What changed in this filing

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Item 1. Financial Statements

2025-05-01 compared with 2024-10-31 · 168 added, 195 removed, 328 unchanged (53% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Current assets:

Cash and cash equivalents $ 14,076 $ 21,425

Accounts receivable, net of allowance for credit losses of $ 6,150 a nd $ 4,787 at September 30, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance for credit losses of $ 6,545 a nd $ 6,328 at March 31, 2025 and December 31, 2024, respectively

15,800 18,154

29 unchanged sentences

Total liabilities 301,278 239,323

Commitments and contingencies - Note 8

Stockholders’ equity:

4 unchanged sentences

44,000 shares authorized;

26,540 and 25,382 shares issued, 26,540 and 24,998 shares outstanding at September 30, 2024 and December 31, 2023, respectively

Treasury stock at cost, zero (1) and 384 shares at September 30, 2024 and December 31, 2023, respectively

27,122 and 26,671 shares issued, 27,122 and 26,671 shares outstanding at March 31, 2025 and December 31, 2024, respectively

Treasury stock at cost, zero (1) shares at March 31, 2025 and December 31, 2024

Additional paid-in capital 507,149 504,849

3 unchanged sentences

Total liabilities and stockholders’ equity $ 498,941 $ 436,638

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

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

See the Condensed

4 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Three Months Ended

Recurring $ 33,187 $ 30,273

9 unchanged sentences

Total operating expenses 26,623 23,048

(Loss) income from operations ( 3,622 ) 253 ( 8,245 ) 764

Loss from operations ( 2,015 ) ( 441 )

Interest income 171 336

Interest expense ( 451 ) ( 180 )

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

Other (expense) income, net — ( 283 ) 10 ( 291 )

Other income, net 188 10

Loss from operations before income taxes ( 2,107 ) ( 275 )

Income tax expense (benefit) 170 ( 123 ) 434 267

Income tax expense 291 33

Net loss ( 2,398 ) ( 308 )

15 unchanged sentences

Stock issued upon option exercise and vesting of restricted and performance stock units 451 4 — 437 — — 441

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

Share based compensation — — — 1,863 — — 1,863

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

Net loss — — — — ( 2,398 ) — ( 2,398 )

1 unchanged sentence

Balance at March 31, 2025 27,122 $ 271 $ — $ 507,149 $ ( 309,624 ) $ ( 133 ) $ 197,663

Stock issued upon option exercise and vesting of restricted and performance stock units 58 — — 63 — — 63

Stock issued, ESPP 61 1 — 332 — — 333

Stock issued for acquisitions 50 — — 323 — — 323

Share based compensation — — — 1,488 — — 1,488

Net loss — — — — ( 4,360 ) — ( 4,360 )

Other comprehensive income — — — — — 9 9

Balance at June 30, 2024 25,918 $ 259 $ — $ 496,743 $ ( 300,121 ) $ ( 1,350 ) $ 195,531

Stock issued upon option exercise and vesting of restricted and performance stock units 97 1 — 329 — — 330

Stock issued for acquisitions 525 5 — 4,257 — — 4,262

Share based compensation — — — 1,591 — — 1,591

Net loss — — — — ( 3,901 ) — ( 3,901 )

Other comprehensive income — — — — — 1,340 1,340

Balance at September 30, 2024 26,540 $ 265 $ — $ 502,920 $ ( 304,022 ) $ ( 10 ) $ 199,153

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

5 unchanged sentences

Stock issued upon option exercise and vesting of restricted 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 income — — — — ( 308 ) — ( 308 )

1 unchanged sentence

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

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

Share based compensation — — — 1,251 — — 1,251

Net loss — — — — ( 2,206 ) — ( 2,206 )

Other comprehensive loss — — $ — — — ( 201 ) ( 201 )

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

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 $ ( 2,398 ) $ ( 308 )

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

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

Depreciation and amortization 5,972 4,860

5 unchanged sentences

Provision for deferred income taxes 291 24

Loss on extinguishment of debt — 1,208

Net realized gains on sales of available-for-sale securities ( 656 ) ( 652 )

Share-based compensation 1,863 1,902

Loss on disposals of long-term assets — 132

Change in fair value of contingent purchase consideration — 175

Changes in operating assets and liabilities:

7 unchanged sentences

Deferred revenue ( 3,810 ) ( 5,040 )

Net cash (used in) provided by operating activities ( 394 ) 11,835

Net cash provided by (used in) operating activities 1,996 ( 3,947 )

Cash flows from investing activities:

6 unchanged sentences

Cash flows from financing activities:

Payments of notes payable ( 420 ) ( 35,627 )

Debt extinguishment costs — ( 468 )

Payments made on amounts due for the acquisition of intangible assets ( 723 ) ( 236 )

Net proceeds from issuance of common stock 441 176

Capital raise fees ( 47 ) ( 258 )

Net change in client fund obligations 64,207 21,122

Net cash used in financing activities ( 26,291 ) ( 21,400 )

Net decrease in cash and cash equivalents ( 44,894 ) ( 27,741 )

Net cash provided by financing activities 63,925 21,062

Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents 53,291 12,620

Cash and cash equivalents, beginning of period 145,712 177,622

4 unchanged sentences

(in thousands)

Nine Months Ended September 30,

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

Three Months Ended March 31,

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

Cash and cash equivalents $ 14,076 $ 23,166

Cash and cash equivalents included in funds held for clients 121,480 103,514

Total cash and cash equivalents $ 132,728 $ 136,301

Restricted cash and restricted cash equivalents included in funds held for clients 184,927 167,076

Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 199,003 $ 190,242

Supplemental information:

Cash paid for interest $ 125 $ —

Cash paid for income taxes $ 15 $ 532

Non-cash investing and financing activities:

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Asure Software, Inc.

(“Asure”, the “Company”, “we” and “our”), a Delaware corporation, is a provider of cloud-based Human Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) for small, medium-sized and enterprise-level businesses.

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 these businesses can spend their financial capital on growing their business rather than administrative overhead that can impede growth.

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, Recruiting, 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.

Our approach to HR compliance services leverages technology and on-demand content to enhance scalability and efficiency while prioritizing client interactions.

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

We strive to be the most trusted HCM resource to small, medium-sized (“SMBs”) and enterprise-level businesses.

We target SMBs through less densely populated U.S.

metropolitan cities where fewer of our competitors have a presence and have begun expansion of certain product lines to enterprise-level businesses.

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 these businesses 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 their employees and strengthen relationships with their talent.

At the core of our offering is the Asure HCM platform—a SaaS-based system that includes Payroll & Tax filing, Recruiting, Time & Attendance software, HR management tools, and Benefits Administration.

This platform serves as the foundation for delivering both our core software and a range of complementary, technology-enabled services.

These include AsureMarketplace™, which automates data exchange between our HCM system and third-party providers to increase efficiency, accuracy, and breadth of services.

Our HR Compliance services combine expert guidance with scalable digital delivery.

AsurePay™, our Visa-branded payroll card, provides employees with fast, secure access to earned wages.

Additionally, through our licensed brokerage, we offer Insurance Services that help employers manage benefits and reduce administrative costs.

We deliver our solutions directly and through a national network of Reseller Partners.

We strive to be the most trusted HCM resource.

Our solutions solve three primary challenges that prevent businesses from growing:

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

We sell our solutions through both direct and partner channels.

We supplement our direct sales efforts with partner programs that afford us access to opportunities in various geographic and industry niches.

Asure has two types of partners:

Reseller Partners that white label our product s while providing value-added services to their clients (our indirect clients) and Referral Partners that provide us with client leads but do not resell our solutions.

We have and will continue to invest in research and development to expand our solutions.

O ur solutions reduce the administrative burden on employers and increase employee productivity while managing the employment lifecycle.

The Asure HCM suite includes six product lines:

Asure Payroll & Tax, Asure Tax Management Solutions, Asure Time & Attendance, Asure Recruiting, Asure HR Compliance, and AsureMarketplace™.

We develop, market, sell and support our offerings nationwide through our principal office in Austin, Texas and from our other office locations in Alabama, California, Florida, New Jersey, New York, Ohio, South Dakota, Tennessee, and Vermont.

Our solutions reduce the administrative burden on employers and increase employee productivity while managing the employment lifecycle.

The Asure HCM suite includes eight product lines:

Asure Payroll & Tax, Asure Tax Management Solutions, AsureRecruiting™, Asure Time & Attendance, Asure HR Compliance, Asure Insurance and Benefits Administration, AsureMarketplace™, and AsurePay™.

We develop, market, sell and support our offerings nationwide through our principal office in Austin, Texas, and from our other office locations in Alabama, California, Florida, New Jersey, New York, North Carolina, Ohio, South Dakota, 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, 2024, comprehensive loss and changes in stockholders’ equity for the three and nine months ended September 30, 2024 and September 30, 2023, and cash flows for the nine months ended September 30, 2024 and September 30, 2023.

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

These reclassifications had no effect on the consolidated financial position or consolidated results of operations of the Company.

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, 2025, comprehensive (loss) income and changes in stockholders’ equity for the three months ended March 31, 2025 and March 31, 2024, and cash flows for the three months ended March 31, 2025 and March 31, 2024.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto filed with the SEC in our annual report on Form 10-K for the fiscal year ended December 31, 2024 (our “2024 Annual Report on Form 10-K”).

The Company’s results for any interim period are not necessarily indicative of results for a full fiscal year.

Our results for any interim period are not necessarily indicative of results for a full fiscal year.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

REPORTABLE SEGMENTS

Our chief operating decision maker is our Chairman and Chief Executive Officer, Patrick Goepel, who reviews financial information presented on a company-wide basis.

Thus, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, we determined that we have a single reportable segment that primarily derives our revenue in the United States by providing payroll services to customers.

USE OF ESTIMATES

2 unchanged sentences

These estimates are subjective in nature and involve judgments.

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

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

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

1 unchanged sentence

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments with maturities of 90 days or less to be cash equivalents.

We consider all highly liquid investments with maturity of 90 days or less to be cash equivalents.

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

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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 INCOME & LOSS

As of September 30, 2024 and December 31, 2023, accumulated other comprehensive income & loss consisted of net unrealized gains and losses on available-for-sale securities.

We are currently evaluating this standard and the potential effects of these changes to our consolidated financial statements and have adopted this new standard for the current fiscal year.

We do not expect it will have a material impact.

ACCUMULATED OTHER COMPREHENSIVE LOSS

As of March 31, 2025 and December 31, 2024, accumulated other comprehensive loss consisted of net unrealized gains and losses on available-for-sale securities.

NOTE 3 - BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

Asset Acquisitions

During the three months ended March 31, 2025 , we completed three customer relationship asset acquisitions.

The total purchase price of these acquisitions was $ 7,705 , which consisted of $ 6,362 of cash paid during the three months ended March 31, 2025, $ 193 of cash to be paid over the next 12 months, and the delivery of promissory notes in the amount of $ 1,150 , net of discounts.

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

As of March 31, 2025, the outstanding principal balance of the promissory notes for these acquisitions was $ 1,402 .

Business Combinations

2 unchanged sentences

The aggregate purchase price paid for the business was $ 15,162 , consisting of $ 7,900 paid in cash on hand, $ 3,000 in the form of a promissory note ($ 1,716 net of discount), and 525 shares of Asure common stock, which had a fair value of $ 4,262 on the day of acquisition.

As of September 30, 2024, the promissory note had an outstanding principal balance of $ 3,000 and matures on July 1, 2029.

As of March 31, 2025, the promissory note had an outstanding principal balance of $ 3,000 and matures on July 1, 2029.

The purchase consideration was allocated among the acquired assets, which consist of a customer relationships intangible asset with fair value of $ 2,700 , and a developed technology intangible asset with a fair value of $ 3,200 .

1 unchanged sentence

The intangible assets are being amortized on a straight-line basis over eight and five years , respectively.

The remaining $ 8,713 of excess purchase consideration was allocated to goodwill, which is expected to be fully deductible for tax purposes.

The remaining $ 8,713 of excess purchase consideration was allocated to goodwill, which is generally expected to be deductible for tax purposes.

This represents the knowledge and experience of the employees retained as part of the transaction as well as the synergies and economies of scale expected from expanding the Midwest operating region to a national scale.

The operations included in the Company’s financial statements for the three and nine month periods ended September 30, 2024, and pro forma revenue and earnings amounts on a combined basis as if this acquisition had been completed on January 1, 2023, are immaterial to the consolidated financial statements of the Company and have been excluded.

Asset Acquisitions

Effective April 30, 2024, we acquired certain assets of an Ohio based reseller partner, which were used to provide payroll processing services.

The aggregate purchase price paid for the acquisition of these assets was $ 3,000 , consisting of $ 2,300 paid in cash on hand, and $ 700 in the form of a promissory note, plus 50 shares of Asure common stock.

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

As of September 30, 2024, the promissory note had an outstanding principal balance of $ 700 and matures on October 30, 2025.

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 .

As of September 30, 2024, the promissory note had an outstanding principal balance of $ 963 and matures on February 22, 2026.

Asset Acquisitions

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 , consisting of $ 6,891 in cash, of which $ 6,545 was paid at closing, and 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 September 30, 2024, the promissory note had an outstanding principal balance of $ 1,500 and matures on October 1, 2025.

During the year ended December 31, 2024, we completed eleven customer relationship asset acquisitions.

The total purchase price of these acquisitions was $ 14,607 , which consisted of $ 5,842 of cash paid during the year ended December 31, 2024, $ 723 of cash paid during the three months ended March 31, 2025, $ 1,198 of cash to be paid over the next 12 months, $ 595 of cash to be paid thereafter, the delivery of promissory notes in the amount of $ 1,386 , net of discounts, and the delivery of 500 shares of Asure common stock, which had an aggregate fair value of $ 4,863 at the acquisition dates.

The purchase price for certain acquisitions is subject to adjustments for contingent events to be resolved primarily over the next one to three years , including revenue generated from the acquired assets.

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

As of March 31, 2025, the outstanding principal balance of the promissory notes for these acquisitions was $ 1,663 .

NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS

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Total Carrying Value Level 1 Level 2 Level 3

September 30, 2024

March 31, 2025

Funds held for clients

8 unchanged sentences

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):

September 30, 2024

March 31, 2025

Cash equivalents $ 4,789 $ — $ ( 1 ) $ 4,788

Available-for-sale securities:

Certificates of deposit 738 1 — 739

Corporate debt securities 66,579 305 ( 364 ) 66,520

6 unchanged sentences

Available-for-sale securities:

Certificates of deposit 845 2 ( 1 ) 846

Corporate debt securities 63,253 164 ( 619 ) 62,798

4 unchanged sentences

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

As of September 30, 2024 and December 31, 2023, there were 82 and 54 securities, respectively, in an unrealized gain position and there were 80 and 113 securities in an unrealized loss position, respectively.

As of September 30, 2024, these unrealized losses were less than $ 35 individually and $ 576 in the aggregate.

As of March 31, 2025 and December 31, 2024, there were 79 and 45 securities, respectively, in an unrealized gain position and there were 61 and 89 securities in an unrealized loss position, respectively.

As of March 31, 2025, these unrealized losses were less than $ 29 individually and $ 450 in the aggregate.

As of December 31, 2024, these unrealized losses were less than $ 38 individually and $ 738 in the aggregate.

We invest in high quality securities with roughly 67 % 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 have no material individual securities that have been in a continuous unrealized loss position greater than twelve 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 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, 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.

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 financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2) At March 31, 2025 and December 31, 2024, 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 we have classified for use solely for the purposes of satisfying the obligations to remit funds relating to our 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):

September 30, 2024 December 31, 2023

Cash and cash equivalents held to satisfy client funds obligations $ 121,480 $ 147,305

Short-term marketable securities held to satisfy client funds obligations 10,654 10,042

Long-term marketable securities held to satisfy client funds obligations 61,455 61,728

March 31, 2025 December 31, 2024

Restricted cash and cash equivalents held to satisfy client funds obligations $ 184,927 $ 124,287

Restricted short-term marketable securities held to satisfy client funds obligations 9,903 5,273

Restricted long-term marketable securities held to satisfy client funds obligations 62,189 63,055

Total funds held for clients $ 257,019 $ 192,615

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

September 30, 2024

Expected maturities of available-for-sale securities are as of March 31, 2025, are as follows (in thousands):

One year or less $ 9,903

2 unchanged sentences

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

December 31, 2023 Acquisitions September 30, 2024

December 31, 2024 Acquisitions March 31, 2025

Goodwill $ 94,724 $ — $ 94,724

2 unchanged sentences

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

As of September 30, 2024, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

Gross Intangible Assets December 31, 2023 Acquisitions September 30, 2024

As of March 31, 2025, there has been no impairment of goodwill based on the qualitative assessments we have performed.

Gross Intangible Assets December 31, 2024 Acquisitions March 31, 2025

Customer relationships $ 148,097 $ 8,247 $ 156,344

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Amortization Net

September 30, 2024

March 31, 2025

Customer relationships 8.5 $ 156,344 $ ( 87,218 ) $ 69,126

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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 $ 11,790 and $ 9,929 for the nine months ended September 30, 2024 and 2023, respectively.

Amortization expenses recorded in cost of sales were $ 150 and $ 368 for the nine months ended September 30, 2024 and 2023, respectively.

There was no impairment of intangibles during the nine months ended September 30, 2024 based on the qualitative assessment performed by the Company.

Amortization expenses recorded in Operating Expenses were $ 4,308 and $ 3,449 for the three months ended March 31, 2025 and 2024, respectively.

Amortization expenses recorded in Cost of Sales were $ 50 for the three months ended March 31, 2025 and 2024.

There was no impairment of intangibles during the three months ended March 31, 2025 based on the qualitative assessment we performed.

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 for the period presented below (in thousands):

September 30, 2024

2025 (Remaining) $ 13,419

Thereafter 6,491

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

Maturity Cash Interest Rate September 30, 2024 December 31, 2023

Maturity Cash Interest Rate March 31, 2025 December 31, 2024

Notes Payable – Acquisitions (1)

1 unchanged sentence

$ 11,345 $ 9,943

Notes Payable – Other 11/01/25 10.00 % $ 5,000 5,000

Gross Notes Payable $ 16,345 $ 14,943

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

Gross Notes Payable Unamortized Debt Discount Net Notes Payable

September 30, 2024

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

March 31, 2025

Current portion of notes payable $ 8,541 $ ( 593 ) $ 7,948

5 unchanged sentences

Total $ 14,943 $ ( 2,226 ) $ 12,717

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

September 30, 2024

The following table summarizes the future principal payments related to our outstanding debt as of March 31, 2025 (in thousands):

2025 (Remaining) $ 7,578

Total $ 16,345

Notes Payable - Acquisitions

In July 2024, we purchased substantially all of the assets of an applicant tracking technology company based out of South Dakota.

In connection with the business combination, we delivered a promissory note to the seller.

As of September 30, 2024, the promissory note had an outstanding principal balance of $ 3,000 and matures on July 1, 2029.

In April 2024, we acquired certain assets of an Ohio based reseller partner, which were used to provide payroll processing services.

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

As of September 30, 2024, the promissory note had an outstanding principal balance of $ 700 and matures on October 30, 2025.

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

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

As of September 30, 2024, the promissory note had an outstanding principal balance of $ 963 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, we delivered a promissory note to the seller.

As of September 30, 2024, the promissory note had an outstanding principal 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, 2024, the promissory note had an outstanding principal balance of $ 3,780 .

As of March 31, 2025, we have seven promissory notes related to acquisitions that occurred during the three months ended March 31, 2025 and prior years with a combined outstanding principal balance of $ 11,345 and maturity dates ranging from October 1, 2025 to July 1, 2029.

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

Senior Credit Facility with Structural Capital Investments III, LP

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, 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.

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 Loan Agreement.

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

Notes Payable - Other

In November 2024, we delivered a promissory note to an unrelated third party in exchange for cash.

As of March 31, 2025 , the promissory note had an outstanding principal balance of $ 5,000 and matures on November 1, 2025.

On April 10, 2025, we extinguished this debt using the proceeds of a new credit facility.

See Note 12 — Subsequent Events for the details of the extinguishment of this note after the reporting period.

NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables from contracts with customers, net of allowance for credit losses of $ 6,150 , w ere $ 17,233 at September 30, 2024.

Receivables from contracts with customers, net of allowance for credit losses of $ 6,545 , were $ 15,800 at March 31, 2025.

Receivables from contracts with customers, net of allowance for credit losses of $ 6,328 , were $ 18,154 at December 31, 2024.

We had a provision for expected losses of $ 111 , write-offs charged against the allowance for credit losses of $ 16 , and recoveries on previously written off receivables of $ 1,267 during the nine months ended September 30, 2024.

No customer represented more than 10% of our net accounts receivable balance as of September 30, 2024 or December 31, 2023.

Deferred Commissions

Deferred commission costs from contracts with customers w ere $ 11,958 and $ 10,302 at September 30, 2024 and December 31, 2023 , respectively.

The amount of amortization recognized for the three and nine months ended September 30, 2024 was $ 689 and $ 1,548 , respectively, and for the three and nine months ended September 30, 2023 was $ 1,029 and $ 2,176 , respectively.

We had a provision for expected losses of $ 93 , write-offs charged against the allowance for credit losses of $ 22 , and recoveries on previously written off receivables of $ 145 during the three months ended March 31, 2025.

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 bal ance as of March 31, 2025 and December 31, 2024, respectively.

Contract Assets

Costs to Fulfill Contracts

Contract assets from contracts with customers were $ 2,232 and $ 1,712 at March 31, 2025 and December 31, 2024, respectively .

Costs to Obtain Contracts

Deferred commission costs from contracts with customers were $ 12,956 and $ 12,351 at March 31, 2025, and December 31, 2024 , respectively.

The amount of amortization recognized for the three months ended March 31, 2025, and March 31, 2024, was $ 737 and $ 611 , respectively.

Deferred Revenue

During the three and nine months ended September 30, 2024, revenue of $ 286 and $ 6,409 , respectively, and during the three and nine months ended September 30, 2023, revenue of $ 924 and $ 6,650 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

During the three months ended March 31, 2025 and 2024 , revenue of $ 5,990 and $ 5,118 , 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, 2024, approximately $ 67,318 of revenue is expected to be recognized from remaining performance obligations.

As of March 31, 2025, approximately $ 82,125 of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 38 % 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 September 30, 2024.

During the nine months ended September 30, 2024, various multi-year license arrangement was finalized primarily driving the increase in our deferred revenue balances as of September 30, 2024 when compared to December 31, 2023.

The arrangement is also driving the decrease in our transaction price estimated to be recognized during the next 12 months from 87 % as of December 31, 2023 to 34 % as of September 30, 2024.

Revenue Concentration

During the nine months ended September 30, 2024 and 2023, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 - LEASES

These amounts exc lude 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, 2025.

Revenue Co ncentration

During the three months ended March 31, 2025 and 2024, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lease Commitments

We have entered into office space lease agreements, which qualify as operating leases under ASU No.

1 unchanged sentence

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

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

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

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

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

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

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 September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Operating lease cost $ 534 $ 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 % as of September 30, 2024 and December 31, 2023.

The weighted average remaining lease term is four years and five years as of September 30, 2024 and December 31, 2023, respectively.

The weighted average discount rate of our operating leases is 10 % as of March 31, 2025 and December 31, 2024.

The weighted average remaining lease term is four years as of March 31, 2025 and December 31, 2024.

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

Nine Months Ended September 30,

Three Months Ended March 31,

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

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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):

September 30, 2024

2025 (Remaining) $ 1,472

Thereafter 27

2 unchanged sentences

Total lease liabilities $ 5,324

Contingencies

Although we have been, are, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of March 31, 2025, we were not currently a party to any material legal proceedings.

NOTE 9 - SHARE-BASED COMPENSATION

3 unchanged sentences

The number of shares reserved for issuance under the 2018 Plan is 4,748 shares.

We have an aggregate of 2,525 options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted and outstanding pursuant to the 2018 Plan as of September 30, 2024.

As of September 30, 2024, the number of shares available for future grant under the 2018 Plan is 972 .

Share based compensation for our stock option plans for the three and nine months ended September 30, 2024 was $ 1,591 and $ 4,981 , respectively, and for the three and nine months ended September 30, 2023 was $ 1,251 and $ 4,170 , respectively .

Issuance of common stock related to the exercise of stock options, the vesting of restricted stock units, and the vesting of restricted stock units converted from performance stock units are as follows for the period presented below (in thousands):

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

2024 2023 2024 2023

We have an aggregate of 2,809 options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted and outstanding pursuant to the 2018 Plan as of March 31, 2025.

As of March 31, 2025, the number of shares available for future grant under the 2018 Plan is 163 .

Share based compensation for our stock option plans for the three months ended March 31, 2025, and March 31, 2024, was $ 1,863 and $ 1,902 , respectively.

Issuance of common stock related to the exercise of stock options and the vesting of restricted stock units (including restricted stock units that converted from performance stock units) are as follows for the period presented below (in thousands):

Three Months Ended March 31,

Common stock issued - options 69 26

Common stock issued - RSU (1)

Common stock issued - PSU — — 109 —

Effective January 1, 2024, the Compensation Committee of the Board of Directors (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.

(1) Included in these amounts are 159 and 109 of restricted stock units that were converted from performance stock units which vested during the three months ended March 31, 2025 and 2024, respectively.

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 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.

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 our achievement of certain performance metrics tied to our recurring revenue and gross profit for 2024.

On March 6, 2025, the PSUs converted to RSUs at 70 % of target based on the achievement of set performance metrics, and we paid out a total of 153 RSUs to our executive officers.

Effective January 1, 2025, the Compensation Committee approved the grant of PSUs pursuant to a PSU Award Grant Notice and PSU Award Agreement (the “2025 PSU Award Agreement”) under the 2018 Plan to our executive officers payable in the form of RSUs.

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,

2024 2023 2024 2023

Three Months Ended March 31,

Net loss $ ( 2,398 ) $ ( 308 )

4 unchanged sentences

Diluted loss per share $ ( 0.09 ) $ ( 0.01 )

NOTE 11 - SEGMENT INFORMATION

We manage our business activities on a consolidated basis and operate as one reportable segment.

Our chief operating decision maker (“CODM”) is the Chairman and Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The CODM uses consolidated net loss, as reported on our Consolidated Statements of Comprehensive Loss, to assess financial performance and allocate resources.

These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between cost of sales, sales and marketing, general and administrative, and research and development expenses.

The CODM does not review assets in evaluating the results of the segment, and therefore, such information is not presented.

The operating financial results of our single reportable segment for three months ended March 31, 2025, and March 31, 2024, are as follows (in thousands):

Total revenues $ 34,854 $ 31,652

Significant segment expenses

Compensation 22,788 19,998

Non-compensation 9,617 8,249

Deferred software and commission costs ( 3,372 ) ( 2,916 )

Amortization, depreciation, and other noncash expenses 8,128 6,795

Other segment expenses 91 ( 166 )

Total expenses 37,252 31,960

Net loss ( 2,398 ) ( 308 )

NOTE 12 - SUBSEQUENT EVENTS

On October 31, 2024, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC ("Roth”).

The Sales Agreement provides for the offer and sale of up to $ 25,000 of the Company’s newly issued Common Stock, par value $ 0.01 per share (the “Common Stock”), from time to time through an “at the market offering” program.

The Company will specify the parameters for the sale of the shares of Common Stock, including the number of shares to be issued, the time period during which sales are requested to be made, any limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made.

The Company may offer and sell up to $ 25,000 of shares of Common Stock pursuant to the Sales Agreement.

Actual sales of Common Stock under the Sales Agreement will depend on a variety of factors including, among other things, market conditions, the trading price of the Common Stock and potential funding needs.

As a result, the full amount of capital may not be fully realized.

The Company intends to use the net proceeds from these at-market offerings, if any, for general corporate purposes.

The Company's general corporate purposes include, but are not limited to, repayment or refinancing of debt, capital expenditures, funding possible acquisitions, working capital and satisfaction of other obligations.

Credit, Security and Guaranty Agreement with MidCap Financial Trust

On April 10, 2025, we entered into a Credit, Security and Guaranty Agreement (the “Loan Agreement”) with MidCap Financial Trust (“MidCap”) and the lenders from time to time party thereto (such lenders collectively with MidCap, the “Lenders”).

Under the Loan Agreement, we may borrow up to $ 60,000 from the Lenders, with $ 20,000 funded on April 10.

2025, the closing date of the Loan Agreement (the “Closing Date”).

The remaining $ 40,000 is available through March 31, 2027, in increments of $ 2,000 (subject to customary notice period requirements), provided that we maintain a Total Leverage Ratio (as defined in the Loan Agreement) of less than 4.50 to 1.00, at the time that we draw funds, and that the funds are used for permitted acquisitions (as defined in the Loan Agreement).

The maturity date of the loan as provided under the Loan Agreement is April 1, 2030 (the “Maturity Date”).

Interest on the outstanding loan balance is payable monthly in arrears at an annual rate of Term SOFR plus 5.00 %, subject to a Secured Overnight Financing Rate (“SOFR”) floor of 2.00 %.

Prior to April 1, 2029 (the “Amortization Start Date”), we must make interest-only payments on the outstanding loan balance.

Commencing on the Amortization Start Date and continuing on the first day of each calendar month thereafter, we will pay an amount equal to the total principal of the outstanding loan balance divided by twelve ( 12 ), for a twelve ( 12 ) month straight-line amortization of equal monthly principal payments.

Also on a monthly basis, we must pay an administrative agency fee to MidCap equal to 0.25 % of the average end-of-day principal balance outstanding during the immediately preceding month.

We are subject to customary events of default as described in the Loan Agreement.

In such event, and for so long as it continues, the outstanding loan balance will bear interest at 2.0 % per annum in excess of the rate otherwise payable.

Under the Loan Agreement, we covenant to maintain a (1) Total Leverage Ratio (as defined in the Loan Agreement), as tested quarterly, no greater than 5.50 to 1.00, and (2) minimum liquidity threshold of 10.00 % of the outstanding principal amount of the Loans.

In connection with the Loan Agreement, we incurred $ 1,954 of origination, legal, and other fees that represent debt financing costs to be deferred and amortized over the duration of the Loan Agreement.

As a result, net proceeds of the Loan Agreement were $ 18,046 .

Extinguishment of Third-Party Note Payable

On April 10, 2025, we opted to repay the outstanding balance on our unrelated third-party promissory note (the “Note”) prior to its maturity using the proceeds of the Loan Agreement.

In connection with the extinguishment, we paid the lender an aggregate amount of $ 5,197 (the “Payoff Amount”) in full payment of our outstanding obligations under the Note.

The Payoff Amount represented $ 5,097 of outstanding principal and interest on the unpaid principal balance and a $ 100 prepayment fee.

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