What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-13 · 170 added, 219 removed, 298 unchanged (57% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current assets:

Cash, cash equivalents, and restricted cash $ 32,787 $ 17,010

Accounts receivable, net of allowance for doubtful accou nts of $ 1,186 a nd $ 3,248 at September 30, 2023 and December 31, 2022, respectively

Cash and cash equivalents $ 23,166 $ 30,317

Accounts receivable, net of allowance for credit losses of $ 5,108 a nd $ 4,787 at March 31, 2024 and December 31, 2023, respectively

15,074 14,202

17 unchanged sentences

Other accrued liabilities 7,170 3,862

Contingent purchase consideration — 2,955

Deferred revenue 3,547 6,853

15 unchanged sentences

Common stock, $ 0.01 par value;

44,000 shares author ized;

25,235 and 20,628 shares issued, 24,851 and 20,244 shares outstanding at September 30, 2023 and December 31, 2022, respectively

Treasury stock at cost, 384 shares at September 30, 2023 and December 31, 2022

( 5,017 ) ( 5,017 )

44,000 shares authorized;

25,749 and 25,382 shares issued, 25,749 and 24,998 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Treasury stock at cost, zero (1) and 384 shares at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 494,537 487,973

3 unchanged sentences

Total liabilities and stockholders’ equity $ 469,338 $ 443,868

(1) The aggregate Treasury stock of prior repurchases of the Company's own common stock was retired and subsequently issued effective January 1, 2024.

See the Condensed

Consolidated Statement of Changes in Stockholders' Equity for the impact of this transaction.

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

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share amounts)

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Recurring $ 30,273 $ 27,956

9 unchanged sentences

Total operating expenses 23,048 22,437

Income (loss) from operations 253 ( 3,708 ) 764 ( 11,727 )

Interest expense, net ( 782 ) ( 1,122 ) ( 4,321 ) ( 3,006 )

(Loss) gain on extinguishment of debt ( 1,517 ) — ( 1,517 ) 180

Other (expense) income, net ( 283 ) 399 ( 291 ) 1,349

Loss from operations before income taxes ( 2,329 ) ( 4,431 ) ( 5,365 ) ( 13,204 )

Income tax (benefit) expense ( 123 ) 102 267 206

Net loss ( 2,206 ) ( 4,533 ) ( 5,632 ) ( 13,410 )

Other comprehensive loss:

Unrealized loss on marketable securities ( 201 ) ( 1,243 ) ( 213 ) ( 2,802 )

Comprehensive loss $ ( 2,407 ) $ ( 5,776 ) $ ( 5,845 ) $ ( 16,212 )

Basic and diluted loss per share

(Loss) income from operations ( 441 ) 1,963

Interest income 336 349

Interest expense ( 180 ) ( 2,293 )

Other income, net 10 83

(Loss) income from operations before income taxes ( 275 ) 102

Income tax expense (benefit) 33 ( 237 )

Net (loss) income ( 308 ) 339

Other comprehensive (loss) income:

Unrealized (loss) income on marketable securities ( 244 ) 481

Comprehensive (loss) income $ ( 552 ) $ 820

Basic and diluted (loss) income per share

Basic $ ( 0.01 ) $ 0.02

9 unchanged sentences

Balance at December 31, 2023 24,998 $ 254 $ ( 5,017 ) $ 487,973 $ ( 290,440 ) $ ( 1,115 ) $ 191,655

Stock issued upon option exercise and vesting of restricted stock units 375 4 — 1,984 — — 1,988

Share based compensation — — — 1,337 — — 1,337

Net income — — — — 339 — 339

Other comprehensive income — — — — — 481 481

Balance at March 31, 2023 20,619 $ 210 $ ( 5,017 ) $ 436,907 $ ( 280,887 ) $ ( 2,002 ) $ 149,211

Stock issued upon option exercise and vesting of restricted stock units 40 — — 42 — — 42

Stock issued, ESPP 46 1 — 236 — — 237

Share based compensation — — — 1,582 — — 1,582

Net loss — — — — ( 3,765 ) — ( 3,765 )

Other comprehensive loss — — — — — ( 493 ) ( 493 )

Balance at June 30, 2023 20,705 $ 211 $ ( 5,017 ) $ 438,767 $ ( 284,652 ) $ ( 2,495 ) $ 146,814

Stock issued upon option exercise and vesting of restricted stock units 99 1 — 479 — — 480

Shares issued, net of issuance costs 4,047 40 — 45,484 — — 45,524

Stock issued upon option exercise and vesting of restricted and performance stock units 301 3 — 173 — — 176

Stock issued for acquisitions 450 5 — 4,489 — — 4,494

Share based compensation — — — 1,902 — — 1,902

Retirement and reissuance of treasury shares — ( 4 ) 5,017 — ( 5,013 ) — —

Net loss — — — — ( 308 ) — ( 308 )

Other comprehensive loss — — — — — ( 244 ) ( 244 )

Balance at September 30, 2023 24,851 $ 252 $ ( 5,017 ) $ 485,981 $ ( 286,858 ) $ ( 2,696 ) $ 191,662

Balance at March 31, 2024 25,749 $ 258 $ — $ 494,537 $ ( 295,761 ) $ ( 1,359 ) $ 197,675

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

6 unchanged sentences

Share based compensation — — — 1,337 — — 1,337

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

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

Net income — — — — 339 — 339

Other comprehensive income — — — — — 481 481

Balance at March 31, 2023 20,619 $ 210 $ ( 5,017 ) $ 436,907 $ ( 280,887 ) $ ( 2,002 ) $ 149,211

Stock issued upon option exercise and vesting of restricted stock units 33 — — — — — —

Stock issued, ESPP 38 — — 192 — — 192

Share based compensation — — — 814 — — 814

Net loss — — — — ( 5,860 ) — ( 5,860 )

Other comprehensive loss — — — — — ( 496 ) ( 496 )

Balance at June 30, 2022 20,142 $ 205 $ ( 5,017 ) $ 431,647 $ ( 275,637 ) $ ( 1,658 ) $ 149,540

Stock issued upon option exercise and vesting of restricted stock units 18 — — — — — —

Share based compensation — — — 798 — — 798

Net loss — — — — ( 4,533 ) — ( 4,533 )

Other comprehensive loss — — — — — ( 1,243 ) ( 1,243 )

Balance at September 30, 2022 20,160 $ 205 $ ( 5,017 ) $ 432,445 $ ( 280,170 ) $ ( 2,901 ) $ 144,562

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 loss $ ( 5,632 ) $ ( 13,410 )

Adjustments to reconcile loss to net cash provided by operations:

Net (loss) income $ ( 308 ) $ 339

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

Depreciation and amortization 4,860 4,789

2 unchanged sentences

Non-cash interest expense — 982

Net accretion of discounts and amortization of premiums on available-for-sale securities ( 63 ) 279

Provision for doubtful accounts 2,004 304

Provision for deferred income taxes 111 163

Loss (gain) on extinguishment of debt 1,208 ( 180 )

Net accretion of discounts on available-for-sale securities ( 78 ) ( 14 )

Provision for expected losses 46 652

Provision for (recovery of) deferred income taxes 24 ( 73 )

Net realized gains on sales of available-for-sale securities ( 652 ) ( 453 )

2 unchanged sentences

Change in fair value of contingent purchase consideration — ( 69 )

Adjustment to Intangibles — 23

Changes in operating assets and liabilities:

7 unchanged sentences

Deferred revenue ( 5,040 ) ( 4,339 )

Net cash provided by operating activities 11,835 6,957

Net cash (used) in provided by operating activities ( 3,947 ) 4,588

Cash flows from investing activities:

7 unchanged sentences

Payments of notes payable — ( 232 )

Debt extinguishment costs ( 468 ) —

Payments of contingent purchase consideration — ( 9 )

Payments made on amounts due for the acquisition of intangible assets ( 236 ) —

Net proceeds from issuance of common stock 176 1,988

Capital raise fees ( 258 ) —

Net change in client fund obligations 21,122 19,372

Net cash used in financing activities ( 21,400 ) ( 34,032 )

Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 27,741 ) ( 61,066 )

Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 164,042 198,641

Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 136,301 $ 137,575

Net cash provided by financing activities 21,062 21,128

Net increase in cash and cash equivalents 12,620 19,069

Cash and cash equivalents, beginning of period 177,622 164,042

Cash and cash equivalents, end of period $ 190,242 $ 183,111

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

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

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

Three Months Ended March 31,

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

Cash and cash equivalents $ 23,166 $ 21,438

Restricted cash and restricted cash equivalents included in funds held for clients 103,514 126,690

Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 136,301 $ 137,575

Cash and cash equivalents included in funds held for clients 167,076 161,673

Total cash and cash equivalents $ 190,242 $ 183,111

Supplemental information:

4 unchanged sentences

Notes payable issued for acquisitions $ 827 $ —

Shares issued to settle contingent consideration $ 2,543 $ —

Shares issued for acquisitions $ 4,494 $ —

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

6 unchanged sentences

We offer human resources (“HR”) tools necessary to build a thriving workforce, provide the resources to stay compliant with dynamic federal, state, and local tax jurisdictions and their respective labor laws, freeing cash flows so SMBs can spend their financial capital on growing their businesses rather than administrative overhead that can impede growth.

Our solutions also provide new ways for employers to connect with and to differentiate themselves with their employees in order to enhance their relationships with their talent.

Our solutions also provide new ways for employers to connect with their employees in order to enhance their relationships with their talent.

Asure’s HCM suite (“Asure HCM”) includes Payroll & Tax solutions, HR compliance and services, Time & Attendance software and data integrations that enable employers and their employees to enhance efficiencies and take advantage of value-added solutions, which we refer to as AsureMarketplace™.

AsureMarketplace™ automates interactions between our HCM systems with third-party providers to enhance efficiency, improve accuracy and to extend the range of services offered to employers and their employees.

The Company’s approach to HR compliance services incorporates artificial intelligence technology to enhance scalability and efficiency while prioritizing client interactions.

Our approach to HR compliance services incorporates artificial intelligence technology to enhance scalability and efficiency while prioritizing client interactions.

We offer our services directly and indirectly through our network of reseller partners.

8 unchanged sentences

Asure Payroll & Tax, Asure Tax Management Solutions, Asure Time & Attendance, Asure HR Compliance, 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, New Jersey, New York, Tennessee, and Vermont.

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

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, 2023, comprehensive loss and changes in stockholders’ equity for the three and nine months ended September 30, 2023 and September 30, 2022, and cash flows for the nine months ended September 30, 2023 and September 30, 2022.

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, 2024, comprehensive (loss) income and changes in stockholders’ equity for the three months ended March 31, 2024 and March 31, 2023, and cash flows for the three months ended March 31, 2024 and March 31, 2023.

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

10 unchanged sentences

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

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.

CASH AND CASH EQUIVALENTS

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

Cash equivalents include investments in an institutional money market fund, which invests in U.S.

1 unchanged sentence

Carrying value approximates fair value.

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

As of December 31, 2022, the Company had a restricted cash balance of $ 500 related to the collateralization of a letter of credit issued by South State Bank in connection with its money transmission licenses, which was released in the first quarter of 2023.

As of September 30, 2023, the Company had no restricted cash.

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.

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 $ 150,000 (which includes 1,480 of unsold securities that were previously registered on other registration statements effective at the time of the filing of our current S-3).

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

As of September 30, 2023, there is $ 104,000 available under the shelf registration statement.

On August 21, 2023, we completed an underwritten public offering in which we sold an aggregate of 3,333 newly issued shares of our common stock at a public offering price of $ 12.00 per share, and realized net proceeds of $ 37,475 , after deducting underwriting discounts and offering expenses of $ 2,525 .

Additionally, on August 30, 2023, the Underwriters exercised their option to purchase an additional 500 shares of our common stock, and we realized net proceeds of $ 5,507 , after deducting underwriting discounts and offering expenses of $ 493 .

As of September 30, 2023, the Company’s principal sources of liquidity consisted of approximately $ 32,787 of cash, cash equivalents and restricted cash, together with cash generated from operations of our business over the next twelve months.

We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions;

however we believe that we have sufficient liquidity to support our business operations for at least the next twelve months.

Future business demands may lead to cash utilization at levels greater than recently experienced or expected.

We may need to raise additional capital in the future in order to grow our existing software operations and to seek additional strategic acquisitions in the near future.

Currently the Company does not have a credit facility or access to a line of credit.

Further, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments — Credit Losses (Topic 326), which 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 standard became effective for interim and annual periods beginning after December 15, 2022.

Effective January 1, 2023, the Company adopted the provisions of ASU No.

2016-13 and determined that adoption did not have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires companies to disaggregate information about their effective tax rate reconciliation as well as information on income taxes paid.

The standard applies to all entities subject to income taxes.

The standard becomes effective for public entities for annual periods beginning after December 15, 2024.

We are currently evaluating this standard and the potential effects of these changes to our consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, 2025.

In November 2023 , the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses for interim and annual periods.

In addition, the standard requires public entities that have a single reportable segment to provide all the disclosures required by the standard and all existing segment disclosures in Topic 280.

The standard is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

ACCUMULATED OTHER COMPREHENSIVE LOSS

As of September 30, 2023 and December 31, 2022, accumulated other comprehensive loss consisted of net unrealized gains and losses on available-for-sale securities.

As of March 31, 2024 and December 31, 2023, accumulated other comprehensive loss consisted of net unrealized gains and losses on available-for-sale securities.

NOTE 3 - BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

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 .

Effective February 22, 2024, we acquired certain assets of a payroll processing and benefits brokerage servicer based in New Jersey.

The aggregate purchase price paid for the acquisition of these assets was $ 6,000 , consisting of $ 500 paid in cash on hand, 450 shares of Asure common stock, having an agreed value of $ 4,500 , and the remaining $ 1,000 in the form of a promissory note.

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

In May 2023, the Company paid the remaining balance of $ 422 on the promissory note, consisting of $ 411 in principal and $ 11 in accrued interest.

As of September 30, 2023, there are no further amounts due or owing under the subordinated promissory note.

2021 and 2020

In September 2021, the Company acquired certain assets of two payroll businesses, which were used to provide payroll processing services.

In connection with these acquisitions there were two outstanding promissory notes payable.

In September 2023, the Company paid the remaining balance of $ 2,312 on one of the promissory notes, consisting of $ 2,223 in principal and $ 89 in accrued interest.

The second promissory note also includes contingent consideration for which the Company calculated the final value to be $ 587 .

The contingent consideration was added as an increase to the principal balance due on the promissory note during the second quarter of 2023.

As of September 30, 2023, the second promissory note had an outstanding balance of $ 4,200 and matures on September 30, 2026.

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

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

The first contingent purchase consideration was paid in June 2021.

The outstanding contingent purchase consideration of $ 2,299 was valued based on the trailing twelve-month revenue at October 31, 2021 and was paid in shares of the Company’s common stock in July 2023.

As a result, the outstanding contingent consideration of $ 2,299 was extinguished with the issuance of 214 shares of the Company’s common stock.

As of September 30, 2023, no further contingent purchase obligation remains.

As of March 31, 2024, the promissory note had an outstanding balance of $ 1,000 and matures on February 22, 2026.

Effective October 1, 2023, we acquired certain assets of an Alabama based reseller partner, which were used to provide payroll processing services.

The aggregate purchase price paid for these assets was $ 8,391 , paid as follows:

(i) $ 6,891 in cash of which $6,545 was paid at closing and (ii) the delivery of a promissory note in the amount of $ 1,500 .

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

As of March 31, 2024, the promissory note had an outstanding balance of $ 1,500 and matures on October 1, 2025.

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, 2023 and December 31, 2022, 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 for the periods presented below (in thousands):

Total Carrying Value Level 1 Level 2 Level 3

September 30, 2023

March 31, 2024

Funds held for clients

7 unchanged sentences

Total $ 75,201 $ 3,431 $ 71,770 $ —

Contingent purchase consideration (1)

$ 2,955 $ — $ — $ 2,955

Total $ 2,955 $ — $ — $ 2,955

(1) See Note 3 — Business Combinations and Asset Acquisitions 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, 2023

Restricted cash equivalents $ 4,711 $ — $ ( 7 ) $ 4,704

Cash equivalents and investments classified as available-for-sale within funds held for clients consisted of the following for the periods presented below (in thousands):

March 31, 2024

Cash equivalents $ 2,320 $ 1 $ ( 4 ) $ 2,316

Available-for-sale securities:

6 unchanged sentences

December 31, 2023

Restricted cash equivalents $ 2,829 $ — $ — $ 2,829

Cash equivalents $ 3,447 $ — $ ( 16 ) $ 3,431

Available-for-sale securities:

6 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, there were 7 and 3 securities, respectively, in an unrealized gain position and there were 159 and 124 securities in an unrealized loss position, respectively.

As of September 30, 2023, these unrealized losses were less than $ 79 individually and $ 2,719 in the aggregate.

As of March 31, 2024 and December 31, 2023, there were 32 and 54 securities, respectively, in an unrealized gain position and there were 141 and 113 securities in an unrealized loss position, respectively.

As of March 31, 2024, these unrealized losses were less than $ 60 individually and $ 1,489 in the aggregate.

As of December 31, 2023, these unrealized losses were less than $ 61 individually and $ 1,363 in the aggregate.

We invest in high quality securities with roughly 70% of our portfolio made up of A ratings and above with unrealized losses primarily attributable to macroeconomic factors rather than credit related.

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

We do not intend to sell these investments and we do not expect to sell these investments before recovery of their amortized cost basis, which may be at maturity.

We review our investments to identify and evaluate investments that indicate credit losses.

We review our investments to identify and evaluate investments that indicate possible credit losses.

Factors considered in determining whether a loss is a credit loss include the length of time and extent to which fair value has been less than the cost basis, the credit rating of the investment, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2) At September 30, 2023 and December 31, 2022, 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, 2023 December 31, 2022

Restricted cash and cash equivalents held to satisfy client funds obligations $ 103,514 $ 147,032

Restricted short-term marketable securities held to satisfy client funds obligations 9,297 9,174

Restricted long-term marketable securities held to satisfy client funds obligations 59,692 47,382

(2) At March 31, 2024 and December 31, 2023, 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 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 for the periods presented below (in thousands):

March 31, 2024 December 31, 2023

Cash and cash equivalents held to satisfy client funds obligations $ 167,076 $ 147,305

Short-term marketable securities held to satisfy client funds obligations 13,881 10,042

Long-term marketable securities held to satisfy client funds obligations 58,851 61,728

Total funds held for clients $ 239,808 $ 219,075

Expected maturities of available-for-sale securities as of September 30, 2023 are as follows (in thousands):

Expected maturities of available-for-sale securities are as follows for the period presented below (in thousands):

March 31, 2024

One year or less $ 13,881

2 unchanged sentences

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

December 31, 2022 Acquisitions September 30, 2023

December 31, 2023 Acquisitions March 31, 2024

Goodwill $ 86,011 $ — $ 86,011

2 unchanged sentences

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

As of September 30, 2023, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

Gross Intangible Assets December 31, 2022 Acquisitions September 30, 2023

As of March 31, 2024, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

Gross Intangible Assets December 31, 2023 Acquisitions March 31, 2024

Customer relationships $ 127,843 $ 12,376 $ 140,219

Developed technology 12,001 — 12,001

Reseller relationships 1,344 1,029 2,373

Trade names 880 — 880

Non-compete agreements 1,032 — 1,032

$ 132,228 $ 1,029 $ 133,257

The gross carrying amount and accumulated amortization of our intangible assets as of September 30, 2023 are as follows (in thousands, except weighted average periods):

Total $ 141,756 $ 12,376 $ 154,132

The gross carrying amount and accumulated amortization of our intangible assets are as follows for the periods presented below (in thousands, except weighted average periods):

Weighted Average

1 unchanged sentence

Amortization Net

September 30, 2023

March 31, 2024

Customer relationships 8.6 $ 140,219 $ ( 70,630 ) $ 69,589

Developed technology 6.9 12,001 ( 10,731 ) 1,270

Reseller relationships 6.4 2,373 ( 985 ) 1,388

Trade names 4.3 880 ( 880 ) —

4 unchanged sentences

Developed technology 6.9 12,001 ( 10,701 ) 1,300

Reseller relationships 6.9 1,344 ( 889 ) 455

Trade names 4.3 880 ( 880 ) —

2 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 $ 9,929 and $ 10,134 for the nine months ended September 30, 2023 and 2022, respectively.

Amortization expenses recorded in Cost of Sales were $ 368 and $ 889 for the nine months ended September 30, 2023 and 2022, respectively.

There was no impairment of intangibles during the nine months ended September 30, 2023 based on the qualitative assessment performed by the Company.

Amortization expenses recorded in Operating Expenses were $ 3,449 and $ 3,302 for the three months ended March 31, 2024 and 2023, respectively.

Amortization expenses recorded in Cost of Sales were $ 50 and $ 268 for the three months ended March 31, 2024 and 2023, respectively.

There was no impairment of intangibles during the three months ended March 31, 2024 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 September 30, 2023 (in thousands):

The following table summarizes the future estimated amortization expense relating to our intangible assets for the period presented below (in thousands):

March 31, 2024

2024 $ 12,047

Thereafter 6,230

1 unchanged sentence

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

Maturity Cash Interest Rate September 30, 2023 December 31, 2022

Maturity Cash Interest Rate March 31, 2024 December 31, 2023

Subordinated Notes Payable – Acquisitions (1)

1 unchanged sentence

$ 6,700 $ 5,700

Senior Credit Facility 10/1/2025 14.25 % — 30,607

Gross Notes Payable $ 6,700 $ 5,700

2 unchanged sentences

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

September 30, 2023

March 31, 2024

Current portion of notes payable $ 420 $ ( 397 ) $ 23

5 unchanged sentences

Total $ 5,700 $ ( 1,391 ) $ 4,309

The following table summarizes the future principal payments related to our outstanding debt as of September 30, 2023 (in thousands):

The following table summarizes the future principal payments related to our outstanding debt for the period presented below (in thousands):

March 31, 2024

Total $ 6,700

Subordinated Notes Payable - Acquisitions

In January 2023, the Company resolved the outstanding claims for indemnification for which it was withholding 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.

As of September 30, 2023, there are no further amounts due or owing under this subordinated promissory note.

In April 2023, the Company calculated the final contingent consideration due in connection with the acquisition of a payroll business in September 2021.

In February 2024, we acquired certain assets of a payroll processing and benefits brokerage servicer based in New Jersey.

In connection with the acquisition that took place, we delivered a promissory note to the seller.

As of March 31, 2024, the promissory note had an outstanding balance of $ 1,000 and matures on February 22, 2026.

In October 2023, we acquired certain assets of an Alabama based reseller partner, which were used to provide payroll processing services.

In connection with the acquisition that took place, we delivered a promissory note to the seller.

As of March 31, 2024, the promissory note had an outstanding balance of $ 1,500 and matures on October 1, 2025.

In April 2023, we calculated the final contingent consideration due in connection with the acquisition of a payroll business in September 2021.

As a result, the fair value of the contingent consideration of $ 587 was added as an increase to the principal balance due on the promissory note.

As of September 30, 2023, the promissory note had an outstanding balance of $ 4,200 .

In May 2023, the Company paid the outstanding balance of a subordinated note payable in connection with the acquisition of customer relationships of a payroll business that took place in 2022.

As a result, the Company paid the remaining balance of $ 422 on the promissory note consisting of $ 411 in principal and $ 11 in accrued interest.

As of September 30, 2023, there are no further amounts due or owing under the subordinated note payable.

In September 2023, the Company paid the outstanding balance of a subordinated note payable in connection with the acquisition of certain assets of a payroll business that took place in 2021.

As a result, the Company paid the remaining balance of $ 2,312 on the promissory note consisting of $ 2,223 in principal and $ 89 in accrued interest.

As of September 30, 2023, there are no further amounts due or owing under the subordinated note payable.

As of March 31, 2024, the promissory note had an outstanding balance of $ 4,200 .

In January 2023, we resolved the outstanding claims for indemnification for which we were withholding payment of a subordinated note payable issued in connection with the purchase of a business acquired in 2020.

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

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

As of March 31, 2024, there are no further amounts due or owing under this subordinated promissory note.

See Note 3 — 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 (the “Loan 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 the Lender (“Agent”), under the terms of which the Lenders committed to lend us up to $ 50,000 in term loan financing to support our growth needs (the “Facility”).

Of the amount committed by the Lenders, the Company drew $ 30,000 in September 2021.

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

On August 7, 2023, the Company entered into an amendment to the Facility, whereby the Final Payment Fee (as defined in the Loan Agreement) was settled for $ 1,677 (the “Settled Amount”), which was paid on August 7, 2023.

The Final Payment Fee was originally equal to 1.0 % of the increase in our market capitalization since September 10, 2021, and was due upon payment in full of the obligations under the Senior Credit Facility.

The Company also paid the Lenders a fee equal to $ 250 to be credited against any reimbursable expenses owed to the Lenders in a future refinancing of the Facility if it occurs prior to December 31, 2024.

On September 12, 2023, the Company opted to terminate the Loan Agreement and repay the outstanding balance on the secured promissory note (the “Note”).

On September 12, 2023, we terminated the Loan and Security Agreement (the “Loan Agreement”), among the Company, Structural Capital Investments III, LP (“Structural” and together with the other lenders that were parties thereto, the “Lenders”), and Ocean II PLO LLC, as administrative and collateral agent for the Lender and repaid the outstanding balance on the secured promissory note issued under the Loan Agreement (the “Note”).

In connection with the termination, the Company paid the Agent for the benefit of the Lenders an aggregate amount of $ 30,927 (the “Payoff Amount”) in full payment of our outstanding obligations under the Loan Agreement.

The Payoff Amount represented $ 30,617 of outstanding principal and interest on the unpaid principal balance, a 1.0 % prepayment fee in the amount of $ 306 and $ 5 for the accrued non-utilization fee and lender expenses associated with the extinguishment.

As of September 30, 2023, there are no further amounts due or owing under the Facility.

As of March 31, 2024, there are no further amounts due or owing under the Facility.

On August 7, 2023, we entered into an amendment to the Loan Agreement, whereby the Final Payment Fee (as defined in the Loan Agreement) was settled for $ 1,677 (the “Settled Amount”), which was paid on August 7, 2023.

We also paid the Lenders a breakup fee equal to $ 250 .

NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 1,186 , w ere $ 15,133 at September 30, 2023.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 3,248 , were $ 12,123 at December 31, 2022.

The decrease in the allowance for doubtful accounts balance during the three and nine months ended September 30, 2023 is primarily due to the removal of fully reserved receivable balances.

The increase in the receivable balance during the first nine months of 2023 is primarily due to deferred payment terms on many of our Earned Retention Tax Credit commitments.

No customer represented more than 10% of our net accounts receivable balance as of September 30, 2023 and December 31, 2022, respectively.

Receivables from contracts with customers, net of allowance for credit losses of $ 5,108 , w ere $ 15,074 at March 31, 2024.

Receivables from contracts with customers, net of allowance for credit losses of $ 4,787 , were $ 14,202 at December 31, 2023.

We had a provision for expected losses of $ 46 , write-offs charged against the allowance for credit losses of $ 3 , and recoveries on previously written off receivables of $ 279 during the three months ended March 31, 2024.

No customer represented more than 10% of our net accounts receivable balance as of March 31, 2024 and December 31, 2023, respectively .

Deferred Commissions

Deferred commission costs from contracts with customers w ere $ 9,155 and $ 6,660 at September 30, 2023 and December 31, 2022 , respectively.

The amount of amortization recognized for the three and nine months ended September 30, 2023 was $ 1,029 and $ 2,176 , respectively, and for the three and nine months ended September 30, 2022 was $ 412 and $ 1,192 , respectively.

Deferred commission costs from contracts with customers w ere $ 10,378 and $ 10,302 at March 31, 2024 and December 31, 2023 , respectively.

The amount of amortization recognized for the three months ended March 31, 2024 and 2023 was $ 611 and $ 496 , respectively.

The increase in amortization during the three months ended March 31, 2024 is primarily due to an increased focus on sales of recurring revenue streams in the prior year that are now being amortized.

Deferred Revenue

During the three and nine months ended September 30, 2023, revenue of $ 924 and $ 6,650 , respectively, an d during the three and nine months ended September 30, 2022, revenue of $ 156 and $ 3,362 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

During the three months ended March 31, 2024 and 2023 , revenue of $ 5,118 and $ 5,613 , 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, 2023, approximately $ 18,891 of revenue is expected to be recognized from remaining performance obligations.

As of March 31, 2024, approximately $ 18,713 of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 76 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

These amounts exclude remaining performance obligations related to contracts for professional services for tax and payroll offerings whose remaining contractual term is less than one year as of March 31, 2024.

Revenue Co ncentration

During the three and nine months ended September 30, 2023 and 2022, there were no customers that individually represented 10% or more of consolidated revenue.

During the three months ended March 31, 2024 and 2023, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 - LEASES

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

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

The components of the rent expense for the three and nine months ended September 30, 2023 and 2022 are as follows (in thousands):

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

2023 2022 2023 2022

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

The components of the rent expense are as follows for the periods presented below (in thousands):

Three Months Ended March 31,

Operating lease cost $ 446 $ 531

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 10 % and 8 % as of September 30, 2023 and December 31, 2022, respectively.

The weighted average remaining lease term is five years as of September 30, 2023 and December 31, 2022.

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

Nine Months Ended September 30,

The weighted average discount rate of our operating leases is 10 % as of March 31, 2024 and December 31, 2023.

The weighted average remaining lease term is five years as of March 31, 2024 and December 31, 2023.

Supplemental cash flow information related to operating leases are as follows for the periods presented below (in thousands):

Three Months Ended March 31,

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

Operating cash outflows from operating leases $ 500 $ 494

Non-cash operating activities:

Operating lease assets obtained or removed in exchange for new, modified or terminated operating lease liabilities $ ( 473 ) $ 2,221

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

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

March 31, 2024

Thereafter 855

4 unchanged sentences

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

The 2018 Plan, approved by our stockholders, 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 2018 Plan, approved by our stockholders, 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 reserved for issuance under the 2018 Plan is 4,350 shares.

We have an aggregate of 2,306 options, RSUs and PSUs granted and outstanding pursuant to the 2018 Plan as of September 30, 2023.

As of September 30, 2023, the number of shares available for future grant under the 2018 Plan is 1,737 .

Share based compensation for our stock option plans for the three months ended September 30, 2023, and September 30, 2022, was $ 1,251 and $ 799 , respectively, and for the nine months ended September 30, 2023, and September 30, 2022, was $ 4,170 and $ 2,341 , respectively.

We issued 66 and 349 shares of common stock related to exercises of stock options for the three and nine months ended September 30, 2023, and issued no shares of common stock related to exercises of stock options for the three and nine months ended September 30, 2022.

We issued 40 and 164 shares of common stock upon the vesting of restricted stock units for the three and nine months ended September 30, 2023, and issued 22 and 95 shares of common stock upon the vesting of restricted stock units for the three and nine months ended September 30, 2022 .

We have an aggregate of 2,612 options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted and outstanding pursuant to the 2018 Plan as of March 31, 2024.

As of March 31, 2024, the number of shares available for future grant under the 2018 Plan is 1,040 .

Share based compensation for our stock option plans for the three months ended March 31, 2024, and March 31, 2023, was $ 1,902 and $ 1,337 , respectively.

We issued 26 and 277 shares of common stock related to exercises of stock options for the three months ended March 31, 2024 and 2023, respectively.

We issued 166 and 98 shares of common stock upon the vesting of restricted stock units for the three months ended March 31, 2024 and 2023, respectively.

We issued 109 shares of common stock upon the vesting of RSUs converted from PSUs for the three months ended March 31, 2024.

Effective January 1, 2023, the Compensation Committee of the Board of Directors (the “Compensation Committee”) approved the grant of performance stock units (“PSUs”) pursuant to a PSU Award Grant Notice and PSU Award Agreement (the “2023 PSU Award Agreement”) under the 2018 Plan to our executive officers payable in the form of RSUs.

The number of RSUs into which the PSUs converted for each executive officer was a sliding scale between 0% to 200% of the target amount based on the Company’s achievement of certain performance metrics tied to the Company’s recurring revenue and gross profit for 2023.

On February 26, 2024, the PSUs converted to RSUs at 200% of target based on the achievement of set performance metrics, and we paid out a total of 325 RSUs to our executive officers.

Effective January 1, 2024, the Compensation Committee approved the grant of PSUs pursuant to a PSU Award Grant Notice and PSU Award Agreement (the “2024 PSU Award Agreement”) under the 2018 Plan to our executive officers payable in the form of RSUs.

The number of RSUs into which the PSUs convert for each executive officer is a sliding scale between 0% to 200% of the target amount based on the Company’s achievement of certain performance metrics tied to the Company’s recurring revenue and gross profit for 2024.

NOTE 10 - NET LOSS PER SHARE

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The following table sets forth the computation of basic and diluted net loss per common share for the periods presented below (in thousands, except per share amounts):

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

2023 2022 2023 2022

Net loss $ ( 2,206 ) $ ( 4,533 ) $ ( 5,632 ) $ ( 13,410 )

Three Months Ended March 31,

Net (loss) income $ ( 308 ) $ 339

Weighted-average shares of common stock outstanding 25,334 20,347

Basic loss per share $ ( 0.10 ) $ ( 0.22 ) $ ( 0.27 ) $ ( 0.67 )

Net loss $ ( 2,206 ) $ ( 4,533 ) $ ( 5,632 ) $ ( 13,410 )

Basic (loss) income per share $ ( 0.01 ) $ 0.02

Net (loss) income $ ( 308 ) $ 339

Weighted-average shares of common stock outstanding 25,334 21,041

Diluted loss per share $ ( 0.10 ) $ ( 0.22 ) $ ( 0.27 ) $ ( 0.67 )

NOTE 11 - EMPLOYEE RETENTION TAX CREDIT

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act 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 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 Condensed Consolidated Statements of Comprehensive Loss to reflect the ERTC payable to us for the first three quarters in 2021 presented as other current assets within our Condensed Consolidated Balance Sheets.

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

In January and February 2023, the Company received the remaining balance of $ 7,076 for the ERTC benefit.

Diluted (loss) income per share $ ( 0.01 ) $ 0.02

NOTE 11 - SUBSEQUENT EVENTS

On October 1, 2023, the Company acquired certain assets of a Reseller Partner, which were used to provide payroll processing services.

The Partner is located in the southeastern United States.

The aggregate purchase price that the Company paid for these assets was $ 8,391 , paid as follows:

(i) $ 6,891 in cash of which $ 6,545 was paid at closing and (ii) the delivery of a promissory note in the amount of $ 1,500 .

On April 9, 2024, 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 $ 150,000 (which includes [ 1,480 ] of unsold securities that were previously registered on a prior registration statement effective at the time of the filing of our current S-3).

The shelf registration statement relating to these securities became effective on April 19, 2024.

On April 9, 2024, 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 registration statement relating to these securities became effective on April 19, 2024.

On April 30, 2024, we acquired certain assets of a reseller partner, which were used to provide payroll processing services.

The partner is located in Ohio.

The aggregate purchase price that we paid for these assets was $ 3,000 , consisting of $ 2,300 paid in cash on hand, $ 700 in the form of a promissory note with the principal balance due on October 30, 2025, and 50 shares of Asure common stock.

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