XML 58 R10.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Summary of Significant Accounting Policies | 12 Months Ended
--- | ---
Dec. 31, 2021
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Nature of business PAR Technology Corporation (the “Company” or “PAR,” “we,” or “us”), through its consolidated subsidiaries, operates in two segments - the Restaurant/Retail segment and the Government segment. 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 a fully 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 DoD and other federal agencies, as well as satellite command and control, communication, and IT mission systems at several DoD facilities worldwide. The accompanying consolidated financial statements include the Company's accounts and those of its consolidated wholly owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. COVID-19 continued to create significant uncertainty and worldwide economic disruption in 2021. The Company’s business continued to experience delays in customer orders and sales, restrictions on its employees ability to travel or work, increased costs for hardware, components and materials, and disruptions in its supply chain. The extent to which COVID-19 impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including, among others, the duration and scope of the COVID-19 pandemic, the severity of COVID-19 variants and the actions, especially those taken by governmental authorities, to contain the pandemic or mitigate its impact and the impact on the businesses of our customers, partners, and suppliers. As pandemic-related events continue to evolve, additional impacts may arise that the Company is not aware of currently. Any prolonged material disruption of the Company’s business or the businesses of the Company's customers, partners, or suppliers could materially impact the Company's financial position, results of operations or cash flows. Basis of presentation and use of estimates The Company prepares its consolidated financial statements and related notes in accordance with accounting principles generally accepted in the United States of America. The preparation of the consolidated 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, credit losses for receivables, valuation of excess and obsolete inventories, and measurement of contingent consideration at fair value. Actual results could differ from those estimates. Business combinations The Company accounts for business combinations pursuant to ASC Topic 805, Business Combinations, which requires that assets acquired and liabilities assumed be recorded at their respective fair values on the date of acquisition. The fair value of the consideration paid is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is allocated to goodwill. The purchase price allocation process requires the Company to make significant assumptions and estimates in determining the purchase price and the assets acquired and liabilities assumed at the acquisition date. The Company’s assumptions and estimates are subject to refinement and, as a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. The Company’s consolidated financial statements and results of operations reflect an acquired business after the completion of the acquisition. Contingent consideration The Company determined the acquisition date fair value of contingent consideration associated with the Restaurant Magic Acquisition in December 2019 using Monte-Carlo simulation valuation techniques, with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC Topic 820, Fair Value Measurement. This valuation technique is also used to determine current fair value of the contingent consideration. The simulation uses probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent post-closing revenue focused milestones obligation. 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 the Company's 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 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; any change in the fair value adjustment is recorded in the earnings of that period. During 2020, the Company recorded a $3.3 million adjustment to decrease the fair value of the contingent consideration related to the Restaurant Magic Acquisition to zero as of December 31, 2020. No additional adjustments were made by the Company during 2021. Revenue recognition policy See “Note 3 – Revenue Recognition” – for revenue recognition policy and disclosures. Warranty provisions Warranty provisions for product warranties are recorded in the period in which the Company becomes obligated to honor the warranty, which generally is the period in which the related product revenue is recognized. The Company accrues warranty reserves based upon historical factors such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts. When a sale is consummated, a warranty reserve is recorded based upon the estimated cost to provide the service over the warranty period which can range from 12 to 36 months and cost of replacement parts. Activity related to warranty claims are as follows:
|  | December 31, 2021 |  | December 31, 2020
Beginning balance |  | $ | 994 |  |  | $ | 1,490 |
Adjustments to reserve |  | (10) |  |  | (300) |
Warranty claims settled |  | (222) |  |  | (196) |
Ending balance |  | $ | 762 |  |  | $ | 994 |
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 years ended December 31, 2021 and 2020. 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 following (in thousands):
| December 31, 2021 |  | December 31, 2020
Cash and cash equivalents |  |  |
Cash | $ | 69,249 |  |  | $ | 59,700 |
Money market funds | 119,170 |  |  | 120,986 |
Total cash and cash equivalents | $ | 188,419 |  |  | $ | 180,686 |
Accounts receivable – current expected credit losses The Company maintains a provision for accounts receivables that it does not expect to collect. In accordance with ASC Topic 326 Financial Instruments - Credit Losses, the Company accrues its estimated losses from uncollectable accounts receivable to the provision based upon recent historical experience, the length of time the receivable has been outstanding, other specific information as it becomes available, and reasonable and supportable forecasts not already reflected in the historical loss information. Provisions for current expected credit losses are charged to current operating expenses. Actual losses are charged against the provision when incurred. Inventories The Company’s inventories are valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method. The Company uses certain estimates and judgments and considers several factors including product demand, changes in customer requirements and changes in technology to provide for excess and obsolescence reserves to properly value inventory. Property, plant and equipment Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to twenty-five years. Expenditures for maintenance and repairs are expensed as incurred. Other assets Other assets primarily consist of cash surrender value of life insurance related to the Company’s deferred compensation plan eligible to certain employees. The funded balance is reviewed on an annual basis. The balance of the life insurance policy was $3.7 million at December 31, 2021 and December 31, 2020, respectively. Income taxes The Company and its subsidiaries file a consolidated U.S. federal income tax return. State tax returns are filed on a combined or separate basis depending on the applicable laws in the jurisdictions where the tax returns are filed. The Company also files foreign tax returns on a separate company basis in the countries in which it operates. The provision for income taxes is based upon pretax loss with deferred income taxes provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The Company records a valuation allowance when necessary to reduce deferred tax assets to their net realizable amounts. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Other liabilities Other liabilities represent amounts owed to employees that participate in the Company’s deferred compensation plan and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) deferred payroll taxes. Amounts owed to employees participating in the deferred compensation plan at December 31, 2021 were $2.4 million as compared to $2.8 million at December 31, 2020. In response to the COVID-19 pandemic, many governments enacted measures to provide aid and economic stimulus; these measures included the deferring the due dates of tax payments. The CARES Act enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. The CARES Act provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. As 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 had deferred a total of $2.8 million of payroll taxes during 2020, of which $1.9 million was paid in December 2021 and the remaining balance to be paid in December 2022. Deferred payroll taxes were $1.9 million at December 31, 2021 and were included within accrued salaries and benefits and on the consolidated balance sheet. Foreign currency The assets and liabilities for the Company’s international operations are translated into U.S. dollars using year-end exchange rates. Income statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are recorded as a separate component of stockholders’ equity under the heading Accumulated Other Comprehensive Loss. Exchange gains and losses on intercompany balances of permanently invested long-term loans are also recorded as a translation adjustment and are included in Accumulated Other Comprehensive Loss. Foreign currency transaction gains and losses are recorded in other income, net in the accompanying statements of operations. Other income (expense), ne t The Company's foreign currency transaction gains and losses and rental income and losses are recorded in other income, net in the accompanying statements of operations. Identifiable intangible assets The Company's identifiable intangible assets represent intangible assets acquired in the acquisition of Brink Software, Inc in September 2014 (“Brink Acquisition”), the Drive-Thru Acquisition, the Restaurant Magic Acquisition, the Punchh Acquisition, 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 seven years. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in the Company's consolidated statements of operations. The Company exercises judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent 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 the Company capitalizes and amortizes could change in future periods. Included in identifiable intangible assets are approximately $3.4 million and $6.5 million of costs related to software products that have not satisfied the general release threshold as of December 31, 2021 and December 31, 2020, respectively. These software products will be ready for their intended use within the next 12 months. Software costs placed into service during the years ended December 31, 2021 and 2020 were $9.3 million and $3.8 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 expense for acquired developed technology and internally developed software was broken out as follows:
(in thousands) | 2021 |  | 2020 |  | 2019
Amortization of acquired developed technology | $ | 11,978 |  |  | $ | 3,457 |  |  | $ | 1,061 |
Amortization of internally developed software | 5,411 |  |  | 3,269 |  |  | 4,470 |
The components of identifiable intangible assets are:
| December 31, |  |
(in thousands) | 2021 |  | 2020 | Estimated Useful Life | Weighted-Average Amortization Period
Acquired developed technology | $ | 109,100 |  |  | $ | 24,500 |  | 3 - 7 years | 5.25 years
Internally developed software costs | 25,735 |  |  | 15,670 |  | 3 years | 2.90 years
Customer relationships | 12,360 |  |  | 4,860 |  | 7 years | 5.00 years
Trade names | 1,410 |  |  | 1,410 |  | 2 - 5 years | 3.00 years
Non-compete agreements | 30 |  |  | 30 |  | 1 year | 1.00 year
| 148,635 |  |  | 46,470 |  |  |
Less accumulated amortization | (39,479) |  |  | (20,265) |  |  |
| $ | 109,156 |  |  | $ | 26,205 |  |  |
Internally developed software costs not meeting general release threshold | 3,407 |  |  | 6,516 |  |  |
Trade names (non-amortizable) | 6,200 |  |  | 400 |  | Indefinite |
| $ | 118,763 |  |  | $ | 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):
2022 | $ | 22,247 |
2023 | 20,308 |
2024 | 17,417 |
2025 | 16,343 |
2026 | 16,091 |
Thereafter | 16,750 |
Total | $ | 109,156 |
The Company tested its indefinite lived intangible assets for impairment during the fourth quarter of its fiscal years ended December 31, 2021 and 2020. To value indefinite lived intangible assets, the Company utilizes the relief from royalty method to estimate the fair values of trade names. There was zero impairment to indefinite lived intangible assets in 2021 or 2020. Amortization expense for identifiable intangible assets was allocated as follows:
(in thousands) | 2021 |  | 2020 |  | 2019
Amortization of identifiable intangible assets recorded in cost of service | $ | 17,389 |  |  | $ | 6,726 |  |  | $ | 5,531 |
Amortization expense allocated to intangible assets | 1,825 |  |  | 1,150 |  |  | 156 |
Stock-based compensation The Company measures and records compensation expense for all stock-based compensation to employees, including awards of employee stock options, restricted stock awards and restricted stock units (both time-vested and performance-based), in the financial statements as compensation cost over the applicable vesting periods using a straight-line expense recognition method, based on their fair value on the date of grant. The fair value of stock-based awards is determined by using the Black-Scholes option valuation model for option awards and closing price on the date of grant for restricted stock awards and restricted stock units. The Black-Scholes valuation model incorporates assumptions as to the fair value of stock price, volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. In valuing the stock options, significant judgment is required in determining the expected volatility of the Company's common stock and the expected life that individuals will hold their stock options prior to exercising. Expected volatility is based on the historical and implied volatility of the Company's common stock. The expected life of stock-based compensation is derived from the historical actual term of option grants and an estimate of future exercises during the remaining contractual period of the option. While volatility and estimated life are assumptions that do not bear the risk of change subsequent to the grant date of stock options, these assumptions may be difficult to measure, as they represent future expectations based on historical experience. Further, expected volatility and the expected life of options and awards may change in the future, which could substantially change the grant-date fair value of future awards and, ultimately, the expense the Company records. The Company elects to account for forfeitures based on recognition in the reporting period incurred. Compensation expense for awards with performance conditions is reassessed each reporting period and recognized based upon the probability that the performance targets will be achieved. The Company expenses stock-based compensation for stock options, restricted stock awards, restricted stock units and performance awards over the requisite service period. For awards with only a service condition, the Company expenses stock-based compensation using the straight-line method over the requisite service period for the entire award. For awards with both performance and service conditions, the Company expenses the stock-based compensation on a straight-line basis over the requisite service period for each separately vesting portion of the award, taking into account the probability that the Company will satisfy the performance condition. Net loss per share Net loss per share is calculated in accordance with ASC Topic 260: Earnings per Share, which specifies the computation, presentation and disclosure requirements for earnings per shares (“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 December 31, 2021, there were 1,305,881 anti-dilutive stock options outstanding compared to 956,627 as of December 31, 2020 and 383,000 as of December 31, 2019. At December 31, 2021 there were 418,084 anti-dilutive restricted stock units compared to 426,632 and 67,000 as of December 31, 2020 and December 31, 2019, respectively. Due to their anti-dilutive nature, the potential effects of the 2024 Notes, 2026 Notes, and the 2027 Notes conversion features (refer to “Note 8 – Debt” for additional information) were excluded from the diluted net loss per share calculation as of December 31, 2021, December 31, 2020 and December 31, 2019. Potential shares resulting from 2024 Notes, 2026 Notes, and 2027 Notes conversion features at respective maximum conversion rates of 46.4037 per share 30.8356 per share, and 17.8571 per share are approximately 638,051, 3,700,272 and 4,732,132, respectively. The following is a reconciliation of the weighted average shares outstanding for the basic and diluted loss per share computations (in thousands, except per share data):
| December 31,
| 2021 |  | 2020 |  | 2019
Net loss | $ | (75,799) |  |  | $ | (36,562) |  |  | $ | (15,571) |
Basic: |  |  |  |  |
Weighted average common shares | 25,088 |  |  | 19,014 |  |  | 16,223 |
Loss per common share, basic | $ | (3.02) |  |  | $ | (1.92) |  |  | $ | (0.96) |
Diluted: |  |  |  |  |
Weighted average common shares | 25,088 |  |  | 19,014 |  |  | 16,223 |
Loss per common share, diluted | $ | (3.02) |  |  | $ | (1.92) |  |  | $ | (0.96) |
Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company's impairment tests are based on the Company's identified reporting units within those operating segments used in the test for goodwill impairment. If the carrying value of either reporting unit exceeds its fair value, an impairment charge is recognized for the excess of the carrying value of the reporting unit over its fair value. The Company conducted its annual goodwill impairment test during the fourth quarter of 2021 and determined that the fair value for each of the reporting units significantly exceeded its respective carrying value. As such, goodwill was not impaired. No impairment charge was recorded in any of the periods presented in the accompanying consolidated financial statements. The following table presents the goodwill activities for the periods presented (in thousands):
December 31, 2019 |  | $ | 41,386 |
Working capital adjustment |  | (172) |
December 31, 2020 |  | 41,214 |
Punchh Acquisition |  | 417,559 |
ASC 805 measurement period adjustment (Note 2) |  | (1,467) |
December 31, 2021 |  | $ | 457,306 |
Impairment of long-lived assets The Company evaluates the accounting and reporting for the impairment of long-lived assets in accordance with the reporting requirements of ASC Topic 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company will recognize impairment of long-lived assets or asset groups if the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets. If the carrying value of a long-lived asset or asset group is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset or asset group for assets to be held and used, or the amount by which the carrying value exceeds the fair market value less cost to sell for assets to be sold. No impairment was recorded in 2021, 2020, or 2019. Divestiture Sale of SureCheck In the second quarter of 2019, ParTech sold substantially all of the assets relating to the SureCheck product line within the Company's Restaurant/Retail segment. The sale did not qualify for treatment as a discontinued operation, and therefore, the SureCheck product line is included in the Company’s operations for the year ended December 31, 2019. 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. In the year ended December 31, 2021, the Company paid Act III Management $1.3 million in consideration for services performed under the master development agreement; as of December 31, 2021, there were no accounts payable owed by the Company to Act III Management. Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, ASU 2019-12 which is intended to simplify various requirements related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 effective January 1, 2021. In the year ended December 31, 2021, application of the standard to the Company's September 2021 convertible note offering, the 2027 Notes, resulted in classification to stockholders' equity of a $14.9 million partial release of the Company's deferred tax asset valuation adjustment. Refer to “Note 8 – Debt” for additional information. Accounting Pronouncements Not Yet Adopted In August 2020, the FASB issued 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 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 transition method and expects that the adoption will have a material impact on its consolidated financial statements and related disclosures. For example, the Company currently anticipates that the guidance will result in the removal of the equity component related to its Senior Notes of $87.8 million; decrease its interest expense due to the removal of the amortization component of the debt discount related to the equity component. The Company is still evaluating the cumulative effect of the change on retained earnings and other components of equity for its opening balance adjustment. In October 2021, the FASB issued ASU 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 expects to adopt ASU 2021-08 in the first quarter of 2023. With the exception of the standards discussed above, there were no other recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2021 that are of significance or potential significance to the Company.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=123372394&loc=d3e18726-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration