taking. This product offering is of particular relevance during the COVID-19 pandemic as it provides our customers with another means to deliver their products and serve their customers, even in these uncertain times. Additionally, our recently released merchant services offering, PAR Payment Services provides restaurantsonto a unified commerce cloud platform. This unified commerce cloud platform is further extended with card payment processing capabilities, which we serviceour compatible POS hardware and support.

We believe our cloud software solutions, hardware offerings and services uniquely position us to be a leader in helping to digitizedrive-thru solutions. Our open API (application programming interface) allows for integration with the modern restaurant. Our continued success and growth will depend upon our ability to successfully deploy capital to where it earns its highest return. This includes the development and introduction of new products and product enhancements, targeted acquisitions and a constant review of internal spend. We have spent extensive time building a culture of intense rigor around capital allocation and we believe it will be a key part of our future success.world’s leading restaurant technology platforms.

Our Government segment provides technical expertise in contract development of advanced systems and software solutions for the U.S. DoD and other Federalfederal agencies, as well as satellite, communication, and IT mission systems support at a number of U.S. Government facilities both in the U.S. and worldwide. Our strategyThe Government segment is to build upon our Government segment's sustained performancefocused on existing service contracts, coupledtwo principal offerings, intelligence solutions and mission systems contract support, with investmentsadditional revenue from a small number of licensed software products for use in enhanced business development capabilities. We believe we are well positioned to realize continued renewals of expiring contractsanalytic and extensions of existing contracts, and to secure service and solution contracts in expanded areas within the U.S. DoD and other Federal agencies.operational environments that leverage geospatial intelligence data. We believe our highly
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relevant technical competencies, intellectual property, and investments in new technologies provide opportunities to offer systems integration, products, and highly-specialized service solutions to the U.S. DoD and other Federalfederal agencies. The general uncertainty in U.S. defense total workforce policies (military, civilian, and contract), procurement cycles, and spending levels for the next several years are factors we monitor as we develop and implement our business strategy for our Government segment.

Recent Developments Affecting Our Business - COVID 19COVID-19 Update

The COVID-19 pandemic continues to affect the U.S.present challenges to our Restaurant/Retail segment that we continue to monitor and global economies affecting our business, operations, and financial results, and the restaurant industry generally. The effects of the COVID-19 pandemic, including the effects of responses of governmental authorities and companiesrespond to reduce the spread of the virus, such as shutdowns or reduced capacity restrictions, travel restrictions, and work-from-home requirements or practices, are expected to continue for the foreseeable future as economies and businesses transition to a new normal.

Early in the COVID-19 pandemic, we took a number ofwith actions to mitigate itsdisruption to our operations and to protect our profitability. The challenges that exist in the environment our Restaurant/Retail business operates in, include: disruptions in supply chain, increasing materials cost, intense competition for qualified personnel, and increasing compensation costs, any of which could adversely impact on our employees and business, including limiting travel to essential-business only, implementing work-from-home policies and augmenting shifts for our production employees, and at the same time introduced new product offerings to promote social distancing, including PARkit, a virtual kiosk, virtual drive-thru and/or on-line ordering solution, and self-install hardware product configurations, offered subscription discounts and deferred payment arrangements to customers and continued to invest in our Brink POS platform and adjacent opportunities to position our business to the new normal and seek new opportunities. We also implemented cost saving measures, including reductions in discretionary spending, a non-essential position hiring freeze, a reduction in workforce, employee furloughs and temporary salary reductions. While we continue to manage our business in response to the COVID-19 pandemic, we are unable to accurately predict the ultimate impact that the COVID-19 pandemic will have on our business, operations, financial condition and financial results. The operations and results or prospects. For additional information on the various risks posedof our Government business have not been materially impacted by the COVID-19 pandemic, please read “Risk Factors” in Part II, "Item 1A. Risk Factors" in this Quarterly Report.pandemic.

Further,Business Highlights and Recent Developments

•On September 17, 2021, we completed a public offering of our common stock in which we issued and sold 982,143 shares of common stock at a public offering price of $56.00 per share. We received net proceeds from the COVID-19 pandemic has not hadoffering of $52.5 million, after deducting underwriting discounts, offering costs and commissions.

•On September 17, 2021, we sold $265.0 million in aggregate principal amount, of 1.50% Convertible Senior Notes due 2027 (the “2027 Notes”). The 2027 Notes were issued pursuant to an indenture, dated September 17, 2021, between us and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “2027 Indenture”). The 2027 Notes pay interest at a material adverse impactrate equal to 1.50% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning April 15, 2022.

•On September 17, 2021, we used the net proceeds from our Government business2027 Notes and common stock and debt offerings to date. repay in full the Owl Rock Term Loan, including $1.8 million accrued interest and a $3.6 million prepayment premium. Following its repayment, the Owl Rock Credit Agreement was terminated.

RESULTS OF OPERATIONS

Key Performance Indicators and Strategic Financial Metrics:

We monitor certain operating and non-GAAP financial metrics in the evaluation and management of our business; certain key operating and non-GAAP financial metrics have continued our work-from-home arrangements for non-essential employees and on-site operations continuebeen provided as we believe these to be accomplished through teleworkuseful in facilitating period-to-period comparisons of our business performance. Operating and non-GAAP financial metrics do not reflect and should be viewed independently of our financial performance determined in accordance with GAAP. Operating and non-GAAP financial metrics are not forecasts or indicators of future or expected results and should not have undue reliance placed upon them by investors.
Annual Recurring Revenue
Three Months
Ended September 30,		Increase (decrease)
In thousands202120202021 vs 2020
Brink POS29,479 22,862 28.9 %
Data Central9,114 8,353 9.1 %
Punchh43,950 29,982 46.6 %
Total$82,543 $61,197 34.9 %

Annualized Recurring Revenue (“ARR”), is the annualized revenue from SaaS and related revenue of our software products. We calculate ARR by annualizing the monthly recurring revenue for all active sites as of the last day of each month for the respective reporting period. ARR also includes recurring payment processing services revenue, net of expenses. We charge a staggered staffing approach that achieves the intent and benefits of social distancing. For contracts requiring specialized equipment, we use our established off-site lab environment permitting the safe continuation of development and testing activities until government facilities reopen.per-transaction fee each time a customer payment is processed electronically.


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Results of Operations —Active Sites
Nine Months
Ended September 30,		Increase (decrease)
In thousands202120202021 vs 2020
Brink POS14.9 11.0 35.2 %
Data Central6.2 5.7 8.0 %
Punchh52.9 34.6 53.1 %

ThreeActive sites represent locations active on our SaaS software as of the last day of the respective fiscal period. Punchh active sites from 2020 are included in the table to highlight year-over-year comparison between 2021 and 2020.

Segment Revenue by Product Line as Percentage of Total Revenue
Three Months
Ended September 30,
Percentage of total revenueIncrease (decrease)
In thousands20212020202120202021 vs 2020
Hardware$29,669 $20,149 38.1 %36.7 %47.2 %
Software17,168 6,789 22.0 %12.4 %152.9 %
Services12,984 10,409 16.7 %19.0 %24.7 %
Total Restaurant/Retail59,821 37,347 76.8 %68.1 %60.2 %
ISR9,619 8,943 12.4 %16.3 %7.6 %
Mission systems8,237 8,084 10.6 %14.7 %1.9 %
Product services183 473 0.2 %0.9 %(61.3)%
Total Government18,039 17,500 23.2 %31.9 %3.1 %
Total revenue$77,860 $54,847 100.0 %100.0 %42.0 %
The above table includes 2021 Punchh revenues of $8.6 million for software and $1.1 million for services.
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Nine Months
Ended September 30,
Percentage of total revenueIncrease (decrease)
In thousands20212020202120202021 vs 2020
Hardware$70,858 $50,390 35.2 %32.5 %40.6 %
Software40,145 19,700 19.9 %12.7 %103.8 %
Services36,526 32,299 18.1 %20.8 %13.1 %
Total Restaurant/Retail147,529 102,389 73.3 %65.9 %44.1 %
ISR28,450 27,457 14.1 %17.7 %3.6 %
Mission systems24,706 24,619 12.3 %15.9 %0.4 %
Product services592 805 0.3 %0.5 %(26.5)%
Total Government53,748 52,881 26.7 %34.1 %1.6 %
Total revenue$201,277 $155,270 100.0 %100.0 %29.6 %
The above table includes 2021 Punchh revenues of $15.7 million for software and $2.1 million for services.

Recurring and Non-Recurring Revenue as Percentage of Total Revenue
Three Months
Ended September 30,
Percentage of total revenueIncrease (decrease)
In thousands20212020202120202021 vs 2020
Recurring revenue$24,974 $14,012 32.1 %25.5 %78.2 %
Non-recurring revenue34,847 23,335 44.7 %42.5 %49.3 %
Total Restaurant/Retail$59,821 $37,347 76.8 %68.1 %60.2 %
Total Government$18,039 $17,500 23.2 %31.9 %3.1 %
Total revenue$77,860 $54,847 100.0 %100.0 %42.0 %
The above table includes 2021 Punchh revenues of $9.5 million for recurring revenue and $0.2 million for non-recurring within the Restaurant/Retail segment.

Nine Months
Ended September 30,
Percentage of total revenueIncrease (decrease)
In thousands20212020202120202021 vs 2020
Recurring revenue62,939 40,188 31.3 %25.9 %56.6 %
Non-recurring revenue84,590 62,201 42.0 %40.1 %36.0 %
Total Restaurant/Retail$147,529 $102,389 73.3 %65.9 %44.1 %
Total Government$53,748 $52,881 26.7 %34.1 %1.6 %
Total revenue$201,277 $155,270 100.0 %100.0 %29.6 %
The above table includes 2021 Punchh revenues of $17.6 million for recurring revenue and $0.2 million for non-recurring within the Restaurant/Retail segment.

Recurring revenue represents all revenue from contracts where there is a predictable revenue pattern occurring in regular intervals with a relatively high degree of probability. This includes SaaS, hardware and software maintenance, and payment processing revenue and excludes the results from Punchh.
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Adjusted EBITDA and Adjusted Net Loss/Adjusted Diluted Net Loss Per Share

We use the non-GAAP measures adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share because they provide useful information to investors as an indicator of strength and performance of our ongoing business operations and relative comparisons to respective prior periods.

We make reference to EBITDA, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share which are non-GAAP financial measures. EBITDA represents net loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude certain non-cash and non-recurring charges, including stock-based compensation, acquisition expenses, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance. Adjusted net loss/adjusted diluted net loss per share, net of tax represents the exclusion of amortization of acquired intangible assets, certain non-cash and non-recurring charges, including stock-based compensation, acquisition expense, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance.

EBITDA, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income (loss) or cash flow from operating activities as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies. The tables below provide reconciliations between net loss and EBITDA, adjusted EBITDA and adjusted net loss.

Three Months
Ended September 30,
20212020
Reconciliation of EBITDA and adjusted EBITDA:
Net loss$(31,933)$(3,711)
Benefit from income taxes(37)(8)
Interest expense5,406 2,235 
Depreciation and amortization6,199 2,409 
EBITDA$(20,365)$925 
Stock-based compensation expense (1)3,785 1,005 
Contingent consideration (2)— (2,310)
Acquisition costs (3)138 — 
Loss on extinguishment of debt (4)11,916 — 
Other expense – net (5)539 486 
Adjusted EBITDA$(3,987)$106 
1Adjustments reflect stock-based compensation expense within selling, general and administrative expenses and cost of contracts of $3.8 million for the three months ended September 30, 2021 and $1.0 million for the three months ended September 30, 2020.
2Adjustment reflects a change to the fair market value of the contingent consideration liability related to the 2019 acquisition of AccSys, LLC (the “Restaurant Magic Acquisition”).
3Adjustment reflects the expenses incurred in the April 8, 2021 merger transaction whereby Punchh Inc become a wholly owned subsidiary of the Company (the “Punchh Acquisition”) of $0.1 million for the three months ended September 30, 2021.
4Adjustment reflects the $11.9 million loss on extinguishment of debt related to the repayment of the senior secured term loan under the credit agreement we entered into with Owl Rock First Lien Master Fund, L.P. to fund a portion of the Punch Acquisition (the “Owl Rock Term Loan”) during the three months ended September 30, 2021.
5Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations.

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Nine Months
Ended September 30,
20212020
Reconciliation of EBITDA and adjusted EBITDA:
Net loss$(50,160)$(23,597)
Benefit from income taxes(12,295)(4,265)
Interest expense12,503 6,318 
Depreciation and amortization15,069 6,946 
EBITDA$(34,883)$(14,598)
Stock-based compensation expense (1)9,356 3,217 
China/Singapore expense (2)50 126 
Contingent Consideration (3)— (2,310)
Pending litigation expense (4)600 — 
Acquisition costs (5)3,526 — 
Gain on insurance proceeds (6)(4,400)— 
Severance (7)— 359 
Loss on extinguishment of debt (8)11,916 8,123 
Other expense – net (9)931 1,250 
Adjusted EBITDA$(12,904)$(3,833)
1Adjustments reflect stock-based compensation expense within selling, general and administrative expenses and cost of contracts for the nine months ended September 30, 2021 of $9.4 million and for the nine months ended September 30, 2020 of $3.2 million.
2Adjustment reflects the expenses related to the resolution of China/Singapore matter of $0.1 million for both the nine months ended September 30, 2021 and 2020.
3Adjustment reflects to change to the fair market value of the contingent consideration liability related to the Restaurant Magic Acquisition.
4Adjustment reflects expenses accrued for a pending legal matter of $0.6 million for the nine months ended September 30, 2021.
5Adjustment reflects the expenses incurred in the Punchh Acquisition of $3.5 million for the nine months ended September 30, 2021.
6Adjustment represents the gain on insurance stemming from a legacy claim of $4.4 million for the nine months ended September 30, 2021.
7Adjustment reflects the severance included in gross margin, selling, general and administrative expense and research and development expense of $0.4 million for the nine months ended September 30, 2020.
8Adjustment reflects loss on extinguishment of debt of $11.9 million related to the repayment of the Owl Rock Term Loan for the nine months ended September 31, 2021 and an adjustment of $8.1 million related to the repurchase of approximately $66.3 million of the 4.500% Convertible Senior Notes due 2024 (the “2024 Notes”) for the nine months ended September 30, 2020.
9Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations.

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Three Months Ended September 30,
20212020
Reconciliation of adjusted net loss/diluted loss per share:
Net loss / diluted earnings per share$(31,933)$(1.23)$(3,711)$(0.20)
Benefit from income taxes (1)(162)(0.01)— — 
Non-cash interest expense (2)2,118 0.08 1,126 0.07 
Acquired intangible assets amortization (3)4,279 0.16 1,037 0.06 
Stock-based compensation expense (4)3,785 0.15 1,005 0.06 
Contingent Consideration (5)— — (2,310)(0.13)
Acquisition costs (6)138 0.01 — — 
Loss on extinguishment of debt (7)11,916 0.46 — — 
Other expense – net (8)539 0.02 486 0.03 
Adjusted net loss/diluted loss per share$(9,320)$(0.36)$(2,367)$(0.11)
Adjusted weighted average common shares outstanding25,998 18,250 
1Adjustment reflects a partial release of our deferred tax asset valuation allowance of $0.2 million related to the Punchh Acquisition for the three months ended September 30, 2021. The income tax effect of the below adjustments were not tax-effected due to the valuation allowance on all of our net deferred tax assets.
2Adjustment reflects non-cash accretion of interest expense and amortization of issuance costs related to the 4.500% Convertible Senior Notes due 2024 (the “2024 Notes”), 2.875% Convertible Senior Notes due 2026 (the “2026 Notes”), the 2027 Notes, and the Owl Rock Term Loan of $2.1 million and $1.1 million for the three months ended September 30, 2021 and 2020, respectively.
3Adjustment reflects amortization expense of acquired developed technology within gross margin of $3.8 million and $0.9 million for the three months ended September 30, 2021 and 2020; and amortization expense of acquired other intangible assets of $0.5 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively.
4Adjustments reflect stock-based compensation expense within selling, general and administrative expenses and cost of contracts of $3.8 million for the three months ended September 30, 2021 and $1.0 million for the three months ended September 30, 2020.
5Adjustment reflects to change to the fair market value of the contingent consideration liability related to the Restaurant Magic Acquisition.
6Adjustment reflects the expenses incurred in the Punchh Acquisition of $0.1 million for the three months ended September 30, 2021.
7Adjustment reflects the $11.9 million loss on extinguishment of debt related to the repayment of the Owl Rock Term Loan during the three months ended September 30, 2021.
8Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations.

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Nine Months Ended September 30,
20212020
Reconciliation of adjusted net loss/diluted loss per share:
Net loss / diluted earnings per share$(50,160)$(2.05)$(23,597)$(1.30)
Benefit from income taxes (1)(12,522)(0.51)(4,408)(0.24)
Non-cash interest expense (2)5,035 0.21 3,205 0.18 
Acquired intangible assets amortization (3)9,630 0.39 3,112 0.17 
Stock-based compensation expense (4)9,356 0.38 3,217 0.18 
China/Singapore expense (5)50 — 126 0.01 
Contingent Consideration (6)— — (2,310)(0.13)
Pending litigation expense (7)600 0.02 — — 
Acquisition costs (8)3,526 0.14 — — 
Gain on insurance proceeds (9)(4,400)(0.18)— — 
Severance (10)— — 359 0.02 
Loss on extinguishment of debt (11)11,916 0.49 8,123 0.45 
Other expense – net (12)931 0.05 1,250 0.07 
Adjusted net loss/diluted loss per share$(26,038)$(1.06)$(10,923)$(0.59)
Adjusted weighted average common shares outstanding24,485 18,145 
1Adjustment reflects a partial release of our deferred tax asset valuation allowance of $12.5 million related to the Punchh Acquisition for the nine months ended September 30, 2021; and, a reduction to the benefit of income taxes of $4.4 million for the nine months ended September 30, 2020 related to the issuance of the 2.875% Convertible Senior Notes due 2026 and partial repurchase of the 4.500% Convertible Senior Notes due 2024. The income tax effect of the below adjustments were not tax-effected due to the valuation allowance on all of our net deferred tax assets.
2Adjustment reflects non-cash accretion of interest expense and amortization of issuance costs related to the 2024 Notes, the 2026 Notes, the 2027 Notes and the Owl Rock Term Loan of $5.0 million and $3.2 million for the nine months ended September 30, 2021 and 2020, respectively.
3Adjustment reflects amortization expense of acquired developed technology within gross margin of $8.3 million and $2.6 million for the nine months ended September 30, 2021 and 2020, respectively; and amortization expense of acquired other intangible assets of $1.3 million and $0.5 million for the nine months ended September 30, 2021 and 2020, respectively.
4Adjustments reflect stock-based compensation expense within selling, general and administrative expenses and cost of contracts for the nine months ended September 30, 2021 of $9.4 million and for the nine months ended September 30, 2020 of $3.2 million.
5Adjustment reflects the expenses related to the resolution of China/Singapore matter of $0.1 million for both the nine months ended September 30, 2021 and 2020.
6Adjustment reflects to change to the fair market value of the contingent consideration liability related to the Restaurant Magic Acquisition.
7Adjustment reflects expenses accrued for a pending legal matter of $0.6 million for the nine months ended September 30, 2021.
8Adjustment reflects the expenses incurred in the Punchh Acquisition of $3.5 million for the nine months ended September 30, 2021.
9Adjustment represents the gain on insurance stemming from a legacy claim of $4.4 million for the nine months ended September 30, 2021.
10Adjustment reflects the severance included in gross margin, selling, general and administrative expense and research and development expense of $0.4 million for the nine months ended September 30, 2020.
11Adjustment reflects loss on extinguishment of debt of $11.9 million related to the repayment of the Owl Rock Term Loan for the nine months ended September 31, 2021 and an adjustment of $8.1 million related to the repurchase of approximately $66.3 million of the 2024 Notes for the nine months ended September 30, 2020.
12Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations.


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Consolidated Results:
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Revenues, net:
Product$30,291 $20,470 38.9 %37.3 %48.0 %
Service29,530 16,877 37.9 %30.8 %75.0 %
Contract18,039 17,500 23.2 %31.9 %3.1 %
Total revenues, net$77,860 $54,847 100.0 %100.0 %42.0 %
Gross margin
Product$7,505 $4,475 9.6 %8.2 %67.7 %
Service8,738 5,625 11.2 %10.3 %55.3 %
Contract1,971 1,571 2.5 %2.9 %25.5 %
Total gross margin$18,214 $11,671 23.3 %21.4 %56.1 %
Operating expenses
Selling, general and administrative$21,662 $10,512 27.8 %19.2 %106.1 %
Research and development10,122 4,210 13.0 %7.7 %140.4 %
Amortization of identifiable intangible assets539 257 0.7 %0.5 %109.7 %
Adjustment to contingent consideration liability— (2,310)— %(4.2)%(100.0)%
Total operating expenses$32,323 $12,669 41.5 %23.1 %155.1 %
Loss from operations$(14,109)$(998)(18.1)%(1.8)%> 200%
Other expense, net(539)(486)(0.7)%(0.9)%10.9 %
Interest expense, net(5,406)(2,235)(6.9)%(4.1)%141.9 %
Loss on extinguishment of debt(11,916)— (15.3)%— %— %
Loss before benefit from income taxes(31,970)(3,719)(41.1)%(6.8)%> 200%
Benefit from income taxes37 8 — %— %> 200%
Net loss$(31,933)$(3,711)(41.0)%(6.8)%> 200%
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Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Revenues, net:
Product$72,786 $51,437 36.2 %33.1 %41.5 %
Service74,743 50,952 37.1 %32.8 %46.7 %
Contract53,748 52,881 26.7 %34.1 %1.6 %
Total revenues, net$201,277 $155,270 100.0 %100.0 %29.6 %
Gross Margin
Product$16,628 $10,555 8.3 %6.8 %57.5 %
Service22,316 17,142 11.1 %11.0 %30.2 %
Contract4,573 4,100 2.3 %2.6 %11.5 %
Total gross margin$43,517 $31,797 21.7 %20.4 %36.9 %
Operating expenses
Selling, general and administrative$59,145 $31,988 29.4 %20.6 %84.9 %
Research and development24,574 13,613 12.2 %8.8 %80.5 %
Amortization of identifiable intangible assets1,303 677 0.6 %0.4 %92.5 %
Adjustment to contingent consideration liability— (2,310)— %(1.5)%(100.0)%
Gain on insurance proceeds(4,400)— (2.2)%— %— %
Total operating expenses$80,622 $43,968 40.1 %28.3 %83.4 %
Loss from operations$(37,105)$(12,171)(18.4)%(7.8)%> 200%
Other expense, net(931)(1,250)(0.5)%(0.8)%(25.5)%
Interest expense, net(12,503)(6,318)(6.2)%(4.1)%97.9 %
Loss on extinguishment of debt(11,916)(8,123)(5.9)%(5.2)%46.7 %
Loss before benefit from income taxes(62,455)(27,862)(31.0)%(17.9)%124.2 %
Benefit from income taxes12,295 4,265 6.1 %2.7 %188.3 %
Net loss$(50,160)$(23,597)(24.9)%(15.2)%112.6 %
Revenues, Net
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Product$30,291 $20,470 38.9 %37.3 %48.0 %
Service29,530 16,877 37.9 %30.8 %75.0 %
Contract18,039 17,500 23.2 %31.9 %3.1 %
Total revenues, net$77,860 $54,847 100.0 %100.0 %42.0 %
Product revenue includes our hardware and software license revenue. Service revenue includes SAAS, hardware and software maintenance, payments processing, and professional services revenue. Contract revenue is revenue derived from contracts associated with our Government reporting segment.
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020
Total revenues were $77.9 million for the three months ended September 30, 2021, an increase of 42.0% compared to the three months ended September 30, 2020. Product revenues were $30.3 million an increase of 48.0%. The strong growth was primarily driven by hardware refresh investments by our domestic and international Tier 1 accounts (in part from delayed hardware refreshes due to COVID-19). Service revenues were $29.5 million an increase of 75.0%, primarily driven by revenues from the operations of Punchh of $9.7 million and increases of $1.8 million from other software revenue, and $0.8 million from repair services. Contract revenues were $18.0 million an increase of 3.1%. The increase in contract revenues was driven by a
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$0.7 million increase in our ISR solutions product line partially offset by a $0.3 million decrease in our product services product line.
Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Product$72,786 $51,437 36.2 %33.1 %41.5 %
Service74,743 50,952 37.1 %32.8 %46.7 %
Contract53,748 52,881 26.7 %34.1 %1.6 %
Total revenues, net$201,277 $155,270 100.0 %100.0 %29.6 %
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
Total revenues were $201.3 million for the nine months ended September 30, 2021, an increase of 29.6% compared to the nine months ended September 30, 2020. Product revenues were $72.8 million an increase of 41.5%. The increase was driven by continued growth in kitchen display systems, hardware refresh investments by some of our Tier 1 legacy accounts (in part from delayed hardware refreshes due to COVID-19) and hardware revenue associated with our rollout of Brink POS to new customers. Another driver of the increase was the low sales volumes during the quarter ended September 30, 2020 as a result of COVID-19 related restrictions at our customers' locations. Service revenues were $74.7 million an increase of 46.7%, primarily driven by revenues from the operations of Punchh of $17.8 million and increases of $4.6 million for other software revenue and $1.5 million for repair services. Contract revenues were $53.7 million an increase of 1.6% driven by the Government segment's ISR solutions product line revenues.
Gross Margin
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Product$7,505 $4,475 24.8 %21.9 %67.7 %
Service8,738 5,625 29.6 %33.3 %55.3 %
Contract1,971 1,571 10.9 %9.0 %25.5 %
Total gross margin$18,214 $11,671 23.4 %21.3 %56.1 %
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020
Total gross margin as a percentage of revenue during the three months ended September 30, 2021 was 23.4% compared to 21.3% during the three months ended September 30, 2020. Product margin was 24.8%, compared to 21.9%, recorded for the three months ended September 30, 2020. The increase in margin was primarily due to favorable product mix and favorable absorption of overhead costs due to increased sales. Service margin was 29.6%,compared to 33.3% recorded for the three months ended September 30, 2020, Compared to Threeprimarily driven by an increase in amortization expense for acquired developed technology of $2.9 million recognized as a result of the Punchh Acquisition and incremental costs incurred while transitioning our field operations organization. Service margin during the three months ended September 30, 20192021 included $3.7 million of amortization of intangibles assets compared to $0.9 million of amortization of intangible assets during the three months ended September 30, 2020. Excluding the amortization of acquired intangible assets, Service margin was 42.3% compared to 38.5% for the three months ended September 30, 2020. Contract margin was 10.9%, compared to 9.0% for the three months ended September 30, 2020, primarily due to improved margins in both ISR and Mission Systems product lines.
Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Product$16,628 $10,555 22.8 %20.5 %57.5 %
Service22,316 17,142 29.9 %33.6 %30.2 %
Contract4,573 4,100 8.5 %7.8 %11.5 %
Total gross margin$43,517 $31,797 21.6 %20.5 %36.9 %

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For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
Total gross margin as a percentage of revenue during the nine months ended September 30, 2021 was 21.6% compared to 20.5% during the nine months ended September 30, 2020. Product margin was 22.8%, compared to 20.5%, recorded for the nine months ended September 30, 2020. The increase in margin was primarily due favorable product mix and favorable absorption of overhead costs due to increased sales. The favorable impact from absorption was partially offset by higher material costs. We reported revenuesimplemented hardware price increases at the end of $54.8the second quarter of 2021 to mitigate the impact of increased material costs. Service margin was 29.9%,compared to 33.6% recorded for the nine months ended September 30, 2020. Service margin during the nine months ended September 30, 2021 included $8.3 million of amortization of intangibles assets compared to $2.6 million of amortization of intangible assets during the nine months ended September 30, 2020. Excluding the amortization of acquired intangible assets, Service margin was 41.0% compared to 38.7% for the nine months ended September 30, 2020. Contract margin was 8.5%, compared to 7.8% for the nine months ended September 30, 2020, primarily due to ISR improved margins.
Selling, General Administrative Expenses
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Selling, general and administrative$21,662 $10,512 27.8 %19.2 %106.1 %
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020
Selling, general, and administrative expenses increased to $21.7 million for the quarterthree months ended September 30, 2021 from $10.5 million for the three months ended September 30, 2020, an increase of 20.7% from $45.4106.1%. The increase was primarily driven by $7.2 million recordedin total Punchh operational expenses of which $1.9 million is stock-based compensation. Other drivers included increases of $2.0 million in corporate expenses $0.6 million of variable compensation, and $0.4 million for sales and marketing.
Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Selling, general and administrative$59,145 $31,988 29.4 %20.6 %84.9 %
For the quarternine months ended September 30, 2019.  Our net loss from continuing operations was $3.7 million, or $0.20 per diluted share, for the third quarter of 2020,2021 compared to a net loss of $5.9 million, or $0.36 per diluted share, for the third quarter of 2019. The favorable comparison is primarily driven by a $2.3 million reduction in the Earn-Out liability associated with the Restaurant Magic Acquisition and inorganic growth resulting from the Drive-Thru and Restaurant Magic Acquisitions which absorbed an increase in research and development costs associated with our Restaurant/Retail segment software platforms and an increase in interest expense attributable to the 2026 Notes.
nine months ended September 30, 2020
Operating segment revenue is set forth below:
Three Months Ended September 30,$%
(in thousands)20202019variancevariance
 Restaurant/Retail
Core *$20,967 $18,208 2,759 15 %
Brink **16,380 10,898 5,482 50 %
SureCheck— 734 (734)(100)%
 Total Restaurant Retail$37,347 $29,840 $7,507 25 %
 Government
Intelligence, surveillance, and reconnaissance$8,945 $7,057 1,888 27 %
Mission Systems8,083 8,444 (361)(4)%
Product Services472 37 435 1,176 %
 Total Government$17,500 $15,538 $1,962 13 %

* CORE includes $5.7 million of Drive-Thru revenue for 2020
** Brink includes $2.2 million of Restaurant Magic revenue for 2020

Product revenues were $20.5Selling, general, and administrative expenses increased to $59.1 million for the quarternine months ended September 30, 2021 from $32.0 million for the nine months ended September 30, 2020, an increase of 28.9% from $15.9 million recorded for the quarter ended September 30, 2019, primarily driven by an increase of $3.2 million in revenue from our Core customers, driven by drive-thru product revenue for the quarter ended September 30, 2020 of $5.3 million partially offset by a reduction in legacy Core hardware sales. Product revenue related to Brink for the quarter ended September 30, 2020 was $6.7 million, an increase of 31.2% from $5.1 million recorded for the quarter ended September 30, 2019. The favorable Brink product revenue results were driven by the increase in site activations.

Service revenues were $16.9 million for the quarter ended September 30, 2020, an increase of 21.5% or $3.0 million from $13.9 million recorded for the quarter ended September 30, 2019, primarily due to the addition of revenues derived from the Restaurant Magic business and the growth in Brink recurring software revenues. Service revenue associated with Brink includes recurring software revenue of $5.6 million, an increase of 30.2% from $4.3 million recorded for the quarter ended September 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $2.2 million. Drive-thru service revenue for the quarter ended September 30, 2020 was $0.4 million.

Contract revenues were $17.5 million for the quarter ended September 30, 2020, an increase of 12.9% or $2.0 million from $15.5 million recorded for the quarter ended September 30, 2019.  The favorable increase in contract revenue from our Government reporting segment was driven by contracts entered into during the first half of 2020 relating to intelligence, surveillance, and reconnaissance ("ISR") solutions, with $2.5 million more in backlog compared to the third quarter of 2019.

Product margins for the quarter ended September 30, 2020 were 21.9%, compared to 22.9%, recorded for the quarter ended September 30, 2019, primarily due to unfavorable product mix.

25

Service margins for the quarter ended September 30, 2020 were 33.3%, compared to 32.0% recorded for the quarter ended September 30, 2019, primarily driven by a shift in sales mix that resulted from our M&A activity, with the Restaurant Magic Acquisition and the Drive-Thru Acquisition.

Contract margins for the quarter ended September 30, 2020 were 9.0%, compared to 5.8% for the quarter ended September 30, 2019, primarily due to the increase in Product Services revenue and increased profitability across several contracts in Mission Systems compared to the quarter ended September 30, 2019.

Selling, General, and Administrative ("SG&A") expenses increased to $10.5 million for the quarter ended September 30, 2020 from $9.5 million for the quarter ended September 30, 2019, an increase of 10.5%84.9%. The increase was primarily driven by an additional $0.9$17.5 million in total Punchh related expenses of SG&A expensewhich $3.5 million are acquisition related costs and $14.0 million are operational expenses. Punchh operational expenses included $4.5 million for stock-based compensation. Other drivers excluding Punchh were increases of $4.7 million in corporate expenses, $1.4 million increase in stock-based compensation, $1.1 million for sales and marketing, and $1.0 million from the Restaurant Magic and Drive-Thru Acquisitions.
variable compensation.
Research and Development ("R&D") expenses were $4.2 million forExpenses
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Research and development$10,122 $4,210 13.0 %7.7 %140.4 %
For the quarterthree months ended September 30, 2020, an increase of $0.8 million from $3.4 million for2021 compared to the quarterthree months ended September 30, 2019, driven by an increase of $1.5 million in Brink development and $0.6 million in Restaurant Magic development, partially offset by the SureCheck divestiture and an increase in capitalized software.
2020
For the quarter ended September 30, 2020, we recorded $0.2Research and development expenses were $10.1 million of amortization expense associated with identifiable non-developed technology intangible assets acquired in the Drive-Thru Acquisition and the Restaurant Magic Acquisition; there was no comparable expense for the three months ended September 30, 2019.2021, an increase of $5.9 million from $4.2 million for the three months ended September 30, 2020, driven primarily by $3.2 million for Punchh and $2.7 million related to additional investments in our existing product development organization.
Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Research and development$24,574 $13,613 12.2 %8.8 %80.5 %
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For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
Research and development expenses were $24.6 million for the nine months ended September 30, 2021, an increase of $11.0 million from $13.6 million for the nine months ended September 30, 2020, driven primarily by $6.0 million for Punchh, $3.9 million related to additional investments in our existing software product development, and $1.1 million for product management.

Other Operating Expenses: Amortization of Intangible Assets / Contingent Consideration / Insurance Proceeds
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Amortization of identifiable intangible assets$539 $257 0.7 %0.5 %109.7 %
Adjustment to contingent consideration liability— (2,310)— %(4.2)%(100.0)%
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020
For the three months ended September 30, 2021 and 2020, we recorded $0.5 million and $0.3 million, respectively, of amortization expense associated with identifiable developed technologyother intangible assets. The increase was driven by intangible assets are accounted forrecognized as costpart of sales within service costs of sales.

the Punchh Acquisition.
Also included in Operatingoperating expense for the three-months ended September 30, 2020 iswas a $2.3 million reduction to the fair value of the Earn-Out liability associated with the Restaurant Magic Acquisition. There was no comparable reduction to expense for the three months ended September 30, 2019.2021.
Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Amortization of identifiable intangible assets$1,303 $677 0.6 %0.4 %92.5 %
Adjustment to contingent consideration liability— (2,310)— %(1.5)%(100.0)%
Gain on insurance proceeds(4,400)— (2.2)%— %— %

In other expense, net, we recorded $0.5 million for the quarter ended September 30, 2020, compared to other expense, net, of $0.4 million recorded for the quarter ended September 30, 2019. 

In interest expense, net, we recorded $2.2 million for the quarter ended September 30, 2020, compared to $1.6 million recorded for the quarter ended September 30, 2019. This increase was primarily driven by an increase in convertible debt and associated interest expense related to the 2026 Notes issued in the first quarter of 2020. Interest expense, net includes $1.1 million of non-cash accretion of debt discount and amortization of issuance costs for the three months ended September 30, 2020 compared with $0.9 million for the same period last year.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

We reported revenues of $155.3 millionforFor the nine months ended September 30, 2020, an increase of 15.6% from $134.3 million recorded for2021 compared to the nine months ended September 30, 2019.  Our net loss from continuing operations was $23.6 million, or $1.30 per diluted share, for2020
For the nine months ended September 30, 2021 and 2020, compared to net losswe recorded $1.3 million and $0.7 million, respectively of $9.7 million, or $0.61 per diluted share, for the nine months ended September 30, 2019. Our year-over-year unfavorable performanceamortization expense associated with other intangible assets. The increase was primarily driven by corporate financing charges, including an $8.1 million loss on extinguishment of debt related to the partial repurchaseintangible assets recognized as part of the 2024 Notes, an additional $3.3 million of interest expense related to the 2024 Notes and the 2026 Notes, increased investment in sales, marketing and R&D within the Restaurant/Retail reporting segment, and increased depreciation and amortization expense related to the Restaurant Magic Acquisition and Drive-ThruPunchh Acquisition.

Operating segment revenue is set forth below:
26

Nine months ended September 30,$%
(in thousands)20202019variancevariance
 Restaurant/Retail
Core *$56,233 $54,886 1,347 2 %
Brink **46,156 29,679 16,477 56 %
SureCheck— 3,096 (3,096)(100)%
 Total Restaurant Retail$102,389 $87,661 $14,728 17 %
 Government
Intelligence, surveillance, and reconnaissance$27,459 $20,603 6,856 33 %
Mission Systems24,618 25,177 (559)(2)%
Product Services804 865 (61)(7)%
 Total Government$52,881 $46,645 $6,236 13 %
* CORE includes $13.2 million of Drive-Thru revenue for 2020
** Brink includes $6.2 million of Restaurant Magic revenue for 2020

Product revenues were $51.4 million for the nine months ended September 30, 2020, an increase of 11.5% from $46.1 million recorded for the nine months ended September 30, 2019, primarily driven by increased hardware attachment associated with installations attributable to Brink and hardware sales from our new Drive-Thru product line and partially offset by a $9.6 million reductionAlso included in legacy Core hardware sales. Product revenue related to Brinkoperating expense for the nine months ended September 30, 2020 was $17.2 million, an increase of 24.0% from $13.8 million recorded for the nine months ended September 30, 2019. Drive-Thru product revenue for the nine months ended September 30, 2020 was $12.2 million.

Service revenues were $51.0 million for the nine months ended September 30, 2020, an increase of 22.9% from $41.5 million recorded for the nine months ended September 30, 2019, primarily due to growth in Brink and growth resulting from our acquisition of Restaurant Magic. Service revenue associated with Brink includes recurring software revenue of $15.7 million, an increase of 29.8% from $12.1 million recorded for the nine months ended September 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $6.2 million.

Contract revenues were $52.9 million for the nine months ended September 30, 2020, an increase of 13.5% from $46.6 million recorded for the nine months ended September 30, 2019.  The favorable increase in revenue was driven by ISR solutions, which was driven by a higher backlog at the beginning of this year, which has continued to grow and is now $30 million greater than the same nine month period ended September 30, 2019.

Product margins for the nine months ended September 30, 2020 were 20.5%, compared to 24.3%, recorded for the nine months ended September 30, 2019, primarily driven by unfavorable product mix.

Service margins for the nine months ended September 30, 2020 were 33.6%, compared to 28.1% recorded for the nine months ended September 30, 2019, primarily driven by a shift in sales mix that resulted from our M&A activity with the Restaurant Magic Acquisition and Drive-Thru Acquisition, and our divestiture of Surecheck.

Contract margins for the nine months ended September 30, 2020 were 7.8%, compared to 8.5% for the nine months ended September 30, 2019, primarily due to an increase in business development investment in product services compared to the nine months ended September 30, 2019.

SG&A expenses increased to $32.0 million for the nine months ended September 30, 2020 from $27.2 million for the nine months ended September 30, 2019, an increase of 17.7%. The increase was primarily driven by $2.8 million of expenses associated with the Restaurant Magic Acquisition and Drive-Thru Acquisition and increased depreciation and hosting costs associated with the implementation of our enterprise resource planning ("ERP") system.
R&D expenses were $13.6 million for the nine months ended September 30, 2020, an increase of $4.4 million from $9.2 million for the nine months ended September 30, 2019, primarily driven by a $5.0 million increase in spending in Brink
27

development, $0.9 million in Restaurant Magic development, and partially offset by less SureCheck R&D and increased capitalization of software development.

For the nine months ended September 30, 2020, we recorded $0.6 million of amortization expense associated with identifiable non-developed technology intangible assets acquired in the Drive-Thru Acquisition and the Restaurant Magic Acquisition; there was no comparable expense for the nine months ended September 30, 2019. Amortization expense associated with identifiable developed technology intangible assets are accounted for as cost of sales within service costs of sales.

Also included in Operating expense for the nine-months ended September 30, 2020 is a $2.3 million reduction to the fair value of the Earn-Out liability associated with the Restaurant Magic Acquisition. There was no comparable reduction to expense for the nine months ended September 30, 2019.2021.

In OtherAlso included in operating expense net, we recorded $1.3 million other income, net, for the nine months ended September 30, 2021 was a $4.4 million gain on insurance proceeds received in connection with our settlement of a legacy claim. There was no comparable reduction to expense for the nine months ended September 30, 2020.
Other Expense, Net
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Other expense, net$(539)$(486)(0.7)%(0.9)%10.9 %
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020
In other expense, net, we recorded $0.5 million for the three months ended September 30, 2021, compared to other expense, net, of $1.2$0.5 million recorded for the quarter ended September 30, 2020.
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Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Other expense, net$(931)$(1,250)(0.5)%(0.8)%(25.5)%
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
In other expense, net, we recorded $0.9 million for the nine months ended September 30, 2021, compared to other expense, net, of $1.3 million recorded for the nine months ended September 30, 2019. 2020.

Interest Expense, Net
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Interest expense, net$(5,406)$(2,235)(6.9)%(4.1)%141.9 %
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020
InFor the three months ended September 30, 2021 interest expense, net, wewas $5.4 million, compared to $2.2 million recorded $6.3for the three months ended September 30, 2020. The increase in interest expense was primarily driven by the Owl Rock Term Loan. Interest expense, net includes $2.1 million of non-cash accretion of debt discount and amortization of issuance costs for the three months ended September 30, 2021 compared with $1.1 million for the same period last year.
Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Interest expense, net$(12,503)$(6,318)(6.2)%(4.1)%97.9 %
For the nine months ended September 30, 2020,2021 compared to $3.0the nine months ended September 30, 2020
For the nine months ended September 30, 2021, interest expense, net was $12.5 million, as compared to $6.3 million recorded for the nine months ended September 30, 2019.2020. This increase was primarily driven by interest related to an increase in convertible debt as a result of the issuance of the 2026 Notes in the first quarter of 2020.Owl Rock Term Loan. Interest expense, net includes $3.2$5.0 million of non-cash accretion of debt discount and amortization of issuance costs for the nine months ended September 30, 2020,2021 compared with $3.2 million for the same period last year.
Loss on Extinguishment of Debt
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Loss on extinguishment of debt$(11,916)$— (15.3)%— %— %
For the three months ended September 30, 2021 compared to $1.6the three months ended September 30, 2020
For the three months ended September 30, 2021 the loss on extinguishment of debt was $11.9 million, which was related to the repayment of the Owl Rock Term Loan. There was no loss on extinguishment of debt recorded for the three months ended September 30, 2020.
Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Loss on extinguishment of debt$(11,916)$(8,123)(5.9)%(5.2)%46.7 %
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
For the nine months ended September 30, 2021, loss on extinguishment of debt was $11.9 million, which related to the repayment of the Owl Rock Term Loan as compared to the loss on extinguishment of debt of $8.1 million related to the repurchase of the 2024 Notes for the nine months ended September 30, 2020.

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Taxes
Three Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Benefit from income taxes$37 $8 — %— %> 200%
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020
There was a net tax benefit of $37.0 thousand for the three months ended September 30, 2021. There was a net tax benefit of $8.0 thousand for the three months ended September 30, 2020.

Nine Months
Ended September 30,		Percentage of total revenueIncrease (decrease)
in thousands20212020202120202021 vs 2020
Benefit from income taxes$12,295 $4,265 6.1 %2.7 %188.3 %
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
Net tax benefit of $12.3 million for the nine months ended September 30, 2019.

We recorded2021 is driven by a Loss on extinguishment$12.5 million partial release of debt of $8.1 million forour deferred taxed asset valuation allowance resulting from the deferred tax liabilities recognized in conjunction with the Punchh Acquisition. There was no additional net tax benefit in the nine months ended September 30, 2020,2021 for the 2027 Notes as a result of the repurchase of $66.3 million of 2024 Notes in the first quarter of this year.

Netimpact was recorded within shareholders' equity pursuant to ASU 2019-12. The net tax benefit of $4.3 million for the nine months ended September 30, 2020 iswas driven by the $4.4 million deferred tax benefit impact of the 2026 Notes issuance in the first quarter. The net tax benefit of $4.0 million for the nine months ended September 30, 2019 was driven by the $4.1 million deferred tax benefit impact of the 2024 Notes issuance in April 2019.

issuance.
Liquidity and Capital ResourcesLIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 2020 the Company’s2021 our primary source of liquidity was its sale of the 2026 Notes.existing cash and cash equivalents generated through financing transactions in 2020 and 2021. Cash used in operating activities was $43.6 million for the nine months ended September 30, 2021, compared to $14.4 million for the nine months ended September 30, 2020, compared to $9.6 million2020. Cash used for the nine months ended September 30, 2019. The variance2021 was primarily driven by an increase in net loss, net of non-cash charges and additional net working capital needs for the first quarter of 2020 as a result ofrequirements driven by an increase in strategic procurement of inventoryaccrued salaries and decreasebenefits and an increase in customer deposits. Inventory levels were strategically increased to support the roll out of projects for Brink and to mitigate risk of supply chain disruption due to the COVID-19 pandemic.other current assets. The increase in other current assets reflected an increase in our prepaid assets.

Cash used in investing activities was $381.1 million for the nine months ended September 30, 2021 compared to $6.9 million for the nine months ended September 30, 2020 compared to $11.6 million for the nine months ended September 30, 2019.2020. Investing activities during the nine months ended September 30, 20202021 included $374.7 million of cash consideration in connection with the Punchh Acquisition (net of cash acquired) and capital expenditures of $6.4$5.5 million for developed technology costs associated with our Restaurant/Retail reporting segment software platforms compared to $2.3$6.4 million for software platforms and $2.4 million for implementation of our ERP system for the nine months ended September 30, 2019. The nine months ended September 30, 2019 included the $7.0 million investment for the Drive-Thru Acquisition.  2020.

Cash provided by financing activities was $444.3 million for the nine months ended September 30, 2021, compared to $48.7 million for the nine months ended September 30, 2020, compared2020. On April 8, 2021, we received net proceeds of $155.7 million from the private placement of our common stock to cash providedPAR Act III, LLC and certain funds and accounts advised by financing activitiesT. Rowe Price Associates, Inc., in addition to net proceeds of $65.0$170.7 million forfrom the Owl Rock Term Loan. On September 17, 2021, we received net proceeds of $256.8 million from our offering of the 2027 Notes and $52.5 million from our common stock offering. We used $186.9 million of the proceeds of these offerings to repay the Owl Rock Term Loan in full. During the nine months ended September 30, 2019.  The nine months ended September 30, 2020, included the $120we received net proceeds of $49.5 million issuancefrom our offering of the 2026 Notes, partially offset by thewhich reflects our use of $66.3 million to repurchase of a majority of the 2024 Notes. The nine months ended September 30, 2019 included the $80 million issuance of the 2024 Notes.

In the early part of the fourth quarter of 2020, we raised additional capital through the issuance of 3,616,022 shares of our common stock, resulting in $131.3 million of proceeds, net of underwriting discounts and commissions, and offering expenses payable by the Company. See "Note 14 -Subsequent Events" under Part I, Item 1 of this Quarterly Report for additional information on such offering.

We expect our available cash and cash equivalents will be sufficient to meet our operating needs for at least the next 12 months. Our actual cash needs will depend on many factors, including our rate of revenue growth, growth of our SaaS revenues, the timing and extent of spending to support our product development efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our products, and the factors described above in this Part I, Item 2.
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"Management's “Management's Discussion and Analysis of Financial Condition and Results of Operations"Operations” and elsewhere in thethis Quarterly Report for the fiscal period ended March 31, 2020,September 30, 2021, and in the 20192020 Annual Report and our other filings with the SEC.

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Off-Balance Sheet Arrangements
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OFF BALANCE SHEET ARRANGEMENTS

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

CONTRACTUAL OBLIGATIONS
Contractual ObligationsAs of September 30, 2021, we had the following contractual obligations:

The following table summarizes our contractual obligations at September 30, 2020 and the effect such obligations are expected to have on our liquidity and cash flow in future periods.
(in thousands)Payments Due by Period
TotalLess Than 1 Year1-3 Years4-5 YearsMore Than 5 Years
Operating lease obligations$2,432 $1,132 $1,300 $— $— 
Other purchase obligations20,175 19,691 484 — — 
Debt obligations158,562 4,796 26,866 126,900 — 
$181,169 $25,619 $28,650 $126,900 $— 

The commitments in the table above consist of lease payments for our San Diego, California office, Ontario, Canada office, our other United States locations, and our international locations. The debt obligations include the 2024 Notes, the 2026 Notes and the subordinated promissory note related to the Restaurant Magic Acquisition. Debt obligations includes both principal and interest payments. The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without significant penalty are not included in the table above.

(in thousands)Payments due by period
TotalLess Than 1 Year1-3 Years4-5 YearsMore Than 5 Years
Operating lease obligations$4,744 $1,698 $2,264 $782 $— 
Other purchase obligations54,670 40,054 10,986 3,630 — 
Debt obligations517,210 9,347 102,050 134,850 270,963 
$576,624 $51,099 $115,300 $139,262 $270,963 
Critical Accounting Policies and EstimatesCRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our condensed consolidated financial statements are based on the application of U.S.accounting principles generally accepted accounting principles (“GAAP”).in the United States of America. GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied.  Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis. Significant items subject to such estimates and assumptions include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant and equipment including right-to-use assets and liabilities, identifiable intangible assets and goodwill, the measurement of liabilities and equity recognized for outstanding convertible notes, valuation allowances for receivables, inventories, and measurement of contingent consideration at fair value. Actual results could differ from these estimates. Our estimates are subject to uncertainties, including those estimates.associated with market conditions, risks and trends and the ongoing COVID-19 pandemic. Our critical accounting policies have not changed materially from the discussion of those policies included under “Critical Accounting Policies and Estimates” in the 20192020 Annual Report.

Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Required.Foreign Currency Exchange Risk

Our primary exposures relate to certain non-dollar denominated sales and operating expenses in Europe and Asia. These primary currencies are the Great British Pound, the Euro, the Australian dollar, the Singapore dollar, the Canadian dollar, the Indian Rupee and the Chinese Renminbi. Accordingly, changes in exchange rates may negatively affect our revenue and net income (loss) as expressed in U.S. dollars. We also have foreign currency risk related to foreign currency transactions and monetary assets and liabilities, including intercompany balances denominated in currencies that are not the functional currency. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. As of September 30, 2021, the impact of foreign currency exchange rate changes on our revenues and net income (loss) have not been material. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.

Interest Rate Risk

As of September 30, 2021, we had $13.8 million, $120.0 million, and $265.0 million in aggregate principal amount of the 2024 Notes, the 2026 Notes, and the 2027 Notes, respectively.

We carry the Notes at face value less amortized discount on the consolidated balance sheet. Since the Notes bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the fair value of the Notes changes when the market price of our stock fluctuates or interest rates change.



Item 4.
Controls and Procedures
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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2020.2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of such date due to material weaknesses in our internal control over financial reporting previously identified in Item 9A. “Controls and Procedures” of our 2020 Annual Report.

Remediation Efforts to Address the Material Weaknesses

Our remediation efforts previously identified in Item 9A. “Controls and Procedures” of our 2020 Annual Report to address the identified material weaknesses are ongoing as we continue to implement and document necessary policies, procedures, and internal controls. While we believe the steps taken to date and those planned for future implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts and cannot conclude that the material weaknesses have been remediated as of September 30, 2020.2021. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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Changes in Internal Control Over Financial Reporting.

During the three months ended September 30, 2021, the Company's internal controls over financial reporting included those inherited from the Punchh Acquisition, which are currently under evaluation by management. There were no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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Part II - Other InformationOTHER INFORMATION

Item 1.Legal Proceedings
Item 1. LEGAL PROCEEDINGS

The information in Note“Note 11 – Contingencies,Commitments and Contingencies”, to the financial statements, is responsive to this Item and is incorporated by reference herein.

Item 1A.Risk Factors
Item 1A. RISK FACTORS

The risks described in the “Risk Factors” section of our 20192020 Annual Report, as amended and supplemented by the risks described in the “Risk Factors” section of our Quarterly ReportReports on Form 10-Q for the quarter ended March 31, 2020, including the discussions of the COVID-19 pandemic, as further supplemented by the risks described in our Quarterly Report on Form 10-Q for the quarterquarters ended June 30, 2020,2021 and as amended and supplemented by this Quarterly Report, including the risks below,March 31, 2021, remain current in all material respects.respects, except as amended and further supplemented by this Quarterly Report.

Risks Associated with Notes and Indebtedness

The COVID-19 pandemic has had and is expected to continue toadoption of ASU 2020-06 may have a material adverse effect on our business, operations,reported financial conditionresults.

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Updates (“ASU”) 2020-06, Debt – Debt with Conversion and financial resultsOther Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which is intended to reduce the number of accounting models for convertible debt instruments and convertible preferred stock, and amend guidance for the foreseeablederivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. We have not early adopted ASU 2020-06.

Once adopted, we will no longer be required to separately account for the conversion feature embedded in the 2024, 2026, and 2027 Notes (collectively the “Notes”) pursuant to ASC 470-20, Debt with Conversion and Other Options. As such, the entire proceeds from the issuance of the Notes will be recognized as a liability, net of any issuance costs in our consolidated balance sheet. Any discount from recognition of issuance costs will be amortized over the effective life of the Notes using the effective interest method. The net effect of the adoption of this new standard is a reduction of non-cash interest expense, or increase to net income, as there is no longer a discount from separation of the conversion feature within equity.

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In addition, the ASU modifies the calculation of diluted earnings per share, requiring entities to use the if-converted method for all convertible instruments. As a result, following adoption, we will be required to calculate diluted earnings per share assuming the Notes convert entirely into shares (if that effect is more dilutive) even though we have the option to settle in any combination of cash or shares. We may report lower diluted earnings per share than we would under legacy guidance, and the effect on earnings per share may not reflect our expectations before settlement. Currently, we expect the results of this calculation to be anti-dilutive as we are in a loss position and therefore will not report diluted earnings per share in the near term; however, that could change in the future. Under the terms of the Notes, we may irrevocably elect to deliver the principal amount of the notes upon any conversion in cash. If we make this election, only the conversion spread would be reflected in our calculation of diluted earnings per share.

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

As previously disclosedof September 30, 2021, we had $398.8 million aggregate principal amount of Notes outstanding. Our ability to make scheduled payments of principal or interest, or to refinance the Notes and any future indebtedness will depend on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our operating subsidiaries may not generate cash flow from operations in the future sufficient to service our 2019 Annual Reportdebt. If our operating subsidiaries are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to raise funds through debt or equity issuances, refinance our indebtedness and otherwise access the credit and capital markets at the times and in the amounts needed and on acceptable terms will depend on the capital markets and our other filings with the SEC, we identified that the COVID-19 pandemic had caused disruption to our suppliers and their manufacturers located in China and elsewhere, and that we took steps to mitigate the impact on our supply chain, including increasing safety stock inventory and the use of alternative sources when possible. In late March 2020, we began seeing the impact of the COVID-19 pandemic on all aspects of our Restaurant/Retail reporting segment; and beginning the quarter ended June 30, 2020, we began to experience the adverse effects of the COVID-19 pandemic on our business, primarily due to customer store closures, changes in product and service offerings and delivery formats, delayed product adoptions, reduced or delayed software and hardware deployments, and customer payment delays or defaults.

We continue to actively manage our business to respond to the uncertainties and risks created by the COVID-19 pandemic and the continuously evolving science and government and consumer responses. The extent to which the COVID-19 pandemic will continue to impact our business, operations, financial condition and financial results depends on future developments that are highly uncertain and cannot be predicted, including the geographic spread of the virus, the overall severity of the disease, the duration of the pandemic, the measures taken, or to be taken, by various governmental authorities in response to the pandemic (such as quarantines, shelter-in-place orders and travel restrictions) and the possible further impacts on the global economy. There can be no assurance that the COVID-19 pandemic will not continue to have a material and adverse effect on our business and financial results during any quarter or year in which we are affected.

at such time. We may not be subjectable to claims by third parties for breachengage in any of contract and infringement of intellectual property and/these activities or proprietary rights.

Third parties may assert claims that our software, hardware platforms, or technology infringe, misappropriate, or otherwise violate their intellectual property or other proprietary rights. Third parties may also assert that our sale of certain products require the payment of license fees to them. Such claims may be made by our competitors seeking to obtain a competitive advantage or by other parties, including existing licensors. Additionally,engage in recent years, non-practicing entities have begun purchasing intellectual property assets for the purpose of making claims of infringement and attempting to extract settlements from companies. The risk of claims may increase as the number of software products - in particular POS cloud software products - that we offer and competitors in our market increase and overlaps occur. Any such claims, regardless of merit, resulting in litigationthese activities on desirable terms, which could result in substantial expenses, divert the attention of management, cause significant delays in introducing new or enhanced services or technology, materially disrupt the conduct of our business, and have a material adverse effectdefault on our business, financial condition, and results of operations. In September 2020, we were notified by one of our business partners of a claim for non-payment of royalties due under an existing license agreement; while we believe we have paid all royalties due, we will need to allocate resources to resolve this claim.debt obligations.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Under our equity incentive plan, employees may elect to have us withhold shares to satisfy minimum statutory federal, state and local tax withholding obligations arising from the vesting of their restricted stock.stock and restricted stock units. When we withhold these shares, we are
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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 months ended September 30, 2020, 33,6132021, 91,198 shares were purchasedwithheld at an average price of $15.86$54.04 per share.
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Item 6. EXHIBITS

Exhibit
Number		 
Incorporated by reference into
this Quarterly Report on Form 10-Q 
Date
Filed or
Furnished
Exhibit DescriptionFormExhibit No.
3.110-K3.13/16/2021
3.210-Q4.15/11/2020
4.1Form 8-K (File No. 001-09720)4.19/17/2021
4.2Form 8-K (File No. 001-09720)4.29/17/2021
4.3Form 8-K (File No. 001-09720)4.29/17/2021
31.1Filed herewith
31.2Filed herewith
32.1Furnished herewith
32.2Furnished herewith
101.INSInline XBRL Instance DocumentFiled herewith
101.SCHInline XBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
104Cover Page Interactive Data File (embedded within the Inline XBRL document)Filed herewith
* The schedules and exhibits to such agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

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Item 6.
Exhibits
Exhibit
Number		 
Incorporated by reference into
this Quarterly Report on Form 10-Q 
Date
Filed or
Furnished
Exhibit DescriptionFormExhibit No.
10.1 ††
Form 10-Q (File No. 00109720)10.28/7/2020
10.2 ††
Form 10-Q (File No. 00109720)10.38/7/2020
10.3Form 8-K (File No. 001-09720)1.110/1/2020
31.1  Filed herewith
31.2  Filed herewith
32.1  Furnished herewith
32.2  Furnished herewith
101.INSXBRL Instance Document  Filed herewith
101.SCHXBRL Taxonomy Extension Schema Document  Filed herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase Document  Filed herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase Document  Filed herewith
101.LABXBRL Taxonomy Extension Label Linkbase Document  Filed herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase Document  Filed herewith
104Cover Page Interactive Data File (embedded within the Inline XBRL document)Filed herewith
†† Indicates management contract or compensatory plan or arrangement.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 PAR TECHNOLOGY CORPORATION
 (Registrant)
  
Date:November 6, 20209, 2021/s/ Bryan A. Menar
 Bryan A. Menar
 Chief Financial and Accounting Officer
 (Principal Financial Officer)

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