10-Q 1 par-20220331.htm 10-Q par-20220331
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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 March 31, 2022
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-20220331_g1.jpg
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware16-1434688
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York 13413-4991
(Address of principal executive offices, including zip code)
(315) 738-0600
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ 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 ☑ 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 ☐
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 ☑

As of May 3, 2022, 27,062,382 shares of the registrant’s common stock, $0.02 par value, were outstanding.



PAR TECHNOLOGY CORPORATION

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
Item
Number
 Page
   
Item 1.
   
 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
PART II
OTHER INFORMATION
Item 1.
   
Item 1A.
   
Item 2.
   
Item 6.
   
 
“PARTM,” “Brink POS®,” “Punchh®,” “Data Central®,” “Restaurant Magic®,” “PAR PhaseTM,” “PixelPoint®” and other trademarks appearing in this Quarterly Report belong to us. This Quarterly Report may also contain trade names and trademarks of other companies. Our use of such other companies’ trade names or trademarks is not intended to imply any endorsement or sponsorship by these companies of us or our products or services.


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature, but rather are predictive of PAR’s future operations, financial condition, financial results, business strategies and prospects. Forward-looking statements are generally identified by words such as “anticipate,” “believe,” “can”, “could”, “continue,” “expect,” “estimate,” “future”, “goal”, “intend,” “may,” “opportunity,” “plan,” “should,” “target”, “will,” “would,” “will likely result,” and similar expressions. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties, many of which are beyond PAR’s control, which could cause PAR’s actual results to differ materially from those expressed in or implied by forward-looking statements, including statements relating to and PAR’s expectations regarding the effects of COVID-19 on its business, financial condition, and results of operations and the mitigating or otherwise intended impact of PAR’s responses to the same; the timing and expected benefits of acquisitions, divestitures, and capital markets transactions; statements of the plans, strategies and objectives of management for future operations, including PAR’s unified commerce cloud platform and its go-to-market strategy; statements concerning the expected development, demand, performance, market share or competitive performance relating to PAR’s products or services; projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, deferred taxes, or other financial items, or of PAR’s annual recurring revenue, active sites, net loss, net loss per share and other key performance indicators and financial measures; statements concerning potential supply constraints, component shortages, manufacturing disruptions or logistics challenges; statements about PAR’s human capital strategy and engagement; statements regarding current or future macroeconomic trends or geopolitical events and the impact of those trends and events on PAR and its financial performance; statements regarding claims, disputes or other litigation matters; and any statements of assumptions underlying any of the foregoing. Factors, risks, trends, and uncertainties that could cause PAR’s actual results to differ materially from those expressed in or implied by forward-looking statements include the effects of COVID-19 on PAR’s business, financial condition, and results of operations and the timing and actions by PAR, as well as by governments, businesses, customers and consumers, including store closures (temporary or permanent), decreased or delayed product and service adoptions and installations, delayed payments or payment defaults by customers, and the health and safety of PAR’s employees; PAR’s ability to add and maintain active sites, retain and manage third-party suppliers, secure alternative suppliers, and navigate component shortages, manufacturing disruptions and logistics challenges, shipping delays and increased costs; PAR’s ability to successfully attract, hire and retain necessary qualified employees to develop and expand its business, as exacerbated by the “Great Resignation” or “Big Quit”; the protection of PAR’s intellectual property; PAR’s ability to increase the number of integration partners, and acquire and/or develop relevant technology offerings for current, new, and potential customers for the build-out of its unified commerce cloud platform; the impact of macroeconomic trends and geopolitical events, including the effects of the Russia-Ukraine conflict and inflation; risks associated with PAR’s international operations; changes in estimates and assumptions PAR makes in connection with the preparation of its financial statements and in building business and operational plans and strategies; disruptions in operations from system security risks, data protection breaches, and cyberattacks; PAR’s agility to execute its business and strategies and manage its business continuity risks, including disruptions or delays in product assembly and fulfillment and limitations on PAR’s selling and marketing efforts; potential impacts, liabilities and costs from pending or potential investigations, claims and disputes; and other factors, risks, trends and uncertainties that could cause PAR’s actual results to differ materially from those expressed in or implied by forward-looking statements contained in this Quarterly Report, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 1, 2022, and in our other filings with the SEC. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

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PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (unaudited)

PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
AssetsMarch 31, 2022December 31, 2021
Current assets:  
Cash and cash equivalents$163,207 $188,419 
Accounts receivable – net54,571 49,978 
Inventories40,930 35,078 
Other current assets11,379 9,532 
Total current assets270,087 283,007 
Property, plant and equipment – net13,429 13,709 
Goodwill457,433 457,306 
Intangible assets – net114,579 118,763 
Lease right-of-use assets3,935 4,348 
Other assets12,233 11,016 
Total assets$871,696 $888,149 
Liabilities and Shareholders’ Equity  
Current liabilities:  
Current portion of long-term debt$533 $705 
Accounts payable22,623 20,845 
Accrued salaries and benefits12,718 17,265 
Accrued expenses3,943 5,042 
Lease liabilities – current portion2,153 2,266 
Customer deposits and deferred service revenue16,367 14,394 
Total current liabilities58,337 60,517 
Lease liabilities – net of current portion2,116 2,440 
Deferred service revenue – noncurrent6,463 7,597 
Long-term debt387,681 305,845 
Other long-term liabilities5,629 7,405 
Total liabilities460,226 383,804 
Shareholders’ equity:  
Preferred stock, $.02 par value, 1,000,000 shares authorized
  
Common stock, $.02 par value, 58,000,000 shares authorized, 28,278,562 and 28,094,333 shares issued, 27,052,454 and 26,924,397 outstanding at March 31, 2022 and December 31, 2021, respectively
565 562 
Additional paid in capital578,628 640,937 
Accumulated deficit(151,535)(122,505)
Accumulated other comprehensive loss(3,192)(3,704)
Treasury stock, at cost, 1,226,108 shares and 1,181,449 shares at March 31, 2022 and December 31, 2021, respectively
(12,996)(10,945)
Total shareholders’ equity411,470 504,345 
Total Liabilities and Shareholders’ Equity$871,696 $888,149 

See accompanying notes to unaudited interim condensed consolidated financial statements
2

PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended
March 31,
20222021
Revenues, net:  
Product$25,073 $18,556 
Service33,773 18,028 
Contract21,439 17,883 
Total revenues, net80,285 54,467 
Costs of sales:  
Product19,997 14,885 
Service19,796 12,695 
Contract19,879 16,687 
Total cost of sales59,672 44,267 
Gross margin20,613 10,200 
Operating expenses:  
Selling, general and administrative22,368 14,537 
Research and development10,841 5,809 
Amortization of identifiable intangible assets213 275 
Gain on insurance proceeds (4,400)
Total operating expenses33,422 16,221 
Operating loss(12,809)(6,021)
Other expense, net(368)(51)
Interest expense, net(2,463)(2,160)
Loss before provision for income taxes(15,640)(8,232)
Provision for income taxes(10)(39)
Net loss$(15,650)$(8,271)
Net loss per share (basic and diluted)$(0.58)$(0.38)
Weighted average shares outstanding (basic and diluted)26,97021,929

See accompanying notes to unaudited interim condensed consolidated financial statements

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PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)

Three Months Ended March 31,
20222021
Net loss$(15,650)$(8,271)
Other comprehensive income (loss), net of applicable tax:
Foreign currency translation adjustments512 (302)
Comprehensive loss$(15,138)$(8,573)

See accompanying notes to unaudited interim condensed consolidated financial statements
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PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)

Common StockAdditional
Paid in
Capital
Accumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 202128,095 $562 $640,937 $(122,505)$(3,704)1,181 $(10,945)$504,345 
Impact of ASU 2020-06 implementation (see Note 1 - Basis of Presentation)(66,656)(13,380)(80,036)
Balances at January 1, 202228,095 $562 $574,281 $(135,885)$(3,704)1,181 $(10,945)$424,309 
Issuance of common stock upon the exercise of stock options96 2 811 — — — — 813 
Net issuance of restricted stock awards and restricted stock units88 1  — — — — 1 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 45 (2,051)(2,051)
Stock-based compensation— — 3,536 — — — — 3,536 
Foreign currency translation adjustments— — — — 512 — — 512 
Net loss— — — (15,650)— — — (15,650)
Balances at March 31, 2022 28,279 $565 $578,628 $(151,535)$(3,192)1,226 $(12,996)$411,470 

Common StockAdditional
Paid in
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
Loss
Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at January 1, 202122,983 $459 $243,575 $(46,706)$(3,936)1,066 $(4,987)$188,405 
Issuance of common stock upon the exercise of stock options34 1 408 — — — — 409 
Net issuance of restricted stock units87 2 263 — — — — 265 
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock— — — — — 76 (3,974)(3,974)
Stock-based compensation— — 1,320 — — — — 1,320 
Foreign currency translation adjustments— — — — (302)— — (302)
Net loss— — — (8,271)— — — (8,271)
Balances at March 31, 202123,104 $462 $245,566 $(54,977)$(4,238)1,142 $(8,961)$177,852 


See accompanying notes to unaudited interim condensed consolidated financial statements
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PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
20222021
Cash flows from operating activities:
Net loss$(15,650)$(8,271)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization6,400 2,810 
Accretion of debt in interest expense486 1,180 
Current expected credit losses326 18 
Provision for obsolete inventory529 210 
Stock-based compensation3,536 1,320 
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable(4,868)4,267 
Inventories(6,338)(3,850)
Other current assets(1,849)(4,343)
Other assets(1,353)421 
Accounts payable1,906 5,658 
Accrued salaries and benefits(4,511)(3,916)
Accrued expenses(1,117)1,332 
Customer deposits and deferred service revenue1,651 143 
Other long-term liabilities(346)(413)
Net cash used in operating activities(21,198)(3,434)
Cash flows from investing activities:
Cash paid for acquisition(1,212) 
Capital expenditures(280)(152)
Capitalization of software costs(1,568)(1,517)
Net cash used in investing activities(3,060)(1,669)
Cash flows from financing activities:
Principal payments of long-term debt(173)(163)
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock(2,051)(2,362)
Proceeds from exercise of stock options813 409 
Net cash used in financing activities(1,411)(2,116)
Effect of exchange rate changes on cash and cash equivalents457 (345)
Net decrease in cash and cash equivalents(25,212)(7,564)
Cash and cash equivalents at beginning of period188,419 180,686 
Cash and equivalents at end of period$163,207 $173,122 

See accompanying notes to unaudited interim condensed consolidated financial statements
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PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)

Three Months Ended
March 31,
20222021
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest$9 $19 
Capitalized software recorded in accounts payable13 317 
Capital expenditures in accounts payable73 122 

See accompanying notes to unaudited interim condensed consolidated financial statements

7

PAR TECHNOLOGY CORPORATION
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (“financial statements”) of PAR Technology Corporation and its consolidated subsidiaries (collectively, the “Company”, “PAR”, “we”, “us” or “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements as promulgated by the SEC. In the opinion of management, the Company's financial statements include all normal and recurring adjustments necessary in order to make the financial statements not misleading and to provide a fair presentation of the Company's financial results for the interim period included in this Quarterly Report. 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, 2021 (the “2021 Annual Report”).

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

The Company operates in two distinct reporting segments, Restaurant/Retail and Government. The Company’s chief operating decision maker is the Company’s Chief Executive Officer. The Restaurant/Retail segment provides enterprise restaurants, franchisees, and other restaurant outlets in the three major restaurant categories, quick service, fast casual, and table service, with operational efficiencies, offering them an integrated cloud solution by combining Brink POS cloud software for front-of-house, Data Central back-office cloud solution, PAR Pay and PAR Payment Services for payments, and Punchh loyalty and engagement solution on a unified commerce cloud platform. The Government segment provides technical expertise and development of advanced systems and software solutions for the U.S. Department of Defense (“DoD”) and other federal agencies, as well as satellite command and control, communication, and IT mission systems at several DoD facilities worldwide. The financial statements also include corporate operations, which are comprised of enterprise-wide functional departments.

Cash and Cash Equivalents

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

The Company maintained bank balances that, at times, exceeded the federally insured limit during the three months ended March 31, 2022. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.








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Cash and cash equivalents consist of the following:
(in thousands)March 31, 2022December 31, 2021
Cash and cash equivalents
Cash$72,076 $69,249 
Money market funds91,131 119,170 
Total cash and cash equivalents$163,207 $188,419 

Gain on Insurance Proceeds

During the first quarter of 2021, the Company received $4.4 million of insurance proceeds in connection with the settlement of a legacy claim. No insurance proceeds were received during the three months ended March 31, 2022.

Other Long-Term Liabilities

Other liabilities represent amounts owed to employees that participate in the Company’s deferred compensation plan and the long-term portion of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) deferred payroll taxes. Amounts owed to employees participating in the deferred compensation plan was $2.1 million and $2.4 million at March 31, 2022 and December 31, 2021, respectively.

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

Related Party Transactions

Act III Management LLC (“Act III Management”), a service company to the restaurant, hospitality, and
entertainment industries, provides software development and restaurant technology consulting services to the
Company pursuant to a master development agreement. Keith Pascal, a director of the Company, is an employee of
Act III Management and serves as its vice president and secretary. Mr. Pascal does not have an ownership interest in Act III Management. As of March 31, 2022, the Company had $0.1 million of accounts payable owed to Act III Management and in the three months ended March 31, 2022, the Company paid Act III Management $0.2 million for services performed under the master development agreement.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The new guidance is intended to simplify the accounting for certain convertible instruments with characteristics of both liability and equity. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. As a result, after the adoption of this guidance, an entity’s convertible debt instrument will be wholly accounted for as debt. The guidance also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations by requiring the use of the if-converted method. The guidance is effective for fiscal years beginning after December 15, 2021 and can be adopted on either a fully retrospective or modified retrospective basis. The Company adopted the new standard as of January 1, 2022 under the modified retrospective method and recorded a cumulative effect upon adoption of a $81.3 million increase to convertible notes, $66.6 million reduction to other paid in capital, $13.4 million reduction to accumulated deficit, and a $1.3 million reduction to deferred tax liability to reflect the reversal of the separation of the convertible debt between debt and equity. Prior year presentation of debt was not impacted. The adoption of this standard also decreased the amount of non-cash interest expense to be recognized in future periods as a result of eliminating the discount associated with the equity component. There was
9

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

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which is intended to require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. ASU 2021-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company early adopted the new standard as of January 1, 2022, with no impact to the Company's condensed consolidated financial statements at adoption. Future impact of adoption is dependent on Company's activity as an acquiring entity in transactions subject to Topic 805.

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

NOTE 2: REVENUE RECOGNITION
The Company's revenue is derived from software as a service (“SaaS”), hardware and software sales, software activation, hardware support, installations, maintenance and professional services. Accounting Standards Codification (“ASC”) Topic 606: Revenue from Contracts with Customers requires the Company to distinguish and measure performance obligations under customer contracts. Contract consideration is allocated to all performance obligations within the arrangement or contract. Performance obligations that are determined not to be distinct are combined with other performance obligations until the combined unit is determined to be distinct and that combined unit is then recognized as revenue over time or at a point in time depending on when control is transferred.

The Company evaluated the potential performance obligations within its Restaurant/Retail segment and evaluated whether each performance obligation met the ASC Topic 606 criteria to be considered a distinct performance obligation. Revenue in the Restaurant/Retail segment is recognized at a point in time for licensed software, hardware and installations. Revenue on these items are recognized when the customer obtains control of the asset. This generally occurs upon delivery and acceptance by the customer or upon installation or delivery to a third party carrier for onward delivery to customer. Additionally, revenue in the Restaurant/Retail segment relating to SaaS, the Company's Advanced Exchange hardware service program, its on-site support and other services is recognized over time as the customer simultaneously receives and consumes the benefits of the Company’s performance obligations. The Company’s support services are stand-ready obligations that are provided over the life of the contract, generally 12 months. The Company offers installation services to its customers for hardware and software for which the Company primarily hires third-party contractors to install the equipment on the Company's behalf. The Company pays third party contractors an installation service fee based on an hourly rate agreed to by the Company and contractor. When third party installers are used, the Company determines whether the nature of its performance obligations is to provide the specified goods or services itself (principal) or to arrange for a third-party to provide the goods or services (agent). In the Company's customer arrangements, the Company is primarily responsible for providing a good or service, has inventory risk before the good or service is transferred to the customer, and discretion in establishing prices; as a result, the Company has concluded that it is the principal in the arrangement and records installation revenue on a gross basis.

The support services associated with hardware and software sales are “stand-ready obligations” satisfied over time on the basis that the customer consumes and receives a benefit from having access to the Company's support resources, when and as needed, throughout the contract term. For this reason, the support services are recognized ratably over the contract term since the Company satisfies its obligation to stand ready by performing these services each day. Contracts typically require payment within 30 to 90 days from the shipping date or installation date, depending on the Company's terms with the customer. The primary method used to estimate a stand-alone selling price, is the price that the Company charges for the particular good or service sold by the Company separately under similar circumstances to similar customers. The Company determines stand-alone selling prices as follows: hardware, software and software activation (one-time fee at the initial offering of software or SaaS) performance obligations are recognized at a stand-alone selling price based on the price at which the Company sells the particular good or service separately in similar circumstances and to similar customers. The stand-alone selling price for all other performance obligations, including: pass-through hardware, such as terminals, printers, or card readers; hardware support (referred to as Advanced Exchange), installation, maintenance, licensed software upgrades, and professional services (project management) is recognized by using an expected cost plus margin.
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The Company's revenue in the Government segment is recognized over time as control is generally transferred continuously to its customers. Revenue generated by the Government segment is predominantly related to services; provided, however, revenue is also generated through the sale of materials, software, hardware, and maintenance. For the Government segment cost plus fixed fee contract portfolio, revenue is recognized over time using costs incurred to date to measure progress toward satisfying the Company's performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and general and administrative expenses. Profit is recognized on the fixed fee portion of the contract as costs are incurred and invoiced. Long-term fixed price contracts involve the use of judgment to estimate the total contract revenue and costs. For long-term fixed price contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete the contract, and recognize that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include: labor productivity and availability; the complexity of the work to be performed; and the performance of subcontractors. Revenue and profit in future periods of contract performance are recognized using the aforesaid assumptions, and adjusting the estimate of costs to complete a contract. Once the services provided are determined to be distinct or not distinct, the Company evaluates how to allocate the transaction price. Generally, the Government segment does not sell the same good or service to similar customers and the contract performance obligations are unique to each government solicitation. The performance obligations are typically not distinct. In cases where there are distinct performance obligations, the transaction price would be allocated to each performance obligation on a ratable basis based upon the stand-alone selling price of each performance obligation. Cost plus margin is used for the cost plus fixed fee contract portfolios as well as the fixed price and time and materials contracts portfolios to determine the stand-alone selling price.

In the Government segment, when determining revenue recognition, the Company analyzes whether its performance obligations under Government contracts are satisfied over a period of time or at a point in time. In general, the Company's performance obligations are satisfied over a period of time; however, there may be circumstances where the latter or both scenarios could apply to a contract.

The Company usually expects payment within 30 to 90 days from satisfaction of its performance obligations. None of its contracts as of March 31, 2022 or March 31, 2021 contained a significant financing component.
 
Performance Obligations Outstanding

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

(in thousands)20222021
Beginning balance - January 1$20,046 $11,082 
Recognition of deferred revenue(9,941)(2,603)
Deferral of revenue10,857 2,597 
Ending balance - March 31$20,962 $11,076 
The above table excludes customer deposits of $1.9 million and $1.6 million for the three months ended March 31, 2022 and 2021, respectively. The majority of the deferred revenue balances above relate to professional services, maintenance agreements, and software licenses. These balances are recognized on a straight-line basis over the life of the contract, with the majority of the balance being recognized within the next twelve months.

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

11

During the three months ended March 31, 2022 and 2021, the Company recognized revenue included in contract liabilities at the beginning of each respective period of $4.5 million and $2.6 million.

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

Next 12 months$93,962 
Months 13-2457,185 
Months 25-3633,086 
Thereafter11,422 
Total$195,655 

Disaggregated Revenue

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

Disaggregated revenue is as follows:
Three Months Ended March 31, 2022
(in thousands)Restaurant/Retail
point in time
Restaurant/Retail
over time
Government
over time
Hardware$24,653 $ $ 
Software34 19,313  
Service5,520 9,326  
Mission systems  8,915 
Intelligence, surveillance, and reconnaissance solutions
  12,290 
Product  234 
Total$30,207 $28,639 $21,439 
Three Months Ended March 31, 2021
(in thousands)Restaurant/Retail
point in time
Restaurant/Retail
over time
Government
over time
Hardware$17,835 $ $ 
Software243 7,633  
Service3,412 7,461  
Mission systems  9,547 
Intelligence, surveillance, and reconnaissance solutions
  8,131 
Product  205 
Total$21,490 $15,094 $17,883 
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Practical Expedients and Exemptions

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

NOTE 3: ACQUISITIONS

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

On April 8, 2021 (the “Closing Date”), the Company, ParTech, and Sliver Merger Sub, Inc., a wholly owned subsidiary of ParTech (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Punchh Inc. (“Punchh”), and Fortis Advisors LLC, solely in its capacity as the initial Stockholder Representative. Pursuant to the Merger Agreement, on April 8, 2021, Merger Sub merged with and into Punchh (the “Merger”), with Punchh surviving the Merger and becoming a wholly owned subsidiary of the Company (“Punchh Acquisition”).

Allocation of Acquisition Consideration — Punchh Acquisition

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

During the first quarter of 2022, the preliminary fair values of assets and liabilities as of April 8, 2021 were finalized to reflect final acquisition valuation analysis procedures. These adjustments included a $0.8 million reduction of deferred revenue and $0.3 million of other adjustments, resulting in a reduction to goodwill of $1.1 million during the three months ended March 31, 2022. Indemnification assets and liabilities were reduced by $0.1 million during the three months ended March 31, 2022, with $2.1 million remaining in escrow as of March 31, 2022.

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The following table presents management's final purchase price allocation for the Punchh Acquisition:
(in thousands)Purchase price allocation
Cash$22,714 
Accounts receivable10,214 
Property and equipment592 
Lease right-of-use assets2,473 
Developed technology84,600 
Customer relationships7,500 
Indemnification assets2,109 
Trade name5,800 
Prepaid and other acquired assets2,764 
Goodwill415,055 
Total assets553,821 
Accounts payable and accrued expenses15,617 
Deferred revenue10,298 
Loan payables3,508 
Lease liabilities2,787 
Indemnification liabilities2,109 
Deferred taxes11,794 
Consideration paid$507,708 

Unaudited Pro Forma Financial Information

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

The following table summarizes the Company's unaudited pro forma operating results for the three months ended March 31:
(in thousands)2021
Total revenue$62,535 
Net loss$(11,092)

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

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NOTE 4: ACCOUNTS RECEIVABLE, NET

The Company’s net accounts receivables consist of:
(in thousands)March 31, 2022December 31, 2021
Government segment:  
Billed$17,335 $11,667 
 17,335 11,667 
Restaurant/Retail segment:37,236 38,311 
Accounts receivable - net$54,571 $49,978 

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

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

(in thousands)20222021
Beginning Balance - January 1$1,306 $1,416 
Provisions (reductions)326 (18)
Write-offs(88)(129)
Recoveries (15)
Ending Balance - March 31$1,544 $1,254 

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

NOTE 5: INVENTORIES

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

(in thousands)March 31, 2022December 31, 2021
Finished goods$23,412 $17,528 
Work in process577 688 
Component parts14,915 14,880 
Service parts2,026 1,982 
Inventories$40,930 $35,078 

At March 31, 2022 and December 31, 2021, the Company had excess and obsolescence reserves of $10.2 million and $10.8 million, respectively, against inventories.
NOTE 6: IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL

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

The Company exercises judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized. To the extent the Company can change the manner in which new features and functionalities are developed and tested related to its software platform, assessing the ongoing value of capitalized assets or determining the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs the Company capitalizes and amortizes could change in future periods.

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

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

The components of identifiable intangible assets are:
(in thousands)March 31, 2022December 31, 2021Estimated
Useful Life
Weighted-Average Amortization Period
Acquired developed technology $109,100 $109,100 
3 - 7 years
5 years
Internally developed software costs27,255 25,735 3 years2.92 years
Customer relationships12,360 12,360 7 years5 years
Trade names1,410 1,410 
2 - 5 years
3 years
Non-competition agreements30 30 1 year1 year
 150,155 148,635  
Less accumulated amortization(45,244)(39,479) 
 104,911 109,156  
Internally developed software costs not meeting general release threshold3,468 3,407 
Trademarks, trade names (non-amortizable)6,200 6,200 Indefinite
 $114,579 $118,763 

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

(in thousands)
2022, remaining$16,922 
202320,667 
202417,947 
202516,534 
202616,091 
Thereafter16,750 
Total$104,911 

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

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

(in thousands)
Beginning balance - December 31, 2021$457,306 
Q1 2022 Acquisition1,212 
ASC 805 measurement period adjustment(1,085)
Ending balance - March 31, 2022$457,433 
Refer to “Note 3 — Acquisitions”, for additional information on goodwill from the Q1 2022 Acquisition.
NOTE 7: DEBT

The following table summarizes information about the net carrying amounts of long-term debt as of March 31, 2022:
(in thousands)2024 Notes2026 Notes2027 NotesTotal
Principal amount of notes outstanding$13,750 $120,000 $265,000 $398,750 
Unamortized debt issuance cost(391)(3,003)(7,675)(11,069)
Total long-term portion of notes payable$13,359 $116,997 $257,325 $387,681 

The following table summarizes information about the net carrying amounts of long-term debt as of December 31, 2021:
(in thousands)2024 Notes2026 Notes2027 NotesTotal
Principal amount of notes outstanding$13,750 $120,000 $265,000 $398,750 
Unamortized debt issuance cost(334)(2,440)(5,984)(8,758)
Unamortized discount(1,570)(19,413)(63,164)(84,147)
Total long-term portion of notes payable$11,846 $98,147 $195,852 $305,845 
Refer to "Recently Adopted Accounting Pronouncements" within "Note 1 - Basis of Presentation" for additional information relating to impact to discount due to implementation of ASU 2020-06.

Convertible Senior Notes

On September 17, 2021, the Company sold $265.0 million in aggregate principal amount of 1.500% Convertible Senior Notes due 2027 (the “2027 Notes”). The 2027 Notes were issued pursuant to an indenture, dated September 17, 2021, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “2027 Indenture”). The 2027 Notes bear interest at a rate of 1.500% per year, which is payable semiannually in arrears on April 15 and October 15 of each year, beginning April 15, 2022. Interest accrues on the 2027 Notes from the last date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from September 17, 2021. Unless earlier converted, redeemed or repurchased, the 2027 Notes mature on October 15, 2027. The Company used net proceeds from the sale, in conjunction with net proceeds from the September 2021 sale of common stock (Refer to “Note 8 — Common Stock” for additional information), to repay in full the principal amount of $180.0 million outstanding as of September 17, 2021 (the “Owl Rock Term Loan”) under the credit agreement entered into on April 8, 2021 by the Company and certain of its U.S. subsidiaries, as guarantors, with the lenders party thereto and Owl Rock First Lien Master Fund, L.P. as administrative agent and collateral agent (the “Owl Rock Credit Agreement”). The Company intends to use the remaining net proceeds from the sale for general corporate purposes, including continued investment in the growth of the Company’s businesses and for other working capital needs. The Company may also use a portion of the net proceeds to acquire or invest
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in other assets complementary to the Company’s businesses or for repurchases of the Company’s other indebtedness.

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

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

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

Prior to the Company adopting ASU 2020-06 on January 1, 2022, the carrying amount of the liability component of the Notes was calculated by estimating the fair value of similar notes that do not have associated convertible features. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the fair value amount of the Notes. The valuation model used in determining the fair value of the liability component for the Notes includes inputs, such as the implied debt yield within the nonconvertible borrowing rate. The implied estimated effective rate of the liability component of the 2024 Notes, 2026 Notes, and 2027 Notes was 10.2%, 7.3%, and 6.5% respectively.

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

Prior to the Company adopting ASU 2020-06 on January 1, 2022, in accordance with ASC Topic 470-20 Debt with Conversion and Other Options — Beneficial Conversion Features, at respective issuance dates, the initial measurement of the 2024 Notes at fair value resulted in a liability of $62.4 million and implied value of the convertible feature recognized to additional paid in capital of $17.6 million; the initial measurement of the 2026 Notes at fair value resulted in a liability of $93.8 million and implied value of the convertible feature recognized to additional paid in capital of $26.2 million; and, the initial measurement of the 2027 Notes at fair value resulted in a
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liability of $199.2 million and implied value of the convertible feature recognized to additional paid in capital of $65.8 million. Issuance costs for the Notes amounted to $4.9 million, $4.2 million, and $8.3 million for the 2024 Notes, 2026 Notes, and 2027 Notes, respectively. These costs were allocated to debt and equity components on a ratable basis. For the 2024 Notes, this amounted to $3.8 million and $1.1 million to the debt and equity components, respectively. For the 2026 Notes, this amounted to $3.3 million and $0.9 million to the debt and equity components, respectively. For the 2027 Notes, this amounted to $6.2 million and $2.1 million to the debt and equity components, respectively. Refer to 'Recently Adopted Accounting Pronouncements' in Note 1 for a summary of the Company's January 1, 2022 adoption of ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).

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

Prior to the Company adopting ASU 2020-06 on January 1, 2022, the Company recorded an income tax liability of $15.6 million in 2021 associated with the portion of the 2027 Notes that was classified within shareholders' equity. GAAP requires the offset of the deferred tax liability to be classified within shareholders' equity, consistent with the equity portion of the 2027 Notes. The creation of the deferred tax liability produced evidence of recoverability of the Company's net deferred tax assets, which resulted in the release of a valuation allowance, totaling $14.9 million, that was also classified within shareholders' equity pursuant to ASU 2019-12.

Credit Facility

In connection with, and to partially fund the approximately $397.5 million in cash paid to former Punchh equity holders (the "Cash Consideration") for the Punchh Acquisition, on April 8, 2021, the Company entered into the Owl Rock Credit Agreement. Issuance costs, which included a 2% Original Issue Discount, amounted to $9.3 million with net proceeds amounting to $170.7 million.

The Company used net proceeds from the sale of the 2027 Notes and its concurrent sale of common stock (refer to “Note 8 — Common Stock” for additional information about the sale) to repay in full the Owl Rock Term Loan, including $1.8 million accrued interest and $3.6 million prepayment premium, on September 17, 2021. Following its repayment, the Owl Rock Credit Agreement was terminated. The transaction resulted in a loss on settlement of notes of $11.9 million, which is recorded as a loss on extinguishment of debt in the Company’s unaudited interim condensed consolidated statements of operations. The loss represents the difference between (i) reacquisition price, including prepayment premium, and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.
The following table summarizes interest expense recognized on the Notes and on the Credit Facility:
Three Months
Ended March 31,
(in thousands)20222021
Contractual interest expense$(2,003)$(1,017)
Amortization of debt issuance costs $(486)$(142)
Amortization of discount (1,032)
Total interest expense$(2,489)$(2,191)

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

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The following table summarizes the future principal payments as of March 31, 2022:
(in thousands)
2022, remaining$533 
2023 
202413,750 
2025 
2026120,000 
Thereafter265,000 
Total$399,283 
NOTE 8: COMMON STOCK

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

In connection with, and to partially fund the Cash Consideration of the Punchh Acquisition, on April 8, 2021, the Company entered into securities purchase agreements (the "Purchase Agreements") with each of PAR Act III, LLC ("Act III") and T. Rowe Price Associates, Inc., acting as investment adviser (such funds and accounts being collectively referred to herein as "TRP") to raise approximately $160.0 million through a private placement of the Company's common stock. Pursuant to the Purchase Agreements, the Company issued and sold (i) 73,530 shares of its common stock to Act III for a gross purchase price of approximately $5.0 million ($68.00 per share), and (ii) 2,279,412 shares of common stock to TRP for a gross purchase price of approximately $155.0 million ($68.00 per share) for an aggregate of 2,352,942 shares. The Company incurred $4.3 million of issuance costs in connection with the sale of its common stock.

The Company also issued 1,493,130 of its common stock as part of the consideration paid to former Punchh equity holders in connection with the Punchh Acquisition. Refer to “Note 3 — Acquisitions” for additional information about the Punchh Acquisition.
NOTE 9: STOCK-BASED COMPENSATION

The Company applies the fair value recognition provisions of ASC Topic 718: Stock Compensation. Stock-based compensation expense, net of forfeitures of $0.6 million for the three months ended March 31, 2022, was recorded in the following line items in the condensed consolidated statements of operations. Forfeitures were not material for the three months ended March 31, 2021.
Three Months
Ended March 31,
(in thousands)20222021
Cost of sales - contracts$49 $67 
Selling, general and administrative3,487 1,253 
Total stock-based compensation expense$3,536 $1,320 
At March 31, 2022, the aggregate unrecognized compensation expense related to unvested equity awards was $29.6 million, which is expected to be recognized as compensation expense in fiscal years 2022 through 2025.











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A summary of stock option activity for the three months ended March 31, 2022 is below: