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☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

 

For the Quarterly Period Ended March 31, 2024

☐ TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE

For the Transition Period From __________ to __________

Commission File Number: 1-09720

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

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.

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 7, 2024, 33,991,085 shares of the registrant’s common stock, $0.02 par value, were outstanding.

“PAR®,” “Brink POS®,” “Punchh®,” “MENUTM,” “Data Central®,” "Open Commerce®,” "PAR® Pay”, “PAR® Payment Services”, "StuzoTM," and other trademarks identifying our products and services 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.

Unless the context indicates otherwise, references in this Quarterly Report to "we," "us," "our," the "Company," and "PAR" mean PAR Technology Corporation and its consolidated subsidiaries.

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 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,” "strive," “target”, "vision," “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 plans, strategies and objectives of management for future operations, including PAR’s service and product offerings, its go-to-market strategies and the expected development, demand, performance, market share or competitive performance of its products and services; PAR's ability to achieve and sustain profitability; projections of net revenue, margins, expenses, cash flows, or other financial items; PAR's annual recurring revenue, active sites, subscription service margins, net loss, net loss per share and other key performance indicators and non-GAAP financial measures; PAR's expectations about the availability and terms of product and component supplies for our hardware; the timing and expected benefits of acquisitions, divestitures, and capital markets transactions; PAR’s human capital strategies and engagement; current or future macroeconomic trends or geopolitical events and the impact of those trends and events on PAR and its business, financial condition, and results of operations; claims, disputes or other litigation matters; and 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: PAR's ability to successfully develop or acquire and transition new products and services and enhance existing products and services to meet evolving customer needs and respond to emerging technological trends, including artificial intelligence; PAR's ability to add and maintain active sites, retain and manage suppliers, secure alternative suppliers, and manage inventory levels, manufacturing disruptions or logistics challenges, including shipping delays and cost increases; PAR's ability to successfully attract, develop and retain necessary qualified employees to develop and expand its business, and execute product installations and respond to customer service level needs; the protection of PAR's intellectual property; PAR's ability to retain and add integration partners, and its success in acquiring and developing relevant technology for current, new, and potential customers for its service and product offerings; macroeconomic trends, such as a recession or slowed economic growth, fluctuating interest rates, inflation, and changes in consumer confidence and discretionary spending; geopolitical events, such as effects of the Russia-Ukraine war, tensions with China and between China and Taiwan, the Israel-Hamas conflict and other hostilities in the Middle East; risks associated with PAR's international operations; the effects of global pandemics, such as COVID-19 or other public health crises; changes in estimates and assumptions PAR makes in connection with the preparation of its financial statements, or in building its business and operational plans and in executing PAR's strategies; disruptions in operations from data breaches and cyberattacks, including heightened risks due to the rapid development and adoption of artificial intelligence technologies globally; PAR's ability to maintain proper and effective internal control over financial reporting; PAR's ability to execute its business, operational plans, and strategies and manage its business continuity risks, including disruptions or delays in product assembly and fulfillment; 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2024, in this Quarterly Report, and in our other filings with the SEC. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. 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.

(In thousands, except share amounts)

(unaudited)

(In thousands, except per share amounts)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

			Three Months Ended March 31,
			2024						2023
Cash flows from operating activities:
Net loss			$	(18,288)					$	(15,905)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			7,226						6,933
Accretion of debt in interest expense, net			508						522
Accretion of discount on held to maturity investments in interest expense, net			(397)						—
Current expected credit losses			564						489
Provision for obsolete inventory			108						88
Stock-based compensation			4,410						3,055
Adjustment to contingent consideration liability			—						(5,200)
Deferred income tax			(8,049)						—
Changes in operating assets and liabilities:
Accounts receivable			(5,090)						(7,034)
Inventories			(1,605)						5,051
Other current assets			(4,552)						(2,512)
Other assets			(724)						752
Accounts payable			9,521						4,063
Accrued salaries and benefits			(5,160)						(7,647)
Accrued expenses			(3,376)						1,067
Customer deposits and deferred service revenue			(945)						(343)
Customers payable			2,388						216
Other long-term liabilities			(115)						(343)
Net cash used in operating activities			(23,576)						(16,748)
Cash flows from investing activities:
Cash paid for acquisition, net of cash acquired			(166,292)						—
Capital expenditures			(45)						(823)
Capitalization of software costs			(1,385)						(481)
Proceeds from sale of held to maturity investments			18,980						24,610
Purchases of held to maturity investments			(3,119)						(25,073)
Net cash used in investing activities			(151,861)						(1,767)
Cash flows from financing activities:
Proceeds from private placement of common stock, net of issuance costs			194,490						—
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock			(4,838)						(2,478)
Proceeds from exercise of stock options			1,105						52
Net cash provided by (used in) financing activities			190,757						(2,426)
Effect of exchange rate changes on cash and cash equivalents			479						(512)
Net increase (decrease) in cash and cash equivalents and cash held on behalf of customers			15,799						(21,453)
Cash and cash equivalents and cash held on behalf of customers at beginning of period			47,539						77,533
Cash and cash equivalents and cash held on behalf of customers at end of period			$	63,338					$	56,080
Reconciliation of cash and cash equivalents and cash held on behalf of customers
Cash and cash equivalents			$	50,780					$	48,659
Cash held on behalf of customers			12,558						7,421
Total cash and cash equivalents and cash held on behalf of customers			$	63,338					$	56,080

(unaudited)

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 leading omnichannel cloud-based software and hardware solutions to the restaurant and retail industries. Our product and service offerings include point-of-sale, customer engagement and loyalty, digital ordering and delivery, operational intelligence technologies, payment processing, hardware, and related technologies, solutions, and services. We provide enterprise restaurants, franchisees, and other restaurant outlets in the three major restaurant categories - quick service, fast casual, and table service - with operational efficiencies through a data-driven network with integration capabilities from point-of-sale to the kitchen, to fulfillment. Our subscription services are grouped into two categories: Engagement Cloud, which includes Punchh and Stuzo for customer loyalty and engagement and MENU for omnichannel digital ordering and delivery and Operator Cloud, which includes Brink POS for front-of-house, PAR Payment Services and PAR Pay for payments, and Data Central for back-of-house. PAR's Government segment provides technical expertise and development of advanced systems and software solutions for the U.S. Department of Defense ("DoD"), the intelligence community and other federal agencies. Additionally, we provide support services for satellite command and control, communication, and information technology systems at several DoD facilities worldwide. The Government segment has three principal contract offerings: intelligence, surveillance, and reconnaissance solutions ("ISR Solutions"), mission systems operations and maintenance ("Mission Systems"), and commercial software products for use in analytic and operational environments that leverage geospatial intelligence data ("Commercial Software"). The accompanying consolidated financial statements include the Company's accounts and those of its consolidated subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

The accompanying financial statements of PAR Technology Corporation and its consolidated subsidiaries 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, 2023 (the “2023 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 these 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, valuation allowances for receivables, valuation of excess and obsolete inventories, and measurement of contingent consideration at fair value. Actual results could differ from those estimates.

Cash and cash equivalents and cash held on behalf of customers consist of the following:

The Company maintained bank balances that, at times, exceeded the federally insured limit during the three months ended March 31, 2024. 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.

The carrying value of investment securities consist of the following:

The Company did not record any material gains or losses on these securities during the three months ended March 31, 2024. The estimated fair value of these securities approximated their carrying value as of March 31, 2024 and December 31, 2023.

Other assets include deferred implementation costs of $8.5 million and $8.8 million and deferred commissions of $3.1 million and $2.6 million at March 31, 2024 and December 31, 2023, respectively. Amortization of deferred implementation costs were $1.5 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of deferred commissions were $0.4 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.

Other assets also include the 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 policies was $3.3 million and $3.3 million at March 31, 2024 and December 31, 2023, respectively.

Other long-term liabilities include amounts owed to employees that participate in the Company’s deferred compensation plan. Amounts owed to employees participating in the deferred compensation plan were $1.2 million and $1.4 million at March 31, 2024 and December 31, 2023, respectively.

Beginning with the 2023 Annual Report, we have retroactively split our historical "Selling, general and administrative" financial statement line item ("FSLI"), presented in the condensed consolidated statements of operations under "Operating expenses" into two FSLIs, "Sales and marketing" and "General and administrative", to provide clearer insight into these operationally and economically different operating expenses. This split did not change our total historical operating expenses previously reported.

During the three months ended March 31, 2023, Ronald Shaich, the sole member of Act III Management LLC ("Act III Management"), served as a strategic advisor to the Company's board of directors pursuant to a strategic advisor agreement, which terminated on June 1, 2023. 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, 2024 and December 31, 2023, the Company had zero accounts payable owed to Act III Management. During the three months ended March 31, 2024 and 2023, the Company paid Act III Management zero and $0.1 million, respectively, for services performed under the strategic advisor agreement.

There were no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2024 that are of significance or potential significance to the Company.

Deferred revenue attributable to each of the Company's reporting segments is as follows:

Most performance obligations greater than one year relate to service and support contracts, that the Company expects to fulfill within 36 months. The Company expects to fulfill 100% of service and support contracts within 60 months.

The changes in deferred revenue, inclusive of both current and long-term, are as follows:

The above tables exclude customer deposits of $1.8 million and $1.6 million as of the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized revenue included in deferred revenue at the beginning of each respective period of $2.7 million and $3.1 million.

In the Government segment, the value of existing contracts at March 31, 2024, net of amounts relating to work performed to that date, was approximately $315.4 million, of which $72.0 million was funded, and at December 31, 2023, the value of existing contracts, net of amounts relating to work performed to that date, was approximately $326.0 million, of which $73.2 million was funded.

The value of existing contracts in the Government segment, net of amounts relating to work performed at March 31, 2024, is expected to be recognized as revenue over time as follows:

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 contract terms and economic factors.

Disaggregated revenue is as follows:

On March 8, 2024, ParTech, Inc. ("ParTech"), acquired 100% of the outstanding equity interests of Stuzo Blocker, Inc., Stuzo Holdings, LLC and their subsidiaries (collectively, “Stuzo” and such acquisition, the “Stuzo Acquisition”), a digital engagement software provider to Convenience and Fuel Retailers (C-Stores), for purchase consideration of approximately $170.5 million paid in cash (the "Cash Consideration"), subject to certain adjustments (including customary adjustments for Stuzo cash, debt, debt-like items, and net working capital), and $19.2 million paid in shares of Company common stock. 441,598 shares of common stock were issued as purchase consideration, determined using a fair value share price of $43.41. The Company acquired Stuzo to expand our footprint in the C-Stores market vertical with an industry-leading guest engagement platform serving major brands in the space.

Consideration paid in cash on the date of acquisition included $1.5 million deposited into an escrow account administered by a third party to fund potential post-closing adjustments and obligations. The balance in the escrow account was $1.5 million as of March 31, 2024.

The Company incurred acquisition expenses related to its acquisition of Stuzo of approximately $2.9 million.

The transaction was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. Accordingly, assets acquired and liabilities assumed have been accounted for at their preliminarily determined respective fair values as of March 8, 2024, the date of acquisition. The fair value determinations were based on management's best estimates and assumptions, and with the assistance of independent valuation and tax consultants. Identified preliminary fair values are subject to measurement period adjustments within the permitted measurement period (up to one year from the acquisition date) as management finalizes its procedures and net working capital adjustments are settled.

The following table presents management's preliminary purchase price allocation:

Intangible Assets

The Company identified four acquired intangible assets in the Stuzo Acquisition: developed technology; customer relationships; the Stuzo trade name and trademarks; and non-competition agreements. The preliminary fair value of developed technology and customer relationship intangible assets were determined utilizing the “multi-period excess earnings method”, which is predicated upon the calculation of the net present value of after-tax net cash flows respectively attributable to each asset. The Company applied a seven-year economic life and discount rate of 12.5% in determining the Stuzo developed technology intangible fair value. The Company applied a 7.0% estimated annual attrition rate and discount rate of 12.5% in determining the Stuzo customer relationships intangible preliminary fair value. The preliminary fair value of the Stuzo trade name and trademarks intangible was determined utilizing the “relief from royalty” approach, which is a form of the income approach that attributes savings incurred from not having to pay a royalty for the use of an asset. The Company applied a fair and reasonable royalty rate of 1.0% and discount rate of 12.5% in determining the Stuzo trade name intangible preliminary fair value. The preliminary fair value of the Stuzo non-competition agreements was determined utilizing the discounted earnings method. The estimated useful life of these identifiable intangible assets was preliminarily determined to be seven years for the developed technology, twelve years for the customer relationships, indefinite for the Stuzo trade name and trademarks, and five years for the non-competition agreements.

Goodwill

Goodwill represents the excess of consideration transferred for the fair value of net identifiable assets acquired and is tested for impairment at least annually. The goodwill value represents expected synergies from the product acquired and other benefits. It is not deductible for income tax purposes.

Deferred Taxes

The Company determined the deferred tax position to be recorded at the time of the Stuzo Acquisition in accordance with ASC Topic 740, Income Taxes, resulting in recognition of $8.3 million in deferred tax liabilities for future reversing of taxable temporary differences primarily for intangible assets.

The net deferred tax liability relating to the Stuzo Acquisition was determined by the Company to provide future taxable temporary differences that allow for the Company to utilize certain previously fully reserved deferred tax assets. Accordingly, the Company recognized a reduction to its valuation allowance resulting in a net tax benefit of $8.1 million for the three months ended March 31, 2024.

Pro Forma Financial Information - unaudited

For the three months ended March 31, 2024, the Stuzo Acquisition resulted in additional revenues of $2.7 million and net income of $0.4 million.

The following table summarizes the Company's unaudited pro forma results of operations for the three months ended March 31, 2024 and 2023 as if the Stuzo Acquisition had occurred on January 1, 2023:

The unaudited pro forma results presented above are for illustrative purposes only and do not reflect the realization of actual cost savings or any related integration costs. 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. These unaudited pro forma results include certain adjustments, primarily due to increases in amortization expense due to the fair value adjustments of intangible assets, acquisition related costs and the impact of income taxes on the pro forma adjustments. $2.4 million of acquisition costs have been reflected in the 2023 pro forma results.

The Company’s net accounts receivables consist of:

At March 31, 2024 and December 31, 2023, the Company had current expected credit losses of $2.0 million and $1.9 million, respectively, against accounts receivable for the Restaurant/Retail segment.

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

The components of inventory, adjusted for reserves, consisted of the following:

At March 31, 2024 and December 31, 2023, the Company had excess and obsolescence reserves of $9.1 million and $9.0 million, respectively, against inventories.

The Company's identifiable intangible assets represent intangible assets acquired in acquisitions and software development costs. The components of identifiable intangible assets are:

Software costs placed into service during the three months ended March 31, 2024 and 2023, were $0.5 million and $0.9 million, respectively.

The following table summarizes amortization expense for acquired developed technology and internally developed software:

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

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

The following table summarizes information about the net carrying amounts of long-term debt as of March 31, 2024:

The following table summarizes information about the net carrying amounts of long-term debt as of December 31, 2023:

The following table summarizes interest expense recognized on the long-term debt:

The following table summarizes the future principal payments as of March 31, 2024:

In connection with, and to partially fund the Cash Consideration related to the Stuzo Acquisition, on March 7, 2024, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with funds and accounts advised by T. Rowe Price Investment Management, Inc., ADW Capital, Voss Capital, Greenhaven Road Capital, Jane Street, Progeny 3, Fund 1 Investments LLC, Newtyn Capital, Ghisallo Capital Management and Burkehill Global Management (collectively, the “Purchasers”) to raise approximately $200 million through a private placement of PAR common stock. Pursuant to the Purchase Agreement, PAR issued and sold 5,174,638 shares of its common stock at a 10% discount to the Purchasers for a gross purchase price of approximately $200 million ($38.65 per share). Net proceeds from the Purchase Agreement were approximately $194.4 million, net of issuance costs of $5.5 million.

On January 2, 2024, the Company entered into a consulting agreement with PAR Act III, LLC ("PAR Act III") pursuant to which PAR Act III will provide the Company with strategic consulting, merger and acquisition technology due diligence, and other professional and expert services that may be requested from time to time by the Company’s Chief Executive Officer through April 8, 2026. In consideration for the services provided under the consulting agreement, the Company amended its common stock purchase warrant issued to PAR Act III on April 8, 2021 (the "Warrant") to extend the termination date of the Warrant to April 8, 2028, subject to the consulting agreement remaining in effect through April 8, 2026.

The issuance date fair value of the Warrant extension was determined to be $4.5 million based on using the Black-Scholes model with the following assumptions as of January 2, 2024:

In connection with the Company's March 2024 offering of its common stock, as a result of anti-dilution provisions of the Warrant, an additional 6,312 shares of common stock are available for purchase under the Warrant, at an exercise price of $74.96 per share. 100% of the shares available for purchase under the Warrant are exercisable at the exercise price of $74.96 per share.

The Warrant is accounted for as stock-based compensation to non-employees pursuant to ASC Topic 718, Stock Compensation, by way of ASC Topic 815, Derivatives and Hedging, due to the Warrant extension being in exchange for consulting services. The issuance date fair value of the Warrant extension of $4.5 million will be recognized as stock based compensation expense ratably over the requisite service period for the Warrant extension ending April 8, 2026.

Stock-based compensation expense, net of forfeitures of $0.7 million and $0.1 million, was $4.4 million and $3.1 million for the three months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, the aggregate unrecognized compensation expense related to unvested equity awards was $35.5 million, which is expected to be recognized as compensation expense in fiscal years 2024 through 2027.

A summary of stock option activity for the three months ended March 31, 2024 is below:

A summary of unvested restricted stock units activity for the three months ended March 31, 2024 is below:

A total of 330,000 shares of Company common stock are available for purchase under the Company's 2021 Employee Stock Purchase Plan ("ESPP"), subject to adjustment as provided for in the ESPP. As of March 31, 2024, no shares of common stock were purchased.

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 share (“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 March 31, 2024, there were 802,000 anti-dilutive stock options outstanding compared to 1,021,000 as of March 31, 2023. At March 31, 2024 there were 829,000 anti-dilutive restricted stock units compared to 634,000 as of March 31, 2023.

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

The Company is organized in two segments, Restaurant/Retail and Government. Management views the Restaurant/Retail and Government segments separately in operating its business, as the products and services are different for each segment. Information noted as “Other” primarily relates to the Company’s corporate operations.

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