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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-03-14 · 88 added, 122 removed, 717 unchanged (23% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Changes in Stockholders’ Equity

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Notes to the Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

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

Evaluation of the acquisition-date fair value of customer relationship assets

As described in Note 2 to the financial statements the Company made two significant acquisitions during the year ended December 31, 2021.

As a result of the transactions, the Company acquired customer relationship assets representing the generation of future income from the acquirees’ existing customers.

The acquisition-date fair value for the customer relationship assets was $26.3 million.

The principal considerations for our determination that performing procedures relating to evaluating the acquisition-date fair value of customer relationship assets is a critical audit matter are that there is significant subjectivity involved in evaluating certain inputs in the discounted cash flow model used to determine the fair value of such assets.

This in turn led to high degree of auditor judgment, and an increased effort in performing audit procedures in evaluating the reasonableness of management’s forecasts of future cash flows as well as the selection of assumptions including the discount rates and attrition rates, and the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.

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

These procedures included, among others, (i) evaluating the reasonableness of managements’ forecasts of future cash flows by comparing the projections to historical results;

(ii) testing the source information underlying the determination of the discount rates and attrition rates and testing the mathematical accuracy of the calculations;

and (iii) developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the acquisition-date fair value of customer relationship assets.

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

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

Costa Mesa, California

March 14, 2022

Los Angeles, California

February 27, 2023

ASURE SOFTWARE, INC.

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Employee retention tax credit — 10,533

Income (loss) from operations before income taxes 3,995 ( 15,974 )

Other income, net 1,391 150

(Loss) income from operations before income taxes ( 14,354 ) 3,995

Income tax expense 112 802

Net income (loss) 3,193 ( 16,311 )

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities ( 703 ) 629

Comprehensive income (loss) $ 2,490 $ ( 15,682 )

Basic and diluted earnings (loss) per share

Net (loss) income ( 14,466 ) 3,193

Other comprehensive loss:

Unrealized loss on marketable securities ( 2,384 ) ( 703 )

Comprehensive (loss) income $ ( 16,850 ) $ 2,490

Basic and diluted (loss) earnings per share

Basic $ ( 0.72 ) $ 0.17

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Stock issued, ESPP 56 1 — 339 — — 340

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

Share based compensation — — — 2,990 — — 2,990

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

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

Other comprehensive income — — — — — 629 629

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

Net income — — — — 3,193 — 3,193

Other comprehensive loss — — — — — ( 703 ) ( 703 )

Balance at December 31, 2021 20,028 $ 204 $ ( 5,017 ) $ 429,912 $ ( 266,760 ) $ ( 99 ) $ 158,240

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Share issuance costs — — — — — — —

Net income — — — — 3,193 — 3,193

Net loss — — — — ( 14,466 ) — ( 14,466 )

Other comprehensive loss — — — — — ( 2,384 ) ( 2,384 )

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Cash flows from operating activities:

Net income (loss) $ 3,193 $ ( 16,311 )

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

Net (loss) income $ ( 14,466 ) $ 3,193

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

Depreciation and amortization 18,708 16,246

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Share-based compensation 3,179 2,990

(Gain) loss on disposals of long-term assets ( 32 ) 59

Loss (gain) on disposals of long-term assets 25 ( 32 )

Change in fair value of contingent purchase consideration ( 1,245 ) ( 160 )

Goodwill and intangible asset adjustment 18 —

Changes in operating assets and liabilities:

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Net change in client fund obligations ( 11,055 ) ( 103,434 )

Net cash (used in) provided by financing activities ( 90,650 ) 208,097

Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 126,242 ) 190,925

Net cash used in financing activities ( 12,376 ) ( 90,650 )

Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 34,701 ) ( 126,242 )

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

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

Cash and cash equivalents $ 13,427 $ 28,577

Cash and cash equivalents and restricted cash $ 17,010 $ 13,427

Restricted cash and restricted cash equivalents included in funds held for clients 147,032 185,316

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

AsureMarketplace™ provides clients and their employees the benefits of secure verifications of employment and income through existing core HCM technology.

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

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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 HR Services.

The Asure HCM suite includes five product lines:

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

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.

PRINCIPLES OF CONSOLIDATION

We have prepared our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have included the accounts of our wholly owned subsidiaries.

GAAP”) and have included the accounts of our wholly owned subsidiaries.

We have eliminated all intercompany transactions and balances in consolidation.

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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, 2021, we were not party to any pending legal proceedings.

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of December 31, 2022, we were not party to any material legal proceedings.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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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 December 31, 2021 in the 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.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

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

As of December 31, 2021, the Company has $500 of restricted cash related to our agreement with Atlantic Capital Bank.

As of December 31, 2022, the Company ha s $500 of restricted cash related to collateralizing a letter of credit issued by South State Bank in connection with its money transmission licenses.

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

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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.

As part of the material weakness identified in 2019 that was 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.

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In 2021, the Company disbursed an additional $ 976 of these funds, resulting in a segregated $ 2,832 in funds held for clients with an offsetting liability in client fund obligations at December 31, 2021.

The Company continues its efforts to identify the owners of these funds and the Company expects to escheat to the state of Delaware any funds for which it is unable to identify the owner.

The Company would expect to have this process completed during fiscal ye ar 2022.

In 2022, the Company escheated $ 2,705 to the state of Delaware.

The residual balance of $ 127 is still in the process of being returned to the clients or will be escheated to the appropriate states.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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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 not 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

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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.

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Revenue allocated to hardware under a hardware-as-a-service 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.

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 Income (Loss).

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

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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.

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

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

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

In addition, ERTC revenues that are generated under percentage of recovery arrangements with referral partners are deferred until the client collects the credit.

ADVERTISING COSTS

We expense advertising costs as we incur them.

Advertising expenses were $ 108 and $ 34 for the years ended December 31, 2021 and 2020, respectively.

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

Advertising expens es were $ 1,057 and $ 108 f or the years ended December 31, 2022 and 2021, respectively.

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

LEASE OBLIGATIONS

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The first contingent purchase consideration of $ 1,975 , was offset by certain net amounts owed to us by the seller primarily 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 is expected to be paid 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 December 31, 2021 was the aforementioned $ 191 offset.

The adjustment to the fair value of the contingent consideration as of December 31, 2022 was an increase of $ 394 .

The contingent purchase consideration of $2,299 was valued based on the trailing twelve-month revenue at October 31, 2021 and will be settled in 2023.

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

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

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

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

(i) $ 10,325 in cash at closing, (ii) the delivery of a promissory note in the amount of $ 2,223 , and (iii) the delivery of 244 shares of the Company’s common stock as of December 31, 2022.

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

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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 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 Third 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 December 31, 2021, certain amounts of funds held for clients on our 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 Second and Third Asset Purchase Agreements.

The Second Asset Purchase Agreement and Third 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 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.

Finally, the Third Asset Purchase Agreement set forth a promissory note valued at $ 4,080 and a contingent consideration estimate of $655 as of December 31, 2022.

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 3 - INVESTMENTS AND FAIR VALUE MEASUREMENTS

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Contingent purchase consideration paid ( 130 )

Measurement period adjustment to fair value ( 645 )

Change in fair value of contingent purchase consideration ( 160 )

Change in fair value of contingent liability ( 1,245 )

Issued for acquisitions —

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NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment as of December 31 consisted of the following (in thousands):

Furniture and equipment $ 6,935 $ 6,818

Property and equipment as of December 31, 2022 and 2021 consisted of the following (in thousands):

Estimated Useful Life

Furniture and equipment 2 to 5 $ 7,552 $ 6,935

Software development costs 3 18,678 14,449

Software 2,808 2,808

Leasehold improvements 1,638 1,658

Software 2 to 5 2,808 2,808

Leasehold improvements 2 to 5 1,878 1,638

Gross property and equipment 30,916 25,830

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$ 6,947 $ 8,178

PPP Loan n/a 1.00 % — 8,856

Term Loan n/a 5.25 % — 9,875

Senior Credit Facility 10/1/2025 13.25 % 30,607 30,224

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Subordinated Notes Payable - Acquisitions

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

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

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

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

There remains an outstanding principal balance on the subordinated note payable issued in connection with the purchase of a business the Company acquired in 2020, which note matured on July 1, 2022.

Payment on the principal balance was withheld as security for outstanding claims for which the Company is entitled to indemnification under the purchase agreement.

The Company will make payment, subject to its right to offset under the purchase agreement, when the claims are resolved.

Due to its rights under the purchase agreement and the terms of this note, the Company was not in default under the note.

See Note 13 - Subsequent Events for information related to the resolution of these outstanding claims and the outstanding principal balance on this subordinated note payable.

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

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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 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 and the recolver.

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.

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

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.

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 had committed to lend us up to $50,000 in term loan financing to support our growth needs (the “Facility”) until June 30, 2022.

Of the amount committed by the Lenders, the Company drew $30,000 in September 2021, at the closing and the remaining $20,000 has lapsed.

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

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

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

assets and the assets of our subsidiaries.

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

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In the accompanying 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 years ended December 31 are as follows (in thousands):

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

Operating lease cost $ 2,326 $ 2,171

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

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

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

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

Supplemental cash flow information related to operating leases for the years ended December 31, 2022 and 2021 are as follows (in thousands):

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

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Shelf Registration

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

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

In March 2021, 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.

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The shelf registration statement relating to these securities became effective on April 21, 2021.

As of December 31, 2021, there is $ 150,000 remaining available under the shelf registration statement.

Also in March 2021, we filed an acquisition shelf registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) to allow for us to issue securities in future business combinations, Pursuant to the acquisition shelf registration statement, we may from time to time issue up to 12,500 shares of our common stocks as consideration in future business combinations.

As of December 31, 2022, there is $ 150,000 available under the shelf registration statement.

Also in March 2021, we filed an acquisition shelf registration statement on Form S-4 with the SEC to allow for us to issue securities in future business combinations, Pursuant to the acquisition shelf registration statement, we may from time to time issue up to 12,500 shares of our common stock as consideration in future business combinations.

The shelf registration statement relating to these securities became effective on April 21, 2021.

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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 364 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.

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

This stock repurchase program is in addition to 364 shares available under our stock repurchase plan existing prior to March 10, 2020.

Under this 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.

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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 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.

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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) 2,350 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.

The number of shares available for issuance under the 2018 Plan is 4,350 shares.

We have 1,932 options and 281 RSUs granted and outstanding pursuant to the 2018 Plan as of December 31, 2022.

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

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 RSUs in exchange for the cancellation of options to purchase 468 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.

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Dividend yield — —

As of December 31, 2021, we reserved shares of common stock for future issuance under the 2009 Plan and 2018 Plan as follows (in thousands):

As of December 31, 2022, we reserved shares of common stock for future issuance under the 2018 Plan as follows (in thousands):

Options and RSUs outstanding 2,216

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

We provided matching contributions to the plan of $ 261 and $ 124 in December 31, 2021 and 2020, respectively.

We made a Safe Harbor non-elective contribution of $ 1,495 as of December 31, 2022.

We accrued matching contributions to the plan of $ 261 as of December 31, 2021.

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).

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

Under the ESPP, 475 shares were reserved for issuance of which there remains 228 shares available for future issuance.

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We qualified for the ERTC in the first three quarters of 2021.

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

The receivable for the ERTC benefit as of December 31, 2021 is in Other current assets on our Consolidated Balance Sheets at December 31, 2021.

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

In 2022, the Company received cash of $3,457, reflecting a portion of our ERTC.

See Note 13 - Subsequent Events regarding activity related to ERTC payments occurring after December 31, 2022.

NOTE 11 - INCOME TAXES

The components of the provision (benefit) for income taxes attributable to continuing operations for the years ended December 31 are as follows (in thousands):

The components of the provision (benefit) for income taxes attributable to continuing operations for the years ended December 31, 2022 and 2021 are as follows (in thousands):

State $ 204 $ 95

Foreign — ( 1 )

Total current $ 204 $ 95

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Gross tax provision $ 112 $ 802

Our provision for income taxes attributable to continuing operations for the years ended December 31 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:

Our provision for income taxes attributable to continuing operations for the years ended December 31, 2022 and 2021 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 $ ( 3,013 ) $ 846

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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 for the years ended December 31 are as follows (in thousands):

Significant components of our deferred taxes for the years ended December 31, 2022 and 2021 are as follows (in thousands):

Deferred tax assets

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Balance at December 31, 2020 $ 587

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

Additions based on tax positions related to the current year 23

Additions for tax positions of prior years 4

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

We have excluded stock options and restricted stock units of 2,096 for the year ended December 31, 2021 and 1,713 shares for the year ended December 31, 2020 from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

We have excluded stock options and restricted stock units reflecting 108 shares for the year ended December 31, 2022 and 2,096 shares for the year ended December 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 earnings (loss) per common share for the years ended December 31 (in thousands, except per share amounts):

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NOTE 13 - SUBSEQUENT EVENTS

On January 1, 2022, the Company acquired certain assets of a Reseller Partner, which were used to provide payroll processing services.

The Partner is located in the northeastern United States.

The aggregate purchase price that the Company paid for these assets was $ 2,350 , paid as follows:

(i) $ 1,939 in cash at closing and (ii) the delivery of a promissory note in the amount of $ 411 .

On February 4, 2022, the Company signed a lease to relocate the corporate headquarters to an office in Austin, Texas, which relocation is expected to occur in the fourth quarter of 2022.

The lease is included in Item 15 — Exhibits and Financial Statement Schedules as Exhibit 10.35.

In January 2023, the Company resolved the outstanding claims for indemnification for which it was holding back payment of the subordinated note payable as security for such claim.

As a result of the resolution of those claims, the remaining balance of $232 has been paid to the Seller ($182) and to the claimant ($50) in satisfaction of its claim.

There are no further amounts due or owing under this subordinated note payable.

As discussed in Note 10, the Company received the remaining balance of $7,076 for the ERTC benefit in January and February 2023.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DOCUMENTS

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 8. Financial Statements and Supplementary Data