ASURE SOFTWARE INC 10-Q

ITEM 1A. RISK FACTORS We have updated certain of the risk factors described in Part I, Item 1A. “Risk Factors” in our 2020 Annual Report on Form 10-K (the “Risk Factors”) to reflect the termination of our Third Restated Credit Agreement and the entering of the Senior Credit Facility with Structural Capital Investments III, LLP. The Risk Factors, as updated below, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC, in connection with evaluating the Company, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us. The risk factors described below update the risk factors disclosed in Part I, Item 1A. in our 2020 Annual Report on Form 10-K to include additional information, and should be read in conjunction with the risk factors in our 2020 Annual Report on Form 10-K. We have acquired and plan to continue to acquire from time to time our Reseller Partners' businesses that have licensed our proprietary software either through stock acquisition or through an asset purchase of their client service agreements and related assets. These acquisitions could prove difficult to integrate, result in unknown or unforeseen liabilities, disrupt our business, dilute stockholder value and ownership and adversely affect our operating results and financial condition. Acquisitions and investments involve numerous risks, including: • potential failure to achieve the expected benefits of the combination or acquisition; • difficulties in, and the cost of, integrating operations, technologies, services, platforms and personnel; • diversion of financial and managerial resources from existing operations; • the potential entry into new markets in which we have little or no experience or where competitors may have stronger • market positions; • potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers; • potential loss of key employees of the acquired company; • inability to generate sufficient revenue to offset acquisition or investment costs; • inability to maintain relationships with customers and partners of the acquired business; • difficulty of transitioning the acquired technology onto our existing platforms and customer acceptance of multiple • platforms on a temporary or permanent basis; • increasing or maintaining the security standards for acquired technology consistent with our other services; • potential unknown liabilities associated with the acquired businesses including regulatory noncompliance; • negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation; • additional stock based compensation; • the loss of acquired deferred revenue and unbilled deferred revenue; • delays in customer purchases due to uncertainty related to any acquisition; • ineffective or inadequate controls, procedures and policies at the acquired company; • potential additional cybersecurity and compliance risks resulting from entry into new markets; and • the tax effects of any such acquisitions. Any of these risks could have an adverse effect on our business, operating results and financial condition. To facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us, or at all, which may affect our ability to complete acquisitions or investments. If we finance acquisitions by issuing equity or convertible or other debt securities or loans, or issue equity as consideration for an acquisition, our existing stockholders may be diluted, or we could face constraints related to the terms of, and repayment obligations related to, the incurrence of indebtedness. 27 Table of Contents Our ability to make scheduled payments on or to refinance our existing indebtedness (including the indebtedness under our Senior Credit Facility with Structural Capital Investments III LP and our subordinated promissory notes) depends on our future performance, which is subject to economic, financial, competitive and other factors that may be beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and support our growth strategies. If we are unable to generate sufficient cash flow, we may be required to pursue one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or on desirable terms, which could result in a default on our debt obligations, including under our current debt obligations. In addition, if for any reason we are unable to meet our debt service and repayment obligations, we would be in default under the terms of our Senior Credit Facility with Structural Capital Investments III LP, which would allow our creditors at that time to declare all outstanding indebtedness to be due and payable. Under these circumstances, our lenders could compel us to apply all of our available cash to repay our indebtedness. Our ability to incur debt and the use of our funds could be limited by the restrictive covenants in our loan agreement for our term loan and revolving credit facility. Our agreement with Structural Capital Investments III LP provides for a credit facility that contains restrictive covenants, including restrictions on our ability to pay dividends to stockholders, as well as requirements to comply with certain leverage ratios and other financial maintenance tests and stringent requirements around regulatory compliance. These restrictive covenants and requirements limit the amount of borrowings that are available to us. The agreement covenants may also affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. These covenants could place us at a disadvantage compared to some of our competitors, who may have fewer restrictive covenants and may not be required to operate under these restrictions. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.