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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 June 30, 2020
OR
  TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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

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

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

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

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

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

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



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

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

As of August 1, 2020, 18,250,625 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
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PART II
OTHER INFORMATION
   
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"PAR," "Brink POS®," "PixelPoint®," "PAR EverServ®," "Restaurant Magic®", and "Data Central®" are trademarks of PAR Technology Corporation. This report may also contain trade names and trademarks of other companies. Our use or reference to such other companies' trade names or trademarks is not intended to imply any endorsement or sponsorship by these companies of PAR Technology Corporation or its products or services.



PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements (unaudited)
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and per share amounts)
AssetsJune 30, 2020December 31, 2019
Current assets:  
Cash and cash equivalents$58,775  $28,036  
Accounts receivable – net38,236  41,774  
Inventories – net25,992  19,326  
Other current assets4,167  4,427  
Total current assets127,170  93,563  
Property, plant and equipment – net13,503  14,351  
Goodwill41,214  41,386  
Intangible assets – net34,305  32,948  
Lease right-of-use assets2,445  3,017  
Other assets4,249  4,347  
Total Assets$222,886  $189,612  
Liabilities and Shareholders’ Equity  
Current liabilities:  
Current portion of long-term debt$647  $630  
Accounts payable15,699  16,385  
Accrued salaries and benefits7,538  7,769  
Accrued expenses2,523  3,176  
Lease liabilities - current portion1,295  2,060  
Customer deposits and deferred service revenue9,625  12,084  
Total current liabilities37,327  42,104  
Lease liabilities - net of current portion1,235  1,021  
Deferred service revenue – non current3,937  3,916  
Long-term debt103,849  62,414  
Other long-term liabilities7,928  7,310  
Total liabilities154,276  116,765  
Commitments and contingencies
Shareholders’ Equity:  
Preferred stock, $.02 par value, 1,000,000 shares authorized
    
Common stock, $.02 par value, 58,000,000 shares authorized; 19,295,313 and 18,360,205 shares issued, 18,245,225 and 16,629,177 outstanding at June 30, 2020 and December 31, 2019, respectively
386  367  
Additional paid in capital107,540  94,372  
Accumulated deficit(30,030) (10,144) 
Accumulated other comprehensive loss(5,009) (5,368) 
Treasury stock, at cost, 1,050,088 shares and 1,731,028 shares at June 30, 2020 and December 31, 2019, respectively
(4,277) (6,380) 
Total shareholders’ equity68,610  72,847  
Total Liabilities and Shareholders’ Equity$222,886  $189,612  
See accompanying notes to unaudited interim condensed consolidated financial statements
1


PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share amounts)

Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Net revenues:    
Product$12,333  $14,728  $30,967  $30,245  
Service15,300  13,534  34,075  27,577  
Contract18,058  15,985  35,381  31,107  
 45,691  44,247  100,423  88,929  
Costs of sales:    
Product9,982  11,412  24,887  22,653  
Service9,912  10,118  22,558  20,385  
Contract16,718  14,386  32,852  28,036  
 36,612  35,916  80,297  71,074  
Gross margin9,079  8,331  20,126  17,855  
Operating expenses:    
Selling, general and administrative10,049  9,059  21,476  17,623  
Research and development4,538  2,725  9,403  5,786  
Amortization of identifiable intangible assets210    420    
 14,797  11,784  31,299  23,409  
Operating loss(5,718) (3,453) (11,173) (5,554) 
Other expense, net(139) (374) (764) (804) 
Interest expense, net(2,111) (1,244) (4,083) (1,390) 
Loss on extinguishment of debt    (8,123)   
Loss before benefit from (provision for) income taxes(7,968) (5,071) (24,143) (7,748) 
(Provision for) benefit from income taxes(1,008) 3,962  4,257  3,910  
Net loss$(8,976) $(1,109) $(19,886) $(3,838) 
Basic Earnings per Share:    
Net loss$(0.49) $(0.07) $(1.10) $(0.24) 
Diluted Earnings per Share:
Net loss$(0.49) $(0.07) $(1.10) $(0.24) 
Weighted average shares outstanding:    
Basic18,244  16,290  18,092  16,085  
Diluted18,244  16,290  18,092  16,085  
See accompanying notes to unaudited interim condensed consolidated financial statements

2


PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands, except share and per share amounts)

Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Net loss$(8,976) $(1,109) $(19,886) $(3,838) 
Other comprehensive income, net of applicable tax:    
Foreign currency translation adjustments158  131  359  121  
Comprehensive loss$(8,818) $(978) $(19,527) $(3,717) 
See accompanying notes to unaudited interim condensed consolidated financial statements
3


PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited, in thousands, except share and per share amounts)
Common StockAdditional Paid in CapitalAccumulated deficitAccumulated
Other
Comprehensive
Loss
Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 201918,360  $367  $94,372  $(10,144) $(5,368) 1,731  $(6,380) $72,847  
Net loss—  —  —  (10,910) —  —  —  (10,910) 
Issuance of common stock upon the exercise of stock options2  —  30  —  —  —  30  
Net issuance of restricted stock awards21  —  —  —  —  —    
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock—  —  —  —  —  38  (524) (524) 
Issuance of restricted stock for acquisition908  19  —  —  —  —  —  19  
Equity component of redeemed 2024 convertible notes, net of deferred taxes and issuance costs—  —  (7,988) —  —  (722) 2,435  (5,553) 
Equity component of issued 2026 convertible notes, net of deferred taxes and issuance costs—  —  19,097  —  —  —  —  19,097  
Stock-based compensation—  —  1,089  —  —  —  —  1,089  
Foreign currency translation adjustments—  —  —  —  201  —  —  201  
Balances at March 31, 202019,291  $386  $106,600  $(21,054) $(5,167) 1,047  $(4,469) $76,296  
Net loss—  —  —  (8,976) —  —  —  (8,976) 
Issuance of common stock upon the exercise of stock options4  —  12  —  —  —  —  12  
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock—  —  (195) —  —  3  192  (3) 
Stock-based compensation—  —  1,123  —  —  —  —  1,123  
Foreign currency translation adjustments—  —  —  —  158  —  —  158  
Balances at June 30, 202019,295  386  107,540  (30,030) (5,009) 1,050  (4,277) 68,610  
4


PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited, in thousands, except share and per share amounts)
Common StockAdditional paid in capitalRetained
Earnings (accumulated deficit)
Accumulated
Other
Comprehensive
Loss
Treasury StockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 201817,878  $357  $50,251  $5,427  $(4,253) 1,708  $(5,836) $45,946  
Net loss—  —  —  (2,729) —  —  —  (2,729) 
Issuance of common stock upon the exercise of stock options78  —  30  —  —  —  —  30  
Stock-based compensation—  —  248  —  —  —  —  248  
Foreign currency translation adjustments—  —  —  —  (10) —  —  (10) 
Balances at March 31, 201917,956  $357  $50,529  $2,698  $(4,263) 1,708  $(5,836) $43,485  
Net loss(1,109) (1,109) 
Issuance of common stock upon the exercise of stock options79  3  210  $213  
Stock-based compensation602  602  
Foreign currency translation adjustments131  $131  
Convertible notes conversion discount (net of taxes $4.1 million and issuance costs of $1.1 million)

12,465  12,465  
Balances at June 30, 201918,035  360  63,806  1,589  (4,132) 1,708  (5,836) 55,787  
See accompanying notes to unaudited interim condensed consolidated financial statements

5


PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands, except share and per share amounts)
Six Months Ended
June 30,
 20202019
Cash flows from operating activities:  
Net loss$(19,886) $(3,838) 
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation, amortization and accretion6,700  3,121  
Current expected credit losses978  397  
Provision for obsolete inventory1,439  (522) 
Stock-based compensation2,212  850  
Loss on debt extinguishment8,123    
Deferred income tax(4,408) (4,065) 
Changes in operating assets and liabilities:  
Accounts receivable2,560  (284) 
Inventories(8,105) 1,876  
Other current assets260  (3,406) 
Other assets119  150  
Accounts payable(931) (2,208) 
Accrued salaries and benefits(231) (240) 
Accrued expenses(652) 2,840  
Customer deposits and deferred service revenue(2,438) 1,548  
Other long-term liabilities618  (2,760) 
Net cash used in operating activities(13,642) (6,541) 
Cash flows from investing activities:  
Settlement of working capital for acquisitions172    
Capital expenditures(188) (1,693) 
Capitalization of software costs(4,613) (1,624) 
Net cash used in investing activities(4,629) (3,317) 
Cash flows from financing activities:  
Payments of long-term debt(313)   
Payment of contingent consideration  (2,550) 
Payments of bank borrowings  (17,459) 
Proceeds from bank borrowings  9,640  
Payments for the extinguishment of notes payable(66,250)   
Proceeds from notes payable, net of issuance costs115,916  75,039  
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock(332)   
Proceeds from exercise of stock options
42  243  
Net cash provided by financing activities49,063  64,913  
Effect of exchange rate changes on cash and cash equivalents(53) 121  
Net increase in cash and cash equivalents30,739  55,176  
Cash and cash equivalents at beginning of period28,036  3,485  
Cash and equivalents at end of period$58,775  $58,661  
Supplemental disclosures of cash flow information:  
Cash paid for interest$1,262  $153  
Income taxes, net of refunds10  125  
Capitalized software recorded in accounts payable245    
See accompanying notes to unaudited interim condensed consolidated financial statements
6


PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements ("financial statements") of PAR Technology Corporation and its consolidated subsidiaries (the “Company”, “PAR”, "we", "us", "our") have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements. 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 results for the interim period included in this Quarterly Report on Form 10-Q (“Quarterly Report”). Interim results are not necessarily indicative of results for the full year or any future periods. The information included in this Quarterly Report should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on March 16, 2020.

The preparation of the financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  Significant items subject to such estimates and assumptions include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant and equipment including right-to-use assets and liabilities, identifiable intangible assets and goodwill, the measurement of liabilities and equity recognized for outstanding convertible notes, valuation allowances for receivables, inventories, and measurement of contingent consideration at fair value. Actual results could differ from those estimates.

The Company 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 reporting segment provides point-of-sale (POS) software and hardware, back-office software, and integrated technical solutions to the restaurant and retail industries. The Government reporting segment provides intelligence, surveillance, and reconnaissance solutions and mission systems support to the United States Department of Defense and other Federal agencies. In addition, the financial statements include corporate and eliminations, which is comprised of enterprise-wide functional departments.

Additionally, the Company has reclassified certain costs and expenses in the condensed consolidated statement of operations for the three and six months ended June 30, 2020, amounting to $0.2 million and $0.5 million, respectively, from amortization of intangible assets to cost of service to cost of service to conform to current period presentation. These reclassifications had no effect on previously reported total costs and operating expenses and net loss.

Use of Estimates

Preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Recently Adopted Accounting Pronouncements

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

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates Step 2 from the goodwill impairment test which required entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not
7


exceed the total amount of goodwill allocated to that reporting unit. The Company adopted ASU 2017-04 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.

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

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

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): "Simplifying the Accounting for Income Taxes", which is intended to simplify various requirements related to accounting for income taxes. ASU  2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently assessing the impact of this standard on its financial statements.

With the exception of the new standards discussed above, there were no other recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended June 30, 2020 that are of significance or potential significance to the Company, as compared to the recent accounting pronouncements described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Note 2 - Revenue Recognition

Our 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") 606: "Revenue from Contracts with Customers" requires us 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.

We evaluated the potential performance obligations within our Restaurant/Retail reporting segment and evaluated whether each performance obligation met the ASC 606 criteria to be considered distinct performance obligations. Revenue in the Restaurant/Retail reporting segment is recognized at a point in time for software, hardware and installations. Revenue on these items are recognized when the customer obtains control of the asset. This generally occurs upon delivery and acceptance by the customer or upon installation or delivery to a third party carrier for onward delivery to customer. Additionally, revenue in the Restaurant/Retail reporting segment relating to SaaS, our hardware Advanced Exchange, 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. Our support services are stand-ready obligations that are provided over the life of the contract, generally 12 months. We offer installation services to our customers for hardware and software for which we primarily hire third-party contractors to install the equipment on our behalf. We pay third-party contractors installation service fees at mutually agreed rates. When third-party installers are used, we determine whether the nature of our performance obligations is to provide the specified goods or services ourselves (principal) or to arrange for a third-party to provide the goods or services (agent). In direct customer arrangements, we have discretion over our pricing; we are primarily responsible for providing a good or service; and we have inventory risk before the good or service is transferred to the customer. As a result, we have concluded that we are the principal in the arrangement and record installation revenue on a gross basis.

8


Our contracts typically require payment within 30 to 90 days from the shipping date or installation date. The primary method used to estimate stand-alone selling price, is by referring to the price that we charge for that good or service when we sell it separately under similar circumstances to similar customers. The Company determines stand-alone selling price as follows: hardware, software (on-premises and SaaS) and software activation (which is a one-time fee charged at the initial offering of software) performance obligations are recognized at a stand-alone selling price based on the price at which the Company sells the particular good or service separately in similar circumstances and to similar customers. The stand-alone selling price for all other performance obligations, including: pass-through hardware, such as terminals, printers, or card readers; hardware support, including Advanced Exchange, installation and maintenance; software upgrades; and professional services, including project management, is recognized by using an expected cost plus margin.

Our revenue in the Government reporting segment is generally recognized over time as control of products or services is generally transferred continuously to our customers. While revenue generated by the Government reporting segment is predominantly related to services, we do generate revenue from sales of materials, software, hardware, and maintenance. For the Government reporting segment, cost plus fixed fee contract portfolio revenue is recognized over time using costs incurred as of a determination date, to measure progress toward satisfying our performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead, and general and administrative expenses. Profit is recognized on the fixed fee portion of the contract as costs are incurred and invoiced. Long-term fixed price contracts and programs involve the use of various techniques to estimate total contract revenue and costs. For long-term fixed price contracts, we estimate the profit, as the difference between the total estimated revenue and expected costs to complete a contract, and recognize it over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include: labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors. Revenue and profit in future periods of contract performance are recognized using the same assumptions, adjusted for estimated costs to complete a contract. Once the services provided are determined to be distinct or not distinct, we evaluate how to allocate the transaction price. Generally, the Government reporting segment does not sell the same good or service to similar customers and the contract performance obligations are unique to each government contract. The performance obligations are typically not distinct; however, in cases where there are distinct performance obligations, the transaction price is allocated to each performance obligation ratably, 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 determining when to recognize revenue, we analyze whether our performance obligations in our Government contracts are satisfied over a period of time or at a point in time. In general, our performance obligations are satisfied over a period of time. However, there may be circumstances where the latter or both scenarios could apply to a contract.

We generally anticipate receipt of payment within 30 to 90 days from the date of service. None of our contracts as of December 31, 2019 or June 30, 2020 contained a significant financing component.
 
Performance Obligations Outstanding

The Company's performance obligations outstanding represent the transaction price of firm, non-cancellable orders, with expected delivery dates to customers subsequent to June 30, 2020 and June 30, 2019, respectively, for work that has not yet been performed. The activity of outstanding performance obligations as is relates to customer deposits and deferred service revenue is as follows:
(in thousands)20202019
Beginning balance - January 1$16,000  $14,134  
Change in deferred revenue(430) (327) 
Changes in customer deposits(2,008) 1,272  
Ending balance - June 30$13,562  $15,079  
In the Restaurant/Retail reporting segment most performance obligations over one year are related to service and support contracts, approximately 73% of which we expect to fulfill within the one-year period and 100% within 60 months. At June 30, 2020 and December 31, 2019, transaction prices allocated to future performance obligations were $10.5 million and $10.9 million, respectively.


9


During the three months ended June 30, 2020 and June 30, 2019, we recognized revenue of $3.6 million and $3.9 million,
respectively, included in the contract liabilities at the beginning of the respective period. During the six months ended June 30, 2020 and June 30, 2019, we recognized revenue of $7.7 million and $9.0 million, respectively, included in the contract liabilities at the beginning of the respective period.

The value of existing contracts in the Government reporting segment at June 30, 2020, net of amounts relating to work performed to that date, was approximately $129.6 million, of which $35.5 million was funded, and at December 31, 2019, net of amounts relating to work performed to that date, was approximately $148.7 million, of which $32.8 million was funded. The value of existing contracts, net of amounts relating to work performed to that date are expected to be recognized as revenue over time as follows (in thousands):
Next 12 Months$56,458  
Months 13-2432,644  
Months 25-3624,821  
Thereafter15,690  
TOTAL$129,613  

Disaggregated Revenue
The Company disaggregates revenue from customer contracts by major product group for each reporting segment. The Company believes this method best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Disaggregation of revenue for the three and six months ended June 30, 2020 and June 30, 2019 is as follows:
(in thousands)Three months ended June 30, 2020
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$19,820  $7,813  $  
Mission Systems$  $  $8,087  
ISR Solutions$  $  $9,971  
TOTAL$19,820  $7,813  $18,058  
(in thousands)Three months ended June 30, 2019
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$21,503  $5,829  $  
Grocery283  647    
Mission Systems    8,192  
ISR Solutions    7,793  
TOTAL$21,786  $6,476  $15,985  
(in thousands)Six months ended June 30, 2020
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$47,635  $17,407  $  
Mission Systems    16,535  
ISR Solutions    18,846  
TOTAL$47,635  $17,407  $35,381  
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(in thousands)Six months ended June 30, 2019
Restaurant/Retail - Point in TimeRestaurant/Retail - Over TimeGovernment - Over Time
Restaurant/Retail$43,880