What changed in this filing

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Item 1. Financial Statements

2020-08-10 compared with 2020-05-11 · 190 added, 140 removed, 378 unchanged (47% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2020 (unaudited)

(Amounts in thousands)

June 30, 2020 (unaudited)

December 31, 2019

1 unchanged sentence

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $986 and $904 at March 31, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 885 and $ 904 at June 30, 2020 and December 31, 2019, respectively

Prepaid expenses and other current assets

31 unchanged sentences

44,000 and 22,000 shares authorized;

16,127 and 16,098 shares issued, 15,743 and 15,714 shares outstanding at March 31, 2020 and December 31, 2019, respectively

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

16,225 and 16,098 shares issued, 15,841 and 15,714 shares outstanding at June 30, 2020 and December 31, 2019, respectively

Treasury stock at cost, 384 shares at June 30, 2020 and December 31, 2019

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Professional services, hardware and other

14 unchanged sentences

Income from operations of discontinued operations

Income tax expense

Income tax (benefit) expense

Gain on discontinued operations, net of taxes

Other comprehensive income:

Unrealized gain (loss) on marketable securities

Foreign currency translation gain (loss)

Unrealized gain on marketable securities

Foreign currency translation loss

Comprehensive loss

18 unchanged sentences

Balance at March 31, 2020

Stock issued upon option exercise and vesting of restricted stock units

Stock issued, ESPP

Share based compensation

Other comprehensive income

Balance at June 30, 2020

Common Stock Outstanding

10 unchanged sentences

Balance at March 31, 2019

Stock issued, ESPP

Stock issued upon option exercise and vesting of restricted stock units

Share based compensation

Other comprehensive loss

Balance at June 30, 2019

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

2 unchanged sentences

(Amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

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

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

Depreciation and amortization

Amortization of operating lease assets

Amortization of debt financing costs and discount

Provision for doubtful accounts

Benefit from deferred income taxes

Provision for (recovery of) doubtful accounts

Provision for deferred income taxes

Gain on modification of debt

8 unchanged sentences

Deferred revenue

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

23 unchanged sentences

Equity issued in connection with acquisitions

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

ASURE SOFTWARE, INC.

2 unchanged sentences

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

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

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

Asure facilitates the growth of small and mid-sized companies by helping them (i) build better teams with skills that get them to the next level, (ii) stay compliant with ever changing federal, state, and local tax jurisdictions and labor laws, and (iii) allocate more resources to support growth rather than back-office overhead that suffocates growth.

Asure’s HCM suite, named AsureHCM, includes cloud-based Payroll & Tax, Human Resources ("HR"), and Time & Attendance software as well as HR Services ranging from HR projects to completely outsourcing payroll and HR staff.

We develop, market, sell and support our offerings in North America through our principal office in Austin, Texas and in our marketplaces located in Alabama, California, Colorado, Florida, Georgia, Iowa, Michigan, Nebraska, New York, North Carolina, Ohio, Oregon, Tennessee, Vermont and Washington.

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

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

We used the proceeds to pay down debt.

The purchase price is subject to a working capital adjustment.

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

For further information regarding the transaction, see Note 10 to the accompanying consolidated financial statements.

4 unchanged sentences

These reclassifications include a change in the presentation of revenues.

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, 2020 and the results of operations, statements of changes in stockholders' equity and statements of cash flows for the three months ended March 31, 2020 and March 31, 2019.

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 June 30, 2020 and the results of operations, statements of changes in stockholders' equity for the three and six months ended June 30, 2020 and June 30, 2019, and our statements of cash flows for the six months ended June 30, 2020 and June 30, 2019.

These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in our annual report on Form 10-K for the fiscal year ended December 31, 2019.

19 unchanged sentences

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

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

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

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

11 unchanged sentences

The effects of this standard on our financial position, results of operations and cash flows were not material.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

2020-04 provides temporary optional expedients and exceptions to the guidance in U.S.

GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The guidance simplifies the accounting for modifying contracts that refer to LIBOR and other interbank offered rates.

The guidance is effective upon issuance through December 31, 2022.

We do not expect this guidance to be applicable to our Third Restated Credit Agreement (defined below in Note 5) since it contains a benchmark rate which will be applied to our outstanding notes as the LIBOR rate is phased out.

To the extent we enter into modifications of agreements that are impacted by the LIBOR rate phase-out, we will apply such guidance to those contract modifications.

Standards Yet to Be Adopted

6 unchanged sentences

2019-12, Simplifying the Accounting for Income Taxes .

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

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

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

5 unchanged sentences

CONTINGENCIES

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of March 31, 2020, we were not a party to any pending legal proceedings that are material to our business.

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of June 30, 2020, we were not a party to any pending legal proceedings that are material to our business.

NOTE 3 – INVESTMENTS AND FAIR VALUE MEASUREMENTS

As of March 31, 2020 and December 31, 2019, funds held for clients invested in available-for-sale securities consisting of government and commercial bonds, including mortgage-backed securities, amounted to $26,885 and $24,136, respectively.

As of March 31, 2020 and December 31, 2019, funds held for clients invested in money market funds and other cash equivalents amounted to $38,200 and $48,500, respectively.

Additionally, as of March 31, 2020, we had $17,994 in money market funds, classified as cash equivalents.

As of June 30, 2020 and December 31, 2019, funds held for clients invested in available-for-sale securities consisting of government and commercial bonds, including mortgage-backed securities, amounted to $ 27,591 and $ 24,136 , respectively.

As of June 30, 2020 and December 31, 2019, funds held for clients invested in money market funds and other cash equivalents amounted to $ 47,694 and $ 48,500 , respectively.

Additionally, as of June 30, 2020, we had $ 16,505 in money market funds, classified as cash equivalents.

Cash equivalents as of December 31, 2019 were not material.

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

March 31, 2020

June 30, 2020

Funds Held for Clients (2)

12 unchanged sentences

Asset-backed securities

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

As of March 31, 2020 and December 31, 2019, there were 60 and 53 securities, respectively, in an unrealized gain position and there were 19 and 18 securities, respectively, in an unrealized loss position.

As of March 31, 2020 and December 31, 2019, these unrealized losses were less than $35 individually and $111 in the aggregate.

As of June 30, 2020 and December 31, 2019, there were 79 and 53 securities, respectively, in an unrealized gain position and there were 0 and 18 securities, respectively, in an unrealized loss position.

As of June 30, 2020, we had zero unrealized losses.

As of December 31, 2019, these unrealized losses were less than $ 35 individually and $ 50 in the aggregate.

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

2 unchanged sentences

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

At March 31, 2020 and December 31, 2019, none of these securities were classified as cash and cash equivalents on the accompanying condensed consolidated balance sheets.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

At June 30, 2020 and December 31, 2019, none of these securities were classified as cash and cash equivalents on the accompanying condensed consolidated balance sheets.

Expected maturities of available-for-sale securities as of June 30, 2020 are as follows:

Expected Maturities

12 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 measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019, respectively:

March 31, 2020

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following table presents the fair value hierarchy for our financial assets measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, respectively:

June 30, 2020

Total Carrying Value

15 unchanged sentences

Available-for-sale securities

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

As of June 30, 2020 and December 31, 2019, goodwill was $ 68,697 , which is net of the $ 35,060 impairment loss recognized in the fourth quarter of 2019.

The Company evaluates the recoverability of goodwill annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

As of June 30, 2020, there has been no impairment of goodwill based on the quantitative assessments performed by the Company.

ASURE SOFTWARE, INC.

1 unchanged sentence

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

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

As of March 31, 2020 and December 31, 2019, goodwill was $68,697, which is net of the $35,060 impairment loss recognized in the fourth quarter of 2019.

There is no impairment of goodwill during the three months ended March 31, 2020.

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

March 31, 2020

The gross carrying amount and accumulated amortization of our intangible assets as of June 30, 2020 and December 31, 2019 are as follows:

June 30, 2020

Intangible Assets

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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 $2,349 and $2,418, for the three months ended March 31, 2020 and 2019, respectively.

Amortization expenses recorded in Cost of Sales were $431 and $360 for the three months ended March 31, 2020 and 2019, respectively.

There is no impairment of intangibles during the three months ended March 31, 2020.

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

Calendar Years

2020 (April to December)

Amortization expenses recorded in Operating Expenses were $ 2,349 and $ 2,403 , for the three months ended June 30, 2020 and 2019, respectively.

Amortization expenses recorded in Cost of Sales were $ 397 and $ 360 for the three months ended June 30, 2020 and 2019, respectively.

Amortization expenses recorded in Operating Expenses were $ 4,698 and $ 4,821 , for the six months ended June 30, 2020 and 2019, respectively.

Amortization expenses recorded in Cost of Sales were $ 828 and $ 720 for the six months ended June 30, 2020 and 2019, respectively.

There is no impairment of intangibles during the six months ended June 30, 2020 based on the qualitative assessment performed by the Company.

ASURE SOFTWARE, INC.

1 unchanged sentence

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

The following table summarizes the future estimated amortization expense relating to our intangible assets as of June 30, 2020:

Calendar Years

2020 (June to December)

NOTE 5 – NOTES PAYABLE

1 unchanged sentence

Stated Interest Rate

December 31, 2019

Subordinated Notes Payable – acquisitions

1/1/2021 – 7/1/2021

2.00 % - 3.00

Term Loan – Pinnacle

Term Loan – Wells Fargo Syndicate Partner

2 unchanged sentences

Long-term Notes Payable

The following table summarizes the debt issuance costs as of the dates indicated:

March 31, 2020

The following table summarizes the debt issuance costs as of the dates indicated based:

June 30, 2020

Gross Notes Payable

9 unchanged sentences

Notes payable, net of current portion

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

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes the future principal payments related to our outstanding debt as of June 30, 2020:

Term Loan - Wells Fargo

4 unchanged sentences

Under the Guaranty and Security Agreement, we and each of our wholly owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Third Amended and Restated Credit Agreement

In December 2019, we entered into a third amended and restated credit agreement (the “Third Restated Credit Agreement”) with Wells Fargo Bank, as agent and lender, amending and restating the terms of the Second Amended and Restated Credit Agreement dated as of March 2018.

The Third Restated Credit Agreement provides for $20,000 in term loans and a $10,000 revolver.

The Third Restated Credit Agreement amends the applicable margin rates for determining the interest rate payable on the loans as follows:

Leverage Ratio

Applicable Margin Relative

to Base Rate Loans

Applicable Margin Relative to

LIBOR Rate Loans

2.25% percentage points

3.25% percentage points

≤ 3.00:1.00, and ≥ 2.00:1.00

2.75% percentage points

3.75% percentage points

3.25% percentage points

4.25% percentage points

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

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

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

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

The Third Restated Credit Agreement also:

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

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

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

As of March 31, 2020 and December 31, 2019, no amount was outstanding and $9,500 and $10,000, respectively, was available for borrowing under the revolver.

As of March 31, 2020, a letter of credit of $500 was outstanding under the revolver.

As of March 31, 2020, we were in compliance with all financial covenants and all payments were current.

The Third Restated Credit Agreement provided for $ 20,000 in term loans and a $ 10,000 revolver.

It also amended the applicable margin rates for determining the interest payable on loans and amended certain of our financial covenants, including adding a covenant based on achieving EBITDA of at least $ 3,750 for the three months ended March 31, 2020, $ 4,850 for the six months ended June 30, 2020 and $ 5,950 for the nine months ended September 30, 2020, which covenant was in lieu of a leverage covenant calculated at March 31, 2020, June 30, 2020 and September 30, 2020 See Note 12 - Subsequent Events for information regarding amendments that Wells Fargo Bank and we have made to the Third Restated Credit Agreement after June 30, 2020.

In April 2020, Asure entered into a Promissory Note (the “PPP Note”) with Pinnacle Bank as the lender (the “Lender”), pursuant to which the Lender agreed to give us a loan under the Paycheck Protection Program (the "PPP Loan") offered by the U.S.

Small Business Administration (the “SBA”) in a principal amount of $ 8,856 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves.

Under the Cares Act, the PPP loan may be forgiven if certain criteria are satisfied.

The amount that will be forgiven will be calculated in part with reference to the Company’s full time headcount during the twenty-four week period following the funding of the PPP Loan.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loans granted under the Cares Act.

The PPP Loan is subject to forgiveness to the extent proceeds are used for payroll costs, including payments required to continue group health benefits, and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying Expenses”), pursuant to the terms and limitations of the Cares Act.

The Company intends to use a significant majority of the PPP Loan amount for Qualifying Expenses.

However, no assurances is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

The interest rate on the PPP Note is a fixed rate of 1 % per annum.

To the extent that the amounts owed under the PPP Loan, or a portion of them, are not forgiven, the Company will be required to make principal and interest payments in monthly installments beginning seven months from April 2020 .

The PPP Note matures in two years .

ASURE SOFTWARE, INC.

1 unchanged sentence

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

The PPP Note includes events of default.

Upon the occurrence of an event of default, the Lender will have the right to exercise remedies against the Company, including the right to require immediate payment of all amounts due under the PPP Note.

Revolving Credit Facility

As of June 30, 2020 and December 31, 2019, no amount was outstanding and $ 9,500 and $ 10,000 , respectively, was available for borrowing under the revolver.

Due to the effects of Covid-19 on our business, we were not in compliance with our minimum EBITDA financial covenant as of March 31, 2020 and June 30, 2020 and do not expect to be in compliance with the minimum EBITDA financial covenants as set forth in the Third Restated Credit Agreement in future quarters.

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

See Note 12 – Subsequent Events for information about the amendment we entered with our senior lender resetting these financial covenants and expectations regarding cash available for future business needs and our ability to comply with our financial covenants in future quarters.

NOTE 6 – STOCKHOLDERS’ EQUITY

Authorized Shares

On May 28, 2020, the Company amended its Restated Certificate of Incorporation to increase the total number of authorized shares of capital stock from 23,500,000 to 45,500,000 and the number of authorized shares of common stock from 22,000,000 to 44,000,000 .

Share Repurchase Program

5 unchanged sentences

We expect to finance the program from existing cash resources.

While the program remains in place, there had been no repurchases in 2020 and 2019.

While the program remains in place, there have been no repurchases in 2020 and 2019.

Employee Stock Purchase Plan

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

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

Under the ESPP, 225,000 shares were originally reserved for issuance.

On May 27, 2020, our shareholders increased the number of shares reserved for issuance under the Purchase Plan by an additional 250,000 shares.

Accumulated Other Comprehensive Income (Loss)

As of March 31, 2020 and December 31, 2019, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities.

As of June 30, 2020 and December 31, 2019, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables from contracts with customers, net of allowance for doubtful accounts of $986 were $4,900 at March 31, 2020.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 885 were $ 5,541 at June 30, 2020.

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

As of June 30, 2020, one customer represented 13 % of our net accounts receivable balance.

No customers represented more than 10% of our net accounts receivable balance as of December 31, 2019.

Deferred Commissions

Deferred commission costs from contracts with customers were $2,985 and $2,697 at March 31, 2020 and December 31, 2019, respectively.

The amount of amortization recognized for the three months ended March 31, 2020 and 2019 was $249 and $225, respectively.

Deferred commission costs from contracts with customers were $ 3,148 and $ 2,697 at June 30, 2020 and December 31, 2019, respectively.

The amount of amortization recognized for the three and six months ended June 30, 2020 was $ 190 and $ 440 , respectively and for the three and six months ended June 30, 2019 was $ 471 and $ 591 , respectively.

Deferred Revenue

During the three months ended March 31, 2020 and 2019, revenue of $2,704 and $1,583, respectively, was recognized from the deferred revenue balance at the beginning of each period.

During the three and six months ended June 30, 2020, revenue of $ 689 and $ 3,393 , respectively, and the three and six months ended June 30, 2019, revenue of $ 631 and $ 2,214 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2020, approximately $32,323 of revenue is expected to be recognized from remaining performance obligations.

As of June 30, 2020, approximately $ 27,272 of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 65 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Revenue Concentration

During the three months ended March 31, 2020 and 2019, there were no customers that individually represented 10% or more of consolidated revenue.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

During the three and six months ended June 30, 2020 and 2019, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 – LEASES

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

The components of the rent expense for the three months ended March 31, 2020 and 2019 were as follows:

Three Months Ended March 31,

The components of the rent expense for the three and six months ended June 30, 2020 and 2019 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

1 unchanged sentence

Net rent expense

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 9%.

The weighted average remaining lease term of leases with a lease liability as of March 31, 2020 and December 31, 2019 is 6 years.

Supplemental cash flow information related to operating leases for the three months ended March 31, 2020 and 2019 follow:

Three Months Ended March 31,

The weighted average discount rate of our operating leases is 10 % and 9 % as of June 30, 2020 and December 31, 2019, respectively.

The weighted average remaining lease term is five and six years as of June 30, 2020 and December 31, 2019, respectively.

Supplemental cash flow information related to operating leases for the six months ended June 30, 2020 and 2019 follow:

Six Months Ended June 30,

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

9 unchanged sentences

Total lease liabilities

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 9 – SHARE-BASED COMPENSATION

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The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) 2,350,000 shares, and (ii) any shares subject to issued and outstanding awards under the 2009 Plan as of the effective date of the 2018 Plan that expire, are canceled or otherwise terminate following the effective date of the 2018 Plan.

We have outstanding options to purchase 1,029,218 shares at a weighted exercise price of $8.25, of which options to purchase 63,000 shares at an exercise price of $5.96, vesting over a three-year period, were granted in the three months ended March 31, 2020.

We also had 235,215 outstanding restricted stock units as of March 31, 2020.

We have outstanding options to purchase 1,366,692 shares at a weighted average exercise price of $ 7.77 .

During the three and six months ending June 30, 2020 we issued 481,500 and 544,500 of employee stock options, respectively.

The weighted average exercise price of these awards was $ 6.42 and $ 6.36 for the three and six months ended June 30, 2020, respectively, these awards will vest over a three-year period.

We also had 585,050 outstanding restricted stock units as of June 30, 2020.

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

2 unchanged sentences

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

As of March 31, 2020, we had 849,105 shares available for grant pursuant to the 2018 Plan.

Share based compensation for our stock option plans for the three months ended March 31, 2020 and March 31, 2019 was $438 and $502, respectively.

We issued 19,317 shares and no shares of common stock related to exercises of stock options for the three months ended March 31, 2020 and 2019, respectively.

We issued 9,944 and no shares of common stock related to the issuance of vested restricted stock units for the three months ended March 31, 2020 and 2019, respectively.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

As of June 30, 2020, we had 1,096,104 shares available for grant pursuant to the 2018 Plan.

Share based compensation for our stock option plans for the three months ended June 30, 2020 and June 30, 2019 was $ 588 and $ 392 , respectively and for the six months ended June 30, 2020 and June 30, 2019 was $ 1,026 and $ 1,003 , respectively.

We issued 58,479 and 85,000 shares of common stock related to exercises of stock options for the three months ended June 30, 2020 and 2019, respectively.

We issued 7,213 and 8,000 shares of common stock related to the issuance of vested restricted stock units for the three months ended June 30, 2020 and 2019, respectively.

NOTE 10 – DISCONTINUED OPERATIONS

In December 2019, we sold our Workspace Management business to FM:Systems for approximately $121,500 in cash, of which $1,685 is held in escrow and is included in prepaid expenses and other current assets in the consolidated balance sheets as of March 31, 2020 and December 31, 2019.

In December 2019, we sold our Workspace Management business to FM:Systems for approximately $ 121,500 in cash, of which $ 1,685 is held in escrow and is included in prepaid expenses and other current assets in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

The purchase price is subject to a working capital adjustment.

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

The table below reflects the operating results of the Workspace Management business reported as discontinued operations during the three months ended March 31, 2019.

Three Months Ended March 31, 2019

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

The table below reflects the operating results of the Workspace Management business reported as discontinued operations during the three and six months ended June 30, 2019.

Three Months Ended

Six Months Ended

June 30, 2019

Income from discontinued operations

Income tax expense

Income tax (benefit) expense

Income from discontinued operations, net of taxes

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The table below reflects the depreciation, amortization, capital expenditures, and significant operating and investing non-cash items of the Workspace Management business reported as discontinued operations during the three months ended March 31, 2019:

Three Months Ended

Six Months Ended

June 30, 2019

Depreciation and amortization

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

We have excluded stock options and restricted stock units of approximately 1,264,000 and 1,630,000 shares for the three months ended March 31, 2020 and 2019, respectively, from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per common share for the three months ended March 31, 2020 and March 31, 2019:

Three Months Ended March 31,

We have excluded stock options and restricted stock units of approximately 1,951,000 and 1,502,000 shares for the three and six months ended June 30, 2020 and 2019, respectively, from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following table sets forth the computation of basic and diluted net loss per common share for the three and six months ended June 30, 2020 and June 30, 2019:

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Loss from continuing operations

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Income per share from discontinued operations

Loss per share

Basic and diluted loss per share

NOTE 12 – SUBSEQUENT EVENTS

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

In April 2020, we entered into a Promissory Note (the “PPP Note”) with Pinnacle Bank as the lender (the “Lender”), pursuant to which the Lender agreed to give us a loan under the Paycheck Protection Program (the "PPP Loan") offered by the U.S.

Small Business Administration (the “SBA”) in a principal amount of $8,856 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves;

and interest on certain other outstanding debt.

The Company evaluated subsequent events through the date of the filing of this Quarterly Report on Form 10-Q with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the condensed consolidated financial statements as of June 30, 2020, and events which occurred subsequent to June 30, 2020 but were not recognized in the condensed consolidated financial statements.

On July 7, 2020, our senior lender identified certain events of default under our Third Restated Credit Agreement and reserved their rights to pursue their remedies under the Credit Agreement as a result of the events of default.

Then, on July 10, 2020, our senior lender issued a reservation of rights letter related to these events of default.

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

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

Under the reservation of rights letter, the senior lender began accruing default interest from May 11, 2020, which we would have been required to pay on July 31, 2020.

Our senior lender extended the date by which we would be required to pay the accrued default interest to August 10, 2020 as we were negotiating an amendment to the Third Restated Credit Agreement.

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

ASURE SOFTWARE, INC.

1 unchanged sentence

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

According to the terms of the Paycheck Protection Program and current guidance from the SBA and U.S.

Department of Treasury, all or a portion of loans under the program may be forgiven if the PPP Loan proceeds are used for permitted expenses, as outlined in the CARES Act and related regulations, including 75% of the PPP Loan proceeds being used for payroll related costs.

The amount that may be forgiven will be calculated in part with reference to our full time headcount during the eight week period following the funding of the PPP Loan.

The SBA and U.S.

Department of Treasury may continue to update guidance on the calculation of loan forgiveness, which updated guidance could affect the amount of the PPP Loan proceeds that could be forgiven.

The interest rate on the PPP Note is a fixed rate of 1% per annum.

To the extent that the amounts owed under the PPP Loan, or a portion of them, are not forgiven, we will be required to make principal and interest payments in monthly installments beginning seven months from April 2020.

The PPP Note matures in two years.

The PPP Note includes events of default.

Upon the occurrence of an event of default, the Lender will have the right to exercise remedies against us, including the right to require immediate payment of all amounts due under the PPP Note.

As amended by the Fourth Amendment, the Third Restated Credit Agreement now provides for $ 10,000 in term loans and a $ 5,000 revolver, requiring that we make a principal payment of $ 9,750 on our outstanding term loans and reducing future availability on our revolver by $5,000.

The Fourth Amendment also re-amortized the outstanding principal amount of the term loan, which is now payable as follows:

$62.5 beginning on September 30, 2020 and the last day of each fiscal quarter thereafter through and including December 31, 2021;

$125 beginning on March 31, 2022 and the last day of each fiscal quarter thereafter.

In addition, the Fourth Amendment requires a LIBOR floor of 1.00 % and sets the Applicable Margin at the highest level through September 30, 2021.

The Applicable Margin is currently at 4.25 %.

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

The Fourth Amendment provides for an accordion feature to our term loan that would allow us to borrow up to an additional $15,000 in term loans subject to certain conditions following the Covenant Conversion Date, which is described below.

The Fourth Amendment also reset our financial covenants as follows:

Adjusts our minimum EBITDA covenant requiring us to achieve EBITDA of at least $750 for the nine months ended September 30, 2020, instead of $5,950, and further extends this covenant to June 30, 2022 as it was previously going to sunset as of September 30, 2020.

Adds a new financial covenant for minimum recurring revenue of $40,000 for the three quarter period ending September 30, 2020 and increasing on a quarterly basis through June 30, 2022 as further set forth in the Fourth Amendment.

Adjusts the applicable fixed charge coverage ratio for periods after June 30, 2022 as set forth in the Fourth Amendment.

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

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

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

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

Our senior lender waived the payment of default interest that had accrued since May 11, 2020 and stopped assessing default interest as of August 10, 2020.

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

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

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

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

We had sufficient cash on hand to make the required payment of $9,750 in connection with the Fourth Amendment and expect to have enough cash on hand to meet our future business needs.

Further, we expect to comply with our financial covenants in future quarters under the Third Restated Credit Agreement, as amended by the Fourth Amendment.

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