What changed in this filing

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Item 9A. Controls and Procedures

2021-03-11 compared with 2020-03-16 · 428 added, 390 removed, 787 unchanged (51% of the section changed)

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Evaluation of Disclosure Control and Procedures

Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of December 31, 2019 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure due to the material weakness identified below.

Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of December 31, 2020 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

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Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”).

Based on our assessment, management has concluded that our internal control over financial reporting was not effective as of December 31, 2019 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

generally accepted accounting principles due to the material weakness identified below.

Our independent registered public accounting firm, Marcum LLP, has issued an audit report with respect to our internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K, and is incorporated herein by reference.

Management identified a deficiency related to the design effectiveness of the Company’s controls surrounding the safeguarding of assets.

Specifically, the Company did not maintain appropriate access to certain systems and did not maintain appropriate segregation of duties related to processes associated with those systems.

Although there were no material misstatements to the consolidated financial statements as of and for the year ended December 31, 2019, such deficiency creates a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis and presents a material weakness in the Company’s internal control over financial reporting.

As a result, management concluded that our internal control over financial reporting was not effective at December 31, 2019.

There were no changes in our internal control over financial reporting during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

generally accepted accounting principles.

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

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Remediation of Material Weakness in Internal Control Over Financial Reporting

During the fourth quarter of 2019, Management identified a deficiency related to the design effectiveness of the Company's controls surrounding the safeguarding of assets.

Specifically, the Company did not maintain appropriate access to certain systems and did not maintain appropriate segregation of duties related to processes associated with those systems.

Management has implemented measures designed to remediate the material weakness.

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(i) review and changes to system access, (ii) organization re-alignment to improve and ensure segregation of duties and (iii) implementation of additional manual and IT controls.

We believe that the above actions will remediate the material weakness.

The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We expect the remediation of this material weakness will be completed by June 30, 2020.

While we continue to make improvements in our processes and controls, we believe that the above actions have remediated the material weakness as of December 31, 2020.

Changes in Internal Control Over Financial Reporting

Except for the material weakness identified during the fourth quarter, as of December 31, 2019, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that

occurred during the fourth quarter of 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except for the remediation of the material weakness during the fourth quarter of 2020, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

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

This new stock repurchase program is in addition to the approximately 66,000 shares available under our existing stock repurchase plan.

Under this new stock repurchase program, we may repurchase shares in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

The extent to which we repurchase our shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by our management.

The repurchase program may be extended, suspended or discontinued at any time.

We expect to finance the program from existing cash resources.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the headings “Item 1 – Election of Directors and “Other Matters.”

In addition, the following table sets forth information regarding our current executive officers as of March 16, 2020:

Patrick Goepel

Chief Executive Officer

Kelyn Brannon

Chief Financial Officer

Eyal Goldstein

Chief Revenue Officer

Rhonda Parouty

Chief Operating Officer

Patrick Goepel was elected to our Board of Directors in August 2009.

He was subsequently appointed as Interim Chief Executive Officer on September 15, 2009 and became Chief Executive Officer as of January 1, 2010.

Prior to joining Asure, he served as Chief Operating Officer of Patersons Global Payroll.

Previously, he was the President and Chief Executive Officer of Fidelity Investment’s Human Resource Services Division from 2006 to 2008;

President and Chief Executive Officer of Advantec from 2005 to 2006;

and Executive Vice President of Business Development and US Operations at Ceridian from 1994 to 2005.

A former board member of iEmployee, Mr.

Goepel currently serves on the board of directors of APPD Investments and SafeGuard World International.

Kelyn Brannon joined Asure as Chief Financial Officer in October 2017.

Prior to joining Asure, Ms.

Brannon held positions as a CFO as well as a CEO at several leading enterprises, including Amazon, Calypso Technology, Calix, and most recently, Arista Networks, where she served as CFO from 2013-2015.

Brannon also held senior finance positions at Sun Microsystems, Lexmark International, and Ernst & Young, and is a member of the American Institute of Certified Public Accountants.

Brannon earned a Bachelor’s degree in Political Science from Murray State University.

Eyal Goldstein joined Asure as Chief Revenue Officer in December 2016.

Prior to joining Asure, Mr.

Goldstein served as Chief Revenue Officer of Insight Venture Partner’s FilmTrack, a global rights management platform, from 2013-2016.

He previously served as Executive Vice President of DAZ Systems, prior to DAZ he was Regional Vice President at Oracle Corp.

and served as Vice President at Ceridian Corporation.

Goldstein earned a Bachelor’s degree in English from the University of Nevada, Las Vegas.

Rhonda Parouty joined Asure as Chief Operating Officer in January 2019.

Prior to joining Asure, Ms.

Parouty was an advisor to various start-ups, including Trivie, Inc.

From 2016 to 2017, Ms.

Parouty served as Executive Vice President, Channel Management & Consumer Brands at BrandMuscle, a global leader in precision local marketing solutions.

From 2007 until 2016, Ms.

Parouty held various positions with HP Software, including as Head of Revenue, Global Business Development & Strategy Director (2014-2016);

Global Business Strategy & Operations Director (2012-2014);

and Global Application Owner & Consulting Services Leader (2007-2012).

EXECUTIVE COMPENSATION

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PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement foe our 2020 annual meeting of shareholders under the heading “Item 2 – Ratification of Independent Registered Public Accounting Firm.”

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the heading “Item 2 – Ratification of Independent Registered Public Accounting Firm.”

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019 and 2018

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2020 and 2019

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All schedules for which provision is made in the applicable account regulation of the Securities and Exchange Commission are either not required under the related instructions, are inapplicable or the required information is included elsewhere in the Consolidated Financial Statements and incorporated herein by reference.

EXHIBIT NUMBER

DOCUMENT DESCRIPTION

EXHIBIT NUMBER DOCUMENT DESCRIPTION

2.1 Asset and Equity Purchase Agreement, dated as of October 7, 2019, between Asure Software, Inc., FM Systems Group, LLC and FMS Bidco UK Limited**(1 0 )

2.2 Asset Purchase Agreement among Asure Payroll Tax Management LLC, Payroll Tax Management, Inc., Financial Business Group Holdings, and Alden J.

Blowers, dated as of July 1, 2020 (1 8 )

3.1 Restated Certificate of Incorporation (2)

3.2 Certificate of Amendment to Certificate of Incorporation (1 7 )

3.3 Third Amended and Restated Bylaws ( 9 )

3.4 Amendment to No.

1 to Third Amended and Restated Bylaws (1 3 )

4.1 Specimen Certificate for the Common Stock (4)

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4.4† Stock Option Agreement for Patrick Goepel (1)

Subordinated Promissory Note in the principal amount of $450,000 dated April 1, 2018 between Asure Software Inc.

and Wells Fargo Bank.

4.5 Intentionally omitted

4.6 Description of the Company’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934* (12)

2009 Equity Plan, amended as of June 26, 2012 (6)

Amendment No.

3 to 2009 Equity Plan (6)

Form of Option Agreement under the 2009 Equity Plan (6)

10.1 Intentionally omitted

10.2 Intentionally omitted

10.3 Intentionally omitted

10.4† Stock Purchase Agreement dated September 25, 2009 with Patrick Goepel ( 6 )

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10.11 Third Amended Restated Credit Agreement dated as of December 31, 2019, by the lenders identified by the Signature Pages thereto, Wells Fargo Bank, National Association, as Administrative Agent, and Asure Software, Inc.

10.12 Amendment No.

1 To Third Amended and Restated Credit Agreement, dated February 21, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (1 6 )

10.13 Amendment No.

2 To Third Amended and Restated Credit Agreement, dated April 24, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (1 6 )

10.14 Waiver and Amendment No.

3 To Third Amended and Restated Credit Agreement, dated June 30, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto ( 19 )

10.15 Waiver and Amendment No.

4 to Third Amended and Restated Credit Agreement and Amendment No.

2 to the Amended and Restated Guaranty and Security Agreement, dated August 10, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto ( 19 )

10.16 Intentionally omitted

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10.18 Intentionally omitted

Employee Stock Purchase Plan (9)

10.19† Employee Stock Purchase Plan, as amended on May 27, 2020 (1 5 )

10.20 Intentionally omitted

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10.25 Intentionally omitted

Amendment No.

4 to the 2009 Equity Plan (10)

10.26† Form of Indemnification Agreement (8)

10.27† Executive Change in Control Severance Plan (8)

Purchase Agreement, dated as of April 1, 2018, between Asure Software, Inc.

and Wells Fargo Bank, N.A.

10.28 Intentionally omitted

10.29 Intentionally omitted

10.30 Asure Software, Inc.

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and FM Systems Group, LLC (1 1 )

10.34 General Release and Separation Agreement between Asure Software, Inc.

Brannnon, dated August 11, 2020 (2 0 )

10.35 Promissory Note, dated April 15, 2020, between Asure Software, Inc.

and Pinnacle Bank (1 4 )

10.36 Underwriting Agreement, dated December 18, 2020, between Asure Software, Inc.

and Roth Capital Partners, LLC, as representative (2 1 )

14.1 Code of Business Conduct and Ethics (3)

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(5) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 19, 2019.

(6) Incorporated by reference to the Company’s 2013 Proxy Statement filed with the SEC on April 30, 2013.

(6) Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the SEC on September 28, 2009.

(7) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2020.

(9) Incorporated by reference to the Company’s Registration Statement on Form S-8 (No.

333-215097) filed with the SEC on December 14, 2016.

(10) Incorporated by reference to the Company’s Proxy Statement filed with the SEC on April 21, 2017.

(8) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 21, 2017.

(9) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2018 filed with the SEC on November 9, 2018.

(13) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 2, 2018.

(14) Incorporated by reference to the Company’s Registration Statement on Form S-8 (No.

333-230967) filed with the SEC on April 19, 2019.

(10) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2019.

(11) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2019.

(12) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 16, 2020.

(13) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 6, 2020.

(14) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2020.

(15) Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14 A filed on April 27, 2020.

(16) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020

filed with the SEC on May 11, 2020.

(17) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 2, 2020.

(18) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 13, 2020.

(19) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2020

filed with the SEC on August 10, 2020.

(20) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30,

2020 filed with the SEC on November 9, 2020.

(21) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2020.

Index to Financial Statements and Financial Statement Schedules (Item 15(a)(1) of Part IV)

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We have audited the accompanying consolidated balance sheets of Asure Software, Inc.

(the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”).

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 16, 2020 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weakness.

Explanatory Paragraph - Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842) , as amended, effective January 1, 2019, using the modified retrospective approach.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

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

As described in Note 1 to the consolidated financial statements, the Company performed a recoverability test of its long-lived assets by comparing the estimated future cash flows from its asset group to its carrying value.

As described in Note 5 to the consolidated financial statements, the Company performed its annual evaluation of goodwill for impairment by comparing the estimated fair value of the reporting unit to its carrying value.

The Company determined that as of the valuation date there was only one asset group and one reporting unit.

The Company used a discounted cash flow model to estimate the fair value of the reporting unit, The Company’s cash flow model used to test the recoverability of its long-lived assets and evaluate goodwill for impairment requires management to make subjective estimates and assumptions, particularly related to the forecast of future revenues.

The principal considerations for our determination that performing procedures relating to evaluating the recoverability of the carrying value of goodwill and long-lived assets is a critical audit matter, are that there is significant judgment by management in both the identification of the reporting unit and asset group, and in the estimation of future cash flows.

This in turn led to high degree of auditor judgment, subjectivity and effort in performing audit procedures in evaluating audit evidence related to

management’s identification of reporting unit and asset group, and management’s estimates and assumptions used in the forecasts and discounted cash flow models.

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

These procedures included, among others, (i) evaluating management’s determination of a single reporting unit;

(ii) evaluating management’s determination of a single asset group;

and (iii) testing management’s process of estimating forecasted cash flows by comparing the forecasts to historical results, internal communications to management and board of directors, forecast information included in analyst and industry reports for the Company, and other macroeconomic indicators.

In addition, our procedures to evaluate the recoverability of goodwill included a sensitivity analysis of the implied control premium by comparing the fair value determined by the Company against the market capitalization of the Company at the valuation date.

/s/ Marcum LLP

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(Amounts in thousands)

2020 December 31,

Current assets:

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Accounts and note receivable, net of allowance for doubtful accounts of $ 771 and $ 904 at December 31, 2020 and December 31, 2019, respectively

Inventory 449 656

Prepaid expenses and other current assets 3,284 8,551

Current assets of discontinued operations

Total current assets before funds held for clients 37,162 42,841

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Property and equipment, net 8,281 7,867

Goodwill 73,958 68,697

Intangible assets, net 64,552 63,850

Operating lease assets, net 6,450 6,963

Long-term assets of discontinued operations

Other assets 3,951 3,224

Total assets $ 515,423 $ 320,067

Liabilities and stockholders’ equity

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Other accrued liabilities 1,380 6,556

Contingent purchase obligation 3,880 —

Deferred revenue 5,838 5,500

Current liabilities of discontinued operations

Total current liabilities before client fund obligations 29,445 21,362

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Other liabilities 1,157 139

Long-term liabilities of discontinued operations

Total long-term liabilities 19,747 30,876

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

( 5,017 ) ( 5,017 )

Additional paid-in capital 419,827 396,102

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Years Ended December 31

Recurring $ 63,315 $ 70,066

Professional services, hardware and other 2,192 3,084

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Cost of sales 27,414 29,836

Gross profit 38,093 43,314

Operating expenses

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Loss from continuing operations before income taxes ( 15,974 ) ( 66,402 )

Income tax benefit

Income tax expense (benefit) 337 ( 24,111 )

Loss from continuing operations ( 16,311 ) ( 42,291 )

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Other comprehensive income (loss):

Change in unrealized gain (loss) on available for sale securities

Change in unrealized gain on available for sale securities 629 6

Foreign currency translation loss — ( 597 )

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Basic and diluted loss per share from continuing operations

Basic $ ( 1.03 ) $ ( 2.73 )

Diluted $ ( 1.03 ) $ ( 2.73 )

Basic and diluted net income (loss) per share

Basic $ ( 1.03 ) $ 1.93

Diluted $ ( 1.03 ) $ 1.93

Weighted average basic and diluted shares

Basic 15,910,000 15,511,000

Diluted 15,910,000 15,511,000

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

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(Amounts in thousands)

Common Stock Amount

Treasury Stock

Additional Paid-

Accumulated Other

Outstanding Common Stock Amount Treasury Stock Additional Paid-

in Capital Accumulated

Deficit Accumulated Other

Comprehensive

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BALANCE AT DECEMBER 31, 2018 15,282 $ 157 $ ( 5,017 ) $ 391,927 $ ( 283,643 ) $ ( 906 ) $ 102,518

Retrospective adoption of Topic 606

Stock issued upon option exercise and vesting of restricted stock units 204 2 — 846 — — 848

Share based compensation — — — 2,268 — — 2,268

Stock issued upon option exercise

Stock issued, net of issuance cost

Stock issued under the employee stock purchase plan 105 1 — 507 — — 508

Stock issued upon acquisition 123 1 — 554 — — 555

Net income — — — — 30,001 — 30,001

Disposal of discontinued operations — — — — — 1,472 1,472

Other comprehensive income — — — — — ( 591 ) ( 591 )

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Stock issued under the employee stock purchase plan 59 — — 292 — — 292

Stock issued upon acquisition

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

Share based compensation — — — 2,365 — 2,365

Disposal of discontinued operations

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

Other comprehensive income — — — — — 629 629

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Amortization of debt financing costs and discount 395 1,462

Release of contingent consideration

Provision for doubtful accounts 372 446

Benefit from deferred income taxes

Provision (benefit) from deferred income taxes 551 ( 1,193 )

Loss (gain) on extinguishment of debt ( 138 ) 2,808

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Loss on disposals of fixed assets 59 62

Change in fair value of contingent purchase consideration 1,135 —

Changes in operating assets and liabilities:

Accounts receivable 1,118 ( 1,446 )

Inventory 11 ( 1,581 )

Prepaid expenses and other assets ( 911 ) ( 3,113 )

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Cash paid for:

Interest $ 1,029 $ 8,897

Income taxes 3,662 126

Non-cash Investing and Financing Activities:

Subordinated notes payable –acquisitions

Notes issued in connection with acquisition 1,177 —

Contingent purchase consideration 2,745 —

Equity issued in connection with acquisitions — 555

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NOTE 1 - THE COMPANY

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 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 worldwide through our principal office in Austin, Texas and additional offices in Alabama, California, Florida, Massachusetts, Michigan, Nebraska, New York, North Carolina, Tennessee, Vermont, Washington, and the United Kingdom.

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

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

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

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

Our platform vision is to help clients grow their business and become the most trusted HCM resource to entrepreneurs everywhere.

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

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

The Asure HCM suite includes four product lines:

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

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

In December 2020, we completed an underwritten public offering of 2,990,000 shares of our common stock at a public offering price of $ 7.25 .

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

Following this offering, we have approximately $ 111,760 available under our shelf registration statement on Form S-3.

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

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

The seller will be paid additional consideration for the assets based on the trailing twelve-month revenue from the acquired assets at each of April 30, 2021 and October 31, 2021.

Subject to any disagreement as to the calculation of the contingent purchase consideration, payments for contingent purchase consideration, if any, will be made by May 30, 2021 and December 30, 2021.

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.

The purchase price is subject to a working capital adjustment.

We used the proceeds to pay down debt owed to our senior lender.

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

For further information regarding the transaction, see Note 12 to the accompanying consolidated financial statements.

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We have eliminated all significant intercompany transactions and balances in consolidation.

We have made certain reclassifications to the prior year’s consolidated financial statements to conform to the current year presentation.

The chief operating decision maker is Asure’s Chief Executive Officer who reviews financial information presented on a company-wide basis.

Accordingly, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, we determined that the Company has a single reporting segment and operating unit structure.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

USE OF ESTIMATES

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

SIGNIFICANT RISKS AND UNCERTAINTIES

The COVID-19 pandemic has resulted in a global economic slowdown and disruptions that have and could continue to negatively impact our business.

The pandemic and numerous measures implemented to contain the virus such as business shutdowns, shelter-in-place orders and travel bans and restrictions have caused businesses, especially small and medium sized businesses some of whom are our customers, to reduce headcount or cease operations as customer demand decreased.

Given the economic slowdown and other risks and uncertainties associated with the pandemic, we expect that our business, financial condition, results of operations and growth prospects will be adversely affected in the future.

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

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

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

If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

RECLASSIFICATION

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 previously reported net income.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash deposits and highly liquid investments with an original maturity of three months or less when purchased.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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Interest and dividends on securities classified as available-for-sale are included in interest income.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

FUNDS HELD FOR CLIENTS

Funds held for clients represent assets that, based upon the Company’s intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client fund obligations on our consolidated balance sheets.

Funds held for clients are held in demand deposit accounts at major financial institutions and are classified as a current asset on our consolidated balance sheets since these funds are held solely for the purposes of satisfying the client fund obligations.

Funds held for clients represent assets that are held for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services and are classified as client fund obligations on our consolidated balance sheets.

Funds held for clients are held in demand deposit or brokerage accounts at financial institutions and are classified as a current asset on our consolidated balance sheets.

Client fund obligations represent the Company’s contractual obligations to remit funds to satisfy clients’ payroll and tax payment obligations and are recorded on the consolidated balance sheets at the time that the Company impounds funds from clients.

The client fund obligations represent liabilities that will be repaid within one year of the balance sheet date.

The Company has reported client fund obligations as a current liability on the consolidated balance sheets totaling $145,227 and $123,170 as of December 31, 2019 and December 31, 2018 , respectively.

The Company has classified funds held for clients as a current asset totaling $137,935 and $122,206 as of December 31, 2019 and 2018 , respectively, since these funds are held solely for the purposes of satisfying client funds obligations.

The Company has reported client fund obligations as a current liability on the consolidated balance sheets.

As part of the previously identified material weakness which we have subsequently remediated, the Company recovered approximately $ 4,290 in funds and insurance proceeds.

The Company recognized $ 3,961 of these funds as receivables in other assets on the consolidated balance sheets at December 31, 2019 with an offsetting liability in client fund obligations.

The Company collected the full $ 4,290 during the first quarter of 2020 and has since disbursed $ 482 of these funds resulting in a segregated $ 3,808 in funds held for clients with an offsetting liability in client fund obligations at December 31, 2020.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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We place accounts on “Credit Hold” if a placed order exceeds the credit limit or sooner if circumstances warrant.

We follow our credit policy consistently and routinely monitor our delinquent accounts for indications of uncollectability.

We follow our credit policy consistently and routinely monitor our delinquent accounts for indications of collectability.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

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Inventory consists of finished goods and is stated at the lower of cost or net realizable value, cost being determined using the first-in, first-out method.

Inventory includes a full range of biometric and card recognition clocks that we sell as part of our AsureTime&Attendance solutions.

Inventory includes a full range of biometric and card recognition clocks that we sell as part of our Asure Time&Attendance solutions.

We routinely assess our on-hand inventory for timely identification and measurement of obsolete, slow-moving or otherwise impaired inventory.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

PROPERTY AND EQUIPMENT

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Property and equipment also includes leasehold improvements which we record at cost less accumulated amortization.

We record amortization of leasehold improvements using the straight-line method over the shorter of the lease term or over the life of the respective assets, as applicable.

We record amortization of leasehold improvements using the straight-line method over the shorter of the lease

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

term or over the life of the respective assets, as applicable.

We recognize gains or losses related to retirements or disposition of fixed assets in the period incurred.

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We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests if indicators of potential impairment exist, by first assessing qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.

On January 1, 2019, w e early adopted Accounting Standards Update ("ASU") No.

On January 1, 2019, we early adopted Accounting Standards Update ("ASU") No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

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In 2019, we recognized an impairment loss on goodwill.

In 2018, there was no impairment of goodwill.

See Notes 4 and 5 for additional information regarding goodwill.

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See Note 5 for additional information regarding intangible assets.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, including intangible assets with definite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

We have determined that there was no impairment of long-lived assets including intangible assets with definite lives, for the year ended December 31, 2020.

ORIGINAL ISSUE DISCOUNTS

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At the time of any repurchases or retirements of related debt, we write off the remaining amount of net original issue discounts and include them in the calculation of gain or loss on extinguishment in the consolidated statements of comprehensive loss.

REVENUE RECOGNITION

On January 1, 2018, we adopted ASC Topic 606 (“Topic 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.

There was no impact to revenue as a result of applying Topic 606 for the year ended December 31, 2018 .

ASURE SOFTWARE, INC.

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

REVENUE RECOGNITION

Our revenue consists of software-as-a-service (“SaaS”) offerings and time-based software subscription license arrangements that also, typically, include hardware, maintenance/support, and professional services elements.

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We determine standalone selling prices based on the amount that we believe the market is willing to pay determined through historical analysis of sales data as well as through use of the residual approach when we can estimate the standalone selling price for one or more, but not all, of the promised goods or services.

SaaS arrangements and time-based software subscriptions typically have an initial term ranging from one to three years and are renewable on an annual basis.

The terms of our contracts with customers range from month to month for some Asure HCM direct clients to longer terms ranging from one to three years, some of which are renewable for successive terms.

A typical SaaS/software subscription arrangement will also include hardware, setup and implementation services.

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ADVERTISING COSTS

We expense advertising costs as we incur them.

Advertising expenses were $64 and $55 for 2019 and 2018 , respectively.

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

ASURE SOFTWARE, INC.

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

We expense advertising costs as we incur them.

Advertising expenses were $ 34 and $ 64 for the years ended December 31, 2020 and 2019, respectively.

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

LEASE OBLIGATIONS

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Lease agreements that contain both lease and non-lease components are generally accounted for separately.

FOREIGN CURRENCY TRANSLATION

We measure the financial statements of our foreign subsidiaries using the local currency as the functional currency.

Accordingly, we translate the assets and liabilities of these foreign subsidiaries at current exchange rates at each balance sheet date.

We record translation adjustments arising from the translation of net assets located outside of the United States into United States dollars in accumulated other comprehensive loss as a separate component of stockholders’ equity.

We translate income and expenses from the foreign subsidiaries using monthly average exchange rates.

We include net gains and losses resulting from foreign exchange transactions in other income and expenses, which were not significant in 2019 and 2018 .

We account for income taxes using the liability method under ASC 740, Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements.

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Recently Adopted Standards

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) .

The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases.

A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) and an operating lease asset representing its right to use the underlying asset for the lease term.

Additional qualitative and quantitative disclosures are also required.

We adopted the standard on January 1, 2019, utilizing the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented.

Upon adoption, we did not record an adjustment to our beginning accumulated deficit.

In addition, we adopted the following additional practical expedients available for implementation:

• An entity need not reassess whether any existing or expired contracts are or contain leases;

• An entity need not reassess lease classification for any existing or expired leases;

• An entity need not reassess initial direct costs for any existing leases.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We recognized operating lease liabilities of approximately $8,900 on January 1, 2019.

A right-of-use asset of approximately $8,200 was recognized based on the lease liability, adjusted for the reclassification of deferred rent and lease incentive of approximately $700 .

The standard did not materially impact our operating results or liquidity upon adoption.

The standard has no impact on the timing or classification of our cash flows as reported in the Condensed Consolidated Statement of Cash Flows.

Our accounting for finance leases remained substantially unchanged.

Disclosures related to this standard are included in Note 15.

In January 2017, the FASB issued ASU 2017-04, which simplifies the accounting for goodwill impairment by requiring a goodwill impairment to be measured using a single step impairment model, whereby the impairment equals the difference between the carrying amount and the fair value of the specified reporting units in their entirety.

This eliminates the second step of the current impairment model that requires companies to first estimate the fair value of all assets in a reporting unit and measure impairments based on those fair values and a residual measurement approach.

It also specifies that any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

We recognized a goodwill impairment loss in 2019.

Refer to Note 5.

In February 2018, the FASB issued ASU No.

2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which provides entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the 2017 Tax Cuts and Jobs Act (“the Tax Act”) to retained earnings.

We adopted the standard effective January 1, 2019.

The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

Standards Yet to Be Adopted

The FASB issued ASU No.

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Implementation on a prospective or retrospective basis varies by specific disclosure requirements.

Early adoption is permitted.

The standard also allows for the early adoption of any removed or modified disclosures upon issuance of this ASU while delaying the adoption of the additional disclosures until their effective date.

We plan to adopt this standard at the effective date and do not expect any material impact from adoption.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

The FASB issued ASU No.

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The new guidance reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

For public companies, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted.

Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

The effects of this standard on our financial position, results of operations or cash flows are not expected to be material.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Standards Yet to Be Adopted

The FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes, in December 2019.

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.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

ASU 2019-12 is effective for fiscal years beginning after December

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

15, 2020, and interim periods within those fiscal years.

We are currently evaluating the impact, if any, the adoption will have on our financial position and results of operations.

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As of December 31, 2020 and 2019, we also had $ 63,999 and $ 48,500 , respectively, of funds held for clients invested in money market funds and other cash equivalents.

Additionally, as of December 31, 2018, we had $8,111 in money market funds classified as cash equivalents.

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

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Cash equivalents as of December 31, 2020 and December 31, 2019 was not material.

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

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Asset-backed securities 499 1 — 500

Total $ 25,315 $ 606 $ ( 2 ) $ 25,919

December 31, 2019:

Funds Held for Clients (2)

Certificates of deposit $ 8,828 $ 11 $ — $ 8,839

Corporate debt securities 6,883 6 ( 9 ) 6,880

Municipal bonds 6,383 6 ( 7 ) 6,382

US Government agency securities 1,000 — — 1,000

Asset-backed securities 1,067 — ( 32 ) 1,035

Total $ 24,161 $ 23 $ ( 48 ) $ 24,136

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

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

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

One year or less $ 5,507

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

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Fair Value Measure at December 31, 2020

Total Carrying Value at December 31, 2020 Quoted

(Level 1) Significant

(Level 2) Significant

Cash and cash equivalents

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

Funds held for clients

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Available-for-sale securities 25,919 — 25,919 —

Total $ 95,122 $ 69,203 $ 25,919 $ —

Contingent purchase consideration $ 3,880 $ — $ — $ 3,880

Total $ 3,880 $ — $ — $ 3,880

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Fair Value Measure at December 31, 2019

Cash equivalents

Money market funds

Total Carrying Value at December 31, 2019 Quoted

(Level 1) Significant

(Level 2) Significant

Funds held for clients

Money market funds $ 48,500 $ 48,500 $ — $ —

Available-for-sale securities 24,136 — 24,136 —

Total $ 72,636 $ 48,500 $ 24,136 $ —

Other Financial Assets and Liabilities

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The fair value is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities.

Our Level 3 balance is comprised of a contingent purchase obligation.

This obligation is calculated using a Monte Carlo model that has significant unobservable inputs.

We will revalue this obligation each quarter until it is paid.

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

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

The seller will be paid additional consideration for the assets based on the trailing twelve-month revenue at each of April 30, 2021 and October 31, 2021.

Subject to any disagreement as to the calculation of the contingent purchase consideration, payments for contingent purchase consideration, if any, will be made by May 30, 2021 and December 30, 2021.

For the initial measurement, we utilized a Monte Carlo simulation to determine the fair value of the contingent purchase consideration.

We utilized a discounted cash flow model to determine if an adjustment was required at December 31, 2020.

There was a $ 1,135 adjustment to the fair value of the contingent consideration at December 31, 2020.

Balance at January 1, 2020 $ —

Purchase 2,745

Net realized / unrealized losses 1,135

Balance at December 31, 2020 $ 3,880

NOTE 4 - ACQUISITIONS

2020 Acquisitions

In January 2018, we acquired all of the outstanding shares of common stock of Pay Systems of America, Inc.

(“Pay Systems”), a provider of HR, payroll and employee benefits services.

The aggregate consideration for the shares consisted of (i) $13,935 in cash and (ii) a subordinated promissory note (the “Pay Systems Note”) in the principal amount of $1,572 , subject to adjustment.

We funded the cash payment with cash on hand.

The Pay Systems Note bears interest at an annual rate of 2.0% and is payable in two installments – one-half, plus accrued interest, on July 1, 2018 and the remaining principal balance and accrued interest on January 1, 2019 .

This note was paid in full in January 2019.

In January 2018, we also completed the acquisitions of two other companies that are current resellers of our leading Human Resource Information System platform.

We funded these two acquisitions with cash on hand, subordinated promissory notes and shares of Asure common stock.

In January 2020, we acquired certain assets of a payroll business.

The aggregate initial purchase price for the assets was $ 2,153 which included a cash payment of $ 1,724 , which we paid for in cash at closing, a custodial account hold back of $ 99 and a promissory note of $ 330 , with principal and interest due in April 2021.

The Company accounted for this as an asset acquisition.

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

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

The seller will be paid additional consideration for the assets based on the trailing twelve-month revenue from the acquired assets at each of April 30, 2021 and October 31, 2021.

Subject to any disagreement as to the calculation of the contingent purchase consideration, payments for contingent purchase consideration, if any, will be made by May 30, 2021 and December 30, 2021.

In December 2020, we acquired certain assets of two payroll businesses and an HR consulting business.

The aggregate initial purchase price for the assets was $ 8,212 , which included a cash payment of $ 7,365 at closing and promissory notes of $ 847 , with principal and interest due in July 2022.

ASURE SOFTWARE, INC.

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

In April 2018, we acquired all of the assets of a provider of outsourced HR, consulting, and professional services around payroll and employee benefits;

and we acquired all of the share capital of a provider of a sensor-based solution that allows organizations across the world to streamline operations, create efficiencies, enhance productivity, and analyze employee engagement.

We funded these acquisitions with cash (using borrowed funds under our Second Restated Credit Agreement) and subordinated promissory notes.

In April 2018, we also purchased a portfolio of customer accounts and the related contracts for payroll processing services (known as Evolution Payroll) from Wells Fargo for an aggregate purchase price of $10,450 .

The aggregate purchase price consisted of (i) $10,000 in cash and (ii) a subordinated promissory note (the “Evolution Payroll Note”) in the principal amount of $450 .

The Evolution Payroll Note bears interest at an annual rate of 2.0% , and the unpaid principal and all accrued interest under the Evolution Payroll Note is payable on April 9, 2020 .

To finance this transaction, we borrowed approximately $10,000 under our Second Restated Credit Agreement.

In July 2018, we acquired all of the capital stock of USA Payroll, Inc.

and assets of its affiliates (“USA Payroll”), a payroll processing company based in Rochester, New York and a licensee of our Evolution software.

The aggregate purchase price consisted of (i) $18,561 in cash;

(ii) a subordinated promissory note (the “USA Payroll Notes”) in the principal amount of $3,263 ;

and (iii) 225,089 unregistered shares of our common stock valued at $3,600 based on a volume-weighted average of the closing prices of our common stock during a 90-day period.

We funded the cash payment with cash on hand.

The USA Payroll Notes bear interest at an annual rate of 3.0% .

Interest payments are due on July 1, 2019, July 1, 2020 and accrued interest and principal is due on July 1, 2021.

Except for the purchase of Pay Systems, Evolution Payroll portfolio and USA Payroll, the 2018 acquisitions, individually, were not material to our results of operations, financial position, or cash flows.

We have treated the purchase of the Evolution Payroll portfolio as an acquisition of assets, rather than as an acquisition of a business.

Purchase Price Allocation

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The primary areas of those preliminary estimates that we have not yet finalized relate to certain tangible assets and liabilities acquired, and income and non-income based taxes.

We recorded the transactions, with the exception of the Evolution Payroll portfolio purchase, using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the dates of acquisitions.

The $40,323 of intangible assets subject to amortization consist of $33,554 allocated to Customer Relationships, $2,100 for Developed Technology, $2,330 for Trade Names, and $330 for Noncompete Agreements.

We recorded the transactions using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the dates of acquisitions.

The $ 11,853 of intangible assets subject to amortization consist of $ 9,753 allocated to Customer Relationships, $ 2,000 for Developed Technology, and $ 100 for Trade Names.

To value the Trade Names, we employed the relief from royalty method under the market approach.

For the Noncompete Agreements, we employed a form of the income approach which analyzes the Company’s profitability with these assets in place, in contrast to the Company’s profitability without them.

For the Customer Relationships and Developed Technology, we employed a form of the excess earnings method, which is a form of the income approach.

The discount rate used in valuing these assets ranged from 13.0% to 33.0% , which reflects the risk associated with the intangible assets related to the other assets and the overall business operations to us.

We estimated the fair values of the Trade Names using the relief from royalty method based upon a 1.0% royalty rate.

We believe significant synergies are expected to arise from these strategic acquisitions.

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

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Cash & cash equivalents $ 196

Accounts receivable 48

Fixed assets 2

Funds held for clients 5,505

Goodwill 5,261

Intangibles 11,853

Total assets acquired $ 22,865

Accounts payable

Deferred tax liability

Accrued other liabilities

Deferred revenue

Client fund obligations $ 5,505

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Purchase price $ 13,339

Working capital adjustment

Notes payable 1,177

Custodial hold back 99

Adjustment to fair value of contingent liability 2,745

Adjustment to fair value of Asure’s stock

Debt discount

Fair value of net assets acquired $ 17,360

The purchase of the Evolution Payroll portfolio has been accounted for as an asset acquisition under the acquisition method of accounting.

The amendments in ASU 2017-1 provide a screen to determine when a set of assets and activities is not a business.

The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets and activities is not a business.

Since the acquisition was determined to be an asset acquisition, the total value of the purchase consideration is allocated to the asset acquired.

Management assessed the fair value of the promissory note and cash consideration as of April 1, 2018, which was as follows:

Promissory note

Debt discount

Fair value of asset acquired, Customer Relationships

As an asset acquisition, we also capitalized approximately $40 of total costs incurred to complete the acquisition consisting of legal fees of approximately $30 and accounting fees of approximately $10 .

The total intangible asset of $10,444 is recorded in our consolidated balance sheet within Intangible Assets- Customer Relationships, and is being amortized over its estimated useful life of eight years.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Transaction costs incurred for the business acquisitions were $1,347 in the year ended December 31, 2018, and were expensed as incurred and included in selling, general and administrative expenses.

Contingent consideration

In connection with the acquisition of all of the assets of a provider of outsourced human resources, consulting, and professional services in April 2018, we recorded contingent consideration based upon the expected achievement of certain milestone goals.

In connection with the acquisition of certain assets of the payroll tax business in July 2020, we recorded contingent consideration based upon the expected achievement of certain milestone goals.

We will record any changes to the fair value of contingent consideration due to changes in assumptions used in preparing the valuation model in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).

Contingent consideration is valued using a multi-scenario discounted cash flow method.

The assumptions used in preparing the discounted cash flow method include estimates for outcomes if milestone goals are achieved and the probability of achieving each outcome.

The assumptions used in preparing the discounted cash flow method include estimates for outcomes if milestone goals are achieved and the probability

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

of achieving each outcome.

Management estimates probabilities and then applies them to management’s conservative case forecast, most likely case forecast and optimistic case forecast with the various scenarios.

The Company retained a third party expert to assist in determining the value of the contingent consideration as of April 1, 2018.

As of April 1, 2018, the third party expert determined the value of the contingent consideration for the acquisition was $489 based on a Monte Carlo simulation model for fiscal 2017 to 2019.

We released the liability for the contingent consideration in 2018, and recorded a gain of $489 to Other Income in the accompanying consolidated statement of operations.

Unaudited Pro Forma Financial Information

The following unaudited summary of pro forma combined results of operations for the year ended December 31, 2018 gives effect to our 2018 business and asset acquisitions as if we had completed them on January 1, 2017.

This pro forma summary does not reflect any operating efficiencies, cost savings or revenue enhancements that we may achieve by combining operations.

In addition, we have not reflected certain non-recurring expenses, such as legal expenses and other transactions expenses for the first 12 months after the acquisition, in the pro forma summary.

We present this pro forma summary for informational purposes only and it is not necessarily indicative of what our actual results of operations would have been had the acquisitions taken place as of January 1, 2017, nor is it indicative of future consolidated results of operations.

Year Ended December 31, 2018

Net income (loss)

Net income (loss) per common share:

Basic and diluted

Weighted average shares outstanding

We did not have material acquisitions in 2019.

The Company retained a third-party expert to assist in determining the value of the contingent consideration for the third quarter 2020.

As of September 30, 2020, the third-party expert determined the value of the contingent consideration for the acquisition was $ 2,745 based on a Monte Carlo simulation model for fiscal 2020 to 2021.

At December 31, 2020, we increased the amount to $ 3,880 based on a discounted cash flow model for fiscal 2020 to 2021.

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

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We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests, if indicators of potential impairment exist, using a fair-value-based approach.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We typically use an income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets.

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Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

During fiscal 2019, we determined that the estimated fair value of our HCM reporting unit was less than its carrying value.

During fiscal 2020, we determined that the estimated fair value of our reporting unit was greater than its carrying value.

We determined this using the quantitative method.

In addition, we also performed the income based approach discussed above and compared the market value of our common stock to our reporting unit’s carrying value noting its market value exceeded carrying value.

Therefore, we had no impairment charge for 2020.

During fiscal 2019, we determined that the estimated fair value of our reporting unit was less than its carrying value.

Therefore, we compared the carrying value of the reporting unit to its fair value in order to determine if an impairment exists.

In addition to performing the income based approach discussed above we compared the market value of our common stock to our HCM reporting unit’s carrying value noting its carrying value exceeded market value.

In addition to performing the income based approach discussed above we compared the market value of our common stock to our reporting unit’s carrying value noting its carrying value exceeded market value.

A non-cash, before-tax impairment charge of 35,060 was recognized to reduce the carrying amount of the goodwill to its estimated fair value as of December 31, 2019.

There were no impairment indicators or triggering events during the previously reported quarters of 2019, the sale of our Workspace Management business in the fourth quarter led to an increase in the carrying value of the remaining business above its market value as of December 31, 2019.

There were no impairment indicators or triggering events during the first three quarters of 2019.

The sale of our Workspace Management business in the fourth quarter led to an increase in the carrying value of the remaining business above its market value as of December 31, 2019.

We believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants.

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The following table summarizes the changes in our goodwill:

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Balance at Balance at December 31, 2018 $ 99,108

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Adjustments to goodwill associated with acquisitions ( 177 )

Impairment loss ( 35,060 )

Balance at December 31, 2019 68,697

Goodwill recognized upon acquisition 5,261

Adjustments to goodwill associated with acquisitions

Impairment loss

Balance at December 31, 2020 $ 73,958

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

Intangible Assets

Weighted Average

Intangible Assets Weighted Average

Period (in Years) 2020

Gross Accumulated

Amortization Net

Developed Technology 6.6 $ 12,001 $ ( 7,608 ) $ 4,393

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Reseller Relationships 7.0 853 ( 853 ) —

Trade Names 3.0 880 ( 312 ) 568

Noncompete Agreements 5.2 1,032 ( 853 ) 179

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Intangible Assets

Weighted Average

8.5 $ 103,076 $ ( 38,524 ) $ 64,552

Intangible Assets Weighted Average

Period (in Years) 2019

Gross Accumulated

Amortization Net

Developed Technology 6.0 $ 10,001 $ ( 6,004 ) $ 3,997

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Reseller Relationships 7.0 853 ( 853 ) —

Trade Names 3.0 780 ( 78 ) 702

Noncompete Agreements 5.2 1,032 ( 682 ) 350

8.5 $ 91,224 $ ( 27,374 ) $ 63,850

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

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

2021 $ 11,601

Thereafter 13,363

Total $ 64,552

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6 - NOTES PAYABLE

The following table summarizes our outstanding debt as of December 31, 2020 and 2019:

Stated Interest Rate

Maturity Stated Interest Rate 2020 2019

Subordinated Notes Payable- acquisitions 1/1/2021 - 7/1/2022 2.00 % - 3.00 %

$ 6,182 $ 7,185

2.00% - 3.50%

PPP Loan - Pinnacle Bank 4/15/2022 1.00 % 8,856 —

Term Loan - Wells Fargo term loan 12/31/2024 5.25 % 9,875 20,000

Term Loan - Wells Fargo Syndicate Partner

Term Loan - Wells Fargo

Total Notes Payable $ 24,913 $ 27,185

1 unchanged sentence

Long-term notes payable $ 12,525 $ 24,489

Information presented in this table, the table that immediately follows and the last table in this footnote includes principal and interest due under the terms of a promissory note with Pinnacle Bank.

This loan was issued to us in connection with the Paycheck Protection Program pursuant to Title I of the Coronavirus Aid, Relief and Economic Security Act.

Under the terms of the Paycheck Protection Program, the principal balance and interest due under the promissory note will be forgiven if we meet certain conditions related to the use of the loan proceeds.

Under the terms of our promissory note with Pinnacle Bank, we would have been required to make payments on this promissory note in November 2020;

however, the Small Business Administration issued guidance, prior to that date, that deferred all payments that would be owed on this loan until after the Small Business Administration makes a decision on our loan forgiveness application.

While we expect that the entire loan will be forgiven, we cannot be certain that the Small Business Administration will grant forgiveness of our entire loan.

If we do not receive forgiveness of our entire loan, we will be obligated to start making payments on the portion of the principal and interest that is not forgiven so that it will be fully repaid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank.

We filed our initial application for forgiveness in December 2020, and completed our application in early February 2021.

The following table summarizes the debt issuance costs as of December 31, 2020 and 2019:

December 31, 2020

Gross Notes Payable

Debt Issuance Costs

Net Notes Payable

Gross Notes Payable Debt Issuance Costs Net Notes Payable

Notes payable, current portion 1

$ 12,388 $ ( 78 ) $ 12,310

Notes payable, net of current portion 2

12,525 ( 300 ) 12,225

Total Notes Payable $ 24,913 $ ( 378 ) $ 24,535

(1) Net Notes Payable includes $ 6,866 of Gross Notes Payables and $ 0 Debt Issuance Cost and Debt Discount related to our PPP loan with Pinnacle Bank, all or a portion of which we expect will be forgiven and for which we are not obligated to make any payments until the Small Business Administration has made a decision regarding our application for loan forgiveness.

(2) Net Notes Payable, includes $ 1,989 of Gross Notes Payables and $ 0 Debt Issuance Cost and Debt Discount related to our PPP loan with Pinnacle Bank, all or a portion of which we expect will be forgiven and for which we are not obligated to make payments until the Small Business Administration has made a decision regarding our application for loan forgiveness.

ASURE SOFTWARE, INC.

2 unchanged sentences

December 31, 2019

Gross Notes Payable

Debt Issuance Costs

Net Notes Payable

Gross Notes Payable Debt Issuance Costs Net Notes Payable

Notes payable, current portion $ 2,696 $ ( 125 ) $ 2,571

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Total Notes Payable $ 27,185 $ ( 472 ) $ 26,713

We used a portion of the proceeds from the sale of the Workspace Management business to repay our notes payable.

In connection with the payment of our debt, we recorded a loss on extinguishment of debt of $2,808 , which is included in interest expense and other, net in the consolidated statement of comprehensive income (loss) for the year ended December 31, 2019.

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

2021 $ 12,388

Gross Notes Payable $ 24,913

Term Loan - Wells Fargo

Senior Credit Facility - Wells Fargo N.A.

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

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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.

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

As described below, the Credit Agreement was also amended, but not restated, on August 10, 2020.

Following the amendment and restatement on December 31, 2019, the Credit Agreement provided for $ 20,000 in term loans and a $ 10,000 revolver and provided for new 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.

On July 7, 2020, our senior lender identified certain events of default under our Credit Agreement and reserved their rights to pursue their remedies as a result of the events of default and issued a reservation of rights letter related to these events of default on July 10, 2020.

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.

This covenant was 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.

The other events of default our lender identified 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.

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

The Credit Agreement now provides for $ 10,000 in term loans and a $ 5,000 revolver and required that we make a principal payment of $ 9,750 on our outstanding term loans and reduce future availability on our revolver by $ 5,000 .

The Amendment provides for an accordion feature to our term loan that would allow us

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

to borrow up to an additional $ 15,000 in term loans subject to certain conditions following the Covenant Conversion Date.

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

The Amendment also reset our financial covenants and added a new financial covenant for minimum recurring revenue.

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

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.

We expect to be in compliance with these amended financial covenants over the next twelve months and are compliant as of 12/31/2020.

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 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.

As of December 31, 2020, and December 31, 2019, no amount was outstanding and $ 4,500 and $ 10,000 , respectively, was available for borrowing under the revolver.

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

The Third Amended Restated Credit Agreement (the "Third Restated Credit Agreement"), which we entered on December 31, 2019, 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

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

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

4 unchanged sentences

• 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 December 31, 2019 and December 31, 2018 , no amount was outstanding and $10,000 and $5,000 , respectively, was available for borrowing under the revolver.

As of December 31, 2019 , compliance with certain financial covenants was not yet required under the Third Restated Credit Agreement and all payments remain current.

We expect to be in compliance or be able to obtain compliance through debt repayments with available cash on hand or cash we expect to generate from the ordinary course of operations over the next twelve months.

As of December 31, 2020, compliance with certain financial covenants was not yet required under the Third Restated Credit Agreement as a result of the Amendment and all payments remain current.

We expect to be in compliance or be able to

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

obtain compliance through debt repayments with available cash on hand or cash we expect to generate from the ordinary course of operations over the next twelve months.

Due to the effects of Covid-19 on our business and the related need to support our operations, we applied for and received a loan from Pinnacle Bank under the Paycheck Protection Program during the second quarter of 2020.

Under the terms of our note with Pinnacle Bank, principal payments would have begun in November 2020.

However, the Small Business Administration, who administers loans issued under the Paycheck Protection Program, has issued guidance, deferring all payments that would be owed on this loan until the Small Business Administration makes a decision on our loan forgiveness application.

While we expect that the entire loan will be forgiven, we cannot be certain that the Small Business Administration will grant forgiveness of our entire loan.

If we do not receive forgiveness of our entire loan, we will be obligated to begin repaying the portion of the principal and interest that is not forgiven such that it is fully paid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank.

Further, if the portion of the PPP Loan that is not forgiven (the “Unforgiven Debt”) exceeds $ 3,250 or requires monthly payments of principal and interest in excess of $ 185 , it is likely we will be in default under our Third Restated Credit Agreement unless we obtain a waiver from our senior lender or are otherwise able to negotiate acceptable terms with our senior lender and Pinnacle Bank.

We filed our initial application for forgiveness of this loan in December 2020, and completed our application in early February 2021.

Given this, we expect that payments we may owe, if any, would not start until second quarter of 2021.

Under GAAP, we are required to report this entire loan as outstanding debt in our financial statements and further identify the current portion of this debt (e.g.

amounts which would be payable in the next 12 months) with reference to the actual terms of our note with Pinnacle Bank.

Notwithstanding how this loan is reported in our financial statements, we do not expect to make any payments on this note until at least second quarter of 2021, and then only to the extent that any portion of this note is not forgiven in accordance with the terms of the Paycheck Protection Program.

NOTE 7 - PROPERTY AND EQUIPMENT

1 unchanged sentence

Furniture and equipment:

$ 6,818 $ 7,851

Software development costs 10,308 7,529

1 unchanged sentence

shorter of the lease term or life of the improvement 1,658 1,221

Internal support equipment:

Finance leases:

lease term or life of the asset

Total property and equipment 21,592 20,571

10 unchanged sentences

During the years ended December 31, 2020 and 2019, we capitalized $ 2,780 and $ 2,756 of software development costs, respectively.

NOTE 8 - CERTAIN BALANCE SHEET ACCOUNTS

Prepaid expenses and other current assets as of December 31, 2020 and 2019 consist of the following:

ASURE SOFTWARE, INC.

1 unchanged sentence

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

NOTE 8 - CERTAIN BALANCE SHEET ACCOUNTS

Prepaid expenses and other current assets as of December 31, 2019 and 2018 consist of the following:

Non-trade receivables related to custodial funds 418 $ 4,118

2 unchanged sentences

Other current assets 1,472 1,294

Total 3,284 $ 8,551

Other accrued liabilities as of December 31, 2020 and 2019 consist of the following:

1 unchanged sentence

Accrued expenses and other 1,380 3,948

Total $ 1,380 $ 6,556

NOTE 9 - STOCKHOLDERS’ EQUITY

SHELF REGISTRATION

In December 2020, we completed an underwritten public offering of 2,990,000 shares of our common stock at a public offering price of $ 7.25 .

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

In April 2018, we filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”) to provide access to additional capital, if needed.

Pursuant to the shelf registration statement, we may from time to time offer to sell in one or more offerings shares of our common stock or other securities having an aggregate value of up to $175,000 (which includes approximately $60,000 of unsold securities that were previously registered on our currently effective registration statements).

Pursuant to the shelf registration statement, we may from time to time offer to sell in one or more offerings shares of our common stock or other securities having an aggregate value of up to $ 175,000 (which includes approximately $ 60,000 of unsold securities that were previously registered on other registration statements effective at the time of this filing of our current S-3).

The shelf registration statement relating to these securities became effective on April 16, 2018.

As of December 31, 2019 , there is $133,438 remaining available under the shelf registration statement.

In June 2018, we completed an underwritten public offering in which we sold an aggregate of 2,375,000 shares of our common stock at a public offering price of $17.50 per share.

We realized net proceeds of approximately $38,900 after deducting underwriting discounts and estimated offering expenses.

As of December 31, 2020, there is approximately $ 111,760 remaining available under the shelf registration statement.

SHARE REPURCHASE PROGRAM

Pursuant to our stock repurchase plan, we may repurchase up to 450,000 shares of our common stock.

We have repurchased a total of 384,000 shares for approximately $5,000 over the life of the plan.

Management will periodically assess repurchasing additional shares, depending on our cash position, market conditions, financial covenants and other factors.

While the program remains in place, we did not repurchase any shares during 2019 or 2018 .

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

This new stock repurchase program is in addition to the approximately 364,446 shares available under our existing stock repurchase plan.

The repurchase program may be extended, suspended or discontinued at any time.

We expect to finance the program from existing cash resources.

STOCK AND STOCK OPTION PLANS

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The 2018 Plan provides for the grant of stock options, including incentive stock options (“ISOs”) and nonqualified stock options (“NQSOs”), stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance bonus awards, performance stock unit awards, other stock or cash-based awards and dividend equivalents to eligible individuals.

We generally grant stock options with exercise prices equal to the fair market value at the time of grant.

The options generally vest over three to four years and are exercisable for a period of five to ten years beginning with the date of grant.

The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) 750,000 shares, (ii) any shares subject to issued and outstanding awards under the 2009 Plan as of the effective date of the 2018 Plan that expire, are cancelled

We generally grant stock options with exercise prices equal to the fair market value at the time of

ASURE SOFTWARE, INC.

1 unchanged sentence

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

or otherwise terminate following the effective date of the 2019 Plan.

In May 2019, our shareholders approved an amendment to the 2018 Plan to increase the number of shares of common stock authorized for issuance by 600,000 shares.

The options generally vest over three to four years and are exercisable for a period of five to ten years beginning with the date of grant.

In May 2019 and May 2020, our shareholders approved amendments to the 2018 Plan to increase the number of shares of common stock authorized for issuance by 600,000 shares and 1,000,000 shares, respectively.

We have 1,713,000 options and RSUs granted and outstanding pursuant to the 2018 Plan as of December 31, 2020.

14 unchanged sentences

Dividend yield — —

As of December 31, 2019 , we reserved shares of common stock for future issuance as follows:

As of December 31, 2020, we reserved shares of common stock for future issuance under the 2009 Plan and 2018 Plan as follows:

Options and RSUs outstanding 1,713,000

2 unchanged sentences

The following table summarizes activity related to options during the year ended December 31, 2020.

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Shares Weighted

Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value

Outstanding at the beginning of the year 1,685,000 $ 9.71

Granted 771,000 6.52

Exercised ( 130,000 ) 5.55

Canceled ( 1,054,000 ) 10.06

Outstanding at the end of the year 1,272,000 $ 7.92 3.4 $ 533

Vested and expected to vest 1,256,000 $ 8.55 3.2 $ 456

Exercisable 375,000 $ 7.91 2.1 $ 98

The total intrinsic value of options exercised during the years ended December 31, 2020 and 2019 was $ 205 and $ 356 , respectively.

As of December 31, 2020, total compensation cost not yet recognized related to nonvested share options was $ 2,563 , which is expected to be recognized over a weighted average period of 1.75 years.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes activity related to RSUs during the year ended December 31, 2020.

Shares Weighted

Grant-Date Fair Value

Outstanding at the beginning of the year 70,000 $ 11.52

Granted 597,000 5.32

Released ( 76,000 ) 6.86

Forfeited ( 150,000 ) 5.47

Outstanding at the end of the year 441,000 $ 5.99

9 unchanged sentences

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 reserved for issuance.

Under the ESPP, 475,000 shares were reserved for issuance of which there remains 364,446 shares available for future issuance.

NOTE 11 - CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 771 were $ 4,852 at December 31, 2020.

8 unchanged sentences

We expect to recognize revenue on approximately 71 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Revenue Concentration

1 unchanged sentence

NOTE 12 - 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 sheet as of December 31, 2019.

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

In December 2019, we sold our Workspace Management business to FM:Systems for approximately $ 121,500 in cash.

We used the proceeds to pay down debt owed to our senior lender.

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

This transaction enabled 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:

Years Ended December 31

Year Ended December 31

Revenue $ 24,619

Income from discontinued operations $ 3,498

2 unchanged sentences

Income from discontinued operations, net of taxes $ 72,292

The table below shows the carrying amounts of major classes of assets and liabilities of the discontinued operations presented separately in the consolidated balance sheet as of December 31, 2018:

Accounts receivable, net

Other current assets

Property and equipment, net

Intangible assets, net

Accounts payable

Accrued liabilities and other current liabilities

Other long-term liabilities

Total liabilities

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:

Years Ended December 31

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Year Ended December 31

Depreciation and amortization $ 1,060

4 unchanged sentences

Gain on sale of discontinued operations ( 94,293 )

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 13 - NET LOSS PER SHARE

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The components of pre-tax loss from continuing operations for the years ended December 31, 2020 and 2019 are as follows:

The components of the provision (benefit) for income taxes attributable to continuing operations for the years ended December 31, 2019 and 2018 are as follows:

Total current

Total deferred

Domestic $ ( 15,974 ) $ ( 66,402 )

Total $ ( 15,974 ) $ ( 66,402 )

ASURE SOFTWARE, INC.

1 unchanged sentence

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

The components of the provision (benefit) for income taxes attributable to continuing operations for the years ended December 31, 2020 and 2019 are as follows:

Federal $ — $ ( 21,697 )

State ( 214 ) ( 1,899 )

Foreign ( 1 ) 42

Total current ( 215 ) ( 23,554 )

Federal 259 ( 210 )

State 293 ( 347 )

Total deferred 552 ( 557 )

$ 337 $ ( 24,111 )

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

9 unchanged sentences

Lease liabilities 1,931 1,905

Goodwill — 2,132

Other 303 347

18,100 16,628

Valuation allowance ( 6,892 ) ( 5,204 )

2 unchanged sentences

Acquired intangibles ( 5,930 ) ( 7,828 )

Fixed assets ( 284 ) ( 125 )

Capitalized software ( 1,524 ) ( 1,353 )

1 unchanged sentence

Right-of-use asset ( 1,721 ) ( 1,756 )

Goodwill ( 1,637 ) —

( 12,096 ) ( 11,760 )

Net deferred liabilities $ ( 888 ) $ ( 336 )

At December 31, 2019 , we had federal net operating loss carryforwards of approximately $33,700 , research and development credit carryforwards of approximately $3,739 and alternative minimum tax credit carryforwards of approximately $31 .

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

At December 31, 2020, we had federal net operating loss carryforwards of approximately $ 48,435 , research and development credit carryforwards of approximately $ 3,579 .

The net operating loss and research and development credit carryforwards will expire in varying amounts from 2021 through 2040 , if not utilized.

Approximately $ 16,962 of the net operating loss carryforwards carry forward indefinitely, but can only offset up to 80 % of taxable income.

Minimum tax credit carryforwards carry forward indefinitely.

As a result of various acquisitions by us in prior years, we may be subject to a substantial annual limitation in the utilization of the net operating losses and credit carryforwards due to the “change in ownership” provisions of Section 382 of the Internal Revenue Code of 1986.

1 unchanged sentence

Due to the uncertainty surrounding the timing of realizing the benefits of our favorable tax attributes in future tax returns, we have placed a valuation allowance against our net deferred tax assets, exclusive of jurisdictions in which we have net deferred tax liabilities.

During the year ended December 31, 2019 , the valuation allowance decreased by approximately $14,849 due primarily to operations and acquisitions.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

During the year ended December 31, 2020, the valuation allowance increased by approximately $ 1,688 due primarily to operations.

Our provision for income taxes attributable to continuing operations for the years ended December 31, 2020 and 2019 differ from the expected tax expense (benefit) amount computed by applying the statutory federal income tax rate of 21% to income before income taxes as a result of the following:

7 unchanged sentences

Change in valuation allowance 1,688 ( 14,849 )

$ 337 $ ( 24,111 )

Under ASC 740-10, Income Taxes , we periodically review the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions.

13 unchanged sentences

Balance at December 31, 2020 $ 587

As of December 31, 2019 , we had $856 of unrecognized tax benefits, which would affect the effective tax rate if recognized.

As of December 31, 2020, we had $ 587 of unrecognized tax benefits, of which $ 15 would affect the effective tax rate if recognized.

Our assessment of our unrecognized tax benefits is subject to change as a function of our financial statement audit.

1 unchanged sentence

During the twelve months ended December 31, 2020, we recognized $ 0 of interest and penalties in our income tax expense.

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We file tax returns in the U.S.

federal jurisdiction and in several state and foreign jurisdictions.

federal jurisdiction and in several state jurisdictions.

We are subject to U.S.

federal income tax examinations for years ending on or after December 31, 2016 and are subject to state and local or foreign income tax examinations by tax authorities for years ending on or after December 31, 2015.

We are not currently under audit for federal, state or any foreign jurisdictions.

federal income tax examinations for years ending on or after December 31, 2017 and are subject to state and local income tax examinations by tax authorities for years ending on or after December 31, 2016.

We are not currently under audit for any federal or state jurisdictions.

NOTE 15 - LEASES

3 unchanged sentences

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

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

4 unchanged sentences

Net rent expense

As of December 31, 2019, we had lease liabilities of $7,512 , of which $1,575 is presented as a current liability, and ROU assets of $6,963 on the accompanying consolidated balance sheet.

As of December 31, 2020, we had lease liabilities of $ 7,199 , of which $ 1,833 is presented as a current liability, and Right of Use ("ROU") assets of $ 6,450 on the accompanying consolidated balance sheet.

For purposes of calculating the ROU assets and lease liabilities for such leases, 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.

12 unchanged sentences

NOTE 16 - SUBSEQUENT EVENTS

ASURE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements, except as disclosed in Note 9 and below.

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

This new stock repurchase program is in addition to the approximately 66,000 shares available under our existing stock repurchase plan.

The repurchase program may be extended, suspended or discontinued at any time.

We expect to finance the program from existing cash resources.

The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements.

FORM 10-K SUMMARY

2 unchanged sentences

ASURE SOFTWARE, INC.

March 16, 2020

/s/ PATRICK GOEPEL

March 11, 2021 By /s/ PATRICK GOEPEL

Patrick Goepel

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

/s/ PATRICK GOEPEL

Chief Executive Officer

(Principal Executive Officer)

March 16, 2020

Signature Title Date

/s/ PATRICK GOEPEL Chief Executive Officer, Chairman of the Board and Director

(Principal Executive Officer) March 11, 2021

Patrick Goepel

/s/ KELYN BRANNON

Chief Financial Officer

(Principal Financial and Accounting Officer)

March 16, 2020

Kelyn Brannon

/s/ DAVID SANDBERG

Chairman of the Board

March 16, 2020

David Sandberg

/s/ DANIEL GILL

March 16, 2020

/s/ CHARLES LATHROP, JR.

March 16, 2020

Charles Lathrop, Jr.

/s/ BRADFORD OBERWAGER

March 16, 2020

/s/ JOHN PENCE Chief Financial Officer

(Principal Financial and Accounting Officer) March 11, 2021

/s/ DANIEL GILL Lead Independent Director March 11, 2021

/s/ BENJAMIN ALLEN Director March 11, 2021

Benjamin Allen

/s/ CARL DREW Director March 11, 2021

/s/ GRACE LEE Director March 11, 2021

/s/ BRADFORD OBERWAGER Director March 11, 2021

Bradford Oberwager

RANDALL WATERFIELD

March 16, 2020

Randall Waterfield

/s/ BJORN REYNOLDS Director March 11, 2021

Bjorn Reynolds

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

What changed 10-K

Item 9A. Controls and Procedures