What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-31 · 92 added, 89 removed, 174 unchanged (51% of the section changed)

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possible fluctuations in our financial and operating results;

privacy concerns and laws and other regulations may limit the effectiveness of our applications;

privacy concerns and laws and other regulations that may limit the effectiveness of our applications;

the financial and other impact of any previous and future acquisitions;

domestic and international regulatory developments, including changes to or applicability to our business of privacy and data securities laws, money transmitter laws and anti-money laundering laws;

domestic and international regulatory developments, including tarriffs, changes to or applicability to our business of privacy and data securities laws, money transmitter laws, laws related to earned wage access and anti-money laundering laws;

regulatory pressures on economic relief enacted as a result of the COVID-19 pandemic that change or cause different interpretations with respect to eligibility for such programs;

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significant costs as a result of operating as a public company;

the expiration of Employee Retention Tax Credits (“ERTC”) and the impact of the Internal Revenue Service recent measures regarding ERTC claims and the corresponding cash collections of existing receivables;

the expiration of Employee Retention Tax Credits (“ERTC”) and the impact of recent regulatory and other measures by governmental authorities regarding ERTC claims and the corresponding cash collections of existing receivables;

the inability to continue to release timely updates for changes in laws;

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inability to maintain third-party licensed software;

evolving regulation of the Internet, changes in the infrastructure underlying the Internet or interruptions in Internet;

evolving regulation of the Internet, changes in the infrastructure underlying the Internet or interruptions in Internet services;

factors affecting our deferred tax assets and ability to value and utilize them;

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potential sales of a substantial number of shares of our common stock along with its volatility;

risks associate with potential equity-related transactions including dividends, rights under the stockholder plan to discourage certain actions and other impacts as a result of actions of our stockholders.

and risks associated with potential equity-related transactions including dividends, rights under the stockholder plan to discourage certain actions and other impacts as a result of actions of our stockholders.

Further information on these and other factors that could affect our financial results is included in the reports on Forms 10-K, 10-Q and 8-K, and in other filings we make with the Securities and Exchange Commission (the “SEC”) from time to time.

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Asure assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

The following review of Asure’s financial position as of June 30, 2025 and December 31, 2024, and results of operations for the three and six months ended June 30, 2025 and 2024 should be read in conjunction with our 2024 Annual Report on Form 10-K filed with the SEC on March 6, 2025.

The following review of Asure’s financial position as of September 30, 2025, and December 31, 2024, and results of operations for the three and nine months ended September 30, 2025 and 2024, should be read in conjunction with our 2024 Annual Report on Form 10-K filed with the SEC on March 6, 2025 and our quarterly reports filed with the SEC on May 1, 2025, and July 31, 2025.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are available through the investor relations page of our internet website free of charge as soon as reasonably practicable after they are electronically filed, or furnished to, the SEC.

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

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

AsurePay™, our payroll card, which we provide in association with our partners, offers employees fast, secure access to earned wages.

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

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The acquisition enables us to both improve our existing time and attendance offerings as well as allow us to cross-sell our full suite of HCM products to the new customer base.

During the three months ended September 30, 2025, we completed two customer relationship asset acquisitions as part of our ongoing acquisition strategy.

The total purchase price of these acquisitions was $11,227, which consisted of $8,252 of cash paid during the three months ended September 30, 2025 , $173 of cash to be paid over the next 12 months, the delivery of promissory notes in the amount of $1,896, net of discounts, and the delivery of 124 shares of Asure common stock, which had an aggregate fair value of $956 at the acquisition dates.

The purchase price for one acquisition is subject to an adjustment for contingent events which are generally expected to occur over the next one to two years, including revenue generated from the acquired assets.

Subsequent to September 30, 2025, but before the filing of the financial statements, we completed a customer relationship asset acquisition.

The total purchase price of this acquisition was $1,146, which consisted of $700 of cash paid at close and the delivery of a promissory note in the amount of $446, net of discount.

RESULTS OF OPERATIONS (in thousands)

The following table sets forth, for the fiscal periods indicated, the percentage of total revenue represented by certain items in our Condensed Consolidated Statements of Comprehensive Loss:

Six Months Ended June 30,

Nine Months Ended September 30,

Revenue 100 % 100 %

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As a percentage of total revenue, we expect our mix of recurring revenue, and professional services, hardware and other revenue to remain relatively constant.

While revenue mix varies by product, recurring revenue consistently represented over 95% of total revenue in the three and six months ended June 30, 2025, compared to 96% in the three and six months ended June 30, 2024.

While revenue mix varies by product, recurring revenue represented over 88% and 92% of total revenue in the three and nine months ended September 30, 2025, respectively, compared to 98% and 97% in the three and nine months ended September 30, 2024, respectively.

This decrease was due to the increase in hardware sales as a result of time and attendance business growth.

Our revenue was derived from the following sources (in thousands):

Three Months Ended

June 30, Variance

September 30, Variance

2025 2024 $ %

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Total $ 36,252 $ 29,304 $ 6,948 24 %

Six Months Ended

June 30, Variance

Nine Months Ended

September 30, Variance

2025 2024 $ %

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The amount of interest we earn from the investment of client funds is also impacted by changes in interest rates.

Recurring revenue for the three months ended June 30, 2025 was $28,596, an increase of $1,545, or 6%, from $27,051 for the three months ended June 30, 2024.

The increase is primarily due to an increase in tax management solutions.

Recurring revenue for the six months ended June 30, 2025 was $61,783, an increase of $4,459, or 8%, from $57,324 for the six months ended June 30, 2024.

The increase is primarily due to an increase in tax management solutions.

Recurring revenue for the three months ended September 30, 2025, was $31,841, an increase of $3,215, or 11%, from $28,626 for the three months ended September 30, 2024.

The increase is primarily due to an increase in time and attendance solutions.

Recurring revenue for the nine months ended September 30, 2025, was $93,624, an increase of $7,674, or 9%, from $85,950 for the nine months ended September 30, 2024.

The increase is primarily due to an increase in tax management solutions and time and attendance solutions.

Professional Services, Hardware and Other Revenue

Professional Services, Hardware and Other Revenues represents implementation fees, one-time consulting projects, on-premise maintenance, hardware devices to enhance our software products as well as ERTC revenues that are transactional in nature.

Professional services, hardware and other revenue increased $535, or 54%, for the three months ended June 30, 2025 from the similar period in 2024, primarily due to an increase in professional services, offset with a decrease in non-recurring ERTC revenue.

Refer to “Risk Factors” previously disclosed in our Annual Report on Form 10-K, filed with the SEC on March 6, 2025, for more information about risks related to our ERTC business.

Professional services, hardware, and other revenue increased $823, or 35%, for the six months ended June 30, 2025 from the similar period in 2024, primarily due to a an increase in professional services.

Professional Services, Hardware and Other Revenues represents implementation fees, one-time consulting projects, on-premise maintenance, hardware devices to enhance our software products.

Professional services, hardware and other revenue for the three months ended September 30, 2025, was $4,411, an increase of $3,733, or 551%, from $678 for the three months ended September 30, 2024.

This increase is primarily due to an increase in hardware related to our time and attendance solutions.

Professional services, hardware, and other revenue for the nine months ended September 30, 2025, was $7,606, an increase of $4,556, or 149%, from $3,050 for the nine months ended September 30, 2024.

The increase is primarily due to an increase in professional services and our time and attendance solutions.

Our total customer base is widely spread across industries and sizes.

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Gross Profit and Gross Margin

Consolidated gross profit for the three months ended June 30, 2025, was $19,911, an increase of $1,043, or 6%, from $18,868 for the three months ended June 30, 2024.

Gross profit as a percentage of revenue decreased to 66% for the three months ended June 30, 2025 from 67% for the same period in 2024.

Consolidated gross profit for the six months ended June 30, 2025, was $44,519, an increase of $3,044, or 7%, from $41,475 for the six months ended June 30, 2024.

Gross profit as a percentage of revenue remained flat at 69% for the six months ended June 30, 2025 and 2024.

Consolidated gross profit for the three months ended September 30, 2025, was $23,142, an increase of $3,438, or 17%, from $19,704 for the three months ended September 30, 2024.

Gross profit as a percentage of revenue decreased to 64% for the three months ended September 30, 2025, from 67% for the same period in 2024.

The decrease is primarily attributable to the growth in our time and attendance solutions.

Consolidated gross profit for the nine months ended September 30, 2025, was $67,661, an increase of $6,482, or 11%, from $61,179 for the nine months ended September 30, 2024.

Gross profit as a percentage of revenue decreased to 67% for the nine months ended September 30, 2025, from 69% for the same period in 2024.

The decrease is primarily attributable to the growth in our time and attendance solutions.

Our cost of sales relates primarily to direct product costs, compensation for operations and related consulting expenses, hardware expenses, facilities, and related expenses and the amortization of our purchased software development costs.

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Sales and marketing expenses primarily consist of salaries and related expenses for sales and marketing staff, including stock-based expenses, commissions, as well as marketing programs, which include events, corporate communications and product marketing activities.

Sales and marketing expenses for the three months ended June 30, 2025 were $8,149, an increase of $1,225, or 18%, from $6,924 for the three months ended June 30, 2024.

The increase is primarily due to an increase in headcount resulting in an increase in salaries and wages.

Sales and marketing expenses as a percentage of revenue increased to 27% for the three months ended June 30, 2025 from 25% for the same period in 2024.

Sales and marketing expenses for the six months ended June 30, 2025 were $16,535, an increase of $1,844, or 13%, from $14,691 for the six months ended June 30, 2024.

The increase is primarily due to an increase in referral fees associated with non-recurring ERTC revenue arrangements.

Sales and marketing expenses as a percentage of revenue remained flat at 25% for the six months ended June 30, 2025 and 2024.

Sales and marketing expenses for the three months ended September 30, 2025, were $9,043, an increase of $2,363, or 35%, from $6,680 for the three months ended September 30, 2024.

The increase is primarily due to an increase in bad debt and headcount resulting in an increase in salaries and wages.

Sales and marketing expenses as a percentage of revenue increased to 25% for the three months ended September 30, 2025, from 23% for the same period in 2024.

Sales and marketing expenses for the nine months ended September 30, 2025, were $25,578, an increase of $4,207, or 20%, from $21,371 for the nine months ended September 30, 2024.

The increase is primarily due to an increase in bad debt and headcount resulting in an increase in salaries and wages.

Sales and marketing expenses as a percentage of revenue increased to 25% for the nine months ended September 30, 2025, from 24% for the same period in 2024.

We expect to continue to expand and increase selling costs as we focus on hiring direct sales personnel, expanding recognition of our brand, and lead generation.

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General and administrative expenses primarily consist of salaries and related expenses, including stock-based expenses for finance and accounting, legal, internal audit, human resources and management information systems personnel, legal costs, professional fees, and other corporate expenses such as transaction costs for acquisitions.

General and administrative expenses for the three months ended June 30, 2025 were $10,968, an increase of $850, or 8%, from $10,118 for the three months ended June 30, 2024.

The increase is primarily attributable to increased personnel compensation expenses along with higher service costs associated with regulatory compliance and customer relationship acquisitions.

General and administrative expenses as a percentage of revenue remained flat at 36% for the three months ended June 30, 2025 and 2024.

General and administrative expenses for the six months ended June 30, 2025 were $22,868, an increase of $2,687, or 13%, from $20,181 for the six months ended June 30, 2024.

The increase is primarily attributable to an increased personnel compensation expenses along with higher service costs associated with regulatory compliance and customer relationship acquisitions.

General and administrative expenses as a percentage of revenue increased to 35% for the six months ended June 30, 2025 compared to 34% for the same period in 2024.

General and administrative expenses for the three months ended September 30, 2025, were $11,655, an increase of $1,277, or 12%, from $10,378 for the three months ended September 30, 2024.

The increase is primarily attributable to increased personnel compensation expenses along with higher service costs associated with regulatory compliance and our acquisitions.

General and administrative expenses as a percentage of revenue decreased to 32% for the three months ended September 30, 2025, from 35% for the same period in 2024.

General and administrative expenses for the nine months ended September 30, 2025, were $34,523, an increase of $3,964, or 13%, from $30,559 for the nine months ended September 30, 2024.

The increase is primarily attributable to an increased personnel compensation expenses along with higher service costs associated with regulatory compliance and our acquisitions.

General and administrative expenses as a percentage of revenue remained flat at 34% for the nine months ended September 30, 2025 and 2024.

Research and Development Expenses

Research and development (“R&D”) expenses consist primarily of salaries and related expenses, including stock-based expenses for employees supporting our R&D activities.

R&D expenses for the three months ended June 30, 2025 were $1,273, a decrease of $689, or 35%, from $1,962 for the three months ended June 30, 2024.

R&D expenses for the three months ended September 30, 2025, were $1,174, a decrease of $799, or 40%, from $1,973 for the three months ended September 30, 2024.

The decrease is primarily attributable to an increase in capitalization of software development expenses driven by continued investments in the development of our products, partially offset by an increase in personnel compensation expenses.

R&D expenses as a percentage of revenue decreased to 4% for the three months ended June 30, 2025 from 7% for the same period in 2024.

R&D expenses for the six months ended June 30, 2025 were $3,302, a decrease of $429, or 11%, from $3,731 for the six months ended June 30, 2024.

R&D expenses as a percentage of revenue decreased to 3% for the three months ended September 30, 2025, from 7% for the same period in 2024.

R&D expenses for the nine months ended September 30, 2025, were $4,476, a decrease of $1,228, or 22%, from $5,704 for the nine months ended September 30, 2024.

R&D expenses as a percentage of revenue decreased to 5% for the six months ended June 30, 2025 from 6% for the same period in 2024.

R&D expenses as a percentage of revenue decreased to 4% for the nine months ended September 30, 2025, from 6% for the same period in 2024.

Amortization of Intangible Assets

Amortization expense for the three months ended June 30, 2025 was $4,173, an increase of $127, or 3%, from $4,046 for the three months ended June 30, 2024.

Amortization expense for the three months ended September 30, 2025, was $4,769, an increase of $474, or 11%, from $4,295 for the three months ended September 30, 2024.

The increase is primarily attributable to our continuing acquisitions strategy, with additional acquisitions occurring each quarter.

Amortization expense as a percentage of revenue remained flat at 14% for the three months ended June 30, 2025 from 14% for the same period in 2024.

Amortization expense for the six months ended June 30, 2025 was $8,481, an increase of $986, or 13%, from $7,495 for the six months ended June 30, 2024.

Amortization expense as a percentage of revenue decreased to 13% for the three months ended September 30, 2025, from 15% for the same period in 2024.

Amortization expense for the nine months ended September 30, 2025, was $13,250, an increase of $1,460, or 12%, from $11,790 for the nine months ended September 30, 2024.

The increase is primarily attributable to our continuing acquisitions strategy, with additional acquisitions occurring each quarter.

Amortization expense as a percentage of revenue remained flat at 13% for the six months ended June 30, 2025 from 13% for the same period in 2024.

Amortization expense as a percentage of revenue remained flat at 13% for the nine months ended September 30, 2025 and 2024.

Interest Income and Expense

Interest income for the three months ended June 30, 2025 was $277 compared to interest income of $261 for the three months ended June 30, 2024.

Interest income as a percentage of revenue was 1% for the three months ended June 30, 2025 and 2024.

Interest expense for the three months ended June 30, 2025 was $809 compared to interest expense of $208 for the three months ended June 30, 2024.

Interest expense as a percentage of revenue was 3% for the three months ended June 30, 2025 compared to 1% for the three months ended June 30, 2024.

The increase in Interest expense in the three months ended June 30, 2025 is primarily due to our new Loan Agreement (defined below) with MidCap Financial Trust (“MidCap”) during the quarter.

Interest income for the six months ended June 30, 2025 was $448 compared to interest income of $597 for the six months ended June 30, 2024.

Interest income as a percentage of revenue was 1% for the three months ended June 30, 2025 and 2024.

Interest expense for the six months ended June 30, 2025 was $1,260 compared to interest expense of $388 for the six months ended June 30, 2024.

Interest expense as a percentage of revenue was 2% for the six months ended June 30, 2025 compared to 1% for the six months ended June 30, 2024.

The increase in interest expense in the six months ended June 30, 2025 is primarily due to our new Loan Agreement with MidCap during the period.

Other (Expense) Income, Net

Other (expense) income, net for the three months ended June 30, 2025 was $96 of expense compared to $0 for the three months ended June 30, 2024.

Other (expense) income, net as a percentage of revenue was negligible for the three months ended June 30, 2025 and 2024.

Other (expense) income, net for the six months ended June 30, 2025 was $92 of income compared to $10 of income for the six months ended June 30, 2024.

Other (expense) income, net as a percentage of revenue was negligible for the six months ended June 30, 2025 and 2024.

For the three months ended June 30, 2025 and 2024, we recorded income tax expense attributable to continuing operations of $843 and $231, respectively, an increase of $612.

For the six months ended June 30, 2025 and 2024, we recorded income tax expense attributable to continuing operations of $1,134 and $264, respectively, an increase of $870.

We incurred a loss of $6,123, or $0.22 per share, during the three months ended June 30, 2025, compared to a loss of $4,360, or $0.17 per share, during the three months ended June 30, 2024.

Loss as a percentage of total revenue was 20% and 16% for the three months ended June 30, 2025 and 2024, respectively.

We incurred a loss of $8,521, or $0.31 per share, during the six months ended June 30, 2025, compared to a loss of $4,668, or $0.18 per share, during the six months ended June 30, 2024.

Loss as a percentage of total revenue was 13% and 8% for the six months ended June 30, 2025 and 2024, respectively.

Interest income for the three months ended September 30, 2025, was $250 compared to interest income of $165 for the three months ended September 30, 2024.

Interest income as a percentage of revenue was 1% for the three months ended September 30, 2025 and 2024.

Interest expense for the three months ended September 30, 2025 was $1,966 compared to interest expense of $274 for the three months ended September 30, 2024.

Interest expense as a percentage of revenue was 5% for the three months ended September 30, 2025 compared to 1% for the same period in 2024.

The increase in Interest expense in the three months ended September 30, 2025, is primarily related to interest accrued under our Loan Agreement (defined below) with MidCap Financial Trust (“MidCap”).

Interest income for the nine months ended September 30, 2025 was $698 compared to interest income of $762 for the nine months ended September 30, 2024.

Interest income as a percentage of revenue was 1% for the three months ended September 30, 2025 and 2024.

Interest expense for the nine months ended September 30, 2025 was $3,226 compared to interest expense of $662 for the nine months ended September 30, 2024.

Interest expense as a percentage of revenue was 3% for the nine months ended September 30, 2025 compared to 1% for the same period in 2024.

The increase in interest expense in the nine months ended September 30, 2025, is primarily related to interest accrued under our Loan Agreement with MidCap.

Other Income, Net

Other income, net for the three months ended September 30, 2025 was $220 compared to $0 for the three months ended September 30, 2024.

Other income, net as a percentage of revenue was 1% for the three months ended September 30, 2025, compared to a negligible amount for the same period in 2024.

Other income, net for the nine months ended September 30, 2025 was $312 compared to $10 for the nine months ended September 30, 2024.

Other income, net as a percentage of revenue was negligible for the nine months ended September 30, 2025 and 2024.

For the three months ended September 30, 2025 and 2024, we recorded income tax expense attributable to continuing operations of $367 and $170, respectively, an increase of $197.

For the nine months ended September 30, 2025 and 2024, we recorded income tax expense attributable to continuing operations of $1,501 and $434, respectively, an increase of $1,067.

We incurred a loss of $5,362, or $0.19 per share, during the three months ended September 30, 2025, compared to a loss of $3,901, or $0.15 per share, during the three months ended September 30, 2024.

Loss as a percentage of total revenue was 15% and 13% for the three months ended September 30, 2025 and 2024, respectively.

We incurred a loss of $13,883, or $0.51 per share, during the nine months ended September 30, 2025, compared to a loss of $8,569, or $0.33 per share, during the nine months ended September 30, 2024.

Loss as a percentage of total revenue was 14% and 10% for the nine months ended September 30, 2025 and 2024, respectively.

LIQUIDITY AND CAPITAL RESOURCES (in thousands)

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Cash and cash equivalents (1)

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Working Capital .

We had working capital of $64,268 at June 30, 2025, an increase of $50,627 from working capital of $13,641 at December 31, 2024.

Working capital as of June 30, 2025 and December 31, 2024 includes $3,724 and $8,363 of short-term deferred revenue, respectively.

We had working capital of $14,838 at September 30, 2025, an increase of $1,197 from working capital of $13,641 at December 31, 2024.

Working capital as of September 30, 2025 and December 31, 2024 includes $7,090 and $8,363 of short-term deferred revenue, respectively.

Deferred revenue is an obligation to perform future services.

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Operating Activities .

Net cash provided by operating activities of $5,151 for the six months ended June 30, 2025 was primarily driven by non-cash adjustments to our net loss of approximately $17,614, primarily due to depreciation, amortization, and share-based compensation.

Net cash provided by operating activities of $10,924 for the nine months ended September 30, 2025 was primarily driven by non-cash adjustments to our net loss of approximately $29,526, primarily due to depreciation, amortization, and share-based compensation.

This was offset by changes in operating assets and liabilities, which resulted in a use of $4,719 in cash.

Net cash used in operating activities of $1,719 for the six months ended June 30, 2024 was primarily driven by changes in operating assets and liabilities, which results in a use of $10,677 in cash.

This was offset by non-cash adjustments to our net loss of approximately $13,626, primarily due to depreciation, amortization, and share-based compensation.

Net cash used in operating activities of $394 for the nine months ended September 30, 2024 was primarily driven by non-cash adjustments to our net loss of approximately $21,034, primarily due to depreciation, amortization, and share-based compensation.

This was offset by changes in operating assets and liabilities, which results in a use of $12,859 in cash.

Investing Activities .

Net cash used in investing activities of $17,814 for the six months ended June 30, 2025 is primarily due to acquisitions of intangible assets in business combinations or asset acquisitions of $6,346, purchases of available-for-sale securities and maturities of $12,304, and software capitalization costs of $6,470, partially offset by proceeds from sales and maturities of available-for-sale securities of $7,699.

Net cash used in investing activities of $7,359 for the six months ended June 30, 2024 is primarily due to purchases of available-for-sale securities and maturities of $6,462 and software capitalization costs of $5,042, partially offset by proceeds from sales and maturities of available-for-sale securities of $8,617.

Net cash used in investing activities of $78,170 for the nine months ended September 30, 2025, is primarily due to cash paid in business combinations or asset acquisitions of $52,467, which primarily consists of the acquisition of Lathem, purchases of available-for-sale securities of $36,655, and software capitalization costs of $10,271, partially offset by proceeds from sales and maturities of available-for-sale securities of $21,738.

Net cash used in investing activities of $18,209 for the nine months ended September 30, 2024, is primarily due to cash paid in business combinations or asset acquisitions of $12,397, purchases of available-for-sale securities of $10,914, and software capitalization costs of $7,677, partially offset by proceeds from sales and maturities of available-for-sale securities of $13,325.

Financing Activities .

Net cash provided by financing activities was $73,097 for the six months ended June 30, 2025, which primarily consisted of net proceeds of $57,982 from the Loan Agreement (defined below) with MidCap and net increase in client fund obligations of $20,461.

Net cash used in financing activities was $27,935 for the six months ended June 30, 2024, which primarily consisted of a net decrease in client fund obligations of $28,225.

As of June 30, 2025, we have seven subordinated promissory notes related to acquisitions that occurred during the six months ended June 30, 2025 and prior years with a combined outstanding principal balance of $11,345 and maturity dates ranging from October 1, 2025 to July 1, 2029.

Net cash provided by financing activities was $7,001 for the nine months ended September 30, 2025, which primarily consisted of net proceeds of $57,982 from the Loan Agreement (defined below) with MidCap offset by a net decrease in client fund obligations of $45,506.

Net cash used in financing activities was $26,291 for the nine months ended September 30, 2024, which primarily consisted of a net decrease in client fund obligations of $26,068.

As of September 30, 2025, we have nine subordinated promissory notes outstanding, all of which related to acquisitions that occurred during the nine months ended September 30, 2025 and and periods prior to January 1, 2025, with a combined outstanding principal balance of $14,475 and maturity dates ranging from October 1, 2025 to July 1, 2029.

After September 30, 2025, but before the filing of the financial statements, we repaid two subordinated promissory notes having maturity dates during such period, as well as a partial prepayment of one subordinated promissory note, having an original maturity date of July 1, 2029, reducing the principal balance of such note to $1,000.

As of October 30, 2025, the combined outstanding principal balance of our subordinated promissory notes is $10,275.

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

Under the Loan Agreement, we may borrow up to $60,000 from the Lenders, all of which has been funded as of June 30, 2025.

The first $20,000 was advanced on April 10, 2024, the closing date of the Loan Agreement.

The remaining $40,000 was advanced on June 30, 2025, which funds may only be used for Permitted Acquisitions (as defined in the Loan Agreement).

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

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

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

As of June 30, 2025, we are in compliance with all covenants under the Loan Agreement.

During July 2025, we entered a Limited Consent, Amendment No.

1, and Joinder to the Loan Agreement and Amendment No.

2 of the Loan Agreement (the “Amendments”).

The Amendments, collectively, resulted in an increase in our minimum liquidity threshold from $6,000 (10.00% of the outstanding balance under the Loan Agreement) to $10,000.

In addition, we agreed with the Lenders to increase the final payment fee paid to the Lenders at the time of final payment under the loan from 1.00% to 2.00% of the amount advanced thereunder except in the case of a refinance of the loan with MidCap and the Lenders, in which case, the unaccrued portion of that fee would be waived.

Furthermore, Lathem joined the Loan Agreement as Guarantor and the Lenders consented to the Lathem transaction.

As of September 30, 2025, we are in compliance with all covenants under the Loan Agreement.

Sources of Liquidity .

As of June 30, 2025, our principal sources of liquidity consisted of $66,000 of cash and cash equivalents from proceeds of the MidCap Loan Agreement and cash generated from operations of our business over the next twelve months.

Additionally, we have access to an “at the market offering” program entered in October 31, 2024, under which we may offer and sell up to $25,000 of newly issued common stock.

As of June 30, 2025, there are $25,000 of shares of common stock available for issuance under this program.

As of September 30, 2025, our principal sources of liquidity consisted of $21,520 of cash and cash equivalents generated from operations of our business, which we expect to be our principal source of liquidity over the next twelve months.

Additionally, we have access to an “at the market offering” program entered in October 31, 2024, under which we may offer and sell up to $25,000 of newly issued shares of common stock.

As of September 30, 2025, there are $25,000 of shares of common stock available for issuance under this program.

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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis