What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-09 compared with 2021-11-08 · 122 added, 250 removed, 326 unchanged (53% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

September 30, 2021 December 31, 2020

ASSETS (unaudited)

March 31, 2022 December 31, 2021

Current assets:

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

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

Cash, cash equivalents, and restricted cash $ 12,054 $ 13,427

Accounts receivable, net of allowance for doubtful accounts of $ 2,264 and $ 2,210 at March 31, 2022 and December 31, 2021, respectively

Inventory 286 246

36 unchanged sentences

44,000 shares authorized;

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

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

20,455 and 20,412 shares issued, 20,071 and 20,028 shares outstanding at March 31, 2022 and December 31, 2021, respectively

Treasury stock at cost, 384 shares at March 31, 2022 and December 31, 2021

( 5,017 ) ( 5,017 )

6 unchanged sentences

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except per share amounts)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited)

Recurring $ 23,004 $ 19,242

10 unchanged sentences

Loss from operations ( 2,171 ) ( 1,269 )

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

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

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

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

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

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

Other comprehensive (loss) income:

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

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

Basic and diluted earnings (loss) per share

Interest expense and other, net ( 816 ) ( 224 )

Loss from operations before income taxes ( 2,987 ) ( 1,493 )

Income tax expense 30 105

Net loss ( 3,017 ) ( 1,598 )

Other comprehensive loss:

Unrealized loss on marketable securities ( 1,063 ) ( 139 )

Comprehensive loss $ ( 4,080 ) $ ( 1,737 )

Basic and diluted loss per share

Basic $ ( 0.15 ) $ ( 0.08 )

11 unchanged sentences

Share based compensation — — — 729 — — 729

Share issuance costs — — — ( 23 ) — — ( 23 )

Net loss — — — — ( 3,017 ) — ( 3,017 )

Other comprehensive loss — — — — — ( 1,063 ) ( 1,063 )

Balance at March 31, 2021 19,021 $ 194 $ ( 5,017 ) $ 420,561 $ ( 271,551 ) $ 465 $ 144,652

Stock issued upon option exercise and vesting of restricted stock units 49 1 — 188 — — 189

Stock issued, ESPP 29 — — 170 — — 170

Share based compensation — — — 714 — — 714

Net income — — — — 3,764 — 3,764

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

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

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

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

Share based compensation — — — 784 — — 784

Net income — — — — 5,328 — 5,328

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

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

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

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

Outstanding Common Stock Amount Treasury Stock Additional Paid-in

Capital Accumulated Deficit Other Comprehensive

Income (Loss) Total Stockholders’

March 31, 2022 20,071 $ 205 $ ( 5,017 ) $ 430,641 $ ( 269,777 ) $ ( 1,162 ) $ 154,890

Common Stock Outstanding Common Stock Amount Treasury Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Income (Loss) Total Stockholders’ Equity

Balance at December 31, 2020 18,970 $ 193 $ ( 5,017 ) $ 419,827 $ ( 269,954 ) $ 604 $ 145,653

1 unchanged sentence

Share based compensation — — — 626 — — 626

Share issuance costs — — — ( 23 ) — — ( 23 )

Net loss — — — — ( 1,598 ) — ( 1,598 )

Other comprehensive income — — — — — 65 65

Other comprehensive loss — — — — — ( 139 ) ( 139 )

Balance at March 31, 2021 19,021 $ 194 $ ( 5,017 ) $ 420,561 $ ( 271,552 ) $ 465 $ 144,651

Stock issued, ESPP 32 — — 157 — — 157

Stock issued upon option exercise and vesting of restricted stock units 66 1 — 301 — — 302

Share based compensation — — — 588 — — 588

Net loss — — — — ( 3,944 ) — ( 3,944 )

Other comprehensive income — — — — — 562 562

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

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

Share based compensation — — — 707 — — 707

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

Other comprehensive income — — — — — 11 11

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

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

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income (loss) $ 7,494 $ ( 10,470 )

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

Net loss $ ( 3,017 ) $ ( 1,598 )

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

Depreciation and amortization 4,754 3,862

4 unchanged sentences

Provision for deferred income taxes 22 98

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

Net realized gains on sales of available-for-sale securities ( 203 ) ( 153 )

1 unchanged sentence

(Gain) loss on disposals of long-term assets 1 —

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

Changes in operating assets and liabilities:

7 unchanged sentences

Deferred revenue ( 2,137 ) ( 2,761 )

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

Net cash provided by (used in) operating activities 2,530 ( 1,361 )

Cash flows from investing activities:

4 unchanged sentences

Proceeds from sales and maturities of available-for-sale securities 501 1,926

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

Net cash (used in) provided by investing activities ( 6,719 ) 645

Cash flows from financing activities:

Proceeds from notes payable 29,425 8,856

Payments of notes payable — ( 2,186 )

Payments of contingent purchase consideration ( 1,784 ) —

Debt financing fees ( 878 ) ( 245 )

Net proceeds from issuance of common stock — 108

Net change in client fund obligations 21,296 ( 66,337 )

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

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

Net cash provided by (used in) financing activities 21,296 ( 68,415 )

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents 17,107 ( 69,131 )

Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 198,743 324,985

4 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

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

4 unchanged sentences

Cash paid for interest $ 684 $ 219

Cash paid for income taxes $ 332 $ 3,469

Net assets added from acquisitions $ 763 $ —

Cash (refunded) paid for income taxes $ ( 14 ) $ 183

Non-cash investing and financing activities:

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

Notes payable issued for acquisitions $ 411 $ —

Stock issuance for acquisitions $ 6,428 $ —

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

1 unchanged sentence

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION

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

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

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

1 unchanged sentence

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 platform vision is to become the most trusted HCM resource to entrepreneurs everywhere by helping our clients grow their businesses.

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

1 unchanged sentence

The Asure HCM suite includes four product lines:

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

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

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

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

We have prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly, they do not include all information and footnotes required under U.S.

1 unchanged sentence

GAAP”) for complete financial statements.

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

In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of March 31, 2022 and the results of operations, statements of changes in stockholders’ equity for the three months ended March 31, 2022 and March 31, 2021, and our statements of cash flows for the three months ended March 31, 2022 and March 31, 2021.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto filed with the SEC in our annual report on Form 10-K for the fiscal year ended December 31, 2021 (our “2021 Annual Report on Form 10-K”).

5 unchanged sentences

These estimates are subjective in nature and involve judgments.

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

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

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

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 Condensed Consolidated Financial Statements for continued reasonableness.

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

CASH EQUIVALENTS

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.

2 unchanged sentences

Carrying value approximates fair value.

Cash and cash equivalents are deposited at various area banks, which at times may exceed federally insured limits.

The Company monitors the viability of the banking institutions carrying its assets on a regular basis, and has the ability to transfer cash to various institutions during times of risk.

The Company has not experienced any losses related to these cash balances, and believes its credit risk to be minimal.

SIGNIFICANT RISKS AND UNCERTAINTIES

The coronavirus (“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 our business, financial condition, results of operations and growth prospects to be adversely affected in the future.

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

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 and potential variants, the extent and effectiveness of containment actions, including the administration of vaccinations 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.

Restricted cash consists of cash balances which are restricted as to withdrawal or usage.

As of March 31, 2022, the Company has $500 of restricted cash related to our agreement with Atlantic Capital Bank.

RECENT ACCOUNTING PRONOUNCEMENTS

6 unchanged sentences

The adoption of ASU 2019-12 resulted in no material impact to the Company’s financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments — Credit Losses (Topic 326):

This update establishes a new approach to estimate credit losses on certain financial instruments.

The update requires financial assets measured at amortized cost to be presented at the net amount expected to be collected.

The amended guidance will also update the impairment model for available-for-sale debt securities, requiring entities to determine whether all or a portion of the unrealized loss on such securities is a credit loss.

The Company is currently evaluating this standard and the potential effects of these changes to its consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, 2023.

RECLASSIFICATION

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

The Company reclassified its presentation of restricted cash and restricted cash equivalents included in funds held for clients as of March 31, 2021 in the Condensed Consolidated Statements of Cash Flows to conform to the current period presentation.

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

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

ACCUMULATED OTHER COMPREHENSIVE LOSS

As of March 31, 2022 and December 31, 2021, accumulated other comprehensive loss consisted of net unrealized gains and losses on available-for-sale securities.

NOTE 3 - BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

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

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

(i) $ 10,325 in cash at closing, (ii) the delivery of a promissory note in the amount of $ 2,213 , and (iii) the delivery of 244 shares of the Company’s common stock, which the parties agreed had an aggregate value of $ 2,213 as of September 31, 2021.

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

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

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

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

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

The promissory note was adjusted to $ 4,318 to account for an estimated shortfall in working capital when compared to the working capital target at closing of the transaction.

The Second Asset Purchase Agreement is subject to post-closing adjustments for working capital and purchase price.

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

For the year ended December 31, 2021, there was a measurement period adjustment to the fair value of the contingent consideration of $ 465 .

As of March 31, 2022, certain amounts of funds held for clients on our Condensed Consolidated Balance Sheets are in the process of being transferred to the Company’s legal possession, as stipulated by the respective transitional service agreements included as part of the Asset Purchase Agreement and Second Asset Purchase Agreement.

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

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

Effective January 1, 2022, the Company acquired customer relationships of a payroll business for a cash payment of $ 1,970 , which included $ 31 of transaction costs, and the delivery of a promissory note in the amount of $ 411 .

The acquired customer relationships are recorded as an intangible asset and are being amortized on a straight-line basis over eight years.

NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS

9 unchanged sentences

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

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

The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, respectively (in thousands):

Total Carrying Value Level 1 Level 2 Level 3

September 30, 2021

March 31, 2022

Funds held for clients

6 unchanged sentences

December 31, 2021

Cash equivalents

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

Funds held for clients

5 unchanged sentences

Total $ 4,329 $ — $ — $ 4,329

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

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

December 31, 2020 $ 3,880

Contingent purchase consideration ( 1,975 )

Issued for acquisitions 3,038

September 30, 2021 $ 4,943

(1) See Note 2 — Business Combinations for further discussion regarding the contingent purchase consideration.

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

September 30, 2021

March 31, 2022

Restricted cash equivalents $ 1,144 $ — $ — $ 1,144

15 unchanged sentences

$ 33,278 $ 12 $ ( 114 ) $ 33,176

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

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

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

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

As of March 31, 2022 and December 31, 2021, there were 3 and 10 securities, respectively, in an unrealized gain position and there were 69 and 57 securities in an unrealized loss position, respectively.

As of March 31, 2022, these unrealized losses were less than $ 55 individually and $ 1,171 in the aggregate.

As of December 31, 2021, these unrealized losses were less than $ 11 individually and $ 114 in the aggregate.

3 unchanged sentences

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

(2) At March 31, 2022 and December 31, 2021, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets.

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

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Restricted cash and cash equivalents held to satisfy client funds obligations $ 203,796 $ 185,316

2 unchanged sentences

Total funds held for clients $ 238,679 $ 217,376

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

Expected maturities of available-for-sale securities as of March 31, 2022 are as follows (in thousands):

One year or less $ 7,227

1 unchanged sentence

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

December 31, 2020 Acquisitions September 30, 2021

2021 Acquisitions 2022

Goodwill $ 86,011 $ — $ 86,011

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

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

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

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

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

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

As of March 31, 2022, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

Gross Intangible Assets 2021 Acquisitions 2022

Customer relationships $ 114,611 $ 2,360 $ 116,971

4 unchanged sentences

$ 129,536 $ 2,360 $ 131,896

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

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

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

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

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

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

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

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

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

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

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

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

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

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

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

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

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

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

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

The gross carrying amount and accumulated amortization of our intangible assets as of March 31, 2022 are as follows (in thousands, except weighted average periods):

Weighted Average

1 unchanged sentence

Amortization Net

September 30, 2021

March 31, 2022

Customer relationships 8.7 $ 116,971 $ ( 42,887 ) $ 74,084

12 unchanged sentences

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

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

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

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

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

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

2021 (three months) $ 3,712

Amortization expenses recorded in Operating Expenses were $ 3,432 and $ 2,528 for the three months ended March 31, 2022 and 2021, respectively.

Amortization expenses recorded in Cost of Sales were $ 296 and $ 379 for the three months ended March 31, 2022 and 2021, respectively.

There was no impairment of intangibles during the three months ended March 31, 2022 based on the qualitative assessment performed by the Company.

However, if market, political and other conditions over which we have no control continue to affect the capital markets and our stock price declines, we may experience an impairment of our intangibles in future quarters.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of March 31, 2022 (in thousands):

2022 $ 10,946

Thereafter 10,624

1 unchanged sentence

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

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

Maturity Cash Interest Rate March 31, 2022 December 31, 2021

Subordinated Notes Payable – Acquisitions (1)

1 unchanged sentence

$ 8,815 $ 8,178

PPP Loan 6/30/2021 1.00 % — 8,856

Term Loan 12/31/2024 5.25 % — 9,875

Senior Credit Facility 10/1/2025 9.00 % 30,170 30,224

Total Notes Payable $ 38,321 $ 24,913

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

Gross Notes Payable $ 38,985 $ 38,402

(1) See Note 2 — Business Combinations for further discussion regarding the notes payable related to acquisitions.

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

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

September 30, 2021

March 31, 2022

Current portion of notes payable $ 2,079 $ ( 306 ) $ 1,773

5 unchanged sentences

Total $ 38,402 $ ( 3,375 ) $ 35,027

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

2021 (three months) $ —

The following table summarizes the future principal payments related to our outstanding debt as of March 31, 2022 (in thousands):

Total $ 38,985

4 unchanged sentences

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

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

PPP Loan with Pinnacle Bank

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

In June 2021, we received notice from our Lender that the Small Business Administration (“SBA”) had approved our application for forgiveness of our PPP Loan.

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

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

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

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

Term Loan with Wells Fargo N.A.

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

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

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

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

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

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

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

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

See Note 2 — Business Combinations for further discussion regarding the issuance of subordinated notes payable related to acquisitions.

Senior Credit Facility with Structural Capital Investments III, LP

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

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

15 unchanged sentences

NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

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

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,264 , were $ 6,608 at March 31, 2022.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,210 , were $ 5,308 at December 31, 2021.

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

No customers represented more than 10% of our net accounts receivable balance as of March 31, 2022 and December 31, 2021, respectively.

Deferred Commissions

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

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Deferred commission costs from contracts with customers were $ 5,174 and $ 4,684 at March 31, 2022 and December 31, 2021, respectively.

The amount of amortization recognized for the three months ended March 31, 2022 and March 31, 2021 was $ 345 and $ 232 , respectively.

Deferred Revenue

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

During the three months ended March 31, 2022 and March 31, 2021, revenue of $ 3,058 and $ 3,406 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

Transaction Price Allocated to the Remaining Performance Obligations

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

As of March 31, 2022, approximately $ 22,433 of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 70 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Revenue Concentration

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

During the three months ended March 31, 2022 and 2021, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 - LEASES

5 unchanged sentences

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

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

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

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

2021 2020 2021 2020

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

The components of the rent expense for the three months ended March 31, 2022 and 2021 are as follows (in thousands):

Three Months Ended March 31,

Operating lease cost $ 557 $ 570

2 unchanged sentences

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

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

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

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

Nine Months Ended September 30,

The weighted average discount rate of our operating leases is 8 % as of March 31, 2022 and December 31, 2021, respectively.

The weighted average remaining lease term is five years and six years as of March 31, 2022 and December 31, 2021, respectively.

Supplemental cash flow information related to operating leases for the three months ended March 31 are as follows (in thousands):

Three Months Ended March 31,

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

2 unchanged sentences

Operating lease assets obtained in exchange for new operating lease liabilities $ — $ 325

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

2021 (three months) $ 598

Thereafter 566

4 unchanged sentences

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

The 2018 Plan, approved by our shareholders, replaced our 2009 Equity Incentive Plan, as amended (the “2009 Plan”), however, the terms and conditions of the 2009 Plan continue to govern any outstanding awards previously granted under the 2009 Plan.

The 2018 Plan, approved by our shareholders, replaced 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.

The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) 2,350,000 shares, and (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 canceled or otherwise terminate following the effective date of the 2018 Plan.

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

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

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

These awards will vest over a three year period.

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

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

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

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

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

NOTE 9 – NET EARNINGS (LOSS) PER SHARE

We compute net earnings (loss) per share based on the weighted average number of common shares outstanding for the period.

Diluted net earnings (loss) per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options.

We have 2,334,289 options and RSUs granted and outstanding pursuant to the 2018 Plan as of March 31, 2022.

As of March 31, 2022, the number of shares available for issuance under the 2018 Plan is 197,622 .

Share based compensation for our stock option plans for the three months ended March 31, 2022 and March 31, 2021 was $ 729 and $ 626 .

We issued no common stock related to exercises of stock options for the three months ended March 31, 2022 and issued 19,709 shares of common stock related to exercises for the three months ended March 31, 2021.

We issued 42,667 and 34,920 shares of common stock upon the vesting of restricted stock units, net for the three months ended March 31, 2022 and 2021, respectively.

NOTE 10 - NET LOSS PER SHARE

We compute net loss per share based on the weighted average number of common shares outstanding for the period.

Diluted net loss per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options.

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

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

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

2021 2020 2021 2020

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

We have excluded stock options and restricted stock units of 308,799 for the three months ended March 31, 2022 and 1,854,000 shares for the three months ended March 31, 2021 from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per common share for the three months ended March 31 (in thousands, except per share amounts):

Three Months Ended March 31,

Net loss $ ( 3,017 ) $ ( 1,598 )

Weighted-average shares of common stock outstanding 20,041 19,007

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

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

Basic loss per share $ ( 0.15 ) $ ( 0.08 )

Net loss $ ( 3,017 ) $ ( 1,598 )

Weighted-average shares of common stock outstanding 20,041 19,007

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

NOTE 10 – EMPLOYEE RETENTION TAX CREDIT

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

a refundable tax credit against certain employment taxes.

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

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

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

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

Diluted loss per share $ ( 0.15 ) $ ( 0.08 )

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

What changed 10-Q

Item 1. Financial Statements