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, 2020March 31, 2021
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 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, 21,616,748May 3, 2021, 25,979,138 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
 
76
   
 
97
   
Item 2.
2320
   
Item 3.
2924
   
Item 4.
2924
   
PART II
OTHER INFORMATION
   
Item 1.
3125
   
Item 1A.
3125
   
Item 2.
3126
   
Item 6.33
   
 
3428

"“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.


Forward-Looking Statements
This Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 ("March 31, 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 our expectations regarding the impact of the COVID-19 pandemic on our business, operations, and financial results. While we have taken 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 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; 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 or payment defaults by customers; our ability to be agile in the execution of our business and strategies and our management of business continuity risks, 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 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, 2019,2020 filed with the Securities and Exchange Commission ("SEC"(“SEC”) on March 16, 2020,2021, 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)
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)
AssetsMarch 31, 2021December 31, 2020
Current assets:  
Cash and cash equivalents$173,122 $180,686 
Accounts receivable – net38,706 42,980 
Inventories – net25,296 21,638 
Other current assets7,970 3,625 
Total current assets245,094 248,929 
Property, plant and equipment – net13,627 13,856 
Goodwill41,214 41,214 
Intangible assets – net32,652 33,121 
Lease right-of-use assets2,423 2,569 
Other assets3,665 4,060 
Total assets$338,675 $343,749 
Liabilities and Shareholders’ Equity  
Current liabilities:  
Current portion of long-term debt$676 $666 
Accounts payable18,886 12,791 
Accrued salaries and benefits10,620 13,190 
Accrued expenses3,930 2,606 
Lease liabilities – current portion1,133 1,200 
Customer deposits and deferred service revenue9,895 9,506 
Total current liabilities45,140 39,959 
Lease liabilities – net of current portion1,410 1,462 
Deferred service revenue – noncurrent2,838 3,082 
Long-term debt106,851 105,844 
Other long-term liabilities4,584 4,997 
Total liabilities160,823 155,344 
Commitments and contingencies00
Shareholders’ equity:  
Preferred stock, $.02 par value, 1,000,000 shares authorized0 0 
Common stock, $.02 par value, 58,000,000 shares authorized, 23,103,979 and 22,982,955 shares issued, 21,961,788 and 21,917,357 outstanding at March 31, 2021 and December 31, 2020, respectively462 459 
Additional paid in capital245,566 243,575 
Accumulated deficit(54,977)(46,706)
Accumulated other comprehensive loss(4,238)(3,936)
Treasury stock, at cost, 1,142,191 shares and 1,065,598 shares at March 31, 2021 and December 31, 2020, respectively(8,961)(4,987)
Total shareholders’ equity177,852 188,405 
Total Liabilities and Shareholders’ Equity$338,675 $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 March 31,
202020192020201920212020
Net revenues:Net revenues:    Net revenues:
ProductProduct$20,470 $15,904 $51,437 $46,149 Product$18,556 $18,634 
ServiceService16,877 13,937 50,952 41,514 Service18,028 18,775 
ContractContract17,500 15,539 52,881 46,646 Contract17,883 17,323 
54,847 45,380 155,270 134,309 54,467 54,732 
Costs of sales:Costs of sales:    Costs of sales:
ProductProduct15,995 12,259 40,882 34,912 Product14,885 14,905 
ServiceService11,252 9,482 33,810 29,868 Service12,695 12,646 
ContractContract15,929 14,643 48,781 42,679 Contract16,687 16,134 
43,176 36,384 123,473 107,459 44,267 43,685 
Gross marginGross margin11,671 8,996 31,797 26,850 Gross margin10,200 11,047 
Operating expenses:Operating expenses:    Operating expenses:
Selling, general and administrativeSelling, general and administrative10,512 9,539 31,988 27,162 Selling, general and administrative14,537 11,646 
Research and developmentResearch and development4,210 3,448 13,613 9,233 Research and development5,809 4,865 
Amortization of identifiable intangible assetsAmortization of identifiable intangible assets257 0 677 0 Amortization of identifiable intangible assets275 210 
Adjustment to contingent consideration liability(2,310)0 (2,310)0 
Gain on insurance proceedsGain on insurance proceeds(4,400)0 
12,669 12,987 43,968 36,395 16,221 16,721 
Operating lossOperating loss(998)(3,991)(12,171)(9,545)Operating loss(6,021)(5,674)
Other expense, net(486)(401)(1,250)(1,205)
Interest expense, net(2,235)(1,588)(6,318)(2,978)
Other expense – netOther expense – net(51)(406)
Loss on extinguishment of debtLoss on extinguishment of debt0 0 (8,123)0 Loss on extinguishment of debt0 (8,123)
Loss before benefit from income taxes(3,719)(5,980)(27,862)(13,728)
Benefit from income taxes8 78 4,265 3,988 
Interest expense – netInterest expense – net(2,160)(1,972)
Loss before provision for income taxesLoss before provision for income taxes(8,232)(16,175)
(Provision for) benefit from income taxes(Provision for) benefit from income taxes(39)5,265 
Net lossNet loss$(3,711)$(5,902)$(23,597)$(9,740)Net loss$(8,271)$(10,910)
Basic Earnings per Share:    
Net loss$(0.20)$(0.36)$(1.30)$(0.61)
Diluted Earnings per Share:
Net loss$(0.20)$(0.36)$(1.30)$(0.61)
Weighted average shares outstanding:    
Basic18,250 16,300 18,145 16,086 
Diluted18,250 16,300 18,145 16,086 
Net loss per share (basic and diluted)Net loss per share (basic and diluted)$(0.38)$(0.61)
Weighted average shares outstanding (basic and outstanding)Weighted average shares outstanding (basic and outstanding)21,92917,941

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 March 31,
202020192020201920212020
Net lossNet loss$(3,711)$(5,902)$(23,597)$(9,740)Net loss$(8,271)$(10,910)
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(302)201 
Comprehensive lossComprehensive loss$(3,761)$(6,259)$(23,288)$(9,976)Comprehensive loss$(8,573)$(10,709)

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)

Common StockAdditional Paid in CapitalAccumulated 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 stock87 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 

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 
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 

See accompanying notes to unaudited interim condensed consolidated financial statements
5

Table of Contents
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYCASH FLOWS
(Unaudited, inIn 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)$50,556 
(Unaudited)
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net loss$(8,271)$(10,910)
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation, amortization and accretion3,990 3,142 
Current expected credit losses18 244 
Provision for obsolete inventory210 1,188 
Stock-based compensation1,320 1,089 
Loss on debt extinguishment0 8,123 
Deferred income tax0 (5,386)
Changes in operating assets and liabilities:
Accounts receivable4,267 (1,289)
Inventories(3,850)(5,201)
Other current assets(4,343)(2,764)
Other assets421 85 
Accounts payable5,658 218 
Accrued salaries and benefits(3,916)(1,646)
Accrued expenses1,332 (283)
Customer deposits and deferred service revenue143 (1,733)
Other long-term liabilities(413)0 
Net cash used in operating activities(3,434)(15,123)
Cash flows from investing activities:
Capital expenditures(152)(188)
Capitalization of software costs(1,517)(1,852)
Net cash used in investing activities(1,669)(2,040)
Cash flows from financing activities:
Payments of long-term debt(163)(154)
Payments for the extinguishment of notes payable0 (66,250)
Proceeds from notes payable, net of issuance costs0 115,916 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock(2,362)(153)
Proceeds from exercise of stock options409 30 
Net cash (used in) provided by financing activities(2,116)49,389 
Effect of exchange rate changes on cash and cash equivalents(345)(173)
Net (decrease) increase in operating activities(7,564)32,053 
Cash and cash equivalents at beginning of period180,686 28,036 
Cash and equivalents at end of period$173,122 $60,089 
Supplemental non-cash investing and financing flow information:
Cash paid for interest$19 $953 
Income taxes, net of refunds5 0 
Capitalized software recorded in accounts payable317 0 
Capital expenditures in accounts payable122 0 

See accompanying notes to unaudited interim condensed consolidated financial statements

statement
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Table of Contents
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in 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 
See accompanying notes to unaudited interim condensed consolidated financial statements
7


PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in 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 
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 presentationPresentation

The accompanying unaudited interim condensed consolidated financial statements ("(“financial statements"statement”) 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 (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 allowances for receivables, inventories, and measurement of contingent consideration at fair value. Actual results could differ from those estimates. The Company's estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic; the extent to which the COVID-19 pandemic will impact these estimates is uncertain and cannot be predicted, and there can be no assurance that the COVID-19 pandemic will not have a material and adverse effect on these estimates.

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

Additionally, the Company has reclassified certain costsCash and expenses in the condensed consolidated statement of operations for the three and nine months ended September 30, 2019, amounting to $0.2 million and $0.7 million, respectively, from amortization of intangible assets to cost of service to conform to current period presentation. These reclassifications had no effect on previously reported total costs and operating expenses or net losses.Cash Equivalents

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

PreparationThe Company maintained bank balances that, at times, exceeded the federally insured limit during the three months ended March 31, 2021. The Company has not experienced losses relating to these deposits and management does not believe that
the Company is exposed to any significant credit risk with respect to these amounts.

Cash and cash equivalents consist of the financial statementsfollowing (in thousands):
March 31, 2021December 31, 2020
Cash and cash equivalents
Cash$63,580 $59,700 
Money market funds109,542 120,986 
Total cash and cash equivalents$173,122 $180,686 

Gain on Insurance Proceeds

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

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Other Long-Term liabilities

Other long-term liabilities represent amounts owed to make estimatesemployees that participate in the Company’s deferred compensation
plan, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the datelong-term portion of the financial statementsCoronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) deferred payroll taxes. The amount owed to employees participating in the deferred compensation plan was $2.8 million at March 31, 2021 and December 31, 2020.

Under the CARES Act employers can defer payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the reported amountsremaining 50% due December 31, 2022. As permitted under the CARES Act, the Company deferred payment of revenuethe employer portion of social security taxes through the end of 2020. As of March 31, 2021 and expensesDecember 31, 2020, the Company deferred a total of $2.8 million of payroll taxes during 2020, to be paid equally in the reporting period. Our estimates are subject to uncertainties associated withfourth quarters of 2021 and 2022. The current portion of the ongoing COVID-19 pandemic;deferred payroll taxes was $1.4 million at March 31, 2021 and December 31, 2020 and was included within accrued salaries and benefits and $1.4 million in other long-term liabilities on the 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 effect on these estimates.consolidated balance sheet.

Recently Adopted Accounting Pronouncements

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

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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. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently assessingadopted ASU 2016-13 effective January 1, 2021, and the application of the standard had no material impact of this standard on itsthe Company's financial statements.statements for the three months ended March 31, 2021.

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 is currently assessing the impact of this standard on its financial statements.

With the exception of the new standards discussed above, there were no other recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30, 2020March 31, 2021 that are of significance or potential significance to the Company, as compared to the recent accounting pronouncements described in the 2019 Annual Report.Company.

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 distinct performance obligations. Revenue in the Restaurant/Retail reporting segment is recognized at a point in time for software, hardware and installations. Revenue on these items are recognized when the customer obtains control of the asset. This generally occurs upon delivery and acceptance by the customer or upon installation or delivery to a third party carrier for onward delivery to customer. Additionally, revenue in the Restaurant/
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Retail reporting segment relating to SaaS, ourAdvanced Exchange hardware Advanced Exchange,service programs, on-site support and other services is recognized over time as the customer simultaneously receives and consumes the benefits of the Company’s performance obligations. 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
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arrangements, we have discretion over our pricing; we arethe Company is primarily responsible for providing a good or service; and we havethe Company has inventory risk before the good or service is transferred to the customer.customer, and the Company has discretion in establishing prices. As a result, we havethe Company 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 a “stand-ready obligation” satisfied over time on the basis that the customer consumes and receives a benefit from having access to the Company's support resources, when and as needed, throughout the contract term. For this reason, the support services are recognized ratably over the term since the Company satisfies its obligation to stand ready by performing these services each day. Contracts typically require payment within 30 to 90 days from the shipping date or installation date.date, depending on the Company's terms with the customer. The primary method used to estimate a stand-alone selling price, is by referring to the price that we 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, 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 a contract, and recognize itthat profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include: labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors. Revenue and profit in future periods of contract performance are recognized using the 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.

In determining when to recognize revenue, we analyzethe Company analyzes whether ourits performance obligations in ourits 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, there may be circumstances where the latter or both scenarios could apply to a contract.

We generally anticipate receipt ofThe Company does not include backlog as revenue as it may not result in actual revenue in any particular period, or at all. The Company usually expects payment within 30 to 90 days from satisfaction of a performance obligation. None of ourthe Company's contracts as of DecemberMarch 31, 20192021 or September 30,March 31, 2020 contained a significant financing component.
 
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Performance Obligations Outstanding

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

(in thousands)20212020
Beginning balance - January 1$11,082 $12,486 
Recognition of deferred revenue(2,603)(4,034)
Deferral of revenue2,597 4,026 
Ending balance - March 31$11,076 $12,478 
11The above table excludes customer deposits of $1.6 million and $1.8 million for the three months ended March 31, 2021 and 2020, respectively. The majority of the deferred revenue balances above relate to professional services, maintenance agreements, and software licenses. These are recognized straight-line over the life of the contract, with the majority of the balance being recognized within the next twelve months.

(in 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%78% 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, 2020March 31, 2021 and December 31, 2019,2020, transaction prices allocated to future performance obligations were $9.9$11.1 million and $10.9$11.1 million, respectively.

During the three months ended September 30,March 31, 2021 and March 31, 2020, and September 30, 2019, wethe Company recognized revenue of $2.2$2.6 million and $2.1$4.0 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.

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

Next 12 Months$66,66656,238 
Months 13-2443,36147,328 
Months 25-3631,15624,434 
Thereafter21,27212,066 
TOTAL$162,455140,066 


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:follows (in thousands):
(in thousands)Three months ended September 30, 2020
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over TimeThree months ended March 31, 2021
Restaurant/Retail$29,739 $7,608 $0 
Restaurant/Retail
Point in Time		Restaurant/Retail
Over Time		Government
Over Time
HardwareHardware$17,835 $0 $0 
SoftwareSoftware243 7,633 0 
ServiceService3,412 7,461 0 
Mission SystemsMission Systems$0 $0 $8,084 Mission Systems0 0 9,547 
ISR SolutionsISR Solutions$0 $0 $8,943 ISR Solutions0 0 8,131 
ProductProduct$0 $0 $473 Product0 0 205 
TOTALTOTAL$29,739 $7,608 $17,500 TOTAL$21,490 $15,094 $17,883 
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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 
(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 

(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 March 31, 2020
Restaurant/Retail
Point in Time		Restaurant/Retail
Over Time		Government
Over Time
Hardware$18,137 $0 $0 
Software562 6,382 0 
Service4,942 7,386 0 
Mission Systems0 0 8,448 
ISR Solutions0 0 8,772 
Product0 0 103 
TOTAL$23,641 $13,768 $17,323 
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 periodyear presentation. These reclassifications had no effect on previously reported total "Government - Over Time" revenue.

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 authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (for example, sales, use, value added, and some excise taxes).

Note 3 — Acquisitions

Drive-Thru Acquisition

Effective September 30, 2019, the Company, through its wholly-owned subsidiary ParTech, Inc. ("ParTech"), acquired assets of 3M Company's Drive-Thru Communications Systems business, including the XT-1 and G5 headset systems, contracts and intellectual property associated with the business, for a purchase price of $8.4 million (total fair value of assets was $8.4 million
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including 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").

Restaurant Magic Acquisition

Effective December 18, 2019, the Company, through ParTech, acquired 100% of the limited liability company interests of AccSys LLC (f/k/a AccSys, Inc., and otherwise known as Restaurant Magic) in base consideration of approximately $42.8 million, of which approximately $12.8 million 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" 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% 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 connection with its assumption of awards granted by Restaurant Magic to its employees and contractors prior to the closing of the acquisition.

The fair values assigned to the assets acquired and liabilities assumed in the Drive-Thru Acquisition and the Restaurant Magic Acquisition and presented in the table below were based on management's best estimates and assumptions at the conclusion of the measurement period for each respective transaction:
(in thousands)Purchase price allocation
Developed technology$16,400 
Customer relationships1,100 
Trade name900 
Tangible assets1,344 
Goodwill27,773 
Total assets47,517 
Accounts payable and accrued expenses629 
Deferred revenue715 
Earn-Out liability3,340 
Consideration paid$42,833 


Unaudited Pro Forma Financial Information

For the three months ended September 30, 2020, the Drive-Thru Acquisition and the Restaurant Magic Acquisition resulted in additional revenues of $5.7 million and $2.2 million, respectively. For the nine months ended September 30, 2020, the Drive-Thru Acquisition and 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 Magic Acquisition for the three and nine months ended September 30, 2020. The following unaudited pro forma financial information presents our results as if both acquisitions occurred 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

Sale 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, Net

The Company’s net accounts receivable, net,receivables consists of:of (in thousands):
(in thousands)September 30, 2020December 31, 2019
March 31, 2021December 31, 2020
Government segment:Government segment:  Government segment:  
BilledBilled$8,460 $11,608 Billed$10,700 $11,225 
Advanced billingsAdvanced billings(600)(608)Advanced billings(159)(948)
7,860 11,000  10,541 10,277 
Restaurant/Retail segment:Restaurant/Retail segment:32,246 30,774 Restaurant/Retail segment:28,165 32,703 
Accounts receivable - netAccounts receivable - net$40,106 $41,774 Accounts receivable - net$38,706 $42,980 

At September 30, 2020March 31, 2021 and December 31, 2019,2020, the Company had current, expected credit loss of $1.9$1.3 million and $1.8$1.4 million, respectively, against accounts receivable for the Restaurant/Retail reporting segment. Changes in the current, expected credit loss during the nine months ended September 30, 2020 were as follows:
(in thousands)(in thousands)20202019(in thousands)20212020
Beginning Balance - January 1Beginning Balance - January 1$1,849 $1,351 Beginning Balance - January 1$1,416 $1,849 
Provisions912 975 
(Reductions) provisions(Reductions) provisions(18)380 
Write-offsWrite-offs(881)(321)Write-offs(129)(156)
RecoveriesRecoveries0 0 Recoveries(15)0 
Ending Balance - September 30$1,880 $2,005 
Ending Balance - March 31Ending Balance - March 31$1,254 $2,073 


All receivablesReceivables recorded as of September 30, 2020March 31, 2021 and December 31, 20192020 all represent unconditional rights to payments from customers.
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Note 64 — Inventories, Net

Inventories are primarily used in the manufacture maintenance and service of products within the Restaurant/Retail reporting segment.products. The components of inventories,inventory, net consist of the following:
(in thousands)(in thousands)September 30, 2020December 31, 2019(in thousands)March 31, 2021December 31, 2020
Finished goodsFinished goods$14,055 $8,320 Finished goods$14,634 $12,747 
Work in processWork in process8 16 
Component partsComponent parts7,681 6,768 Component parts6,717 6,105 
Service partsService parts5,377 4,238 Service parts3,937 2,770 
$27,113 $19,326  $25,296 $21,638 

At September 30, 2020March 31, 2021 and December 31, 2019,2020, the Company had inventoryexcess and obsolescence reserves of $12.1$12.2 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 75 — 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 platform and other software applications for internal use in accordance with ASC Topic 350-40, Intangibles - Goodwill and Other - Internal - Use Software. The Company begins to capitalize its costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended. The Company stops capitalizing these costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three to five years. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in the Company's consolidated statements of operations.

The Company exercises judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that the Company can change the manner in which new features and functionalities are developed and tested related to its platform, assessing the ongoing value of capitalized assets or determining the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs for software used in its Restaurant/Retail reporting segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development ("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$3.6 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, 2020March 31, 2021 and December 31, 2019,2020, respectively. These software products are expected to satisfy the general release threshold within the next 12 months. Software development costs capitalizedplaced into service during the three months ended September 30,March 31, 2021 and March 31, 2020 and September 30, 2019 were $2.4$4.8 million and $0.7$1.8 million, respectively. Software development costs capitalized during the nine months ended September 30, 2020 and September 30, 2019 were $6.7 million and $2.3 million, respectively. 

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 five years. Amortization of capitalized software development costs from continuing operations for the three months ended September 30,March 31, 2021 and March 31, 2020 and September 30, 2019 were $1.7$2.0 million and $0.5 million, respectively. Amortization of capitalized software development costs from continuing operations for the nine months ended September 30, 2020 and September 30, 2019 were $4.9 million and $1.5$1.6 million, respectively. 

For the three month period ended September 30, 2020, $1.6 million and $0.3 million
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Table 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 service 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.Contents

The components of identifiable intangible assets are:
(in thousands)(in thousands)September 30, 2020December 31, 2019Estimated
Useful Life		(in thousands)March 31, 2021December 31, 2020Estimated
Useful Life
Acquired and internally developed software costsAcquired and internally developed software costs$40,011 $36,137 3 - 5 yearsAcquired and internally developed software costs$44,979 $40,170 3 - 5 years
Customer relationshipsCustomer relationships4,860 4,860 7 yearsCustomer relationships4,860 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   51,279 46,470  
Less accumulated amortizationLess accumulated amortization(17,806)(12,389) Less accumulated amortization(22,624)(20,265) 
$27,095 $28,638   28,655 26,205  
Internally developed software costs not meeting general release thresholdInternally developed software costs not meeting general release threshold5,342 2,500 Internally developed software costs not meeting general release threshold3,597 6,516 
Trademarks, trade names (non-amortizable)Trademarks, trade names (non-amortizable)1,810 1,810 Trademarks, trade names (non-amortizable)400 400 
$34,247 $32,948     $32,652 $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$6,479 
20227,321 
20235,321 
20243,360 
20253,105 
Thereafter3,069 
Total$28,655 

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 carried by the Restaurant/Retail and Government segments wereremained at $41.2 million and $41.4 million at September 30, 2020for both March 31, 2021 and December 31, 2019,2020, respectively. The Company recognized additions to goodwill 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.

Note 86 — Debt

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

On February 10, 2020, the Company sold $120.0 million in aggregate principal amount of 2.875% Convertible Senior Notes due 2026 (the "2026 Notes"“2026 Notes” and, together with the 2024 Notes, the "Notes"“Notes”). The 2026 Notes were sold pursuant to an indenture, dated February 10, 2020 (the "2026 Indenture"“2026 Indenture” and, together with the 2024 Indenture, the "Indentures"“Indentures”), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. The 2026 Notes pay interest at a rate equal to 2.875% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2020. 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,February 10, 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
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Notes through individually negotiated transactions. Of the total price paid for the 2024 Notes, $59.0 million was allocated to the 2024 Notes settlement, $30.8 million was allocated to the equity component, and $1.0 million was used to pay off accrued interest on the 2024 Notes. The consideration transferred was allocated to the liability and equity components of the 2024 Notes using the equivalent rate that reflected the borrowing rate for a similar non-convertible debt instrument immediately prior to settlement. The transaction resulted in a loss on settlement of convertible notes of $8.1 million, which is recorded as a Loss on extinguishment of debt in the Company’s unaudited condensed consolidated statementstatements of operations. The loss represents the difference between (i) the fair value of the liability component and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.

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

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

In accordance with ASC Topic 470-20 "Debt Debt with Conversion and Other Options — Beneficial Conversion Features"Features, the initial measurement of the 2024 Notes at fair value resulted in a liability of $62.4 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in Additional Paid in Capital of $17.6 million; 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 Paid in Capital of $26.2 million. Issuance costs for the Notes amounted to $4.9 million and $4.2 million for the 2024 Notes and 2026 Notes, respectively. These costs were allocated to debt and equity components on a ratable basis. For the 2024 Notes this amounted to $3.8 million and $1.1 million to the debt and equity components, respectively. For the 2026 Notes this amounted to $3.3 million and $0.9 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 result of the changes to the equity components of the Notes, the Company recognized a deferred income tax benefit of $4.4$5.4 million during the ninethree months ended September 30,March 31, 2020.

The following table summarizes information about the net carrying amounts of the Notes as of September 30, 2020:March 31, 2021:
(in thousands)(in thousands)2024 Notes2026 Notes(in thousands)2024 Notes2026 Notes
Principal amount of notes outstandingPrincipal amount of notes outstanding$13,750 $120,000 Principal amount of notes outstanding$13,750 $120,000 
Unamortized discount (including unamortized debt issuance cost)Unamortized discount (including unamortized debt issuance cost)(2,787)(26,968)Unamortized discount (including unamortized debt issuance cost)(2,447)(24,984)
Total long-term portion of notes payableTotal long-term portion of notes payable$10,963 $93,032 Total long-term portion of notes payable$11,303 $95,016 

The following table summarizes interest expense recognized on the Notes for the three and nine months ended September 30, 2020 and 2019:Notes:
(in thousands)Three Months Ended September 30,
20202019
Contractual interest expense$1,017 $900 
Amortization of debt issuance costs and discount1,126 882 
Total interest expense$2,143 $1,782 
(in thousands)(in thousands)Nine Months Ended September 30,(in thousands)Three months ended March 31,
2020201920212020
Contractual interest expenseContractual interest expense$3,009 $1,650 Contractual interest expense$(1,017)$(1,014)
Amortization of debt issuance costs and discountAmortization of debt issuance costs and discount3,205 1,628 Amortization of debt issuance costs and discount(1,174)(958)
Total interest expenseTotal interest expense$6,214 $3,278 Total interest expense$(2,191)$(1,972)

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The following table summarizes the future principal payments for the Notes as of September 30, 2020March 31, 2021 (in thousands):
2020, remaining$0 
20210 
2021, remaining2021, remaining$0 
202220220 20220 
202320230 20230 
2024202413,750 202413,750 
202520250 
ThereafterThereafter120,000 Thereafter120,000 
TotalTotal$133,750 Total$133,750 

In connection with the Restaurant Magic Acquisition (see "Note 3 - Acquisitions"),acquisition of AccSys, LLC in December 2019, the Company entered into a $2.0 million 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$60,625 payable beginning January 15, 2020 through maturity on December 15, 2022. As of September 30, 2020,March 31, 2021, the outstanding balance of the subordinated promissory note was $1.5$1.2 million of which $0.7 million was in the current portion of long-term debt. The Company's future minimum principal payments are $0.1 million, $0.7$0.5 million and $0.7 million for the remainder of 2020, 2021 and 2022, respectively.

Note 7 — Common Stock

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

Note 98 — Stock Based Compensation

The Company applies the fair value recognition provisions of ASC Topic 718: "Stock Compensation"718: Stock Compensation. The CompanyStock-based compensation expense, net of forfeitures of $34.0 thousand and $52.0 thousand for March 31, 2021 and March 31, 2020, respectively, was recorded stock-based compensationto the following line items in the consolidated statements of $3.2 million and $1.8 million for the nine month periods ended September 30, 2020 and September 30, 2019, respectively. The Company recorded stock-based compensation of $1.0 million and $0.9 millionoperations for the three month periodsmonths ended September 30, 2020 and September 30, 2019, respectively. March 31:
20212020
Cost of Sales - Contracts$67 $94 
Selling, general and administrative1,253 995 
Total stock-based compensation expense$1,320 $1,089 
At September 30, 2020,March 31, 2021, the aggregate unrecognized compensation expense related to unvested equity awards was $9.1 million, (net of estimated forfeitures), which is expected to be recognized as compensation expense in fiscal years 20202021 through 2023.2024.

A summary of stock option activity for the ninethree months ended September 30, 2020March 31, 2021 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 
Granted619 13.82 
Outstanding at January 1, 2021Outstanding at January 1, 2021957 $14.29 
ExercisedExercised(25)10.29 Exercised(34)12.29 
Canceled/forfeitedCanceled/forfeited(15)19.02 Canceled/forfeited(29)18.78 
Outstanding at September 30, 2020989 $14.11 
Outstanding at March 31, 2021Outstanding at March 31, 2021894 $14.22 

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A summary of unvested restricted stock activity for the ninethree months ended September 30, 2020March 31, 2021 is below:
(in thousands, except for award value)(in thousands, except for award value)Restricted Stock AwardsWeighted
Average
Award Value		(in thousands, except for award value)Restricted Stock AwardsWeighted
Average
Award Value
Outstanding at Balance at January 1, 2020171 $23.53 
Outstanding at January 1, 2021Outstanding at January 1, 202161 $25.62 
GrantedGranted21 29.19 Granted2 22.36 
VestedVested(28)24.37 Vested(33)24.91 
Forfeited and cancelledForfeited and cancelled(77)24.16 Forfeited and cancelled(1)20.94 
Outstanding at September 30, 202087 $24.09 
Outstanding at March 31, 2021Outstanding at March 31, 202129 $26.25 

A summary of unvested restricted stock units ("RSU"(“RSU”) activity for the ninethree months ended September 30, 2020March 31, 2021 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)RSU AwardsWeighted
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 Granted73 76.13 
VestedVested0 0 Vested(86)16.40 
Forfeited and cancelled0 0 
Outstanding at September 30, 2020375 $13.24 
Outstanding at March 31, 2021Outstanding at March 31, 2021414 $26.22 
Note 9 — 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,March 31, 2021, there were 989,000894,000 anti-dilutive stock options outstanding compared to 590,000951,000 as of September 30, 2019.March 31, 2020. At September 30, 2020March 31, 2021 there were 375,000414,000 anti-dilutive restricted stock units compared to 067,000 as of September 30, 2019.March 31, 2020.

The potential effects of 2024 Notes and 2026 Notes conversion features (See "Note 8 - Debt") were excluded from the diluted net loss per share as of September 30, 2020March 31, 2021 and September 30, 2019.March 31, 2020. Potential shares from 2024 Notes and 2026 Notes conversion features at respective maximum conversion rates of 46.4046.4037 per share and 30.84 shares of common stock30.8356 per $1,000 principal amount of Notesshare are approximately 638,051 and 3,700,272, respectively.
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 Refer to “Note 6 — Debt” for additional information.
Note 1110 — Contingencies

From time to time, the Company is party to legal proceedings arising in the ordinary course of business. Additionally, U.S. Government contract costs are subject to periodic audit and adjustment. Based on information currently available, and based on its evaluation of such information, the Company believes the legal proceedings in which it is currently involved are not material or are not likely to result in a material adverse effect on the Company’s business, financial condition or results of operations.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.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
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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 withrecent communications from the Singaporean authority, a penalty related to this matter is probable; the Company’s estimated liability for this penalty is not material and related contingencies are not expected to have a material effect on the Company’s financial statements.

 The Company has cooperated with the Chinese authorities, but it is unable to predict what actions the Chinese agencies might take at this time.
Note 1211 — Segment and Related Information

The Company operatesis organized in 2 distinct reporting segments, Restaurant/Retail and Government. The Company’s chiefManagement views the Restaurant/Retail and Government segments separately in operating decision maker isits business, as the Company’s Chief Executive Officer. products and services are different for each segment.

The Restaurant/Retail reporting segment provides point-of-sale (POS)is a provider of software, systems 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, 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 below:

(in thousands)Three Months
Ended March 31,
 20212020
Net Revenues:  
Restaurant/Retail$36,584 $37,409 
Government17,883 17,323 
Total$54,467 $54,732 
Operating loss:
Restaurant/Retail$(9,285)$(6,070)
Government1,190 1,179 
Other2,074 (783)
Total(6,021)(5,674)
Other expense, net(51)(406)
Interest expense, net(2,160)(1,972)
Loss on extinguishment of debt0 (8,123)
Loss before benefit from income taxes$(8,232)$(16,175)
Depreciation, amortization and accretion:
Restaurant/Retail$2,429 $1,855 
Government36 16 
Other1,525 1,271 
Total$3,990 $3,142 
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(in thousands)Three Months
Ended September 30,		Nine Months Ended
September 30,
 2020201920202019
Net Revenues:    
Restaurant/Retail$37,347 $29,841 $102,389 $87,663 
Government17,500 15,539 52,881 46,646 
Total$54,847 $45,380 $155,270 $134,309 
Operating loss:    
Restaurant/Retail$(2,763)$(4,432)$(16,530)$(12,029)
Government1,774 809 4,302 3,690 
Other(9)(368)57 (1,206)
Total(998)(3,991)(12,171)(9,545)
Other expense, net(486)(401)(1,250)(1,205)
Interest expense, net(2,235)(1,588)(6,318)(2,978)
Loss on extinguishment of debt0 0 (8,123)0 
Loss before benefit from income taxes$(3,719)$(5,980)$(27,862)$(13,728)
Depreciation, amortization and accretion:    
Restaurant/Retail$1,984 $824 $5,790 $2,893 
Government80 17 136 54 
Other1,388 1,031 4,226 2,046 
Total$3,452 $1,872 $10,152 $4,993 
Capital expenditures including software costs:    
Restaurant/Retail$1,324 $838 $5,814 $2,679 
Government415 0 849 176 
Other276 480 398 1,780 
Total$2,015 $1,318 $7,061 $4,635 
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 


Segment information, continued:
(in thousands)Three Months
Ended March 31,
 20212020
Capital expenditures including software costs:  
Restaurant/Retail$1,517 $1,707 
Government152 211 
Other0 122 
Total$1,669 $2,040 
Revenues by country:  
United States$50,603 $52,631 
Other Countries3,864 2,101 
Total$54,467 $54,732 

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)March 31, 2021December 31, 2020
Restaurant/Retail$141,330 $140,606 
Government13,165 13,150 
Other184,180 189,993 
Total$338,675 $343,749 

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)March 31, 2021December 31, 2020
United States$247,937 $250,275 
Other Countries14,449 16,570 
Total$262,386 $266,845 

The following table represents goodwill by reporting segment.

(in thousands)March 31, 2021December 31, 2020
Restaurant/Retail$40,478 $40,478 
Government736 736 
Total$41,214 $41,214 

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(in thousands)September 30, 2020December 31, 2019
Restaurant/Retail$40,478 $40,650 
Government736 736 
Total$41,214 $41,386 

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 March 31,
 20212020
Restaurant/Retail reporting segment:  
Dairy Queen9 %16 %
Yum! Brands, Inc.12 %11 %
Government reporting segment:
U.S. Department of Defense33 %32 %
All Others46 %41 %
 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, 2020 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 11,2021 or 2020.

Note 1312 — Fair Value of Financial Instruments

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

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

The Company’s financial instruments primarily consist of cash and cash equivalents, trade receivables, trade payables, debt instruments and deferred compensation assets and liabilities. The carrying amounts of cash and cash equivalents, trade receivables and trade payables as of September 30, 2020March 31, 2021 and December 31, 20192020 were considered representative of their fair values. The estimated fair value of the 2024 Notes and 2026 Notes at September 30, 2020March 31, 2021 was $20.7$32.0 million and $144.7$206.0 million, respectively. The valuation techniques used to determine the fair value of the 2024 Notes and the 2026 Notes are classified within Level 2 of the fair value hierarchy.

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

The amounts owed to employees participating in the deferred compensation plan at September 30, 2020March 31, 2021 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.

The Company usesCompany's Level 3 liability 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$0 at March 31, 2021 and December 31, 2020.
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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 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.

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 March 31, 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 $0 Monte CarloRevenue volatility25.0 %
Discount rate14.0 %
Projected year(s) of payment2021-2022
Note 1413 — Subsequent EventsEvent

On October 5, 2020,April 8, 2021, the Company, completedParTech, Inc., and Sliver Merger Sub, Inc., a wholly owned subsidiary of ParTech, Inc. (“Merger Sub”), entered into an underwritten public offeringAgreement and Plan of Merger (the "offering"“Merger Agreement”) with Punchh Inc. (“Punchh”), pursuantand Fortis Advisors LLC (“Stockholder Representative”), solely in its capacity as the initial Stockholder Representative. The Merger was executed as part of the Company's strategy to be a unified commerce cloud platform for restaurants and retailers, and included the addition of Punchh's loyalty and customer engagement platform. Pursuant to the Company's universal shelf registration statement filedMerger Agreement, on April 8, 2021, Merger Sub merged with and into Punchh (the “Merger”), with Punchh surviving the SEC on September 30, 2020 (Registration No. 333-249142),Merger and becoming a wholly owned subsidiary 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,Merger, the Company granted Jeffries LLC, the underwriterpaid former Punchh stockholders approximately $500.0 million (including holders of vested options and warrants) consisting of approximately (i) $390.0 million in cash (the “Cash Consideration”), and (ii) 1,594,202 shares of the offering,Company's common stock, in each case subject to certain adjustments (including customary adjustments for Punchh cash, debt, debt-like items, and net working capital at closing) for 100% of the equity interests in Punchh.

In connection with, and to partially fund the Cash Consideration for, the Merger, on April 8, 2021, the Company entered into (i) a 30 day optioncredit agreement, as the borrower, with certain of its U.S. subsidiaries, as guarantors, the lenders that are party thereto, and Owl Rock First Lien Master Fund, L.P., as administrative agent and collateral agent, that provides for a term loan in an initial aggregate principal amount of $180.0 million; and (ii) securities 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, 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 up to an additional 502,500500,000 shares of the Company's common stock with an exercise price of $76.50 per share.

The initial accounting for the business combination was incomplete at May 10, 2021; however, the same public offeringCompany's financial results for the three-month period ending March 31, 2021 did include acquisition related costs of $0.7 million. The assets and liabilities of Punchh will be adjusted to their respective fair values as of April 8, 2021, the closing date of the transaction, including working capital, property, plant and equipment, and identifiable intangible assets acquired through the Merger. The excess of the purchase price less underwriting discountsover the fair value of net assets acquired will be recorded to goodwill. Intangible assets acquired include, but are not necessarily limited to, developed technology and commissions. On November 3, 2020, Jeffries, LLC partially exercised its optioncustomer relationships. The estimated acquisition date fair value of these and purchased 266,022 shares of common stock, resultingother acquired assets and liabilities assumed may ultimately be based, in an additional $9.6 million of proceeds, net of underwriting discounts and commissions and offering expenses payable bypart, on inputs that are unobservable. The Company's initial purchase price allocation will be presented in the Company.Company's Form 10-Q for the quarter ending June 30, 2021.

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

When used in this Quarterly Report on Form 10-Q ("(“Quarterly Report”), the terms “PAR”, “Company,“the Company,” “we,” “us” and “our” meanrefers 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”.

Overview

PAR Technology Corporation operates in two distinct reporting segments: ourRestaurant/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 retail and restaurant industries, and ourindustries. Our Government segment which provides intelligence, surveillance, and reconnaissance solutions (“ISR”) and mission systems support to the U.S. Department of Defense ("DoD"(“DoD”) and other Federal agencies.

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

The Brink POS is an open solution offersoffering customers anthe opportunity to integrate with third party products and in-house systems. In support of our customers need to quickly adapt to changing market conditions, we claim the largest integration ecosystem providing access to industry trends and features,– 200+ partners across various product solution categories including mobile/on-lineonline ordering, self-ordering kiosks, loyalty programs, kitchen video systems, guest surveys, enterprise reporting, and other featuressolutions relevant to our customers’ businesses, including Restaurant Magic's cloud, SaaSour cloud-based back-office applicationssolution - Data Central. Data Central providesThese integration capabilities enables restaurants with the necessary tools to achieve peakincrease visits, customer check size, improve operational and financial efficiency, and integrates information from POS, inventory, supply, payroll,most importantly, position them to win in an ever changing and accounting systems to provide a comprehensive view of a restaurant's operations.challenging market.

Our open architecture POS integrated solutions also includesplatforms are optimized to host our POS software applications, as well as many third-party POS applications, and are compatible with a comprehensive offeringvariety of wireless headsets for drive-thru order taking. This product offering is of particular relevance during the COVID-19 pandemicperipheral devices. We partner with numerous vendors that offer complementary in-store peripherals, such as it provides our customers with another meanscash drawers, card readers and printers and kitchen video systems, allowing us to deliver their products and serve their customers, even in these uncertain times. Additionally, our recently released merchant services offering, PAR Payment Services, provides restaurants with card payment processing capabilities, which we service and support.a completely integrated solution through one vendor.

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

OurPAR's Government segment provides technical expertise in contract development of advanced systems and software solutions for the U.S. DoD and other Federal agencies, as well as satellite, communication, and IT mission systems support at a number of U.S. Government facilities both in the U.S. and worldwide. Our 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 relevant technical competencies, intellectual property, and investments in new technologies provide opportunities to offer systems integration, products, and highly-specialized service solutions to the U.S. DoD and other Federal agencies. The general uncertainty in U.S. defense total workforce policies (military, civilian, and contract), procurement cycles, and spending levels for the next several years are factors we monitor as we develop and implement our business strategy for our Government segment.

Recent Developments Affecting Our Business - COVID 19 Update

The COVID-19 pandemic continues to affectcause significant disruption to the U.S. and global economies affectingeconomies. While certain foreign jurisdictions, such as Canada and Europe, have re-imposed lockdowns and curfews in 2021, a number of localities in the U.S. have eased restrictions in the first quarter of 2021 and the U.S. economy continues to show signs of recovery. Although our business operations, andbegan experiencing the impact of the COVID-19 in the second quarter of 2020, we have seen improvements in our financial results as markets have strengthened and businesses have gained confidence in the restaurant industry generally. Theprogress to control the pandemic in the U.S. Beginning in the second half of 2020 through the quarter ended March 31, 2021, revenue has been in line with or above prior year results, our annual recurring revenue has increased quarter-over-quarter, and we have booked at least 1,181 new Brink POS sites in each of the last three quarters. Our Government business continues to not be materially impacted by the COVID-19 pandemic.

We continue to monitor the effects and potential effects of the COVID-19 pandemic includingon all aspects of our business, however it is difficult to predict the effectsfull impact of responses of governmental authorities and companies 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 of actions to mitigate its 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-19future periods. The pandemic we are unable to accurately predict the ultimatemay affect our Restaurant/Retail business in certain ways, including causing disruptions in our supply chain, increasing payment defaults by customers, causing reductions or delays in software or hardware deployments and curtailing customer demand, any of which could adversely impact that the COVID-19 pandemic will have on our business, operations, financial condition and financial results or prospects. For additional information on the various risks posed by the COVID-19 pandemic, please read “Risk Factors” in Part II, "Item 1A. Risk Factors" in this Quarterly Report.results.

Further, the COVID-19 pandemic has not had a material adverse impact on our Government business to date. We have continued our work-from-home arrangements for non-essential employees and on-site operations continue to be accomplished through telework and 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.Recent Developments


•On April 8, 2021, we acquired Punchh Inc (“Punchh”) for approximately $500 million paid in cash and shares of PAR common stock to Punchh shareholders. The cash consideration for the acquisition was primarily financed with a combination of equity and debt. Refer to the “Liquidity and Capital Resource” section of Management's Discussion
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and Analysis for additional acquisition financing information. The acquisition enabled us to take an important step in executing our strategy to be the leading unified commerce cloud platform for restaurants and retailers. The addition of Punchh's loyalty and customer engagement platform positions us to offer integrated point-of-sale, back office, payment and customer engagement solutions across channels. Refer to Note 13 — “Subsequent Event” for additional information.

Condensed Consolidated Results of Operations —

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

We reported consolidated revenues of $54.8$54.5 million for the quarter ended September 30, 2020, an increaseMarch 31, 2021, a decrease of 20.7%0.5% from $45.4$54.7 million recorded for the quarter ended September 30, 2019.March 31, 2020. Our net loss from continuing operations was $3.7$8.3 million, or $0.20$0.38 per diluted share, for the thirdfirst quarter of 2020,2021, compared to a net loss of $5.9$10.9 million, or $0.36$0.61 per diluted share, for the thirdfirst 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.

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 20202020.

Product revenues were $20.5$18.6 million for the quarter ended September 30, 2020, an increase of 28.9% from $15.9March 31, 2021, comparable with the $18.6 million recorded for the quarter ended September 30, 2019, primarily driven by an increase of $3.2March 31, 2020.

Service revenues were $18.0 million in revenue from our Core customers, driven by drive-thru product revenue for the quarter ended September 30, 2020March 31, 2021, a decrease of $5.3 million partially offset by a reduction in legacy Core hardware sales. Product revenue related to Brink for4.3% from the quarter ended September 30, 2020 was $6.7 million, an increase of 31.2% from $5.1$18.8 million recorded for the quarter ended September 30, 2019. The favorable Brink product revenue results wereMarch 31, 2020, primarily driven by thea $1.8 million decrease in implementation revenue partially offset by $0.9 million increase in site activations.software revenue.

ServiceContract revenues were $16.9$17.9 million for the quarter ended September 30, 2020,March 31, 2021, an increase of 21.5%3.5% or $3.0$0.6 million from $13.9$17.3 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.March 31, 2020. The favorable increase in contract revenue from our Government reporting segment was driven by contracts entered into during the first half of 2020 relating tostronger backlog in our intelligence, surveillance, and reconnaissance ("ISR"(“ISR”) solutions with $2.5 million more in backlog compared to the third quarter of 2019.product line entering 2021.

Product margins for the quarter ended September 30, 2020March 31, 2021 were 21.9%19.8%, compared to 22.9%20.0%, recorded for the quarter ended September 30, 2019,March 31, 2020. The decrease in margin is primarily due to unfavorable product mix.increased overheads costs.

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Service margins for the quarter ended September 30, 2020March 31, 2021 were 33.3%29.6%,compared to 32.0%32.6% recorded for the quarter ended September 30, 2019,March 31, 2020, primarily driven by a shiftdecrease in sales mix that resulted from our M&A activity, with the Restaurant Magic Acquisitionimplementation revenue and the Drive-Thru Acquisition.increase in software related costs.

Contract margins for the quarter ended September 30, 2020March 31, 2021 were 9.0%6.7%, compared to 5.8%6.9% for the quarter ended September 30, 2019,March 31, 2020, primarily due to the increase in Product Services revenue and increased profitability across several contractsreduced revenues in Mission Systems and higher labor costs compared to the quarter ended September 30, 2019.March 31, 2020.

Selling, General,general, and Administrative ("SG&A")administrative expenses increased to $10.5$14.5 million for the quarter ended September 30, 2020March 31, 2021 from $9.5$11.6 million for the quarter ended September 30, 2019,March 31, 2020, an increase of 10.5%24.9%. The increase was primarily driven by an additional $0.9a $1.1 million increase in variable compensation and $0.7 million in acquisition costs related to our acquisition of SG&A expense from the Restaurant Magic and Drive-Thru Acquisitions.Punchh, Inc on April 8th, 2021.

Research and Development ("R&D")development expenses were $4.2$5.8 million for the quarter ended September 30, 2020,March 31, 2021, an increase of $0.8$0.9 million from $3.4$4.9 million for the quarter ended September 30, 2019,March 31, 2020, driven primarily by an increase of $1.5 million in Brink developmentPOS and $0.6 million in Restaurant Magic development, partially offset by the SureCheck divestiture and an increase in capitalized software.Data Central development.

For the quarterquarters ended September 30,March 31, 2021 and March 31, 2020, we recorded $0.3 million and $0.2 million, respectively of amortization expense associated with acquired identifiable non-developed technology intangible assets acquired in the Drive-Thru Acquisition and the Restaurant Magic Acquisition; there was no comparable expense for the three months ended September 30, 2019. Amortization expense associated with identifiable developed technology intangible assets are accounted forrecorded as cost of sales within service costs of sales.

Also included in Operatingoperating expense for the three-months ended September 30, 2020 isMarch 31, 2021 was a $2.3$4.4 million reduction to the fair value of the Earn-Out liability associatedgain on insurance proceeds received in connection with the Restaurant Magic Acquisition.Company's settlement of a legacy claim. There was no comparable reduction to expense for the three months ended September 30, 2019.March 31, 2020.

In other expense, net, we recorded $0.5$0.1 million for the quarter ended September 30, 2020,March 31, 2021, compared to other expense, net, of $0.4 million recorded for the quarter ended September 30, 2019. March 31, 2020.

In interest expense, net, we recorded $2.2 million for the quarter ended September 30, 2020,March 31, 2021, compared to $1.6$2.0 million recorded for the quarter ended September 30, 2019.March 31, 2020. This increase was primarily driven by an increase in the balance of convertible debt and associated interest expense related to the 2026 Notes issued in the first quarter of 2020. Interest expense, net includes $1.1$1.2 million of non-cash accretion of debt discount and amortization of issuance costs for the three months ended September 30, 2020March 31, 2021 compared with $0.9$1.0 million for the same period last year.
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Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

We reported revenues of $155.3 millionfor the nine months ended September 30, 2020, an increase of 15.6% from $134.3 million recorded for the nine months ended September 30, 2019.  Our net loss from continuing operations was $23.6 million, or $1.30 per diluted share, for the nine months ended September 30, 2020, compared to net loss of $9.7 million, or $0.61 per diluted share, for the nine months ended September 30, 2019. Our year-over-year unfavorable performance was primarily drivenSegment Revenue by corporate financing charges, including an $8.1 million loss on extinguishment of debt related to the partial repurchase 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-Thru Acquisition.

Operating segment revenue isProduct Line are set forth below:
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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 reduction in legacy Core hardware sales. Product revenue related to Brink 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
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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.

In Other expense, net, we recorded $1.3 million other income, net, for the nine months ended September 30, 2020, compared to other expense, net, of $1.2 million recorded for the nine months ended September 30, 2019. 

In interest expense, net, we recorded $6.3 million for the nine months ended September 30, 2020, compared to $3.0 million recorded for the nine months ended September 30, 2019. 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. Interest expense, net includes $3.2 million of non-cash accretion of debt discount and amortization of issuance costs for the nine months ended September 30, 2020, compared to $1.6 million for the nine months ended September 30, 2019.

We recorded a Loss on extinguishment of debt of $8.1 million for the nine months ended September 30, 2020, as a result of the repurchase of $66.3 million of 2024 Notes in the first quarter of this year.

Net tax benefit of $4.3 million for the nine months ended September 30, 2020 is 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 $4.1 million deferred tax benefit impact of the 2024 Notes issuance in April 2019.
Three Months Ended March 31$%
(in thousands)20212020variancevariance
 Restaurant/Retail
Hardware$17,835 $18,137 $(302)(2)%
Software7,876 6,944 932 13 %
Services10,873 12,328 (1,455)(12)%
Total Restaurant Retail*$36,584 $37,409 $(825)(2)%
Government
Intelligence, surveillance, and reconnaissance$9,547 $8,772 $775 9 %
Mission systems8,131 8,448 (317)(4)%
Product sales205 103 102 99 %
Total Government$17,883 $17,323 $560 3 %
Total Net Revenue$54,467 $54,732 $(265)(0.5)%

Liquidity and Capital Resources

For the ninethree months ended September 30, 2020 the Company’sMarch 31, 2021 our primary source of liquidity was its sale of the 2026 Notes.existing cash and cash equivalents generated through financing transactions in 2020. Cash used in operating activities was $14.4$3.4 million for the ninethree months ended September 30, 2020,March 31, 2021, compared to $9.6$15.1 million for the ninethree months ended September 30, 2019. TheMarch 31, 2020. This variance was driven primarily by an increaseimprovements in net loss and net working capital needs for the first quarter of 2020 as a result of an increase in strategic procurement of inventory and decrease in customer deposits. Inventory levels were strategically increased to support the roll out of projects for Brink and to mitigate risk of supply chain disruption due to the COVID-19 pandemic.requirements.

Cash used in investing activities was $6.9$1.7 million for the ninethree months ended September 30, 2020March 31, 2021 compared to $11.6$2.0 million for the ninethree months ended September 30, 2019.March 31, 2020. Investing activities during the ninethree months ended September 30, 2020March 31, 2021 included capital expenditures of $6.4$1.5 million for developed technology costs associated with our Restaurant/Retail reporting segment software platforms compared to $2.3$1.9 million for software platforms and $2.4 million for implementation of our ERP system for the nine monthsquarter ended September 30, 2019. The nine months ended September 30, 2019 included the $7.0 million investment for the Drive-Thru Acquisition.  March 31, 2020.

Cash provided byused in financing activities was $48.7$2.1 million for the ninethree months ended September 30, 2020,March 31, 2021, compared to cash provided by financing activities of $65.0$49.4 million for the ninethree months ended September 30, 2019.  The nineMarch 31, 2020. During the three months ended September 30,March 31, 2020, includedwe received net proceeds of $49.5 million from the $120$120.0 million issuance of the 2026 Notes partially offset by the repurchase of a majority of the 2024 Notes. The nine months ended September 30, 2019 included the $80 million issuance of the 2024 Notes.

On April 8, 2021, we entered into a merger agreement with Punchh Inc., Punchh survived the merger becoming our wholly owned subsidiary. In connection with the early partmerger, we paid former Punchh stockholders an aggregate of the fourth quarter of 2020, we raised additional capital through the issuance of 3,616,022approximately (i) $390.0 million in cash (the “Cash Consideration”), and (ii) 1,594,202 shares of our common stock, resultingstock. To partially fund the Cash Consideration, we entered into a credit agreement with the lenders thereto and Owl Rock First Lien Master Fund, L.P. as administrative agent and collateral agent that provides for a term loan in $131.3an initial aggregate principal amount of $180.0 million, and securities purchase agreements with each of proceeds, netPAR Act III, LLC, and certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as investment adviser to raise approximately $160.0 million through a private placement of underwriting discountsour common stock. The credit facility matures four years from the date of the credit agreement, and commissions,the outstanding loans thereunder bear interest currently at a rate equal to the Eurocurrency rate plus a margin of 4.75%. The remainder of the Cash Consideration was provided from our cash and offering expenses payable bycash equivalent accounts. Total cash used from our balance sheet for the Company. See "Note 14 -Subsequent Events" undermerger including transaction costs was approximately $66.0 million. Refer to Part I, Item 1 of this Quarterly ReportRefer to Note 13 — “Subsequent Event” for additional information on such offering.information.

We expect our available cash and cash equivalents will be sufficient to meet our operating needs for the next 12 months. Our actual cash needs will depend on many factors, including our rate of revenue growth, growth of our SaaS revenues, the timing and extent of spending to support our product development efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our products, and the factors described above in this Part I, Item 2.
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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, 2020,2021, and in the 20192020 Annual Report and our other filings with the SEC.

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Off-Balance Sheet Arrangements

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

Contractual Obligations

The following table summarizesAs of March 31, 2021, there were no material changes in our contractual obligations at September 30,from those reported in our 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.Annual Report.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are based on the application of U.S.accounting principles generally accepted accounting principlesin the United States of America (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis. Significant itemsPrimary areas where financial information is subject to suchthe use of estimates, assumptions and assumptionsthe application of judgment include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed inaccounts receivable, inventories, accounting for business combinations, at fair value, the carrying amount of property, plantcontingent consideration, goodwill and equipment including right-to-use assets and liabilities, identifiable intangible assets, and goodwill, the measurement of liabilities and equity recognized for outstanding convertible notes, valuation allowances for receivables, inventories, and measurement of contingent consideration at fair value. Actual results could differ from those estimates.taxes. 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

Not Required.Foreign Currency Exchange Risk

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

Interest Rate Risk

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

Item 4.
Controls and Procedures

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.March 31, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2020.such date due to material weaknesses in our internal control over financial reporting previously identified in Item 9A. “Controls and Procedures” of our 2020 Annual Report.

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. The material
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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.

Changes in Internal Control Over Financial Reporting.

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



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Part II - Other Information

Item 1.Legal Proceedings

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

Item 1A.Risk Factors

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

The COVID-19 pandemic hasServicing 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.

In connection with, and to partially fund the purchase price of our acquisition of Punchh Inc., the Company, as the borrower, with certain of its U.S. subsidiaries, as guarantors, entered into a credit agreement on April 8, 2021 with the lenders thereto and Owl Rock First Lien Master Fund, L.P., as the administrative agent and collateral agent, that provides for a term loan in an initial aggregate principal amount of $180.0 million. As of May 10, 2021, $180.0 million of the term loan are outstanding, and we had $180.0 million aggregate principal amount of the 2024 Notes and is expected2026 Notes outstanding.

Our ability to continuemake scheduled payments on the principal of, to have a material adverse effectpay interest on, or to refinance our debt, including our debt evidenced by the 2024 Notes and 2026 Notes and under the term loan, depends on our business,future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our operating subsidiaries may not generate sufficient cash flow from operations in the future to service our debt. If our operating subsidiaries are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to raise funds through additional financing, such as the issuance of equity or debt securities, refinancing our debt, and otherwise accessing the credit and capital markets at the times and in the amounts needed and on acceptable terms will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities on desirable terms or at all, which could result in a default on our debt obligations, and materially and adversely affect our financial condition and financial results for the foreseeable future.restrict our operations.

As previously disclosedThe covenants in the credit agreement that govern our 2019 Annual Reportindebtedness under the term loan may limit our operating 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.financial flexibility.

We continue to actively manageThe covenants in the credit agreement limit 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.ability to:

We may be subject to claims by third parties for breach•incur debt and liens;
•make investments, loans and advances;
•consummate a merger or consolidation;
•sell, lease, assign, transfer or otherwise dispose of contractproperty;
•declare or pay dividends;
•prepay, redeem or repurchase debt;
•engage in affiliate transactions;
•change our business; and infringement of intellectual property and/
•terminate or proprietary rights.modify our organizational documents.

Third parties
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Under the Credit Agreement, the Company is required to maintain liquidity of at least $20 million and a first lien net annual recurring revenue leverage ratio of no greater than the level set forth in the Credit Agreement for the relevant quarter, which starts at 2.60 to 1.00 and declines over time to 1.30 to 1.00.

These covenants may assert claims thatlimit our software, hardware platforms, or technology infringe, misappropriate,ability to make strategic acquisitions, fund investments or otherwise violate their intellectual property orengage in other proprietary rights. Third parties may also assertbusiness activities that our sale of certain products require the payment of license fees to them. Such claims maycould be made by our competitors seeking to obtain a competitive advantage or by other parties, including existing licensors. Additionally, 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 litigation 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 effect 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.interest.

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 ninethree months ended September 30, 2020, 33,613March 31, 2021, 61,181 shares were purchasedwithheld at an average price of $15.86$74.88 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.
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
Exhibit
Number		 
Incorporated by reference into
this Quarterly Report on Form 10-Q 
Date
Filed or
Furnished
Exhibit DescriptionFormExhibit No.
2.1*Form 8-K (File No. 001-09720)2.14/8/2021
10.1††Form 10-K (File No. 001-09720)10.243/16/2021
10.2Form 8-K (File No. 001-09720)10.14/8/2021
10.3*Form 8-K (File No. 001-09720)10.24/8/2021
10.4*Form 8-K (File No. 001-09720)10.34/8/2021
10.5
Common Stock Purchase Warrant, dated April 8, 2021, in favor of PAR Act III, LLC. of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
Form 8-K (File No. 001-09720)10.74/8/2021
31.1Filed herewith
31.2Filed herewith
32.1Furnished herewith
32.2Furnished herewith
101.INSXBRL Instance DocumentFiled herewith
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
* The schedules and exhibits to such agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.
†† Indicates management contract or compensatory plan or arrangement.

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Exhibit
Number
Incorporated by reference into
this Quarterly Report on Form 10-Q
Date
Filed or
Furnished
Exhibit DescriptionFormExhibit No.
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
104Cover Page Interactive Data File (embedded within the Inline XBRL document)Filed herewith
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 PAR TECHNOLOGY CORPORATION
 (Registrant)
  
Date:November 6, 2020May 10, 2021/s/ Bryan A. Menar
 Bryan A. Menar
 Chief Financial and Accounting Officer
 (Principal Financial Officer)

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