What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-08 compared with 2021-08-09 · 202 added, 139 removed, 374 unchanged (48% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

ASSETS (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 11,506 $ 28,577

Accounts receivable, net of allowance for doubtful accounts of $ 2,411 and $ 2,194 at June 30, 2021 and December 31, 2020, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 2,730 and $ 2,194 at September 30, 2021 and December 31, 2020, respectively

Inventory 303 449

26 unchanged sentences

Operating lease liabilities, noncurrent 5,044 5,366

Contingent purchase consideration 3,038 —

Other liabilities 600 1,157

6 unchanged sentences

Common stock, $ 0.01 par value;

44,000 and 22,000 shares authorized;

19,483 and 19,354 shares issued, 19,099 and 18,970 shares outstanding at June 30, 2021 and December 31, 2020, respectively

Treasury stock at cost, 384 shares at June 30, 2021 and December 31, 2020

44,000 shares authorized;

20,352 and 19,354 shares issued, 19,968 and 18,970 shares outstanding at September 30, 2021 and December 31, 2020, respectively

Treasury stock at cost, 384 shares at September 30, 2021 and December 31, 2020

( 5,017 ) ( 5,017 )

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

12 unchanged sentences

Loss from operations ( 4,073 ) ( 4,676 ) ( 9,711 ) ( 9,592 )

Interest (expense) income and other, net ( 223 ) 14 ( 447 ) 710

Gain on extinguishment of debt 8,654 — 8,654 —

Interest income (expense) and other, net ( 530 ) ( 397 ) ( 977 ) ( 930 )

(Loss) gain on extinguishment of debt ( 342 ) ( 11 ) 8,312 123

Employee retention tax credit 10,533 — 10,533 —

Income (loss) from operations before income taxes 5,588 ( 5,084 ) 8,157 ( 10,399 )

Income tax (benefit) expense 298 377 403 395

Income tax expense (benefit) 260 ( 325 ) 663 71

Net income (loss) 5,328 ( 4,759 ) 7,494 ( 10,470 )

Other comprehensive income:

Unrealized gain (loss) on marketable securities ( 69 ) 562 ( 208 ) 627

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities ( 79 ) 11 ( 287 ) 638

Comprehensive income (loss) $ 5,249 $ ( 4,748 ) $ 7,207 $ ( 9,832 )

21 unchanged sentences

Net income — — — — 3,764 — 3,764

Other comprehensive income — — — — — ( 69 ) ( 69 )

Other comprehensive loss — — — — — ( 69 ) ( 69 )

Balance at June 30, 2021 19,099 $ 195 $ ( 5,017 ) $ 421,633 $ ( 267,787 ) $ 396 $ 149,420

Stock issued upon option exercise and vesting of restricted stock units 102 1 — 57 — — 58

Shares issued — acquisitions 767 8 — 6,420 — — 6,428

Share based compensation — — — 784 — — 784

Net income — — — — 5,328 — 5,328

Other comprehensive loss — — — — — ( 79 ) ( 79 )

Balance at September 30, 2021 19,968 $ 204 $ ( 5,017 ) $ 428,894 $ ( 262,459 ) $ 317 $ 161,939

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

17 unchanged sentences

Balance at June 30, 2020 15,841 $ 162 $ ( 5,017 ) $ 397,692 $ ( 259,353 ) $ 602 $ 134,086

Stock issued upon option exercise and vesting of restricted stock units 59 1 — 50 — — 51

Share based compensation — — — 707 — — 707

Net loss — — — — ( 4,759 ) — ( 4,759 )

Other comprehensive income — — — — — 11 11

Balance at September 30, 2020 15,900 $ 163 $ ( 5,017 ) $ 398,449 $ ( 264,112 ) $ 613 $ 130,096

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

7 unchanged sentences

Provision for deferred income taxes 559 26

Gain on modification of debt — ( 134 )

Gain on extinguishment of debt ( 8,312 ) ( 123 )

2 unchanged sentences

(Gain) loss on disposals of long-term assets ( 32 ) 55

Change in fair value of contingent purchase consideration ( 191 ) —

Changes in operating assets and liabilities:

7 unchanged sentences

Deferred revenue ( 2,976 ) ( 3,700 )

Net cash used in operating activities ( 1,898 ) ( 350 )

Net cash provided by operating activities ( 1,144 ) 2,296

Cash flows from investing activities:

4 unchanged sentences

Proceeds from sales and maturities of available-for-sale securities 8,431 8,456

Net cash provided by (used in) investing activities 5,180 ( 8,130 )

Net cash used in investing activities ( 21,042 ) ( 15,312 )

Cash flows from financing activities:

5 unchanged sentences

Net change in client fund obligations ( 146,206 ) 68,441

Net cash used in financing activities ( 117,657 ) ( 10,350 )

Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 114,375 ) ( 18,830 )

Net cash (used in) provided by financing activities ( 133,990 ) 65,494

Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 156,176 ) 52,478

Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 324,985 134,060

Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 168,809 $ 186,538

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

Nine Months Ended September 30,

Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Condensed Consolidated Balance Sheets

5 unchanged sentences

Cash paid for income taxes $ 332 $ 3,469

Net assets added from acquisitions $ 763 $ —

Non-cash investing and financing activities:

Contingent purchase consideration issued for acquisitions $ 3,038 $ 2,745

Notes payable issued for acquisitions $ 4,386 $ 330

Stock issuance for acquisitions $ 6,428 $ —

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4 unchanged sentences

Asure Software, Inc., (“Asure”, the “Company”, “we” and “our”), a Delaware Corporation, is a leading provider of Human Capital Management (“HCM”) software solutions.

We help small- and medium-sized companies grow by assisting them in building better teams with skills to stay compliant with ever-changing federal, state, and local tax jurisdictions and labor laws, and better allocate cash so they can spend their financial capital on growing their business rather than back-office overhead expenses.

We help small and medium-sized companies grow by helping them build more productive teams, providing the tools and resources that help them stay compliant with ever-changing federal, state, and local tax jurisdictions and labor laws, and better allocate cash so they can spend their financial capital on growing their business rather than back-office overhead expenses.

Asure’s Human Capital Management suite, named Asure HCM, includes cloud-based Payroll, Tax Services, and Time & Attendance software as well as human resources (“HR”) services ranging from HR projects to completely outsourcing payroll and HR staff.

5 unchanged sentences

Asure Payroll & Tax, Asure HR, Asure Time & Attendance, and Asure HRServices.

We develop, market, sell and support our offerings nationwide through our principal office in Austin, Texas and from our processing hubs in California, Tennessee, Nebraska, New York, Florida, and Vermont.

We develop, market, sell and support our offerings nationwide through our principal office in Austin, Texas and from our processing hubs in California, Florida, Nebraska, New Jersey, New York, Tennessee, and Vermont.

In May 2021, we closed our Washington office where we provided our HR consulting services as employees from that office now work remotely.

2 unchanged sentences

GAAP”) for complete financial statements.

In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of June 30, 2021 and the results of operations, statements of changes in stockholders’ equity for the three and six months ended June 30, 2021 and June 30, 2020, and our statements of cash flows for the six months ended June 30, 2021 and June 30, 2020.

In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of September 30, 2021 and the results of operations, statements of changes in stockholders’ equity for the three and nine months ended September 30, 2021 and September 30, 2020, and our statements of cash flows for the nine months ended September 30, 2021 and September 30, 2020.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto filed with the SEC in our annual report on Form 10-K for the fiscal year ended December 31, 2020 (our “2020 Annual Report on Form 10-K”).

5 unchanged sentences

These estimates are subjective in nature and involve judgments.

The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful lives of fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions.

The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful lives of long-lived assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions.

We base our estimates on historical experience and on various other assumptions management believes reasonable under the given circumstances.

17 unchanged sentences

The pandemic and numerous measures implemented to contain the virus such as business shutdowns, shelter-in-place orders and travel bans and restrictions have caused businesses, especially small and medium-sized businesses, some of whom are our customers, to reduce headcount or cease operations as customer demand decreased.

Given the economic slowdown and other risks and uncertainties associated with the pandemic, we expect that our business, financial condition, results of operations and growth prospects will be adversely affected in the future.

Given the economic slowdown and other risks and uncertainties associated with the pandemic, we expect our business, financial condition, results of operations and growth prospects to be adversely affected in the future.

Our business is impacted by employment levels as we have contracts that charge clients on a per-employee basis.

11 unchanged sentences

RECLASSIFICATION

The Company reclassified its presentation of restricted cash and restricted cash equivalents included in funds held for clients as of June 30, 2020 in the Condensed Consolidated Statements of Cash Flows to conform to the current period presentation.

The Company reclassified its presentation of restricted cash and restricted cash equivalents included in funds held for clients as of September 30, 2020 in the Condensed Consolidated Statements of Cash Flows to conform to the current period presentation.

Such reclassification had no effect on the consolidated financial position or consolidated results of operations of the Company.

LEGAL PROCEEDINGS

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of June 30, 2021, we were not a party to any pending legal proceedings that are material to our business.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

As of September 30, 2021 and December 31, 2020, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities.

ASURE SOFTWARE, INC.

1 unchanged sentence

(in thousands, except per share amounts)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

As of June 30, 2021 and December 31, 2020, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities.

NOTE 3 – INVESTMENTS AND FAIR VALUE MEASUREMENTS

9 unchanged sentences

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, respectively (in thousands):

The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, respectively (in thousands):

Total Carrying Value Level 1 Level 2 Level 3

June 30, 2021

Cash equivalents

Money market funds $ 3,551 $ 3,551 $ — $ —

September 30, 2021

Funds held for clients

3 unchanged sentences

Contingent purchase consideration (1)

$ 4,943 $ — $ — $ 4,943

Total $ 4,943 $ — $ — $ 4,943

7 unchanged sentences

Contingent purchase consideration (1)

$ 3,880 $ — $ — $ 3,880

Total $ 3,880 $ — $ — $ 3,880

In July 2020, we acquired certain assets of a payroll tax business (the “Asset Purchase Agreement”).

The initial purchase price for the assets was $ 4,250 , which we paid in cash at closing.

The Asset Purchase Agreement set forth two subsequent purchase consideration payments, which are contingent on certain thresholds.

The first contingent purchase consideration of $ 1,975 , was offset by certain net amounts owed to us by the seller related to transition services in the amount of $ 191 , was paid in June 2021 (a total payment of $ 1,784 ).

The second and final contingent purchase consideration, will be based on the trailing twelve-month revenue at October 31, 2021, and will generally be made by April 30, 2022.

We utilized a Monte Carlo simulation to determine the fair value of the contingent consideration.

There was no adjustment to the fair value of the contingent consideration at June 30, 2021.

(1) See Note 4 — Goodwill and Intangible Assets for further discussion regarding the contingent purchase consideration.

ASURE SOFTWARE, INC.

1 unchanged sentence

(in thousands, except per share amounts)

Restricted cash equivalents and i nvestments classified as available-for-sale within funds held for clients consisted of the following (in thousands):

June 30, 2021

The contractual obligations and earn out provision are accounted for as a contingent liability and fair value is determined using Level 3 inputs, as estimating the fair value of these contingent liabilities require the use of significant and subjective inputs that may and are likely to change over the duration of the liabilities.

The following table discloses the change in the gross contingent purchase consideration on the Company’s Condensed Consolidated Balance Sheets as of September 30, 2021 (in thousands):

December 31, 2020 $ 3,880

Contingent purchase consideration ( 1,975 )

Issued for acquisitions 3,038

September 30, 2021 $ 4,943

Restricted cash equivalents and investments classified as available-for-sale within funds held for clients consisted of the following (in thousands):

September 30, 2021

Restricted cash equivalents $ 1,000 $ — $ — $ 1,000

15 unchanged sentences

$ 25,318 $ 603 $ ( 2 ) $ 25,919

(1) Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss.

As of June 30, 2021 and December 31, 2020, there were 53 and 69 securities, respectively, in an unrealized gain position and there were 2 securities in an unrealized loss position for both periods.

As of June 30, 2021, these unrealized losses were less than $ 9 individually and $ 14 in the aggregate.

(1) Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive income (loss).

As of September 30, 2021 and December 31, 2020, there were 42 and 69 securities, respectively, in an unrealized gain position and there were 9 and 2 securities in an unrealized loss position, respectively.

As of September 30, 2021, these unrealized losses were less than $ 6 individually and $ 19 in the aggregate.

As of December 31, 2020, these unrealized losses were less than $ 2 individually and $ 2 in the aggregate.

3 unchanged sentences

Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2) At June 30, 2021 and December 31, 2020, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets.

Funds held for clients represent assets that the Company has classified as restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client funds obligations on our Condensed Consolidated Balance Sheets.

ASURE SOFTWARE, INC.

1 unchanged sentence

(in thousands, except per share amounts)

(2) At September 30, 2021 and December 31, 2020, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets.

Funds held for clients have been invested in the following categories (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Restricted cash and cash equivalents held to satisfy client funds obligations $ 157,303 $ 296,408

2 unchanged sentences

Total funds held for clients $ 174,754 $ 321,069

Expected maturities of available-for-sale securities as of June 30, 2021 are as follows (in thousands):

Expected maturities of available-for-sale securities as of September 30, 2021 are as follows (in thousands):

One year or less $ 3,297

1 unchanged sentence

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

As of June 30, 2021 and December 31, 2020, goodwill was $ 73,958 .

As of June 30, 2021, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

The gross carrying amount and accumulated amortization of our intangible assets as of June 30, 2021 and December 31, 2020 are as follows (in thousands, except weighted average periods):

December 31, 2020 Acquisitions September 30, 2021

Goodwill $ 73,958 $ 12,156 $ 86,114

We believe significant synergies are expected to arise from these strategic acquisitions and their assembled workforces.

This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition.

A portion of acquired goodwill will be amortizable for tax purposes.

As of September 30, 2021, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

Gross Intangible Assets December 31, 2020 Acquisitions September 30, 2021

Customer relationships $ 88,310 $ 26,401 $ 114,711

Developed technology 12,001 — 12,001

Reseller relationships 853 159 1,012

Trade names 880 — 880

Non-compete agreements 1,032 — 1,032

$ 103,076 $ 26,560 $ 129,636

In July 2020, we acquired certain assets of a payroll tax business (the “Asset Purchase Agreement”).

The initial purchase price for the assets was $ 4,250 , which we paid in cash at closing.

The Asset Purchase Agreement set forth two subsequent purchase consideration payments, which are contingent on certain thresholds.

The second and final contingent purchase consideration, will be based on the trailing twelve-month revenue at October 31, 2021, and will generally be made by April 30, 2022.

We utilized a Monte Carlo simulation to determine the fair value of the contingent consideration.

The adjustment to the fair value of the contingent consideration as of September 30, 2021 was the aforementioned $ 191 offset.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

In September 2021, the Company acquired certain assets (the “Second Asset Purchase Agreement”) of a payroll business, which was used to provide payroll processing services.

The aggregate purchase price that the Company paid for these assets was $ 14,750 , paid as follows:

(i) $ 10,325 in cash at closing, (ii) the delivery of a promissory note in the amount of $ 2,213 , and (iii) the delivery of 244 shares of the Company’s common stock, which the parties agreed had an aggregate value of $ 2,213 as of September 30, 2021.

The Second Asset Purchase Agreement is subject to working capital adjustments to the purchase price.

Also in September 2021, we acquired certain assets of a payroll business (the “Third Asset Purchase Agreement”).

The initial purchase price for the assets was $ 24,150 , of which $ 15,000 was paid in cash at closing.

The Third Asset Purchase Agreement also included the delivery of 523 shares of the Company’s common stock, which both parties agreed had an aggregate value of $ 4,800 at closing.

Finally, the Third Asset Purchase Agreement set forth a promissory note initially valued at $4,350 and includes a contingent consideration, which is contingent on certain thresholds and will be based on the trailing twelve-month revenue at September 30, 2022, which we expect will be paid in the fourth quarter of 2022.

The promissory note has since been adjusted to $ 4,318 to account for a shortfall in working capital.

We utilized a Monte Carlo simulation to determine the fair value of the contingent consideration.

There was no adjustment to the fair value of the contingent consideration at September 30, 2021.

The Second Asset Purchase Agreement and Third Asset Purchase Agreement mentioned above were of small, privately held companies, whose historic cash basis financial statements were unaudited and not prepared under generally accepted accounting principals in the United States, including, but not limited to, differences in revenue recognition.

The disclosure of supplemental pro forma financial information suggested under ASC 805 for a public business entity has been deemed impracticable by management due to these reasons.

The gross carrying amount and accumulated amortization of our intangible assets as of September 30, 2021 and December 31, 2020 are as follows (in thousands, except weighted average periods):

Weighted Average

1 unchanged sentence

Amortization Net

June 30, 2021

September 30, 2021

Customer relationships 8.7 $ 114,711 $ ( 36,257 ) $ 78,454

2 unchanged sentences

Trade names 3.0 880 ( 513 ) 367

Noncompete agreements 5.2 1,032 ( 870 ) 162

Non-compete agreements 5.2 1,032 ( 878 ) 154

8.4 $ 129,636 $ ( 47,251 ) $ 82,385

4 unchanged sentences

Trade names 3.0 880 ( 312 ) 568

Noncompete agreements 5.2 1,032 ( 853 ) 179

Non-compete agreements 5.2 1,032 ( 853 ) 179

8.5 $ 103,076 $ ( 38,524 ) $ 64,552

We record amortization expenses using the straight-line method over the estimated useful lives of the intangible assets, as noted above.

Amortization expenses recorded in Operating Expenses were $ 2,528 and $ 2,349 for the three months ended June 30, 2021 and 2020, respectively.

Amortization expenses recorded in Cost of Sales were $ 379 and $ 397 for the three months ended June 30, 2021 and 2020, respectively.

Amortization expenses recorded in Operating Expenses were $ 2,534 and $ 2,424 for the three months ended September 30, 2021 and 2020, respectively.

Amortization expenses recorded in Cost of Sales were $ 379 and $ 397 for the three months ended September 30, 2021 and 2020, respectively.

ASURE SOFTWARE, INC.

1 unchanged sentence

(in thousands, except per share amounts)

Amortization expenses recorded in Operating Expenses were $ 5,056 and $ 4,698 for the six months ended June 30, 2021 and 2020, respectively.

Amortization expenses recorded in Cost of Sales were $ 757 and $ 828 for the six months ended June 30, 2021 and 2020, respectively.

There was no impairment of intangibles during the six months ended June 30, 2021 based on the qualitative assessment performed by the Company.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of June 30, 2021 (in thousands):

2021 (six months) $ 5,788

Amortization expenses recorded in Operating Expenses were $ 7,590 and $ 7,122 for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expenses recorded in Cost of Sales were $ 1,135 and $ 1,225 for the nine months ended September 30, 2021 and 2020, respectively.

There was no impairment of intangibles during the nine months ended September 30, 2021 based on the qualitative assessment performed by the Company.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of September 30, 2021 (in thousands):

2021 (three months) $ 3,712

Thereafter 16,700

1 unchanged sentence

The following table summarizes our outstanding debt as of the dates indicated (in thousands):

Maturity Stated Interest Rate June 30, 2021 December 31, 2020

Maturity Cash Interest Rate September 30, 2021 December 31, 2020

Subordinated Notes Payable – Acquisitions (1)

7/1/2021 – 9/30/2026 2.00 % - 3.00 %

PPP Loan – Pinnacle Bank (1)

$ 8,231 $ 6,182

Term Loan – Wells Fargo Syndicate Partner 12/31/2024 5.25 % 9,750 9,875

PPP Loan 6/30/2021 1.00 % — 8,856

Term Loan 12/31/2024 5.25 % — 9,875

Senior Credit Facility 10/1/2025 9.00 % 30,090 —

Total Notes Payable $ 38,321 $ 24,913

Short-term Notes Payable 3,398 12,388

Long-term Notes Payable $ 10,285 $ 12,525

(1) See the PPP Loan section that follows in this Note 5 — Notes Payable.

(1) See Note 4 — Goodwill and Intangible Assets for further discussion regarding the notes payable related to acquisitions.

The following table summarizes the debt issuance costs as of the dates indicated (in thousands):

Gross Notes Payable Debt Issuance Costs and Debt Discount Net Notes Payable

June 30, 2021

September 30, 2021

Current portion of notes payable $ 2,132 $ ( 218 ) $ 1,914

$ 3,398 $ ( 121 ) $ 3,277

Notes payable, net of current portion 36,189 ( 3,389 ) 32,800

10,285 ( 197 ) 10,088

Total $ 38,321 $ ( 3,607 ) $ 34,714

1 unchanged sentence

Current portion of notes payable $ 12,388 $ ( 78 ) $ 12,310

$ 12,388 $ ( 78 ) $ 12,310

Notes payable, net of current portion 12,525 ( 300 ) 12,225

12,525 ( 300 ) 12,225

Total $ 24,913 $ ( 378 ) $ 24,535

(1) Current portion of notes payable includes $ 0 and $ 6,866 of Gross Notes Payables and $ 0 and $ 0 of Debt Issuance Cost and Debt Discount for the periods ended June 30, 2021 and December 31, 2020, respectively, related to our PPP loan with Pinnacle Bank.

See the PPP Loan section that follows in this Note 5 — Notes Payable.

ASURE SOFTWARE, INC.

1 unchanged sentence

(in thousands, except per share amounts)

(2) Notes Payable, net of current portion includes $ 0 and $ 1,989 of Gross Notes Payables and $ 0 and $ 0 Debt Issuance Cost and Debt Discount for the periods ended June 30, 2021 and December 31, 2020, respectively, related to our PPP loan with Pinnacle Bank.

See the PPP Loan section that follows in this Note 5 — Notes Payable.

The following table summarizes the future principal payments related to our outstanding debt as of June 30, 2021 (in thousands):

Year Ending Amount

2021 (six months) $ 3,148

The following table summarizes the future principal payments related to our outstanding debt as of September 30, 2021 (in thousands):

2021 (three months) $ —

Total $ 38,321

Senior Credit Facility with Wells Fargo N.A.

In March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo, as administrative agent, and the lenders that are party thereto.

The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults, bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control.

In some cases, the defaults are subject to customary notice and grace period provisions.

In March 2014 and in connection with the Credit Agreement, we and our wholly owned active subsidiaries entered into a Guaranty and Security Agreement with Wells Fargo Bank.

Under the Guaranty and Security Agreement, we and each of our wholly owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets.

The Credit Agreement has been amended and restated multiple times, with the most recent amendment and restatement effective December 31, 2019.

The Credit Agreement was also amended, but not restated, on August 10, 2020.

Following the amendment, the Credit Agreement provided for $ 10,000 in term loans and a $ 5,000 revolver and provided for new applicable margin rates for determining the interest payable on loans and amended certain of our financial covenants as described in our 2020 Annual Report on Form 10-K.

We expect to be in compliance with these amended financial covenants over the next twelve months.

For both periods ending June 30, 2021, and December 31, 2020, no amount was outstanding and $ 4,500 was available for borrowing under the revolver.

Subordinated Notes Payable - Acquisitions

There remains an outstanding principal balance on the subordinated note payable issued in connection with the purchase of a business we acquired in 2018, which note matured on July 1, 2021.

Payment on the principal balance was withheld as security for an outstanding claim for which we are entitled to indemnification under the purchase agreement.

We will make the payment, subject to our right of offset under the purchase agreement, when these claims are resolved.

Due to our rights under the purchase agreement and the terms of this note, we are not in default under the note.

See Note 4 — Goodwill and Intangible Assets for further discussion regarding the issuance of subordinated notes payable related to acquisitions.

PPP Loan with Pinnacle Bank

Due to the effects of COVID-19 on our business and the related need to support our operations, we received an unsecured Paycheck Protection Program loan in the amount of $ 8,856 (the “PPP Loan”) in April 2020 from Pinnacle Bank (the “Lender”) under the Coronavirus Aid, Relief and Economic Security Act.

1 unchanged sentence

The amount forgiven of $ 8,560 was the amount we requested in our forgiveness application but was less than the original principal balance due, in part, to changes in SBA guidance following the date of our original loan application.

Following the grant of forgiveness, we had an outstanding principal balance of $ 296 and an additional immaterial amount of accrued interest in our PPP Loan, both of which we paid in full in June 2021.

Following the grant of forgiveness, we had an outstanding principal balance of $ 296 and an additional immaterial amount of accrued interest in our PPP Loan, both of which were paid in full in June 2021.

During the three months ended June 30, 2021 the Company recorded a gain on the forgiveness of the PPP Loan and accrued interest in the amount of $ 8,654 .

The gain on the forgiveness of the PPP Loan is reflected on our Condensed Consolidated Statements of Comprehensive Income, and is a non-taxable event.

Term Loan with Wells Fargo N.A.

In March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo, as administrative agent, and the lenders that are party thereto.

In connection with the Credit Agreement, we and our wholly owned active subsidiaries entered into a Guaranty and Security Agreement with Wells Fargo Bank, guaranteeing all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets.

The Credit Agreement was amended and restated multiple times, with the most recent amendment and restatement effective December 31, 2019.

The Credit Agreement was also amended, but not restated, on August 10, 2020.

For the period ending December 31, 2020, no amount was outstanding and $ 4,500 was available for borrowing under the revolver.

During the three months ended September 30, 2021, we terminated the Credit Agreement.

We paid Wells Fargo an aggregate amount of approximately $ 9,925 in full payment of our outstanding obligations, including $ 9,750 due on the note and immaterial amounts of interest, fees and other expenses.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Senior Credit Facility with Structural Capital Investments III, LP

On September 10, 2021, the Company entered into a Loan and Security Agreement with Structural Capital Investments III, LP (“Structural” and together with the other lenders that are or become parties thereto, the “Lenders”), and Ocean II PLO LLC, as administrative and collateral agent for Structural and the Lenders (“Agent”), under the terms of which the Lenders have committed to lend us up to $ 50,000 in term loan financing to support our growth needs (the “Facility”) until March 31, 2022.

The Company also entered into a secured promissory note with the Agent evidencing our obligations under the Facility.

The Company’s obligations are further guaranteed by each of our subsidiaries and secured by our assets and the assets of our subsidiaries.

At the onset of the agreement, we paid to the Lenders an origination fee of $ 500 .

Interest accrues on any outstanding balance at a rate equal to the greater of 9.0% or the Prime Rate, plus 5.75% (the “Basic Rate”) and is payable in advance.

In addition, interest is paid in kind (“PIK”) at a rate of 1.00% or 1.25% based on our APR Ratio, measured on a quarterly basis.

The PIK interest is added to our outstanding balance and accrues interest at the Basic Rate.

Interest only payments are due until October 2023, with an option to extend until October 2024, dependent on certain financial or revenue metrics before the end of the first twenty-four months of the Facility.

Principal payments begin after the expiration of the interest only period, and are based on a five year amortization schedule, with a balloon payment due in October 2025.

The table above in this Note 5 — Notes Payable summarizing future principal payments assumes the Company will not extend the period of interest only payments to October 2024.

Upon payment in full of the obligations under the Facility, we are to pay Lenders a final payment fee equal to 1.0% of the increase in our market capitalization since the onset of the agreement, at that time valued at $182,400.

The Company has agreed to provide the Lenders the right to participate in a future offering—whether public or private—on the same terms and conditions as other investors for an amount not to exceed $3,000.

There are no financial covenants if our net cash position is equal to or greater than zero.

If our net cash position is less than zero, the Company would be subject to the following financial covenants:

(i) unrestricted cash of no less than $5,000, (ii) maintain an APR ratio of no less than 0.70:1.00 through September 10, 2023, and (iii) maintain an APR ratio of no less than 0.60:1.00 from September 10, 2023 through the remainder of the term of the Facility.

The APR ratio would be the ratio of our tested debt to our annual recurring revenue and would be measured on a quarterly basis.

Our Tested Debt consists of our outstanding obligations under the Facility (exclusive of PIK interest) and any indebtedness issued or earnouts owed to sellers in connection with acquisitions.

NOTE 6 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,411 , were $ 3,482 at June 30, 2021.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,730 , were $ 4,595 at September 30, 2021.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,194 , were $ 3,848 at December 31, 2020.

No customers represented more than 10% of our net accounts receivable balance as of June 30, 2021 and December 31, 2020, respectively.

No customers represented more than 10% of our net accounts receivable balance as of September 30, 2021 and December 31, 2020, respectively.

Deferred Commissions

Deferred commission costs from contracts with customers were $ 4,475 and $ 3,792 at September 30, 2021 and December 31, 2020, respectively.

The amount of amortization recognized for the three and nine months ended September 30, 2021 was $ 424 and $ 963 , respectively, and for the three and nine months ended September 30, 2020 was $ 220 and $ 660 , respectively.

ASURE SOFTWARE, INC.

1 unchanged sentence

(in thousands, except per share amounts)

Deferred Commissions

Deferred commission costs from contracts with customers were $ 4,388 and $ 3,792 at June 30, 2021 and December 31, 2020, respectively.

The amount of amortization recognized for the three and six months ended June 30, 2021 was $ 307 and $ 539 , respectively, and for the three and six months ended June 30, 2020 was $ 190 and $ 471 , respectively.

Deferred Revenue

During the three and six months ended June 30, 2021, revenue of $ 442 and $ 3,848 , and the three and six months ended June 30, 2020, revenue of $ 689 and $ 3,393 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

During the three and nine months ended September 30, 2021, revenue of $ 460 and $ 4,308 , and the three and nine months ended September 30, 2020, revenue of $ 259 and $ 3,652 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2021, approximately $ 24,801 of revenue is expected to be recognized from remaining performance obligations.

As of September 30, 2021, approximately $ 23,945 of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 71 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Revenue Concentration

During the three and six months ended June 30, 2021 and 2020, there were no customers that individually represented 10% or more of consolidated revenue.

During the three and nine months ended September 30, 2021 and 2020, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 7 – LEASES

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We record base rent expense under the straight-line method over the term of the lease.

In the accompanying Condensed Consolidated Statements of Comprehensive Loss, rent expense is included in operating expenses under general and administrative expenses.

The components of the rent expense for the three and six months ended June 30, 2021 and 2020 were as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

In the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss), rent expense is included in operating expenses under general and administrative expenses.

The components of the rent expense for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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For purposes of calculating the operating lease assets and lease liabilities, extension options are not included in the lease term unless it is reasonably certain we will exercise the option, or the lessor has the sole ability to exercise the option.

The weighted average discount rate of our operating leases is 9 % as of June 30, 2021 and December 31, 2020, respectively.

The weighted average remaining lease term is five years and six years as of June 30, 2021 and December 31, 2020, respectively.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Supplemental cash flow information related to operating leases for the six months ended June 30, 2021 and 2020 are as follows (in thousands):

Six Months Ended June 30,

The weighted average discount rate of our operating leases is 8 % as of September 30, 2021 and December 31, 2020, respectively.

The weighted average remaining lease term is five years and six years as of September 30, 2021 and December 31, 2020, respectively.

Supplemental cash flow information related to operating leases for the nine months ended September 30, 2021 and 2020 are as follows (in thousands):

Nine Months Ended September 30,

Cash paid for amounts included in the measurement of lease liabilities:

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Operating lease assets obtained in exchange for new operating lease liabilities $ 1,279 $ 1,052

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Future minimum commitments over the life of all operating leases, which exclude variable rent payments, are as follows (in thousands):

Operating Leases

2021 (six months) $ 1,086

2021 (three months) $ 598

Thereafter 1,193

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We have outstanding options to purchase 1,872 shares at a weighted average exercise price of $ 8.01 .

During the three and six months ending June 30, 2021 we issued 596,000 and 903,500 of employee stock options, respectively.

The weighted average exercise price of these awards was $ 7.86 and $ 7.75 for the three and six months ended June 30, 2021, respectively.

During the three and nine months ending September 30, 2021 we issued employee stock options to purchase 25 and 954 shares, respectively.

The weighted average exercise price of these awards was $ 9.39 and $ 7.83 for the three and nine months ended September 30, 2021, respectively.

These awards will vest over a three year period.

We also had 261,616 outstanding restricted stock units as of June 30, 2021.

As of June 30, 2021, we had 1,607,763 shares available for grant pursuant to the 2018 Plan.

Share based compensation for our stock option plans for the three months ended June 30, 2021 and June 30, 2020 was $ 714 and $ 587 , respectively and for the six months ended June 30, 2021 and June 30, 2020 was $ 1,340 and $ 1,025 , respectively.

We issued 84,829 and 58,479 shares of common stock related to exercises of stock options for the three months ended June 30, 2021 and 2020, respectively.

We issued 27,793 and 7,213 shares of common stock related to the issuance of vested restricted stock units for the three months ended June 30, 2021 and 2020, respectively.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

We also had 193 outstanding restricted stock units as of September 30, 2021.

As of September 30, 2021, we had 1,615 shares available for grant pursuant to the 2018 Plan.

Share based compensation for our stock option plans for the three months ended September 30, 2021 and September 30, 2020 was $ 714 and $ 1,295 , respectively and for the nine months ended September 30, 2021 and September 30, 2020 was $ 1,340 and $ 1,025 , respectively.

We issued 9 and 58 shares of common stock related to exercises of stock options for the three months ended September 30, 2021 and 2020, respectively.

We forfeited 77 and issued 7 shares of common stock related to the issuance of vested restricted stock units, net for the three months ended September 30, 2021 and 2020, respectively.

NOTE 9 – NET EARNINGS (LOSS) PER SHARE

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We compute the number of common share equivalents, which includes stock options, using the treasury stock method.

We have excluded stock options and restricted stock units of approximately 2,172 and 2,172 shares for the three and six months ended June 30, 2021 and 2020, respectively, from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net earnings (loss) per common share for the three and six months ended June 30, 2021 and June 30, 2020 (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

We have excluded stock options and restricted stock units of approximately 2,014 and 2,040 for the three and nine months ended September 30, 2021, respectively, and 1,859 and 2,063 shares for the three and nine months ended September 30, 2020, respectively, from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The following table sets forth the computation of basic and diluted net earnings (loss) per common share for the three and nine months ended September 30, 2021 and September 30, 2020 (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Diluted earnings (loss) per share $ 0.28 $ ( 0.30 ) $ 0.39 $ ( 0.66 )

NOTE 10 – SUBSEQUENT EVENTS

On August 9, 2021, we entered into a commitment letter (the “Commitment Letter”) with Structural Capital Investments III, LP (“Structural”) pursuant to which Structural has agreed, subject to the conditions set forth in the Commitment Letter, to provide us up to $50 million in acquisition and term loan financing to support our growth needs (the “New Credit Facility”).

The Loan and Security Agreement and Ancillary Terms attached to the Commitment Letter provide the material terms and conditions of the New Credit Facility.

Subject to the satisfaction of certain closing conditions, the parties are expected to close and fund up to $25 million of the New Credit Facility on or around September 15, 2021;

however the closing may be extended to September 30, 2021 upon our request, and at Structural’s reasonable discretion.

If the closing conditions are not satisfied by September 30, 2021 (if the extension is granted), the Commitment Letter will expire.

The New Credit Facility would replace our existing facility with Wells Fargo N.A.

and on August 9, 2021, we provided Wells Fargo N.A.

with notice of our intent to terminate the existing facility.

We expect to pay off all of our outstanding obligations to Wells Fargo N.A.

in connection with the closing of the New Credit Facility.

Other Information for an expanded explanation of this event.

NOTE 10 – EMPLOYEE RETENTION TAX CREDIT

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES) was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (“ERTC”):

a refundable tax credit against certain employment taxes.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERTC.

We have qualified for the ERTC in all three quarters of 2021.

During the quarter ended September 30, 2021, we recorded an aggregate benefit of $ 10,533 in Other income (expense), net in our Condensed Consolidated Statements of Comprehensive Income (Loss) to reflect the ERTC for the three quarters in 2021.

The receivable for the ERTC benefit as of September 30, 2021 is in Other current assets on our Condensed Consolidated Balance Sheets at September 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements