What changed in this filing

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Item 9A. Controls and Procedures

2022-03-14 compared with 2021-03-11 · 85 added, 1147 removed, 68 unchanged (95% of the section changed)

4 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”).

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

2 unchanged sentences

In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Remediation of Material Weakness in Internal Control Over Financial Reporting

During the fourth quarter of 2019, Management identified a deficiency related to the design effectiveness of the Company's controls surrounding the safeguarding of assets.

Specifically, the Company did not maintain appropriate access to certain systems and did not maintain appropriate segregation of duties related to processes associated with those systems.

Management has implemented measures designed to remediate the material weakness.

The remediation actions include:

(i) review and changes to system access, (ii) organization re-alignment to improve and ensure segregation of duties and (iii) implementation of additional manual and IT controls.

While we continue to make improvements in our processes and controls, we believe that the above actions have remediated the material weakness as of December 31, 2020.

Changes in Internal Control Over Financial Reporting

1 unchanged sentence

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the headings “Item 1 – Election of Directors and “Other Matters.”

Except as set forth below, the information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the headings “Item 1 – Election of Directors and Other Matters.”

Code of Ethics

The Company has adopted a code of ethics entitled “Code of Business Conduct and Ethics” that applies to directors, officers and employees.

It may be accessed through the “Corporate Governance” section of the Company’s website at investor.asuresoftware.com/corporate-governance .

Asure also elects to disclose the information required by Form 8-K, Item 5.05, “Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics,” through the Company’s website, and such information will remain available on this website for at least a twelve month period.

A copy of the “Code of Business Conduct and Ethics” is available in print to any stockholder who requests it.

EXECUTIVE COMPENSATION

2 unchanged sentences

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the heading “Security Ownership of Certain Beneficial Owners and Management.”

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the heading “Approval of Transactions with Related Parties.”

PRINCIPAL ACCOUNTANT FEES AND SERVICES

PRINCIPAL ACCOUNTANT AND SERVICES

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the heading “Item 2 – Ratification of Independent Registered Public Accounting Firm.”

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements and Financial Statement Schedules

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as a part of this Annual Report on Form 10-K:

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019

Notes to Consolidated Financial Statements

The Financial Statements required by this item are submitted in Part II, Item 8 of this report.

(2) Financial Statement Schedules:

All schedules for which provision is made in the applicable account regulation of the Securities and Exchange Commission are either not required under the related instructions, are inapplicable or the required information is included elsewhere in the Consolidated Financial Statements and incorporated herein by reference.

EXHIBIT NUMBER DOCUMENT DESCRIPTION

2.1 Asset and Equity Purchase Agreement, dated as of October 7, 2019, between Asure Software, Inc., FM Systems Group, LLC and FMS Bidco UK Limited**(1 0 )

All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or in the notes thereto.

(3) Exhibits:

EXHIBIT NUMBER DESCRIPTION

Asset Purchase Agreement among Asure Payroll Tax Management LLC, Payroll Tax Management, Inc., Financial Business Group Holdings, and Alden J.

Blowers, dated as of July 1, 2020 (1 8 )

3.1 Restated Certificate of Incorporation (2)

3.2 Certificate of Amendment to Certificate of Incorporation (1 7 )

3.3 Third Amended and Restated Bylaws ( 9 )

Blowers, dated as of July 1, 2020 (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed July 13, 2020).

Asset Purchase Agreement , among Evolution Payroll Processing LLC, USA Processing, Inc., Mary VanWyck-Fiannaca and Frank Fiannaca, dated as of September 30, 2021 (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

filed October 6, 2021).

Asset Purchase Agreement, among Evolution Payroll Processing LLC, Paydata Payroll Systems, Inc., Summit Trahan Revocable Trust data 2/10/09, as amended and restated U/A/D 6/12/12, Michael J.

Trahan, and and Michael J.

Trahan, as Seller Representative , dated as of September 30, 2021 (Previously filed as an Exhibit to the Company ’ s Current Report on Form 8-K (File No.

1-34522), filed October 6, 2021).

Restated Certificate of Incorporation (Previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q (File No.

1-34522), filed May 11, 2017).

Certificate of Amendment to Certificate of Incorporation (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed June 2, 2020).

Third Amended and Restated Bylaws (Previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q (File No.

1-34522), filed November 9, 2018).

Amendment to No.

1 to Third Amended and Restated Bylaws (1 3 )

4.1 Specimen Certificate for the Common Stock (4)

1 to Third Amended and Restated Bylaws (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed April 6, 2020).

Specimen Certificate for the Common Stock (Previously filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (File No.

1-34522), filed December 13, 2012).

Second Amended and Restated Rights Agreement, dated as of April 17, 2019 between Asure Software, Inc.

and American Stock Transfer & Trust Company (5)

4.3 Letter Agreement from Patrick Goepel relating to forfeiture of option rights (1)

4.4† Stock Option Agreement for Patrick Goepel (1)

and American Stock Transfer & Trust Company (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed April 19, 2019).

Letter Agreement from Patrick Goepel relating to forfeiture of option rights (Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K (File No.

1-34522), filed March 30, 2012) .+

Stock Option Agreement for Patrick Goepel (Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K (File No.

1-34522), filed March 30, 2012) .+

4.5 Intentionally omitted

3 unchanged sentences

10.3 Intentionally omitted

10.4† Stock Purchase Agreement dated September 25, 2009 with Patrick Goepel ( 6 )

10.5† Amended and Restated Employment Agreement dated July 2, 2011 with Patrick Goepel (1)

Stock Purchase Agreement dated September 25, 2009 with Patrick Goepel (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K/A (File No.

1-34522), filed September 28, 2009).

EXHIBIT NUMBER DESCRIPTION

Amended and Restated Employment Agreement dated July 2, 2011 with Patrick Goepel (Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K (File No.

1-34522), filed March 30, 2012).

10.6 Intentionally omitted

3 unchanged sentences

10.10 Intentionally omitted

10.11 Third Amended Restated Credit Agreement dated as of December 31, 2019, by the lenders identified by the Signature Pages thereto, Wells Fargo Bank, National Association, as Administrative Agent, and Asure Software, Inc.

10.12 Amendment No.

1 To Third Amended and Restated Credit Agreement, dated February 21, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (1 6 )

10.13 Amendment No.

2 To Third Amended and Restated Credit Agreement, dated April 24, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (1 6 )

10.14 Waiver and Amendment No.

3 To Third Amended and Restated Credit Agreement, dated June 30, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto ( 19 )

10.15 Waiver and Amendment No.

4 to Third Amended and Restated Credit Agreement and Amendment No.

2 to the Amended and Restated Guaranty and Security Agreement, dated August 10, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto ( 19 )

10.11 Intentionally omitted.

1 unchanged sentence

10.13 Intentionally omitted.

10.19† Employee Stock Purchase Plan, as amended on May 27, 2020 (1 5 )

10.14 Intentionally omitted.

3 unchanged sentences

10.18 Intentionally omitted

10.26† Form of Indemnification Agreement (8)

10.27† Executive Change in Control Severance Plan (8)

Employee Stock Purchase Plan, as amended on May 27, 2020 (Previously incorporated to the Company’s Proxy Statement (File No.

1-34522) for its Annual Meeting of Shareholders held on May 27, 2020) .+

10.20 Intentionally omitted

10.21 Intentionally omitted

10.22 Intentionally omitted

10.23 Intentionally omitted

10.24 Intentionally omitted

Form of Indemnification Agreement (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed December 21, 2017).

Executive Change in Control Severance Plan (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed December 21, 2017) .+

10.27 Intentionally omitted

10.28 Intentionally omitted

Asure Software, Inc.

2018 Incentive Award Plan, as amended on March 29, 2019 (16)

10.31 Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2018 Incentive Award Plan*

10.32 Form of Stock Option Grant Notice and Stock Option Agreement under the 2018 Incentive Award Plan*

10.33 Transition Services Agreement, dated as of December 2, 2019, between Asure Software, Inc.

and FM Systems Group, LLC (1 1 )

10.34 General Release and Separation Agreement between Asure Software, Inc.

Brannnon, dated August 11, 2020 (2 0 )

2018 Incentive Award Plan, as amended on March 29, 2019 (Previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q (File No.

1-34522), filed May 11, 2020) .+

Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2018 Incentive Award Plan (Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K (File No.

1-34522), filed March 11, 2021) .+

Form of Stock Option Grant Notice and Stock Option Agreement under the 2018 Incentive Award Plan (Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K (File No.

1-34522), filed March 11, 2021) .+

Promissory Note, dated April 15, 2020, between Asure Software, Inc.

and Pinnacle Bank (1 4 )

10.36 Underwriting Agreement, dated December 18, 2020, between Asure Software, Inc.

and Roth Capital Partners, LLC, as representative (2 1 )

14.1 Code of Business Conduct and Ethics (3)

and Pinnacle Bank (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed April 21, 2020).

Loan and Security Agreement, dated as of September 10, 2021, among Asure Software, Inc., and Structural Capital Investments III, LP, Ocean II PLO LLC as administrative and collateral agent and the other lenders that are or become parties thereto (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed September 16, 2021).

EXHIBIT NUMBER DESCRIPTION

Secured Term Promissory Note, dated as of September 10, 2021, between Asure Software, Inc.

and Ocean PLO LLC (Previously filed as an Exhibit to the Company’s Current Report on Form 8-K (File No.

1-34522), filed September 16, 2021).

Lease between 405 Colorado Holdings LP and Asure Software Inc., dated February 4, 2022.*

Subsidiaries of the Company *

6 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished, not filed) * *

101 The following materials from Asure Software, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in XBRL (Extensible Business Reporting Language):

(1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Income (Loss), (3) the Consolidated Statements of Cash Flows, and (4) Notes to Consolidated Financial Statements.

† Management contract or compensatory plan or arrangement required to be filed as an Exhibit to the Annual Report on Form 10-K

101 The following materials from Asure Software, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL:

(1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Loss, (3) the Consolidated Statements of Changes in Stockholders’ Equity, (4) the Consolidated Statements of Cash Flows, and (5) Notes to Consolidated Financial Statements (filed herewith).

104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted as Inline XBRL and contained in Exhibit 101 (filed herewith).

+ Indicates management contract or compensatory plan, contract or arrangement in which directors or executive officers participate.

* Filed herewith.

** Schedules and similar attachments to the agreement has been omitted pursuant to Item 601(b)(2) of Regulation S-K.

(1) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 30, 2012.

(2) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2017 filed with the SEC on May 11, 2017.

(3) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2012.

(4) Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 filed with the SEC on December 13, 2012.

(5) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 19, 2019.

(6) Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the SEC on September 28, 2009.

(7) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2020.

(8) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 21, 2017.

(9) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2018 filed with the SEC on November 9, 2018.

(10) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2019.

(11) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2019.

(12) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 16, 2020.

(13) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 6, 2020.

(14) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2020.

(15) Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14 A filed on April 27, 2020.

(16) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020

filed with the SEC on May 11, 2020.

(17) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 2, 2020.

(18) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 13, 2020.

(19) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2020

filed with the SEC on August 10, 2020.

(20) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30,

2020 filed with the SEC on November 9, 2020.

(21) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2020.

Index to Financial Statements and Financial Statement Schedules (Item 15(a)(1) of Part IV)

Report of Independent Registered Public Accounting Firm

Financial Statements:

Consolidated Balance Sheets as of December 31, 20 2 0 and 20 19

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 20 2 0 and 20 1 9

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 20 2 0 and 20 19

Consolidated Statements of Cash Flows for the Years Ended December 31, 20 2 0 and 20 19

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Asure Software, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Asure Software, Inc.

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Evaluation of the recoverability of the carrying value of goodwill and long-lived assets

As described in Note 1 to the consolidated financial statements, the Company performed a recoverability test of its long-lived assets by comparing the estimated future cash flows from its asset group to its carrying value.

As described in Note 5 to the consolidated financial statements, the Company performed its annual evaluation of goodwill for impairment by comparing the estimated fair value of the reporting unit to its carrying value.

The Company determined that as of the valuation date there was only one asset group and one reporting unit.

The Company used a discounted cash flow model to estimate the fair value of the reporting unit, The Company’s cash flow model used to test the recoverability of its long-lived assets and evaluate goodwill for impairment requires management to make subjective estimates and assumptions, particularly related to the forecast of future revenues.

The principal considerations for our determination that performing procedures relating to evaluating the recoverability of the carrying value of goodwill and long-lived assets is a critical audit matter, are that there is significant judgment by management in both the identification of the reporting unit and asset group, and in the estimation of future cash flows.

This in turn led to high degree of auditor judgment, subjectivity and effort in performing audit procedures in evaluating audit evidence related to

management’s identification of reporting unit and asset group, and management’s estimates and assumptions used in the forecasts and discounted cash flow models.

Addressing the matter involved performing procedures and evaluating evidence in connection with forming our overall audit opinion on the consolidated financial statements.

These procedures included, among others, (i) evaluating management’s determination of a single reporting unit;

(ii) evaluating management’s determination of a single asset group;

and (iii) testing management’s process of estimating forecasted cash flows by comparing the forecasts to historical results, internal communications to management and board of directors, forecast information included in analyst and industry reports for the Company, and other macroeconomic indicators.

In addition, our procedures to evaluate the recoverability of goodwill included a sensitivity analysis of the implied control premium by comparing the fair value determined by the Company against the market capitalization of the Company at the valuation date.

/s/ Marcum LLP

We have served as the Company’s auditor since 2016.

Costa Mesa, California

March 11, 2021

ASURE SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

2020 December 31,

Current assets:

Cash and cash equivalents $ 28,577 $ 28,826

Accounts and note receivable, net of allowance for doubtful accounts of $ 771 and $ 904 at December 31, 2020 and December 31, 2019, respectively

Inventory 449 656

Prepaid expenses and other current assets 3,284 8,551

Total current assets before funds held for clients 37,162 42,841

Funds held for clients 321,069 126,625

Total current assets 358,231 169,466

Property and equipment, net 8,281 7,867

Goodwill 73,958 68,697

Intangible assets, net 64,552 63,850

Operating lease assets, net 6,450 6,963

Other assets 3,951 3,224

Total assets $ 515,423 $ 320,067

Liabilities and stockholders’ equity

Current liabilities:

Current portion of notes payable $ 12,310 $ 2,571

Accounts payable 1,288 1,736

Accrued compensation and benefits 2,916 3,424

Operating lease liabilities, current 1,833 1,575

Other accrued liabilities 1,380 6,556

Contingent purchase obligation 3,880 —

Deferred revenue 5,838 5,500

Total current liabilities before client fund obligations 29,445 21,362

Client fund obligations 320,578 130,250

Total current liabilities 350,023 151,612

Long-term liabilities:

Deferred revenue 111 322

Deferred tax liability 888 336

Notes payable, net of current portion and debt issuance cost 12,225 24,142

Operating lease liabilities, noncurrent 5,366 5,937

Other liabilities 1,157 139

Total long-term liabilities 19,747 30,876

Total liabilities 369,770 182,488

Commitments and Contingencies (Notes 2 and 15)

Stockholders’ equity:

Preferred stock, $ .01 par value;

1,500 shares authorized;

none issued or outstanding

Common stock, $ .01 par value;

44,000 and 22,000 shares authorized;

19,354 and 16,098 shares issued, 18,970 and 15,714 shares outstanding at December 31, 2020 and December 31, 2019, respectively

Treasury stock at cost, 384 shares at December 31, 2020 and December 31, 2019

( 5,017 ) ( 5,017 )

Additional paid-in capital 419,827 396,102

Accumulated deficit ( 269,954 ) ( 253,642 )

Accumulated other comprehensive loss 604 ( 25 )

Total stockholders’ equity 145,653 137,579

Total liabilities and stockholders’ equity $ 515,423 $ 320,067

The accompanying notes are an integral part of these consolidated financial statements.

ASURE SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands, except share and per share data)

Years Ended December 31

Recurring $ 63,315 $ 70,066

Professional services, hardware and other 2,192 3,084

Total revenue 65,507 73,150

Cost of sales 27,414 29,836

Gross profit 38,093 43,314

Operating expenses

Selling, general and administrative 36,340 41,535

Research and development 5,959 5,351

Amortization of intangible assets 9,547 11,765

Impairment of goodwill — 35,060

Total operating expenses 51,846 93,711

Loss from operations ( 13,753 ) ( 50,397 )

Interest expense and other, net ( 2,221 ) ( 16,005 )

Loss from continuing operations before income taxes ( 15,974 ) ( 66,402 )

Income tax expense (benefit) 337 ( 24,111 )

Loss from continuing operations ( 16,311 ) ( 42,291 )

Discontinued operations (Note 12)

Gain on disposal of discontinued operations — 94,293

Income from operations of discontinued operations — 3,498

Income tax expense — ( 25,499 )

Gain on discontinued operations, net of taxes — 72,292

Net income (loss) ( 16,311 ) 30,001

Other comprehensive income (loss):

Change in unrealized gain on available for sale securities 629 6

Foreign currency translation loss — ( 597 )

Comprehensive income (loss) $ ( 15,682 ) $ 29,410

Basic and diluted loss per share from continuing operations

Basic $ ( 1.03 ) $ ( 2.73 )

Diluted $ ( 1.03 ) $ ( 2.73 )

Basic and diluted net income (loss) per share

Basic $ ( 1.03 ) $ 1.93

Diluted $ ( 1.03 ) $ 1.93

Weighted average basic and diluted shares

Basic 15,910,000 15,511,000

Diluted 15,910,000 15,511,000

The accompanying notes are an integral part of these consolidated financial statements.

ASURE SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands)

Outstanding Common Stock Amount Treasury Stock Additional Paid-

in Capital Accumulated

Deficit Accumulated Other

Comprehensive

Stockholders’

BALANCE AT DECEMBER 31, 2018 15,282 $ 157 $ ( 5,017 ) $ 391,927 $ ( 283,643 ) $ ( 906 ) $ 102,518

Stock issued upon option exercise and vesting of restricted stock units 204 2 — 846 — — 848

Share based compensation — — — 2,268 — — 2,268

Stock issued under the employee stock purchase plan 105 1 — 507 — — 508

Stock issued upon acquisition 123 1 — 554 — — 555

Net income — — — — 30,001 — 30,001

Disposal of discontinued operations — — — — — 1,472 1,472

Other comprehensive income — — — — — ( 591 ) ( 591 )

BALANCE AT DECEMBER 31, 2019 15,714 161 ( 5,017 ) 396,102 ( 253,642 ) ( 25 ) 137,579

Stock issued upon option exercise and vesting of restricted stock units 207 2 — 727 — 729

Stock issued under the employee stock purchase plan 59 — — 292 — — 292

Shares issued, net of issuance costs 2,990 30 — 20,341 — — 20,371

Share based compensation — — — 2,365 — 2,365

Net loss — — — — ( 16,311 ) — ( 16,311 )

Other comprehensive income — — — — — 629 629

BALANCE AT DECEMBER 31, 2020 18,970 $ 193 $ ( 5,017 ) $ 419,827 $ ( 269,953 ) $ 604 $ 145,654

The accompanying notes are an integral part of these consolidated financial statements.

ASURE SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

Years Ended December 31

Cash flows from operating activities:

Net income (loss) $ ( 16,311 ) $ 30,001

Adjustments to reconcile net income (loss) to net cash used in operations:

Depreciation and amortization 16,169 18,165

Impairment of goodwill — 35,060

Amortization of debt financing costs and discount 395 1,462

Provision for doubtful accounts 372 446

Provision (benefit) from deferred income taxes 551 ( 1,193 )

Loss (gain) on extinguishment of debt ( 138 ) 2,808

Gain on sale of discontinued operations — ( 94,293 )

Share-based compensation 2,365 2,268

Loss on disposals of fixed assets 59 62

Change in fair value of contingent purchase consideration 1,135 —

Changes in operating assets and liabilities:

Accounts receivable 1,118 ( 1,446 )

Inventory 11 ( 1,581 )

Prepaid expenses and other assets ( 911 ) ( 3,113 )

Accounts payable ( 448 ) ( 3,174 )

Accrued expenses and other long-term obligations ( 4,596 ) 5,649

Operating lease liabilities ( 1,606 ) ( 900 )

Deferred revenue 128 5,662

Net cash used in operating activities ( 1,707 ) ( 4,117 )

Cash flows from investing activities:

Proceeds from sale of discontinued operations — 118,206

Acquisitions, net of cash acquired ( 13,141 ) ( 7,443 )

Purchases of property and equipment ( 857 ) ( 1,017 )

Software capitalization costs ( 2,780 ) ( 3,824 )

Net change in funds held for clients ( 184,356 ) ( 20,290 )

Net cash provided by (used in) investing activities ( 201,134 ) 85,632

Cash flows from financing activities:

Proceeds from notes payable 8,856 28,636

Payments of notes payable ( 12,234 ) ( 118,421 )

Proceeds from revolving line of credit — 10,231

Payments of revolving line of credit — ( 10,312 )

Debt financing fees ( 245 ) ( 1,539 )

Payments of finance leases — ( 102 )

Net proceeds from issuance of common stock 21,392 820

Net change in client fund obligations 184,823 22,669

Net cash provided by (used in) financing activities 202,592 ( 68,018 )

Effect of foreign exchange rates — ( 115 )

Net increase (decrease) in cash and cash equivalents ( 249 ) 13,382

Cash and cash equivalents at beginning of period 28,826 15,444

Cash and cash equivalents at end of period $ 28,577 $ 28,826

Supplemental information:

Cash paid for:

Interest $ 1,029 $ 8,897

Income taxes 3,662 126

Non-cash Investing and Financing Activities:

Notes issued in connection with acquisition 1,177 —

Contingent purchase consideration 2,745 —

Equity issued in connection with acquisitions — 555

The accompanying notes are an integral part of these consolidated financial statements.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

NOTE 1 - THE COMPANY

Asure Software, Inc., (“Asure”, the “Company”, “we” and “our”), a Delaware corporation, is a leading provider of cloud-based Human Capital Management (“HCM”) software solutions and, until its divestiture in December 2019, Workspace Management software solutions.

We help small and mid-sized companies grow by helping them build better teams with skills that get them to the next level, 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, HR, and Time & Attendance software as well as HR Services ranging from HR projects to completely outsourcing payroll and HR staff.

We also offer these products and services through our network of reseller partners.

Our platform vision is to help clients grow their business and become the most trusted HCM resource to entrepreneurs everywhere.

Our product strategy is driven by three primary challenges that prevent businesses from growing:

HR complexity, allocation of both human and financial capital, and the ability to build great teams.

The Asure HCM suite includes four product lines:

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, Vermont, and Washington.

In December 2020, we completed an underwritten public offering of 2,990,000 shares of our common stock at a public offering price of $ 7.25 .

We realized gross proceeds of approximately $ 21,700 before deducting underwriting discounts and estimated offering expenses.

Following this offering, we have approximately $ 111,760 available under our shelf registration statement on Form S-3.

In July 2020, we acquired certain assets of a payroll tax business.

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

The seller will be paid additional consideration for the assets based on the trailing twelve-month revenue from the acquired assets at each of April 30, 2021 and October 31, 2021.

Subject to any disagreement as to the calculation of the contingent purchase consideration, payments for contingent purchase consideration, if any, will be made by May 30, 2021 and December 30, 2021.

In December 2019, we completed the sale of the assets of our Workspace Management business for an aggregate purchase price of approximately $ 121,500 in cash.

We used the proceeds to pay down debt owed to our senior lender.

In July 2020, we finalized our working capital adjustment and received escrow funds of $ 1,687 .

For further information regarding the transaction, see Note 12 to the accompanying consolidated financial statements.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

We have prepared our consolidated financial statements in accordance with U.S.

generally accepted accounting principles and have included the accounts of our wholly owned subsidiaries.

We have eliminated all significant intercompany transactions and balances in consolidation.

The chief operating decision maker is Asure’s Chief Executive Officer who reviews financial information presented on a company-wide basis.

Accordingly, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, we determined that the Company has a single reporting segment and operating unit structure.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

USE OF ESTIMATES

Preparation of the consolidated financial statements in conformity with U.S.

generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenues and expenses during the reporting period.

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.

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

These estimates could be materially different under different conditions and assumptions.

Additionally, the actual amounts could differ from the estimates made.

Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness.

We make appropriate adjustments, if any, to the estimates used prospectively based upon such periodic evaluation.

CONTINGENCIES

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 December 31, 2020, we were not party to any pending legal proceedings.

SIGNIFICANT RISKS AND UNCERTAINTIES

The COVID-19 pandemic has resulted in a global economic slowdown and disruptions that have and could continue to negatively impact our business.

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.

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

In addition, the conditions caused by the COVID-19 pandemic could adversely affect our customers’ ability or willingness to purchase our offerings, delay prospective customers’ purchasing decisions, delay the provisioning of our offerings, lengthen payment terms, reduce the value or duration of customer subscription contracts, or affect attrition rates, all of which could adversely affect our future sales, operating results and overall financial performance.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and vendors.

If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

RECLASSIFICATION

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.

These reclassifications had no effect on the previously reported net income.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash deposits and highly liquid investments with an original maturity of three months or less when purchased.

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss).

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

The amortization of premiums and accretion of discounts is included in interest income.

Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense).

The cost of securities sold is based on the specific identification method.

Interest and dividends on securities classified as available-for-sale are included in interest income.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

FUNDS HELD FOR CLIENTS

Funds held for clients represent assets that are held for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services and are classified as client fund obligations on our consolidated balance sheets.

Funds held for clients are held in demand deposit or brokerage accounts at financial institutions and are classified as a current asset on our consolidated balance sheets.

Client fund obligations represent the Company’s contractual obligations to remit funds to satisfy clients’ payroll and tax payment obligations and are recorded on the consolidated balance sheets at the time that the Company impounds funds from clients.

The client fund obligations represent liabilities that will be repaid within one year of the balance sheet date.

The Company has reported client fund obligations as a current liability on the consolidated balance sheets.

As part of the previously identified material weakness which we have subsequently remediated, the Company recovered approximately $ 4,290 in funds and insurance proceeds.

The Company recognized $ 3,961 of these funds as receivables in other assets on the consolidated balance sheets at December 31, 2019 with an offsetting liability in client fund obligations.

The Company collected the full $ 4,290 during the first quarter of 2020 and has since disbursed $ 482 of these funds resulting in a segregated $ 3,808 in funds held for clients with an offsetting liability in client fund obligations at December 31, 2020.

FAIR VALUE OF FINANCIAL INSTRUMENTS

We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis, and non-financial assets and liabilities such as goodwill, intangible assets and property and equipment that are measured at fair value on a non-recurring basis.

CONCENTRATION OF CREDIT RISK

We grant credit to customers in the ordinary course of business.

We limit concentrations of credit risk related to our trade accounts receivable due to our large number of customers, including third-party resellers, and their dispersion across several industries and geographic areas.

We perform ongoing credit evaluations of our customers and maintain reserves for potential credit losses.

We require advanced payments or secured transactions when deemed necessary.

We review potential customers’ credit ratings to evaluate customers’ ability to pay an obligation within the payment term, which is usually net thirty days.

If we receive reasonable assurance of payment and know of no barriers to legally enforce the payment obligation, we may extend credit to customers.

We place accounts on “Credit Hold” if a placed order exceeds the credit limit or sooner if circumstances warrant.

We follow our credit policy consistently and routinely monitor our delinquent accounts for indications of collectability.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to provide adequate protection against losses resulting from extending credit to our customers.

We base this allowance, in the aggregate, on historical collection experience, age of receivables and general economic conditions.

The allowance for doubtful accounts also considers the need for specific customer reserves based on the customer’s payment experience, credit worthiness and age of receivable balances.

Our bad debts have not been material and have been within management expectations.

Inventory consists of finished goods and is stated at the lower of cost or net realizable value, cost being determined using the first-in, first-out method.

Inventory includes a full range of biometric and card recognition clocks that we sell as part of our Asure Time&Attendance solutions.

We routinely assess our on-hand inventory for timely identification and measurement of obsolete, slow-moving or otherwise impaired inventory.

PROPERTY AND EQUIPMENT

We record property and equipment, including software, furniture and equipment, at cost less accumulated depreciation.

We record depreciation using the straight-line method over the estimated economic useful lives of the assets, which range from two to five years .

Property and equipment also includes leasehold improvements which we record at cost less accumulated amortization.

We record amortization of leasehold improvements using the straight-line method over the shorter of the lease

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

term or over the life of the respective assets, as applicable.

We recognize gains or losses related to retirements or disposition of fixed assets in the period incurred.

We expense repair and maintenance costs as incurred.

We periodically review the estimated economic useful lives of our property and equipment and make adjustments, if necessary, according to the latest information available.

BUSINESS COMBINATIONS

We have accounted for our acquisitions using the acquisition method of accounting based on ASC 805— Business Combinations , which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their full fair value as of the date we obtain control.

We have determined the fair value of assets acquired and liabilities assumed based upon our estimates of the fair values of assets acquired and liabilities assumed in the acquisitions.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired.

While we have used our best estimates and assumptions to measure the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, not to exceed one year from the date of acquisition, any changes in the estimated fair values of the net assets recorded for the acquisitions will result in an adjustment to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, we record any subsequent adjustments to our consolidated statements of comprehensive loss.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired in a business combination.

We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests if indicators of potential impairment exist, by first assessing qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.

On January 1, 2019, we early adopted Accounting Standards Update ("ASU") No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment ("ASU 2017-04").

Under ASU 2017-04, an impairment charge is based on the excess of a reporting unit's carrying amount over its fair value.

In 2019, we recognized an impairment loss on goodwill.

See Notes 4 and 5 for additional information regarding goodwill.

We amortize intangible assets not considered to have an indefinite useful life using the straight-line method over their useful lives.

We currently amortize our acquired intangible assets with definite lives over periods ranging from one to nine years .

Each reporting period, we evaluate the estimated remaining useful life of intangible assets and assess whether events or changes in circumstances warrant a revision to the remaining period of amortization or indicate that impairment exists.

In 2019, we accelerated the amortization after a reassessment of the useful lives of certain trade names in relation to our rebranding efforts.

We have no t identified any other impairments of finite-lived intangible assets during any of the periods presented.

See Note 5 for additional information regarding intangible assets.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, including intangible assets with definite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

We have determined that there was no impairment of long-lived assets including intangible assets with definite lives, for the year ended December 31, 2020.

ORIGINAL ISSUE DISCOUNTS

We recognize original issue discounts, when incurred on the issuance of debt, as a reduction of the current loan obligations that we amortize to interest expense over the life of the related indebtedness using the effective interest rate method.

We record the amortization as interest expense – amortization of OID in the Consolidated Statements of Comprehensive Loss.

At the time of any repurchases or retirements of related debt, we write off the remaining amount of net original issue discounts and include them in the calculation of gain or loss on extinguishment in the consolidated statements of comprehensive loss.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

REVENUE RECOGNITION

Our revenue consists of software-as-a-service (“SaaS”) offerings and time-based software subscription license arrangements that also, typically, include hardware, maintenance/support, and professional services elements.

We recognize revenue on an output basis when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our contracts with customers may include multiple performance obligations.

For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price.

We determine standalone selling prices based on the amount that we believe the market is willing to pay determined through historical analysis of sales data as well as through use of the residual approach when we can estimate the standalone selling price for one or more, but not all, of the promised goods or services.

The terms of our contracts with customers range from month to month for some Asure HCM direct clients to longer terms ranging from one to three years, some of which are renewable for successive terms.

A typical SaaS/software subscription arrangement will also include hardware, setup and implementation services.

Revenue allocated to the SaaS/software subscription performance obligations are recognized on an output basis ratably as the service is provided over the non-cancellable term of the SaaS/subscription service and are reported as Recurring revenue on the Consolidated Statement of Comprehensive Loss.

Revenue allocated to other performance obligations included in the arrangement is recognized as outlined in the paragraphs below.

Hardware devices sold to customers are sold as either a standard product sell arrangement where title to the hardware passes to the customer or under a hardware-as-a-service (“HaaS”) arrangement where the title to the hardware remains with Asure.

Revenue allocated to hardware sold as a standard product are recognized on an output basis when title passes to the customer, typically the date we ship the hardware.

Revenue allocated to hardware under a hardware-as-a-service (“HaaS”) arrangement are recognized on an output basis, recorded ratably as the service is provided over the non-cancellable term of the HaaS arrangement, typically one year .

Revenue recognized from hardware devices sold to customers via either of the two above types of arrangements are reported as Hardware revenue on the Consolidated Statement of Comprehensive Loss.

Our professional services offerings typically include data migration, set up, training, and implementation services.

Set up and implementation services typically occur at the start of the software arrangement while certain other professional services, depending on the nature of the services and customer requirements, may occur several months later.

We can reasonably estimate professional services performed for a fixed fee and we recognize allocated revenue on an output basis on a proportional performance basis as the service is provided.

We recognize allocated revenue on an output basis for professional services engagements billed on a time and materials basis as the service is provided.

We recognize allocated revenue on an output basis on all other professional services engagements upon the earlier of the completion of the service’s deliverable or the expiration of the customer’s right to receive the service.

Revenue recognized from professional services offerings are reported as Professional service revenue on the Consolidated Statement of Comprehensive Loss.

We recognize allocated revenue for maintenance/support on an output basis ratably over the non-cancellable term of the support agreement.

Initial maintenance/support terms are typically one to three years and are renewable on an annual basis.

Revenue recognized from maintenance/support are reported as Recurring on the Consolidated Statement of Comprehensive Loss.

We do not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return, refund or cancellation rights have expired or acceptance has occurred.

Our arrangements with resellers do not allow for any rights of return.

Our payment terms vary by the type of customer and the customer’s payment history and the products or services offered.

The term between invoicing and when payment is due is not significant and as such our contracts do not include a significant financing component.

The transaction prices of our contracts do not include consideration amounts that are variable and do not include noncash consideration.

Deferred revenue includes amounts invoiced to customers in excess of revenue we recognize, and is comprised of deferred SaaS/software, HaaS, Maintenance and support, and Professional services revenue.

We recognize deferred revenue when we complete the service and over the terms of the arrangements, primarily ranging from one to three years .

ADVERTISING COSTS

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

We expense advertising costs as we incur them.

Advertising expenses were $ 34 and $ 64 for the years ended December 31, 2020 and 2019, respectively.

We recorded these expenses as part of sales and marketing expenses on our Consolidated Statements of Comprehensive Loss.

LEASE OBLIGATIONS

At the commencement date of a lease, we recognize a liability to make lease payments and an asset representing the right-of-use underlying asset during the lease term.

The lease liability is measured at the present value of lease payments over the lease term.

As our leases typically do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date taking into consideration necessary adjustments for collateral, depending on the facts and circumstances of the lessee and the leased asset, and term to match the lease term.

The operating lease asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives.

Operating lease assets and liabilities as shown separately in our consolidated balance sheets.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Operating lease costs are recognized on a straight-line basis over the lease term.

Lease agreements that contain both lease and non-lease components are generally accounted for separately.

We account for income taxes using the liability method under ASC 740, Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements.

Under the liability method, we determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which we expect the differences to reverse.

We reduce deferred tax assets by a valuation allowance when it is more likely than not that we will not realize some component or all of the deferred tax assets.

SHARE BASED COMPENSATION

We estimate the fair value of each award granted from our stock option plan at the date of grant using the Black-Scholes option pricing model.

The fair value is recognized as expense over the service period, net of estimated forfeitures, using the straight-line method.

The estimation of share-based awards that will ultimately vest requires judgment, and, to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

We primarily consider historical experience when estimating expected forfeitures.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Standards

The FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820).

The new guidance modifies disclosure requirements related to fair value measurement.

The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Implementation on a prospective or retrospective basis varies by specific disclosure requirements.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

The FASB issued ASU No.

2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40).

The new guidance reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Standards Yet to Be Adopted

The FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes, in December 2019.

ASU 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other aspects of the accounting for income taxes.

ASU 2019-12 is effective for fiscal years beginning after December

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

15, 2020, and interim periods within those fiscal years.

We are currently evaluating the impact, if any, the adoption will have on our financial position and results of operations.

NOTE 3 - INVESTMENTS AND FAIR VALUE MEASUREMENTS

At December 31, 2020 and 2019, $ 25,919 and $ 24,136 , respectively, of funds held for clients were invested in available-for-sale securities consisting of government and commercial bonds, including mortgage backed securities.

As of December 31, 2020 and 2019, we also had $ 63,999 and $ 48,500 , respectively, of funds held for clients invested in money market funds and other cash equivalents.

Cash equivalents as of December 31, 2020 and December 31, 2019 was not material.

Investments classified as available-for-sale consisted of the following:

December 31, 2020:

Funds Held for Clients (2)

Certificates of deposit $ 7,370 $ 204 $ — $ 7,574

Corporate debt securities 9,415 297 ( 1 ) 9,711

Municipal bonds 7,531 103 ( 1 ) 7,633

US Government agency securities 500 1 — 501

Asset-backed securities 499 1 — 500

Total $ 25,315 $ 606 $ ( 2 ) $ 25,919

December 31, 2019:

Funds Held for Clients (2)

Certificates of deposit $ 8,828 $ 11 $ — $ 8,839

Corporate debt securities 6,883 6 ( 9 ) 6,880

Municipal bonds 6,383 6 ( 7 ) 6,382

US Government agency securities 1,000 — — 1,000

Asset-backed securities 1,067 — ( 32 ) 1,035

Total $ 24,161 $ 23 $ ( 48 ) $ 24,136

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

At December 31, 2020, there were 69 securities in an unrealized gain position and there were 2 securities in an unrealized loss position.

These unrealized losses were less than $( 1 ) individually and $( 2 ) in the aggregate.

These securities have not been in a continuous unrealized gain or loss position for more than 12 months.

The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity.

The Company reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment.

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 the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2) At December 31, 2020 and 2019, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet.

Expected maturities of available-for-sale securities as of December 31, 2020 are as follows:

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

One year or less $ 5,507

After one year through five years 20,412

After five years through 10 years —

After 10 years —

ASC 820, Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in U.S.

generally accepted accounting principles and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier fair value hierarchy, which is based on the reliability of the inputs used in measuring fair values.

These tiers include:

Quoted prices in active markets for identical assets or liabilities;

Quoted prices in active markets for similar assets or liabilities;

quoted prices in markets that are not active for identical or similar assets or liabilities;

and model-driven valuations whose significant inputs are observable;

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

The following table presents the fair value hierarchy for our financial assets measured at fair value on a recurring basis as of December 31, 2020 and December 31, 2019, respectively:

Fair Value Measure at December 31, 2020

Total Carrying Value at December 31, 2020 Quoted

(Level 1) Significant

(Level 2) Significant

Cash and cash equivalents

Money market funds $ 5,204 $ 5,204 $ — $ —

Funds held for clients

Money market funds 63,999 63,999 — —

Available-for-sale securities 25,919 — 25,919 —

Total $ 95,122 $ 69,203 $ 25,919 $ —

Contingent purchase consideration $ 3,880 $ — $ — $ 3,880

Total $ 3,880 $ — $ — $ 3,880

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

Fair Value Measure at December 31, 2019

Total Carrying Value at December 31, 2019 Quoted

(Level 1) Significant

(Level 2) Significant

Funds held for clients

Money market funds $ 48,500 $ 48,500 $ — $ —

Available-for-sale securities 24,136 — 24,136 —

Total $ 72,636 $ 48,500 $ 24,136 $ —

Other Financial Assets and Liabilities

Financial assets and liabilities with carrying amounts approximating fair value include cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other current liabilities.

The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities.

Our line of credit and notes payable, including current portion, as of December 31, 2020, had a carrying value of $ 24,913 .

This carrying value approximates fair value.

The fair value is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities.

Our Level 3 balance is comprised of a contingent purchase obligation.

This obligation is calculated using a Monte Carlo model that has significant unobservable inputs.

We will revalue this obligation each quarter until it is paid.

In July 2020, we acquired certain assets of a payroll tax business.

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

The seller will be paid additional consideration for the assets based on the trailing twelve-month revenue at each of April 30, 2021 and October 31, 2021.

Subject to any disagreement as to the calculation of the contingent purchase consideration, payments for contingent purchase consideration, if any, will be made by May 30, 2021 and December 30, 2021.

For the initial measurement, we utilized a Monte Carlo simulation to determine the fair value of the contingent purchase consideration.

We utilized a discounted cash flow model to determine if an adjustment was required at December 31, 2020.

There was a $ 1,135 adjustment to the fair value of the contingent consideration at December 31, 2020.

Balance at January 1, 2020 $ —

Purchase 2,745

Net realized / unrealized losses 1,135

Balance at December 31, 2020 $ 3,880

NOTE 4 - ACQUISITIONS

2020 Acquisitions

In January 2020, we acquired certain assets of a payroll business.

The aggregate initial purchase price for the assets was $ 2,153 which included a cash payment of $ 1,724 , which we paid for in cash at closing, a custodial account hold back of $ 99 and a promissory note of $ 330 , with principal and interest due in April 2021.

The Company accounted for this as an asset acquisition.

In July 2020, we acquired certain assets of a payroll tax business.

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

The seller will be paid additional consideration for the assets based on the trailing twelve-month revenue from the acquired assets at each of April 30, 2021 and October 31, 2021.

Subject to any disagreement as to the calculation of the contingent purchase consideration, payments for contingent purchase consideration, if any, will be made by May 30, 2021 and December 30, 2021.

In December 2020, we acquired certain assets of two payroll businesses and an HR consulting business.

The aggregate initial purchase price for the assets was $ 8,212 , which included a cash payment of $ 7,365 at closing and promissory notes of $ 847 , with principal and interest due in July 2022.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

Purchase Price Allocation

Following is the purchase price allocation for the 2020 business acquisitions.

We based the preliminary fair value estimate for the assets acquired and liabilities assumed for these acquisitions upon preliminary calculations and valuations.

Our estimates and assumptions for these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date).

The primary areas of those preliminary estimates that we have not yet finalized relate to certain tangible assets and liabilities acquired, and income and non-income based taxes.

We recorded the transactions using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the dates of acquisitions.

The $ 11,853 of intangible assets subject to amortization consist of $ 9,753 allocated to Customer Relationships, $ 2,000 for Developed Technology, and $ 100 for Trade Names.

To value the Trade Names, we employed the relief from royalty method under the market approach.

For the Customer Relationships and Developed Technology, we employed a form of the excess earnings method, which is a form of the income approach.

We believe significant synergies are expected to arise from these strategic acquisitions.

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 deductible for tax purposes.

Cash & cash equivalents $ 196

Accounts receivable 48

Fixed assets 2

Funds held for clients 5,505

Goodwill 5,261

Intangibles 11,853

Total assets acquired $ 22,865

Client fund obligations $ 5,505

Total liabilities assumed 5,505

Net assets acquired $ 17,360

The following is a reconciliation of the purchase price to the fair value of net assets acquired at the date of acquisition:

Purchase price $ 13,339

Notes payable 1,177

Custodial hold back 99

Adjustment to fair value of contingent liability 2,745

Fair value of net assets acquired $ 17,360

Contingent consideration

In connection with the acquisition of certain assets of the payroll tax business in July 2020, we recorded contingent consideration based upon the expected achievement of certain milestone goals.

We will record any changes to the fair value of contingent consideration due to changes in assumptions used in preparing the valuation model in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).

Contingent consideration is valued using a multi-scenario discounted cash flow method.

The assumptions used in preparing the discounted cash flow method include estimates for outcomes if milestone goals are achieved and the probability

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

of achieving each outcome.

Management estimates probabilities and then applies them to management’s conservative case forecast, most likely case forecast and optimistic case forecast with the various scenarios.

The Company retained a third-party expert to assist in determining the value of the contingent consideration for the third quarter 2020.

As of September 30, 2020, the third-party expert determined the value of the contingent consideration for the acquisition was $ 2,745 based on a Monte Carlo simulation model for fiscal 2020 to 2021.

At December 31, 2020, we increased the amount to $ 3,880 based on a discounted cash flow model for fiscal 2020 to 2021.

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

We accounted for our historical acquisitions in accordance with ASC 805, Business Combinations .

We recorded the amount exceeding the fair value of net assets acquired at the date of acquisition as goodwill.

We recorded intangible assets apart from goodwill if the assets had contractual or other legal rights or if the assets could be separated and sold, transferred, licensed, rented or exchanged.

Our goodwill relates to acquisitions from 2011 through 2020.

In accordance with ASC 350, Intangibles-Goodwill and Other , we review and evaluate our long-lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that we may not recover their net book value.

We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests, if indicators of potential impairment exist, using a fair-value-based approach.

We typically use an income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets.

Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability).

Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows.

Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

During fiscal 2020, we determined that the estimated fair value of our reporting unit was greater than its carrying value.

We determined this using the quantitative method.

In addition, we also performed the income based approach discussed above and compared the market value of our common stock to our reporting unit’s carrying value noting its market value exceeded carrying value.

Therefore, we had no impairment charge for 2020.

During fiscal 2019, we determined that the estimated fair value of our reporting unit was less than its carrying value.

Therefore, we compared the carrying value of the reporting unit to its fair value in order to determine if an impairment exists.

In addition to performing the income based approach discussed above we compared the market value of our common stock to our reporting unit’s carrying value noting its carrying value exceeded market value.

A non-cash, before-tax impairment charge of 35,060 was recognized to reduce the carrying amount of the goodwill to its estimated fair value as of December 31, 2019.

There were no impairment indicators or triggering events during the first three quarters of 2019.

The sale of our Workspace Management business in the fourth quarter led to an increase in the carrying value of the remaining business above its market value as of December 31, 2019.

We believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants.

However, actual events and results could differ substantially from those used in our valuations.

To the extent such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record additional non-cash impairment charges in the future.

We amortize intangible assets not considered to have an indefinite useful life using the straight-line method over their estimated period of benefit, which generally ranges from one to nine years .

In 2019, we disposed of certain trade names in relation to our rebranding efforts.

The following table summarizes the changes in our goodwill:

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

Balance at Balance at December 31, 2018 $ 99,108

Goodwill recognized upon acquisition 4,826

Adjustments to goodwill associated with acquisitions ( 177 )

Impairment loss ( 35,060 )

Balance at December 31, 2019 68,697

Goodwill recognized upon acquisition 5,261

Balance at December 31, 2020 $ 73,958

The gross carrying amount and accumulated amortization of our intangible assets as of December 31, 2020 and 2019 are as follows:

Intangible Assets Weighted Average

Period (in Years) 2020

Gross Accumulated

Amortization Net

Developed Technology 6.6 $ 12,001 $ ( 7,608 ) $ 4,393

Customer Relationships 8.9 88,310 ( 28,898 ) 59,412

Reseller Relationships 7.0 853 ( 853 ) —

Trade Names 3.0 880 ( 312 ) 568

Noncompete Agreements 5.2 1,032 ( 853 ) 179

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

Intangible Assets Weighted Average

Period (in Years) 2019

Gross Accumulated

Amortization Net

Developed Technology 6.0 $ 10,001 $ ( 6,004 ) $ 3,997

Customer Relationships 8.9 78,558 ( 19,757 ) 58,801

Reseller Relationships 7.0 853 ( 853 ) —

Trade Names 3.0 780 ( 78 ) 702

Noncompete Agreements 5.2 1,032 ( 682 ) 350

8.5 $ 91,224 $ ( 27,374 ) $ 63,850

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

Amortization expenses were $ 9,547 and $ 11,765 for 2020 and 2019, respectively, included in Operating Expenses.

Amortization expenses recorded in Cost of Sales were $ 1,604 and $ 1,994 for 2020 and 2019, respectively.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of December 31, 2020

2021 $ 11,601

Thereafter 13,363

Total $ 64,552

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

NOTE 6 - NOTES PAYABLE

The following table summarizes our outstanding debt as of December 31, 2020 and 2019:

Maturity Stated Interest Rate 2020 2019

Subordinated Notes Payable- acquisitions 1/1/2021 - 7/1/2022 2.00 % - 3.00 %

$ 6,182 $ 7,185

PPP Loan - Pinnacle Bank 4/15/2022 1.00 % 8,856 —

Term Loan - Wells Fargo term loan 12/31/2024 5.25 % 9,875 20,000

Total Notes Payable $ 24,913 $ 27,185

Short-term notes payable $ 12,388 $ 2,696

Long-term notes payable $ 12,525 $ 24,489

Information presented in this table, the table that immediately follows and the last table in this footnote includes principal and interest due under the terms of a promissory note with Pinnacle Bank.

This loan was issued to us in connection with the Paycheck Protection Program pursuant to Title I of the Coronavirus Aid, Relief and Economic Security Act.

Under the terms of the Paycheck Protection Program, the principal balance and interest due under the promissory note will be forgiven if we meet certain conditions related to the use of the loan proceeds.

Under the terms of our promissory note with Pinnacle Bank, we would have been required to make payments on this promissory note in November 2020;

however, the Small Business Administration issued guidance, prior to that date, that deferred all payments that would be owed on this loan until after the Small Business Administration makes a decision on our loan forgiveness application.

While we expect that the entire loan will be forgiven, we cannot be certain that the Small Business Administration will grant forgiveness of our entire loan.

If we do not receive forgiveness of our entire loan, we will be obligated to start making payments on the portion of the principal and interest that is not forgiven so that it will be fully repaid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank.

We filed our initial application for forgiveness in December 2020, and completed our application in early February 2021.

The following table summarizes the debt issuance costs as of December 31, 2020 and 2019:

December 31, 2020

Gross Notes Payable Debt Issuance Costs Net Notes Payable

Notes payable, current portion 1

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

Notes payable, net of current portion 2

12,525 ( 300 ) 12,225

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

(1) Net Notes Payable includes $ 6,866 of Gross Notes Payables and $ 0 Debt Issuance Cost and Debt Discount related to our PPP loan with Pinnacle Bank, all or a portion of which we expect will be forgiven and for which we are not obligated to make any payments until the Small Business Administration has made a decision regarding our application for loan forgiveness.

(2) Net Notes Payable, includes $ 1,989 of Gross Notes Payables and $ 0 Debt Issuance Cost and Debt Discount related to our PPP loan with Pinnacle Bank, all or a portion of which we expect will be forgiven and for which we are not obligated to make payments until the Small Business Administration has made a decision regarding our application for loan forgiveness.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

December 31, 2019

Gross Notes Payable Debt Issuance Costs Net Notes Payable

Notes payable, current portion $ 2,696 $ ( 125 ) $ 2,571

Notes payable, net of current portion 24,489 ( 347 ) 24,142

Total Notes Payable $ 27,185 $ ( 472 ) $ 26,713

The following table summarizes the future gross principal payments related to our outstanding debt as of December 31, 2020:

2021 $ 12,388

Gross Notes Payable $ 24,913

Senior Credit Facility - 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.

As described below, the Credit Agreement was also amended, but not restated, on August 10, 2020.

Following the amendment and restatement on December 31, 2019, the Credit Agreement provided for $ 20,000 in term loans and a $ 10,000 revolver and provided for new applicable margin rates for determining the interest payable on loans and amended certain of our financial covenants, including adding a covenant based on achieving EBITDA of at least $ 3,750 for the three months ended March 31, 2020, $ 4,850 for the six months ended June 30, 2020 and $ 5,950 for the nine months ended September 30, 2020, which covenant was in lieu of a leverage covenant calculated at March 31, 2020, June 30, 2020 and September 30, 2020.

On July 7, 2020, our senior lender identified certain events of default under our Credit Agreement and reserved their rights to pursue their remedies as a result of the events of default and issued a reservation of rights letter related to these events of default on July 10, 2020.

The primary event of default that triggered the reservation of rights letter was our failure to achieve Minimum EBITDA of $ 3,750 for the first quarter ending March 31, 2020, as required under Section 7 of the Credit Agreement, which failure was a result of impacts to our business driven primarily by COVID-19.

This covenant was set in December 31, 2019, before the Covid-19 pandemic and its possible effects on our business were known to our senior lender or us.

The other events of default our lender identified were technical defaults resulting from the fact that we were either unaware that our senior lender was considering the failure to achieve Minimum EBITDA an event of default as of May 11, 2020 or because we were unaware that the senior lender was still requiring that we provide certain requested documents in connection with our banking relationship.

Under the reservation of rights letter, the senior lender began accruing default interest from May 11, 2020.

On August 10, 2020, we entered into a waiver and amendment to our Credit Agreement and our Amended and Restated Guaranty and Security Agreement (the “Amendment”).

The Credit Agreement now provides for $ 10,000 in term loans and a $ 5,000 revolver and required that we make a principal payment of $ 9,750 on our outstanding term loans and reduce future availability on our revolver by $ 5,000 .

The Amendment provides for an accordion feature to our term loan that would allow us

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

to borrow up to an additional $ 15,000 in term loans subject to certain conditions following the Covenant Conversion Date.

The outstanding principal balance and all accrued and unpaid interest on the term loans is due on December 31, 2024.

The Amendment also reset our financial covenants and added a new financial covenant for minimum recurring revenue.

The Amendment does not require that we meet our fixed charge ratio or leverage ratio covenant until the Covenant Conversion Date.

The Coverage Conversion Date is the earlier of August 10, 2022 or the date in which we have satisfied the fixed charge coverage ratio and leverage ratio for two consecutive reporting periods.

Until such time, we are only obligated to comply with our minimum EBITDA and minimum recurring revenue covenants.

We expect to be in compliance with these amended financial covenants over the next twelve months and are compliant as of 12/31/2020.

In addition to the requirement that we pay $ 9,750 on our outstanding term loans, we were also required to pay our senior lender an amendment fee of $ 225 .

Our senior lender waived any prepayment penalty that would have otherwise been due on the $ 9,750 payment toward our term loan and agreed that we would not owe a prepayment penalty if we were to refinance our facility before December 31, 2021.

Finally, as a condition to the amendment, our senior lender required that we agree to obtain lender consent for any acquisitions until the later of August 10, 2021 or the Covenant Conversion Date.

Previously certain types of acquisitions were deemed permitted acquisitions, which did not require our lender’s consent.

We do not anticipate an issue with obtaining consent from our lender for accretive acquisitions.

As of December 31, 2020, and December 31, 2019, no amount was outstanding and $ 4,500 and $ 10,000 , respectively, was available for borrowing under the revolver.

Third Amended and Restated Credit Agreement

The Third Amended Restated Credit Agreement (the "Third Restated Credit Agreement"), which we entered on December 31, 2019, amends the applicable margin rates for determining the interest rate payable on the loans as follows:

Leverage Ratio Applicable Margin Relative

to Base Rate Loans Applicable Margin Relative to

LIBOR Rate Loans

2.25 % percentage points

3.25 % percentage points

≤ 3.00 :1.00, and ≥ 2.00 :1.00

2.75 % percentage points

3.75 % percentage points

3.25 % percentage points

4.25 % percentage points

The outstanding principal amount of the term loan is payable as follows:

• $ 125 beginning on March 31, 2020 and the last day of each fiscal quarter thereafter through and including December 31, 2021;

• $ 250 beginning on March 31, 2022 and the last day of each fiscal quarter thereafter.

The outstanding principal balance and all accrued and unpaid interest on the term loans is due on December 31, 2024.

The Third Restated Credit Agreement also:

• adds a covenant that requires that we achieve EBITDA of at least $ 3,750 for the three months ended March 31, 2020, $ 4,850 for the six months ended June 30, 2020 and $ 5,950 for the nine months ended September 30, 2020, which covenant is in lieu of a leverage covenant calculated at March 31, 2020, June 30, 2020 and September 30, 2020;

• amends our leverage ratio covenant to decrease the maximum ratio to 3.50 :1.00 at December 31, 2020, 3.25 :1.00 at March 31, 2021 and June 30, 2021 and 2.50 :1.00 at September 30, 2021 and each quarter-end thereafter;

• amends our fixed charge coverage ratio to be no less than 1.00 :1.00 at March 31, 2020, and each quarter end thereafter through and including December 31, 2021, 1.50 :1.00 at March 31, 2022, 1.60 :1.00 at June 30, 2022, and 2.00 :1:00 at September 30, 2022 and each quarter end thereafter.

As of December 31, 2020, compliance with certain financial covenants was not yet required under the Third Restated Credit Agreement as a result of the Amendment and all payments remain current.

We expect to be in compliance or be able to

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

obtain compliance through debt repayments with available cash on hand or cash we expect to generate from the ordinary course of operations over the next twelve months.

Due to the effects of Covid-19 on our business and the related need to support our operations, we applied for and received a loan from Pinnacle Bank under the Paycheck Protection Program during the second quarter of 2020.

Under the terms of our note with Pinnacle Bank, principal payments would have begun in November 2020.

However, the Small Business Administration, who administers loans issued under the Paycheck Protection Program, has issued guidance, deferring all payments that would be owed on this loan until the Small Business Administration makes a decision on our loan forgiveness application.

While we expect that the entire loan will be forgiven, we cannot be certain that the Small Business Administration will grant forgiveness of our entire loan.

If we do not receive forgiveness of our entire loan, we will be obligated to begin repaying the portion of the principal and interest that is not forgiven such that it is fully paid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank.

Further, if the portion of the PPP Loan that is not forgiven (the “Unforgiven Debt”) exceeds $ 3,250 or requires monthly payments of principal and interest in excess of $ 185 , it is likely we will be in default under our Third Restated Credit Agreement unless we obtain a waiver from our senior lender or are otherwise able to negotiate acceptable terms with our senior lender and Pinnacle Bank.

We filed our initial application for forgiveness of this loan in December 2020, and completed our application in early February 2021.

Given this, we expect that payments we may owe, if any, would not start until second quarter of 2021.

Under GAAP, we are required to report this entire loan as outstanding debt in our financial statements and further identify the current portion of this debt (e.g.

amounts which would be payable in the next 12 months) with reference to the actual terms of our note with Pinnacle Bank.

Notwithstanding how this loan is reported in our financial statements, we do not expect to make any payments on this note until at least second quarter of 2021, and then only to the extent that any portion of this note is not forgiven in accordance with the terms of the Paycheck Protection Program.

NOTE 7 - PROPERTY AND EQUIPMENT

Property and equipment and related depreciable useful lives as of December 31, 2020 and 2019 are composed of the following:

Furniture and equipment:

$ 6,818 $ 7,851

Software development costs 10,308 7,529

Leasehold improvements:

shorter of the lease term or life of the improvement 1,658 1,221

Total property and equipment 21,592 20,571

Less accumulated depreciation and amortization ( 13,311 ) ( 12,704 )

Property and equipment, net $ 8,281 $ 7,867

We record the amortization of our finance leases as depreciation expense on our Consolidated Statements of Comprehensive Loss.

Depreciation and amortization expenses relating to property and equipment were approximately $ 3,504 and $ 2,370 for 2020 and 2019, respectively.

We acquired software development costs from prior acquisitions and we continue to invest in software development.

We are developing products which we intend to offer utilizing software as-a-service (“SaaS”).

We follow the guidance of ASC 350-40, Intangibles- Goodwill and Other- Internal Use Software , for development costs related to these new products.

Costs incurred in the planning stage are expensed as incurred while costs incurred in the application and infrastructure stage are capitalized, assuming such costs are deemed to be recoverable.

Costs incurred in the operating stage are generally expensed as incurred except for significant upgrades and enhancements.

Capitalized software costs are amortized over the software’s estimated useful life, which management has determined to be three years .

During the years ended December 31, 2020 and 2019, we capitalized $ 2,780 and $ 2,756 of software development costs, respectively.

NOTE 8 - CERTAIN BALANCE SHEET ACCOUNTS

Prepaid expenses and other current assets as of December 31, 2020 and 2019 consist of the following:

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

Non-trade receivables related to custodial funds 418 $ 4,118

Receivable from sale of Workspace Management — 1,685

Prepaid expenses 1,394 1,454

Other current assets 1,472 1,294

Total 3,284 $ 8,551

Other accrued liabilities as of December 31, 2020 and 2019 consist of the following:

Income taxes payable $ — $ 2,608

Accrued expenses and other 1,380 3,948

Total $ 1,380 $ 6,556

NOTE 9 - STOCKHOLDERS’ EQUITY

SHELF REGISTRATION

In December 2020, we completed an underwritten public offering of 2,990,000 shares of our common stock at a public offering price of $ 7.25 .

We realized gross proceeds of approximately $ 21,700 before deducting underwriting discounts and estimated offering expenses.

In April 2018, we filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”) to provide access to additional capital, if needed.

Pursuant to the shelf registration statement, we may from time to time offer to sell in one or more offerings shares of our common stock or other securities having an aggregate value of up to $ 175,000 (which includes approximately $ 60,000 of unsold securities that were previously registered on other registration statements effective at the time of this filing of our current S-3).

The shelf registration statement relating to these securities became effective on April 16, 2018.

As of December 31, 2020, there is approximately $ 111,760 remaining available under the shelf registration statement.

SHARE REPURCHASE PROGRAM

On March 10, 2020, our Board of Directors authorized a new stock repurchase plan, under which we may repurchase up to $ 5,000 of our outstanding common stock.

This new stock repurchase program is in addition to the approximately 364,446 shares available under our existing stock repurchase plan.

Under this new stock repurchase program, we may repurchase shares in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

The extent to which we repurchase our shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by our management.

The repurchase program may be extended, suspended or discontinued at any time.

We expect to finance the program from existing cash resources.

STOCK AND STOCK OPTION PLANS

We have one active equity plan, the 2018 Incentive Award Plan (the “2018 Plan”).

The 2018 Plan, approved by our shareholders, is intended to replace our 2009 Equity Incentive Plan, as amended (the “2009 Plan”), however, the terms and conditions of the 2009 Plan will continue to govern any outstanding awards granted thereunder.

Employees and consultants of the Company, its subsidiaries and affiliates, as well as members of our board, are eligible to receive awards under the 2018 Plan.

The 2018 Plan provides for the grant of stock options, including incentive stock options (“ISOs”) and nonqualified stock options (“NQSOs”), stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance bonus awards, performance stock unit awards, other stock or cash-based awards and dividend equivalents to eligible individuals.

We generally grant stock options with exercise prices equal to the fair market value at the time of

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

The options generally vest over three to four years and are exercisable for a period of five to ten years beginning with the date of grant.

The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) 750,000 shares, (ii) any shares subject to issued and outstanding awards under the 2009 Plan as of the effective date of the 2018 Plan that expire, are cancelled or otherwise terminate following the effective date of the 2018 Plan.

In May 2019 and May 2020, our shareholders approved amendments to the 2018 Plan to increase the number of shares of common stock authorized for issuance by 600,000 shares and 1,000,000 shares, respectively.

We have 1,713,000 options and RSUs granted and outstanding pursuant to the 2018 Plan as of December 31, 2020.

In December 2019, we offered to exchange certain outstanding options to purchase shares of our common stock previously granted under the 2009 Plan and the 2018 Plan that have an exercise price per share higher than the greater of $ 8.50 or the closing trading price of our common stock on the offer expiration date (“eligible options”) for new RSUs to be granted under the 2018 Plan.

The offer exchange program was approved by our board of directors and by our shareholders earlier in 2019.

Under the offer exchange program, every 2.5 shares underlying an eligible option would be exchanged for one new RSU.

Upon expiration of the exchange offer in January 2020, we granted 187,000 RSUs in exchange for the cancellation of options to purchase 467,500 shares that were tendered by employees who participated in the offer exchange program.

We use the Black-Scholes option valuation model to value employee stock awards.

We estimate stock price volatility based upon our historical volatility.

Estimated option life and forfeiture rate assumptions are derived from historical data.

For stock-based compensation awards with graded vesting, we recognize compensation expense using the straight-line amortization method.

Total compensation expense recognized in the Consolidated Statements of Comprehensive Loss for stock based awards was $ 2,365 and $ 2,268 for 2020 and 2019, respectively.

The following table summarizes the weighted average assumptions used to develop their fair value for the year ending December 31, 2020 and 2019:

Grant date fair value $ 2.44 $ 2.65

Risk-free interest rate 0.20 % 1.25 %

Expected volatility 55 % 44 %

Expected life in years 2.85 3.50

Dividend yield — —

As of December 31, 2020, we reserved shares of common stock for future issuance under the 2009 Plan and 2018 Plan as follows:

Options and RSUs outstanding 1,713,000

Shares available for future grant 1,244,000

Shares reserved 2,957,000

The following table summarizes activity related to options during the year ended December 31, 2020.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

Shares Weighted

Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value

Outstanding at the beginning of the year 1,685,000 $ 9.71

Granted 771,000 6.52

Exercised ( 130,000 ) 5.55

Canceled ( 1,054,000 ) 10.06

Outstanding at the end of the year 1,272,000 $ 7.92 3.4 $ 533

Vested and expected to vest 1,256,000 $ 8.55 3.2 $ 456

Exercisable 375,000 $ 7.91 2.1 $ 98

The total intrinsic value of options exercised during the years ended December 31, 2020 and 2019 was $ 205 and $ 356 , respectively.

As of December 31, 2020, total compensation cost not yet recognized related to nonvested share options was $ 2,563 , which is expected to be recognized over a weighted average period of 1.75 years.

The following table summarizes activity related to RSUs during the year ended December 31, 2020.

Shares Weighted

Grant-Date Fair Value

Outstanding at the beginning of the year 70,000 $ 11.52

Granted 597,000 5.32

Released ( 76,000 ) 6.86

Forfeited ( 150,000 ) 5.47

Outstanding at the end of the year 441,000 $ 5.99

The total fair value of RSUs vested during the years ended December 31, 2020 and 2019 was $ 528 and $ 430 , respectively.

As of December 31, 2020, total compensation cost not yet recognized related to nonvested share options was $ 2,238 , which is expected to be recognized over a weighted average period of 2.32 years.

NOTE 10 - EMPLOYEE BENEFIT PLANS

401(K) SAVINGS PLAN

We sponsor a defined contribution 401(k) plan that is available to substantially all employees.

Our Board of Directors may amend or terminate the plan at any time.

We provided matching contributions to the plan of $ 124 and $ 814 in 2020 and 2019, respectively.

EMPLOYEE STOCK PURCHASE PLAN

Our Employee Stock Purchase Plan (“Purchase Plan”) was approved by the shareholders in June 2017.

The Purchase Plan allows all eligible employees to purchase a limited number of shares of our common stock during pre-specified offering periods at a discount established by the Board of Directors, not to exceed 15 % of the fair market value of the common stock, at the beginning or end of the offering period (whichever is lower).

Under the ESPP, 475,000 shares were reserved for issuance of which there remains 364,446 shares available for future issuance.

NOTE 11 - CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 771 were $ 4,852 at December 31, 2020.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 904 , were $ 4,808 at December 31, 2019

Deferred Commissions

Deferred commissions costs from contracts with customers were $ 3,792 and $ 2,697 at December 31, 2020 and December 31, 2019, respectively.

The amount of amortization recognized during the December 31, 2020 and 2019 period was $ 906 and $ 1,398 , respectively.

Deferred Revenue

Revenue of $ 3,783 was recognized during the year ended December 31, 2020 that was included in the deferred revenue balance at the beginning of the period.

Transaction Price Allocated to the Remaining Performance Obligations

As of December 31, 2020, approximately $ 31,503 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 2020 and 2019, there were no customers who individually represented 10% or more of consolidated revenue.

NOTE 12 - DISCONTINUED OPERATIONS

In December 2019, we sold our Workspace Management business to FM:Systems for approximately $ 121,500 in cash.

We used the proceeds to pay down debt owed to our senior lender.

In July 2020 we finalized our working capital adjustment and received funds of $ 1,687 representing the entire amount of the escrow.

This transaction enabled us to focus on and continue to deliver our HCM solutions to small and mid-size businesses.

The table below reflects the operating results of the Workspace Management business reported as discontinued operations:

Year Ended December 31

Revenue $ 24,619

Income from discontinued operations $ 3,498

Gain on sale of discontinued operations 94,293

Income tax expense ( 25,499 )

Income from discontinued operations, net of taxes $ 72,292

The table below reflects the depreciation, amortization, capital expenditures, and significant operating and investing non-cash items of the Workspace Management business reported as discontinued operations:

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

Year Ended December 31

Depreciation and amortization $ 1,060

Provision for doubtful accounts ( 87 )

Share based compensation 278

Capital expenditures ( 417 )

Software capitalization ( 1,083 )

Gain on sale of discontinued operations ( 94,293 )

NOTE 13 - NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per common share for the years ended December 31, 2020 and 2019.

Loss from continuing operations $ ( 16,311 ) $ ( 42,291 )

Income from discontinued operations — 72,292

Net income (loss) $ ( 16,311 ) $ 30,001

Weighted-average shares of common stock outstanding, basic and diluted 15,910,000 15,511,000

Basic and diluted income (loss) per share

Loss per share from continuing operations $ ( 1.03 ) $ ( 2.73 )

Income per share from discontinued operations 0.00 4.66

Income (loss) per share $ ( 1.03 ) $ 1.93

We have excluded stock options to acquire 1,713,000 and 1,756,000 shares for 2020 and 2019, respectively, from the computation of the dilutive stock options because the effect of including the stock options would have been anti-dilutive.

NOTE 14 - INCOME TAXES

The components of pre-tax loss from continuing operations for the years ended December 31, 2020 and 2019 are as follows:

Domestic $ ( 15,974 ) $ ( 66,402 )

Total $ ( 15,974 ) $ ( 66,402 )

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

The components of the provision (benefit) for income taxes attributable to continuing operations for the years ended December 31, 2020 and 2019 are as follows:

Federal $ — $ ( 21,697 )

State ( 214 ) ( 1,899 )

Foreign ( 1 ) 42

Total current ( 215 ) ( 23,554 )

Federal 259 ( 210 )

State 293 ( 347 )

Total deferred 552 ( 557 )

$ 337 $ ( 24,111 )

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred taxes at December 31, 2020 and 2019 are as follows:

Deferred tax assets:

Net operating losses $ 11,570 $ 8,004

Research and development credit carryforwards 3,246 3,104

Minimum tax credit carryforwards — 31

Disallowed interest expense carryforwards 54 —

Stock compensation 258 168

Deferred revenue 148 588

Accrued expenses 590 349

Lease liabilities 1,931 1,905

Goodwill — 2,132

Other 303 347

18,100 16,628

Valuation allowance ( 6,892 ) ( 5,204 )

Net deferred tax assets 11,208 11,424

Deferred tax liabilities:

Acquired intangibles ( 5,930 ) ( 7,828 )

Fixed assets ( 284 ) ( 125 )

Capitalized software ( 1,524 ) ( 1,353 )

Deferred commission ( 1,000 ) ( 698 )

Right-of-use asset ( 1,721 ) ( 1,756 )

Goodwill ( 1,637 ) —

( 12,096 ) ( 11,760 )

Net deferred liabilities $ ( 888 ) $ ( 336 )

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

At December 31, 2020, we had federal net operating loss carryforwards of approximately $ 48,435 , research and development credit carryforwards of approximately $ 3,579 .

The net operating loss and research and development credit carryforwards will expire in varying amounts from 2021 through 2040 , if not utilized.

Approximately $ 16,962 of the net operating loss carryforwards carry forward indefinitely, but can only offset up to 80 % of taxable income.

As a result of various acquisitions by us in prior years, we may be subject to a substantial annual limitation in the utilization of the net operating losses and credit carryforwards due to the “change in ownership” provisions of Section 382 of the Internal Revenue Code of 1986.

The annual limitation may result in the expiration of net operating losses before utilization.

Due to the uncertainty surrounding the timing of realizing the benefits of our favorable tax attributes in future tax returns, we have placed a valuation allowance against our net deferred tax assets, exclusive of jurisdictions in which we have net deferred tax liabilities.

During the year ended December 31, 2020, the valuation allowance increased by approximately $ 1,688 due primarily to operations.

Our provision for income taxes attributable to continuing operations for the years ended December 31, 2020 and 2019 differ from the expected tax expense (benefit) amount computed by applying the statutory federal income tax rate of 21% to income before income taxes as a result of the following:

Computed at statutory rate $ ( 3,355 ) $ ( 13,944 )

State taxes, net of federal benefit ( 632 ) ( 1,901 )

Permanent items and other ( 379 ) 992

Credit carryforwards ( 122 ) 2,014

Foreign income taxed at different rates — 22

Goodwill impairment — 3,907

Change in tax carryforwards not benefitted 3,137 ( 352 )

Change in valuation allowance 1,688 ( 14,849 )

$ 337 $ ( 24,111 )

Under ASC 740-10, Income Taxes , we periodically review the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions.

We use a “more likely than not” criterion for recognizing an asset for unrecognized income tax benefits or a liability for uncertain tax positions.

We have determined we have the following unrecognized assets or liabilities related to uncertain tax positions as of December 31, 2020.

We do not anticipate any significant changes in such uncertainties and judgments during the next twelve months.

To the extent we are required to recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability.

The reconciliation of our unrecognized tax benefits is as follows:

Balance at December 31, 2018 $ 1,435

Additions based on tax positions related to the current year 106

Additions for tax positions of prior years 59

Reductions for tax positions of prior years ( 744 )

Balance at December 31, 2019 $ 856

Additions based on tax positions related to the current year ( 232 )

Additions for tax positions of prior years 19

Reductions for tax positions of prior years ( 56 )

Balance at December 31, 2020 $ 587

As of December 31, 2020, we had $ 587 of unrecognized tax benefits, of which $ 15 would affect the effective tax rate if recognized.

Our assessment of our unrecognized tax benefits is subject to change as a function of our financial statement audit.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

During the twelve months ended December 31, 2020, we recognized $ 0 of interest and penalties in our income tax expense.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

We file tax returns in the U.S.

federal jurisdiction and in several state jurisdictions.

We are subject to U.S.

federal income tax examinations for years ending on or after December 31, 2017 and are subject to state and local income tax examinations by tax authorities for years ending on or after December 31, 2016.

We are not currently under audit for any federal or state jurisdictions.

NOTE 15 - LEASES

We have entered into office space lease agreements, which qualify as operating leases under Topic 842.

Under such leases, the lessors receive annual minimum (base) rent.

The leases have original terms (excluding extension options) ranging from one to ten years .

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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

In the accompanying consolidated statements of comprehensive income (loss), rent expense is included in operating expenses under selling, general and administrative expenses.

The components of the rent expense for the year ended December 31, 2020 were as follows:

Operating lease cost

Sublease income

Net rent expense

As of December 31, 2020, we had lease liabilities of $ 7,199 , of which $ 1,833 is presented as a current liability, and Right of Use ("ROU") assets of $ 6,450 on the accompanying consolidated balance sheet.

For purposes of calculating the ROU assets and lease liabilities for such leases, 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.

Our incremental borrowing rate of 10 % is estimated to approximate our interest rate on a collateralized basis with similar terms and payments, using a portfolio approach.

The weighted average remaining lease term of leases with a lease liability as of December 31, 2020 is 5 years.

Supplemental cash flow information related to operating leases for the year ended December 31, 2020 follow:

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

Operating cash outflows from operating leases

Non-cash operating activities:

Operating lease assets obtained in exchange for new operating lease liabilities

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

Total Operating Leases

Total minimum lease payments

Less imputed interest

Total lease liabilities

NOTE 16 - SUBSEQUENT EVENTS

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data or otherwise noted)

The Company evaluated subsequent events through the date of the filing of this Annual Report on Form 10-K with the SEC to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of December 31, 2020, and events which occurred subsequent to December 31, 2020 but were not recognized in the financial statements.

The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements.

** Furnished herewith.

FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ASURE SOFTWARE, INC.

March 11, 2021 By /s/ PATRICK GOEPEL

March 14, 2022 By:

/s/ PATRICK GOEPEL

Patrick Goepel

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature Title Date

/s/ PATRICK GOEPEL Chief Executive Officer, Chairman of the Board and Director

(Principal Executive Officer) March 11, 2021

Patrick Goepel

/s/ JOHN PENCE Chief Financial Officer

(Principal Financial and Accounting Officer) March 11, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signed Title Date

/s/ PATRICK GOEPEL Chief Executive Officer, Chairman of the Board of Directors March 14, 2022

Patrick Goepel Principal Executive Officer

/s/ JOHN PENCE Chief Financial Officer March 14, 2022

John Pence Principal Financial and Accounting Officer

/s/ DANIEL GILL Lead Independent Director March 14, 2022

8 unchanged sentences

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-K

Item 9A. Controls and Procedures