2020 Delaware (I.R.S. Employer (512) 437-2700 (Registrant’s Telephone Number, including Area Code) insurance provider systems. usability designers. new products and services. Our competitors range from regional payroll Gusto. Primary competitors to Asure Time & Attendance include Kronos, Paychex, ADP, Replicon and Time Simplicity. States. online video. consequences. HCM solutions help clients manage their compliance other laws including, most recently, the new Families First Coronavirus Response Act of 2020 and rules and regulations promulgated pursuant to The Coronavirus Aid, Relief, and Economic Security Act (Cares Act) of 2020. Additionally, our solutions help clients meet their obligations as a plan sponsor under COBRA, and sponsor and administer compliant Flexible Spending Account Plans and compliant Consumer Health Care Plans such as Health Savings Accounts and Health Reimbursement Accounts. FUNCTION NUMBER OF Sales and marketing Customer service and technical support Finance, human resources and administration Total asset purchase of their client service agreements and related assets. These acquisitions could prove difficult to integrate, result in unknown or unforeseen liabilities, disrupt our business, dilute stockholder value and ownership and adversely affect our operating results and financial condition. Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The lead to legal liability. Our ability to incur debt and the use of our funds could be limited by the restrictive covenants in our loan agreement for our term loan and revolving credit facility. Evolving regulation of the Internet, changes in the infrastructure underlying the Internet or interruptions in Internet access may adversely affect our business, operating results and financial condition by increasing our expenditures and causing client dissatisfaction. If we fail to adequately protect our proprietary rights, our competitive advantage and brand could be impaired and we may lose valuable assets, generate reduced revenue and incur costly litigation to protect our rights. products. occur, also might make it more difficult for us to raise capital through the sale of equity securities in the future at a time and at a price that we deem appropriate. As of March 8, 2021, we had 19,016,972 shares of common stock outstanding. Our stockholder rights plan, or “poison pill,” includes terms and conditions which could discourage a takeover or other transaction that stockholders may consider favorable. 2022. The Rights have certain anti-takeover effects, including potentially discouraging a takeover that stockholders may consider favorable. The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms Washington. In addition, our Third Restated Credit Agreement contains limitations on our ability to pay dividends and make other distributions. 2020. A B C Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options Weighted Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column A) Equity Compensation Plan Approved by Stockholders (1) Equity Compensation Plans Not Approved by Stockholders (2) Total 2018 2017 Revenues % % Gross margin Selling, general and administrative Research and development Amortization of intangible assets Total operating expenses Total other loss, net ) ) Net loss ) ) overall financial performance until future periods. 2019 Revenue 2018 2017 Increase (Decrease) % Cloud revenue Hardware revenue Maintenance and support revenue Professional services revenue Other revenue ) Total revenue Although our total customer base is widely spread across industries, our HCM sales are concentrated in States. personnel, maintaining COVID related tax codes, increased amortization of capitalized software costs as well as migration to secure cloud hosting services. sale of the Workspace business in 2019, platform. Other, Income Taxes purposes. operations. 2018 2017 Working capital Cash, cash equivalents and short-term investments Cash used in operating activities ) ) Cash used in investing activities ) ) Cash provided by financing activities Operating Activities. Net cash used in operating activities was $20,908, decreases in accounts receivable of $1,118 and increases in inventory of $11, and decreases in accounts payable of $448 and $911 of prepaid expenses and other assets. $3,174. three payroll processing and payroll tax businesses during the year. Cash provided by investing activities during 2019 was $85,632. The cash provided by investing activities in 2019 is primarily driven by the proceeds from the sale of discontinued operations. costs. Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 (“Topic 606”) “Revenue from Contracts with Customers) supersedes the revenue recognition requirements in Income (Loss). Deferred revenue includes amounts invoiced to customers in excess of revenue we recognize, and is comprised of deferred We have assessed the fair value of our customer relationship intangible assets as of December 31, 2020, we do not believe these to be impaired, as the carrying value of the customer relationship intangible assets are recoverable through the associated project cash flows. 2019 2019 2019 2019 DOCUMENT DESCRIPTION 4.1 The following materials from Asure Software, Inc.’s Annual Report on Form 10-K for the year ended December 31, * (1) Board of Directors of December 31, 2018 December 31, 2017 Assets Current assets: Cash and cash equivalents Accounts and note receivable, net of allowance for doubtful accounts of $1,467 and $425 at December 31, 2018 and December 31, 2017, respectively Inventory Prepaid expenses and other current assets Total current assets before funds held for clients Funds held for clients Total current assets Property and equipment, net Goodwill Intangible assets, net Other assets Total assets Liabilities and stockholders’ equity Current liabilities: Current portion of notes payable Accounts payable Accrued compensation and benefits Other accrued liabilities Deferred revenue Total current liabilities before client fund obligations Client fund obligations Total current liabilities Long-term liabilities: Deferred revenue Deferred tax liability Notes payable, net of current portion and debt issuance cost Other liabilities Total long-term liabilities Total liabilities Commitments (Note 13) Stockholders’ equity: Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding Common stock, $.01 par value; 22,000 and 22,000 shares authorized; 15,666 and 12,876 shares issued, 15,282 and 12,492 shares outstanding at December 31, 2018 and December 31, 2017, respectively Treasury stock at cost, 384 shares at December 31, 2018 and December 31, 2017 ) ) Additional paid-in capital Accumulated deficit ) ) Accumulated other comprehensive income (loss) ) ) Total stockholders’ equity Total liabilities and stockholders’ equity INCOME (LOSS) 2018 2017 Revenue: Cloud revenue Hardware revenue Maintenance and support revenue Professional services revenue Other revenue Total revenue Cost of Sales Gross profit Operating expenses Selling, general and administrative Research and development Amortization of intangible assets Total operating expenses Income (loss) from operations ) ) Other income (expense) Interest expense and other ) ) Total other expense, net ) ) Loss from operations before income taxes ) ) Income tax benefit (expense) ) Net loss ) ) Other comprehensive income (loss): Foreign currency translation (loss) gain ) ) Other comprehensive loss ) ) Basic and diluted net loss per share Basic ) ) Diluted ) ) Weighted average basic and diluted shares Basic Diluted Common Stock Outstanding Common Stock Amount Treasury Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Income (Loss) Total Stockholders’ Equity BALANCE AT DECEMBER 31, 2016 ) ) Share based compensation Stock issued upon option exercise Stock issued, net of issuance cost Net loss ) ) Other comprehensive income ) ) BALANCE AT DECEMBER 31, 2017 ) ) ) Retrospective adoption of Topic 606 Share based compensation Stock issued upon option exercise Stock issued, net of issuance cost Net loss ) ) Other comprehensive income ) ) BALANCE AT DECEMBER 31, 2018 ) ) ) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ) ) Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization Amortization of debt financing costs and discount Release of contingent consideration ) Provision for doubtful accounts Provision for deferred income taxes ) Gain on extinguishment of debt ) Share-based compensation Loss on disposals of fixed assets Changes in operating assets and liabilities: Accounts receivable ) ) Inventory ) ) Prepaid expenses and other assets ) ) Accounts payable ) Accrued expenses and other long-term obligations ) Deferred revenue ) Net cash used in operating activities ) ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions net of cash acquired ) ) Purchases of property and equipment ) ) Software capitalization costs ) ) Restricted cash Net change in funds held for clients ) ) Net cash used in investing activities ) ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable Payments on notes payable ) ) Proceeds from revolving line of credit Payments on revolving line of credit ) Debt financing fees ) ) Payments on capital leases ) ) Net proceeds from issuance of common stock Net change in client fund obligations Net cash provided by financing activities Effect of foreign exchange rates Net increase (decrease) in cash and cash equivalents ) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period SUPPLEMENTAL INFORMATION: Cash paid for: Interest Income taxes Non-cash Investing and Financing Activities: Subordinated notes payable –acquisitions Equity issued in connection with acquisitions Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization of premiums and accretion of discounts is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. sheets. at December 31, 2020. ALLOWANCE FOR DOUBTFUL ACCOUNTS 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 0 impairment of long-lived assets including intangible assets with definite lives, for the year ended December 31, 2020. We do not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return, refund or cancellation rights have expired or acceptance has occurred. Our arrangements with resellers do not allow for any rights of return. non-lease components are generally accounted for separately. Balance Sheet December 31, 2018 Balance Using Previous Standard Increase (Decrease) Assets Prepaid expenses and other current assets ) Total current assets before funds held for clients ) Total current assets ) Other assets Total assets Liabilities and stockholders’ equity Accumulated deficit ) ) Total stockholders’ equity Total liabilities and stockholders’ equity Income Statement For the Year Ended December 31, 2018 Balance Using Previous Standard Increase (Decrease) Operating expenses Selling, general and administrative ) Total operating expenses ) Loss from operations ) ) ) Loss from operations before income tax ) ) ) Net Loss ) ) ) Other comprehensive loss ) ) ) Amortized Cost Gross Unrealized Gains (1) Gross Unrealized Losses (1) Aggregate Estimated Fair Value Corporate debt securities (2) ) liabilities. Fair Value Measure at December 31, 2018 Total Quoted Significant Carrying Prices Other Significant Value at in Active Observable Unobservable December 31, Market Inputs Inputs 2018 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents Short-term available-for-sale securities- Funds Held for Clients Total Fair Value Measure at December 31, 2017 Total Quoted Significant Carrying Prices Other Significant Value at in Active Observable Unobservable December 31, Market Inputs Inputs 2017 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents Total We believe significant synergies are expected to arise from these strategic acquisitions. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition. A portion of acquired goodwill will be deductible for tax purposes. Pay Systems USA Payroll Others Total Cash & cash equivalents Accounts receivable Fixed assets Inventory Other assets Funds held for clients Goodwill Intangibles Total assets acquired Accounts payable Deferred tax liability Accrued other liabilities Deferred revenue Client fund obligations Total liabilities assumed Net assets acquired Pay Systems USA Payroll Others Total Purchase price Working capital adjustment ) ) ) Adjustment to fair value of contingent liability ) ) Adjustment to fair value of Asure’s stock ) ) ) Debt discount ) ) ) ) Fair value of net assets acquired Fair Value Cash Promissory note Debt discount ) Total Fair value of asset acquired, Customer Relationships Contingent consideration for the third quarter 2020. iSystems Others Total Cash & cash equivalents Accounts receivable Restricted cash Fixed assets Other assets Funds held for clients Goodwill Intangibles Total assets acquired Accounts payable Accrued other liabilities Deferred revenue Client fund obligations Total liabilities assumed iSystems Others Total Purchase price Working capital adjustment Adjustment to fair value of Asure’s stock issued Debt discount ) ) ) Fair value of net assets acquired For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Revenues Net income (loss) ) ) Net income (loss) per common share: Basic and diluted ) Weighted average shares outstanding 2020. certain trade names in relation to our rebranding efforts. Balance at December 31, 2017 Goodwill recognized upon acquisitions Adjustments to goodwill associated with acquisitions Foreign exchange adjustment to goodwill ) Balance at December 31, 2018 2018 Intangible Assets Weighted Average Amortization Period (in Years) Gross Accumulated Amortization Net Developed Technology ) Customer Relationships ) Reseller Relationships ) Trade Names ) Noncompete Agreements ) ) 2017 Intangible Assets Weighted Average Amortization Period (in Years) Gross Accumulated Amortization Net Developed Technology ) Customer Relationships ) Reseller Relationships ) Trade Names ) Noncompete Agreements ) ) We record amortization expense using the straight-line method over the estimated useful lives of the intangible assets, as noted above. Amortization expenses were 2019 2020 2021 2022 2023 Thereafter Total 2020 Maturity Stated Interest Rate 2018 2017 Subordinated Notes Payable- acquisitions 5/25/2019 – 7/1/2021 % Term Loan – Wells Fargo Syndicate Partner 5/25/2022 % Term Loan - Wells Fargo 5/25/2022 % Total Notes Payable Short-term notes payable Long-term notes payable Gross Notes Payable 2018 Debt Issuance Costs Net Notes Payable 2018 Notes payable, current portion ) Notes payable, net of current portion ) Total Notes Payable ) Gross Notes Payable 2017 Debt Issuance Costs Net Notes Payable 2017 Notes payable, current portion Notes payable, net of current portion ) Total Notes Payable ) Year Ending 2019 2020 2021 2022 Gross Notes Payable N.A. 2.25% percentage points 3.25% percentage points 2.75% percentage points 3.75% percentage points 3.25% percentage points 4.25% percentage points The outstanding principal amount of the term December 31, 2024. 2018 2017 Software: 3-5 years Furniture and equipment: 2-5 years Internal support equipment: 2-4 years Capital leases: lease term or life of the asset Leasehold improvements: shorter of the lease term or life of the improvement Software development costs Less accumulated depreciation and amortization ) ) We record the amortization of our approximately $21,700 before deducting underwriting discounts and estimated offering expenses. from existing cash resources. 2020. 2018 2017 Risk-free interest rate % % Expected volatility Expected life in years Dividend yield 2019: Options and RSUs outstanding Shares reserved 2018 2017 Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price Outstanding at the beginning of the year Granted Exercised ) ) Canceled ) ) Outstanding at the end of the year Options exercisable at the end of the year Weighted average fair value of options granted during the year Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Weighted-Average Remaining Contractual Life (Years) Weighted-Average Exercise Price Number Exercisable and Vested Weighted-Average Exercise Price available for future issuance. 2019 Transaction Price Allocated to the Remaining Performance Obligations 2018 2017 Net Loss ) ) Weighted-average shares of common stock outstanding Basic and diluted net loss per share ) ) 2019. 2018 2017 Domestic ) ) Foreign ) ) Total ) ) 2018 2017 Current: Federal State Foreign ) Total current ) Deferred: Federal ) State ) Foreign ) Total deferred ) ) 2018 2017 Deferred tax assets: Net operating losses Research and development credit carryforwards Minimum tax credit carryforwards Disallowed interest expense carryforwards Stock compensation Deferred revenue Fixed assets Accrued expenses Other Valuation allowance ) ) Net deferred tax assets Deferred tax liabilities: Acquired intangibles ) ) Fixed assets ) Capitalized software ) Deferred commission ) Goodwill ) ) ) ) Net current deferred tax assets (liabilities) ) ) operations. 2018 2017 Computed at statutory rate ) ) State taxes, net of federal benefit ) ) Permanent items and other Credit carryforwards ) ) Foreign income taxed at different rates ) ) Effect of Tax Act Change in tax carryforwards not benefitted Change in valuation allowance ) ) ) Balance at December 31, 2016 Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions for tax positions of prior years ) Balance at December 31, 2017 Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions for tax positions of prior years Balance at December 31, 2018 the lessor has the sole ability to exercise the option. Our Year Ending Operating Lease Obligations Capital Lease Obligations 2019 2020 2021 2022 2023 Thereafter Less: Sublease income ) Total Less current portion of obligations ) Long-term portion of obligations By Patrick Goepel Chief Executive Officer, Chairman of the Board and Director Chief Financial Officer /s/ DANIEL GILL Lead Independent Director March Daniel Gill Director March Bradford Oberwager ☒☒ 2018☐☐ Delaware74-241569674-2415696 (State or other jurisdiction of (I.R.S. Employer
incorporation or organization)
Identification No.)78746NoneTitle of each class Trading Symbol Name of each exchange on which registered Common Stock, $0.01 par value ASUR NASDAQ Capital Market Series A Junior Participating Preferred Share Purchase Rights N/A N/A Common Stock, $0.01 par value Indicate by check mark if disclosure of delinquent filings pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐or a smaller reporting company, as definedor an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. ☒☐ Non-accelerated filer ☐☒ Smaller reporting company ☒ Emerging growth company ☐12,140,14114,567,741 shares of the registrant’s Common Stock held by non-affiliates on June 30, 2018,2020, the last business day of the registrant’s most recently completed second quarter, was approximately $193,635,249.$93,670,575. For purposes of this computation all officers, directors and 5% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are, in fact, affiliates of the registrant. 12, 2019,8, 2021, there were 15,404,86519,016,972 shares of the registrant’s Common Stock, $.01 par value, issued and outstanding. 20182021 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Proxy Statement, or an amendment to this report containing the Items comprising Part III, will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.PART IItem 1.310262626Item 4. PART II27272837373939Item 9B. PART III404041414142Item 16. 47SPECIALThis Annual Report oncontains forward-lookingmay constitute "forward-looking" statements within the meaning of Section 27Athe safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements contained in this report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements.1995. The words “believe,” “may,” “will,” “estimate,” “continue,“projects,” “anticipate,” “intend,” “expect,” “seek,“should,” “plan,” and similar expressions are intended to identify forward-looking statements. Examples of “forward looking statement” include statements we make regarding our operating performance, future results of operations and financial position, revenue growth, earnings or other projections.section.section, factors discussed throughout Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” as well as in our periodic filings with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.As used in this report, the terms “Asure,” “Registrant,” “we,” “us,” and “our” mean Asure Software, Inc. and its subsidiaries unless the context indicates otherwise.PART IAsure Software, Inc., a Delaware Corporation, headquartered in Austin, Texas, is(“HCM”) and Workspace Management, offering intuitive and innovative cloud-based(HCM) solutions designed to help organizationsdelivered primarily as Software-as-a-Service (SaaS). We facilitate the growth of all sizes and complexities build companies of the future. Our cloud platforms enable clients worldwide to better manage their people and space in a mobile, digital, multi-generational, and global landscape. Asure’s offerings include a fully-integrated HCM platform, flexible benefits and compliance administration, HR consulting, and time and labor management as well as a full suite of Agile Workspace solutions for conference room scheduling, desk sharing programs, and real estate optimization.Asure’s platform vision is to help clients proactively manage costs associated with their three most expensive assets, real estate, labor and technology, while creating an employee experience that fosters efficiency, productivity and engagement. Asure serves approximately 10,000 direct clients in 80 countries, ranging from global Fortune 500 clients to small and mid-sized businesses (“SMB”("SMBs"). Some of our current clients include Aetna, Apple Inc., Baker & McKenzie, Fannie Mae, Wells Fargo, Citigroup, Deutsche Bank, KPMG UK, La Trobe University, Merck by helping them (i) stay compliant with ever changing federal, state, and Co., Inc., Mondelez, Pfizer, Inc., Pearson, PSSI, Salesforce.com, Inc., State Streetlocal tax jurisdictions and Thomson Reuters. labor laws, (ii) allocate more resources to support growth rather than back-office overhead that suffocates growth, and (iii) build better teams with skills that get them to the next level.mission guidesvision is to become the work we do each day; it is “To deliver innovative technology with the passionmost trusted HCM resource to empower every client’s workspaceentrepreneurs and the commitment to makemanagers by helping SMBs grow their workdays easier.”The Asure productbusinesses. Our solution strategy is driven by three primary trends inchallenges that prevent businesses from growing: human resources (HR) complexity, allocation of both human and financial capital, and the market: mobilization, globalizationability to build great teams. Our HCM suite, named AsureHCM®, includes cloud-based Payroll & Tax, HR, a Time & Attendance software, and technology. Asure offers four product lines: AsureSpace™, AsureForce®, AsureHCM and AsureEvolution. AsureHCM and AsureEvolution are our Mid-market and SMB/Channel HCM platforms respectively, which include AsureBenefits and AsureConsulting. AsureSpace™ Agile Workspace solutions enable organizationsHR Services ranging from HR projects to optimize their real estate investment and create a digital workspace that empowers mobile and virtual employees, while streamlining internal operations. AsureForce® Time and Labor Management helps organizations optimize their workforce while controlling labor administration costs and activities.For all of the Asure product lines, supportSupport and professional services are key elements of our value proposition and overall solution. In addition to state-of-the-art hosting platformscloud solutions, hosted in Amazon AWS, and regular software upgrades and releases, Asure gives ourwe provide clients easy access to our skilled support team. Our services and support representatives are knowledgeable not just in the Asure solution,Asure’s solutions, but also in their respective industries and provide advice and guidance onabout best practices and change management strategies.strategies in the payroll and HCM industry. Many of our staff have professional certifications in payroll (Certified Payroll Professionals, CPPs) and human resources (Professional in Human Resources, PHR, and Senior Professional in Human Resource, SPHR, certifications). From installation to training and post-live support, our professional services team delivers a proficient customerclient experience on a globalnational scale.wide rangepresence. We market directly to SMBs and their “trusted advisors,” including CPAs, regional banks, and benefits brokers. Through an indirect model, Reseller Partners pay us recurring monthly license fees to white label our solutions while providing value-add HCM services to their clients (our indirect clients). Reseller Partners are comprised of audiences, from smallpure-play payroll providers focused on a geographic or industry niches and medium-sized businesses to enterprise organizations throughout the United States, EuropeSMB’s trusted advisors (typically CPAs, regional banks, and Asia/Pacific. Our unique blendbenefits brokers).Asure makesitsour website, our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file these materials or furnish them to the Securities and Exchange Commission.RECENT DEVELOPMENTSIn January 2018, we acquired all of the outstanding shares of common stock of Pay Systems of America, Inc. (“Pay Systems”), a provider of HR,employee benefits services. 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.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.In addition, we made other acquisitions during 2018 that were not material to our results of operations, financial position or cash flows.PRODUCTS AND SERVICESAsure’s SaaSHCM solutions are uniquely designed to help companies more effectively manage their global, mobile, flexible workforces.grow. Companies use Asure’sour solutions to more effectively deployaddress three primary challenges that prevent businesses from growing:engagelocal tax, and labor laws. They also lack the technical staff and resources to maintain software, hosting, and integrations of proprietary payroll and HCM technology stacks. Most SMBs also need their human capital focused on growth (sales, marketing, product development, client service, etc.) rather than back-office staff that adds overhead and unnecessary complexity to running their business. Our solutions are primarily delivered in the cloud with no IT footprint or administrative back-office needed.modern workforce in pursuit ofbusiness, people and capital are scarce resources. We enable SMBs to allocate their goals in three ways: 1. Attract and retain talent – Companies useheadcount toward growth rather than IT or administrative back-office staff. Since Asure’s cloud solutions to implement flexible co-working and mobile worker strategies that not only are attractive to top talent but also provide access to new pools of talent since employees can work anywhere at anytime. Additionally, Asure’s HCM Recruiting software helps streamline the entire recruiting process.2. Cut labor and real estate expense – By executing mobile worker strategies, companies can access talent in more remote – less expensive – markets beyond the reach of a typical commute. And because these modern workers don’t requireprimarily delivered as much dedicated office space, companiesSaaS, clients are able to substantially cut real estate expense.3. Productivity – Studies show that employees who have more flexibility in their work are more engaged. So,conserve cash by hiringavoiding large upfront implementation and capital purchase expenses.talent who spend more time working, less time commuting,practices in recruiting, developing, and are more engaged, companies improve productivity.With a suite of workforce and workspace products called the Asure Smart Office, Asure is well-positioned to deliver innovative, scalable solutions across industries and around the world. retaining key staff.the modern workforce, the Asurehelping SMBs grow their businesses, our product team aims to create and deliver easy-to-use solutions that help attract talent, cut laborsimplify their business, better allocate resources, and real estate costs,build great teams. Our solutions are primarily recurring cloud-based solutions delivered as SaaS and improve productivity. Within the Asure Smart Office suite, product groupings include cloud revenue, hardware revenue, maintenance and support revenue, on premises software license revenue, professionalHR services revenue, and consulting revenue.AsureSpace™ workspace management solutions offer clients significant costs savings and Return on Investment (“ROI”) gains by maximizing their real estate with a full portfolio of innovative and intuitive SaaS solutions. The AsureSpace platform offers three core products, each of which can stand alone or be bundled together for a comprehensive solution. SmartView® occupancy sensors and analytics platform offers unique insights into how space is being used, allowing companies to make proactive, strategic decisions about real estate investments and workspace design. SmartMove® move management software helps companies design floorplans and track permanent seat assignments as well as manage assets such as telephones, laptops, desks, chairs,professional services and virtually any item assigned to an employee. AsureSpace™ Resource Scheduler is the foundation of the AsureSpace platform with a sophisticated yet intuitive approach to workspace management. Featuring conference room and desk reservations, service management, interactive floorplans, visitor management, calendar and web conference integrations and robust reporting, Resource Scheduler is a comprehensive solution for the digital workspace. NowSpace®, a mobile app for Apple and Android devices empowers mobile workers to find and reserve desks and conference rooms directly from their smart phones. AsureSpace™ touch panels and kiosks are placed outside busy areas for on-the-fly desk and space reservations, while lending a high-tech presence to a standard office and enhancing the visitor experience. Finally, workspace business intelligence (“WBI”) tools offer invaluable reportinghardware (time clocks and data visualizations for executives to understand space utilizationcollection devices).further optimize their real estate investments.AsureHCMTax.From traditional human resource (“HR”) managementWe automate all the complex and ever changing regulations associated with payroll and taxes in all U.S. jurisdictions - from wages, benefits, overtime, and garnishments to benefits, talent acquisitiontips, direct deposits, Fair Labor Standard Act and performance management, AsureHCM provides an easy-to-use platform forfederal, state, and local payroll taxes. Key capabilities include:professionals and employees alike. Our emphasis oncomplexities that SMBs face, including employee self-service so employees can access all their information (e.g., pay history and automated processes reflects the growing trend of workforce mobilization while empowering HR teamscompany documents). With Asure HR’s dashboard, clients have convenient single-system access to focus on more strategic initiatives. Our HCM suite of solutions are easy-to-use with fully integrated HR/payroll applications uniquely designed to help companies recruit, manage, pay, and analyze their workforce more effectively. Combined with the AsureBenefits offering of COBRA administration and consumer spending accounts, and AsureHR Help for professional guidance on HR challenges, AsureHCM is a comprehensive platform that delivers a cohesive and engaging experience throughout the employee life cycle.Asure’s SMB HCM Channel product, Evolution HCM, was developed with the channel market in mind. Its fully integrated Payroll, HR, and Tax Management suite offers service providers a path to growth and success with unparalleled accuracy, productivity, and financial control. Evolution HCM provides its users the flexibility and best practices to handle clients of all size and complexity levels, as well as meet the ever-evolving needsevery facet of the industry.AsureConsulting allowsemployee’s lifecycle. This solutionSMB clientscomplementary hardware (time clocks and data collection devices) to run their businesses because we take on the responsibility for all the traditional Human Resource functions. Our suite of services assists organizations through the entire employee lifecycle – from finding the right people, to on-boarding, to development and performance management and finally, to exit strategies and separation. Everything for the SMB market, seamlessly integrated.Costprovide cost savings and additionalpotential ROI gains come in the form of a more strategic use of labor dollars and the elimination of time theft with AsureForce® workforce management solutions.theft. Mobile time tracking with AsureForce Mobile helps executives better understand where and when their employees are working, providing insight into labor schedules and labor costs. With AsureForce Mobile,our mobile solution, employees can punch in and out from remote locations, andas geo-positioning verifies the physical coordinates. Biometric time clocks, including facial recognition, reduce time theft and help combat buddy punching, which can cost companies millionsassists in the verification of dollars per year.the identities of workers. Automated system notifications, real-time dashboards, and flexible configuration options all work to streamline operations. Finally, employees, supervisors and executives have real-time access to data and business intelligence to optimize labor costing, improve labor scheduling, and ultimately control labor costs.Our acquisitions have enabled us Key capabilities include:disrupton-demand call center for all HR questions, and to a fully outsourced HR function. Asure also supports discreet functions like payroll administration and the HCM market by offering a comprehensive solution that brings workforcebenefit enrollment process.workspace management together. Empowering HR professionals to partner with real estate management teams and take a more strategic role in company initiatives ultimately results in a work environment that is productive, efficient and most importantly, engaging for employees. An optimized employee experience delivered through a unified, cloud-based management platform increases company bottom-line performance and gives executives new insight into their most costly assets: people and real estate.Asure strives to bring quickly to market innovative, cloud-based solutions that capture the convergence of workspace and workforce technologies in order to elevate the employee experience. First-to-market mobile applications are a testament to our success in innovation. Additionally, Asure is committed to co-innovation, working in partnership with industry leaders, resellers, partners and clients around the globe to develop technology solutions that meet the needs of a rapidly shifting workspace.OurThe HCM industry is characterized by continuing improvements in technology, resulting in the frequent introduction of new products, short product life cycles, changes in customerclient needs, and continual improvement in product performance characteristics. Asure strivesWe strive to be cost-effective and timely in enhancing our software applications,innovative, cloud-based solutions, developing new innovative software solutions that address the increasingly sophisticated and varied needs of an evolving range of customers,growing businesses and anticipating technological advances while adhering to payroll and HCM industry standards.Asure First-to-market mobile applications are a testament to our success in innovation.around the globework closely with clients and sales and marketing teams to build solutions based on market requirements and client feedback. We also garner inputs from clients, competitive comparisons, and relevant technology innovations. Development teams are staffed with software developers, quality assurance engineers and support specialists who work closely with our customersspecialists. Specific roles include product owners, solutions architects, software engineers, software engineers in test, quality assurance analysts, technical writers, scrum masters, and sales and marketing teams to build products and services based on market requirements and customer feedback. We develop our new product and service roadmaps based on inputs from customers, competitive comparisons and relevant technology innovations. strategy is rooted instrategies are based on agile methodologies that foster continuous innovation and flexibility.improvement with collaboration with stakeholders. The development team enhances the functionality of our software and hardware productssolutions through continuouscontinual improvement and new feature releases, with a particular focus on cloud-based solutions delivered as SaaS solutionsfor growing businesses that struggle with complexity and products for the mobile workforceReseller Partners that need powerful back-office tools and the digital workspace. Asure willscalable infrastructure. We continue to evaluate opportunities for developing new software sosolutions that enable organizations canto further streamline andtheHR tasks associated with administeringgrowing their businesses. We seek to simultaneously allow organizations to improve their productivity while reducing the costs associated with those business tasks.We also actively search for potential product, service or business acquisitions that we believe will complement our existing and planned product and service offerings. We cannot guarantee that we will make future acquisitions or that we can successfully integrate acquired assets or businesses profitably into Asure.Despite our efforts, we also cannot guarantee that we will complete our existing and future development efforts or that our new and enhanced software products will adequately meet the requirements of the marketplace and achieve market acceptance. Additionally, Asure may experience difficulties that could delay or prevent the successful development or introduction of new or enhanced software products. In the case of acquiring new or complementary software products or technologies, we may not be able to integrate the acquisitions into our current product lines. Furthermore, despite extensive testing, errors may be found in new software products or releases after shipment, resulting in a diversion of development resources, increased service costs, loss of revenue and/or delay in market acceptance.Asure sells its software products and servicesa direct and channel (partner) model, which enables us to sell our software solutions in an efficient, cost-effective manner.partner models. Prospective customersclients learn about Asure throughin a variety of ways, including advertising, web site searches, sales calls, public relations, referral channels, direct marketing, and social media. When prospective customersclients show an interest in Asure, we connect themthey are connected with a sales representative, who works to close the sale, via ourAsure’s web site, phone, or a face-to-face meeting to discussby discussing solutions that meet their needs and the solutions they are interested in and make the sale.needs. We track our marketing and sales activities to provide immediate previewinsights into activities, leads and pipeline opportunities. AsureOur account management teams also work with existing customersclients to promote and sell additional solutions that are relevant for each customer. In addition to thisclient. We supplement our direct sales model, we supplement these efforts with our partner programs described below.programs. By working with our partners, we expand the reach of our direct sales force and gain access to key opportunities in major market segments worldwide. various geographic and industry niches.partners in our Partner Program:partners: Reseller Partners and Referral Partners.are companies that represent us globally, as well as before the Federal government, and often offer complementary products to either the workspace management product line or the workforce product line. Reseller Partners commit to a minimum level of business per year with us and receive a channel discount for that commitment. Our Reseller Partners outside the United States include JLL, Red River Technology and Kathea, which represent the workspace product line. We also have several Reseller Partners that represent our software in the Federal government space. Resellers of our workforce product line in the United States include Oasis Outsourcing, a large provider of human resource outsourcing solutions. Referral Partners. Referral Partners provide us with the name and particular information about a prospective customer and its needs as a sales lead. If we accept the sales lead, we register it for the Referral Partner. If we make a sale as a direct result of such a lead, we will pay the Referral Partner a sales lead referral fee. Currently, we have a number of Referral Partners, including Atmosphere Interiors PPI, BuildingI, Martek and SHI for the workspace management product and our workforce product line.COMPETITIONWe believe we have a unique position in the market place as the only technology provider in the world that offers cloud-based workspace and workforce management solutions from a single partner. Additionally, Asure has been first-to-market with mobile apps in the workspace management industry, and we are the only known company to have both geospatial and facial recognition technology working together for mobile time tracking.Specific to the AsureSpace™ line of workspace management software solutions, we have a competitive advantage in the breadth of our complementary workspace management solutions and the scope of our analytics as well as our resources available for product development, client services, and client support. The primary competitors to AsureSpace™ include Dean Evans & Associates, Inc., AgilQuest Corporation and Condeco Ltd. (UK). In addition to our features and available services, we believe the principal competitive advantages of AsureSpace™ include its cloud-based service model, extensive product integration options and partner channel, scalable deployments, configurable interfaces, mobile access and price. Our expert services team, proven implementation methodology and “partner v. vendor” approach have also shown to be critical differentiators.The AsureForce® line of workforce management software solutions has a competitive advantage in the marketplace in serving organizations seeking specific point-solutions as well as organizations desiring an integrated suite of solutions, particularly in the area of mobile time collection. The AsureForce Mobile and AirClock™ products are first-to-market technology solutions with significant market demand. By competing tactically with point-solutions and strategically with an integrated suite of solutions, Asure can serve the needs of a broad spectrum of companies. Primary competitors to AsureForce® include Kronos, Replicon, and Time Simplicity.Our key competitive advantage in the HCM product line is our single database architecture. Many HCM providers offer ‘integrated’ solutions meaning multiple databases and redundant data entry. AsureHCM offers a single employee record throughout the entire employee life cycle, starting with an online job application. Other differentiating factors include our intuitive user interface with mobile accessibility, an integrated time and labor solution, and streamlined workflows with automated notifications and self-service options throughout. With a complementary suite of HR products such as consumer spending accounts and HR Help, AsureHCM offers a comprehensive platform to advance an organization’s HR strategy. Within the Evolution SBO channel, differentiators include a robust back-end solution for payroll and tax management and with the Asure acquisition, access to a full suite of ancillary products and the long-term advantage of our Partner-For-Life mentality. SBOs can continue as an Asure licenseeto license our solutions with the opportunity to expand their available offerings,solutions, or they can come under the Asure umbrellaumbrella.experiencebenefit brokers) that provide us with SMB leads but do not resell our solutions. Since SMBs rely on their trusted advisors to guide them in selecting payroll and HCM solutions, we have found this to be a fruitful source of leads. Referral Partners provide qualified leads that convert to clients at a higher rate than non-referral leads. We have been successful in nurturing some Referral Partners to become Reseller Partners over time as the full benefitreferral relationships develop and they become more comfortable in the HCM space.a forward-thinking technology company.ourAsure’s main competitors are ADP, Paychex, Kronos, Paylocity, Ultimate Software,Paycor, Paycom, Ceridian, AscentisNamely, and Infinisource.software model, affordability and proven deployment methodology, we faceAsure faces several categories of competitive challenges:•Vendors with face-to-face sales contact. In this highly relationship-based sales process, vendors with large, dispersed field-based sales teams who meet and consult with prospects have an advantage. Key U.S. vendors who approach the market in this manner include ADP, Kronos, PeopleSoft and Condeco. Asure has recently launched a field-based approach to sales and also focuses on high-touch marketing campaigns and leveraging relationships with channel partners to build relationships with prospects.•National payroll processors with loss-leader products. Large brand and market share payroll processing vendors (such as ADP, Inc.) offer equivalent point solutions at little or no cost to prospects when in a competitive engagement because these loss leader products become inconsequential next to their core business offerings.•Single application vendors. Vendors that offer similar point-solutions, such as room scheduling, office hoteling management, time and attendance, employee/manager self-service and paystub management, can be perceived as better meeting an immediate and specific need.7Becauseour products and servicesthe first few months when in a competitive engagement because the short-term lost revenue is subjectinconsequential compared with the long-term revenue they expect to rapid technological change and there are relatively low barriersreceive over the next 8 to entry in the workspace management software market, we routinely encounter new entrants or competition from vendors in some or all aspects of our product lines. Competition from these potential market entrants may take many forms. 10 years with that same client.customerclient requirements. As a result, they may compete more effectively on price and other terms. Additionally, those competitors may devote greater resources in developing products or in promoting and selling their products to achieve greater market acceptance. Asure isWe are actively taking measures designed to address our competitive challenges, and clients tend to recognize the benefits of working with an established and publicly-traded partner versus a start-up or transitional vendor. However, we cannot assureensure that we will be able to achieve or maintain a competitive advantage with respect to any of the competitive factors.Asure’smulti-seriesomni-channel direct marketing programs to drive awareness, interest and revenue. Marketing vehicles include our web site, organic and paid search, advertising, public relations, direct marketing, events, social media, content marketing, reputation management, and eMarketing. In 2019, we are expanding our strategy to include Account Based Marketing and vertical-specific marketing.other digital marketing tactics. Our marketing plan addresses growth and retention goals for allkey target audiences from small and medium-sized businesses to Fortune 500 companies and divisions of enterprise organizations throughout the United States, Europe and Asia/Pacific. focus on our comprehensive Sales Enablement plan which we developedinvest in 2017, to drive revenue through the education and development of direct and channel sales teams. With an emphasis on social selling, sales enablement tools, DiscoverOrgprocesses, and LinkedIn Navigator are elevating prospectingbest-practice training of our sales organization. We have implemented and topcontinue to optimize an end-to-end lead generation process that generates leads from marketing activities, captures and tracks all digital click behavior of funnel sales activity with meaningful connections, targeted research and the distribution of relevant content. Sales teams also have access to a sophisticated ROI calculator that enhances the discovery process and creates a demonstrable ROI with interactive components that allow prospect champions to build a case internally, expediting the sales cycle. In conjunction withlead in our marketing automation software and CRM, follow-up and take all leads through a qualification and disposition process that ends in a closed loop of either won/lost opportunities or leads that get passed back to marketing for further nurturing. Sales Enablement staff support sales with product management team, our sales enablement team is promoting a consultative sales approachtraining, client and prospect demonstrations, and marketing webinars as well as best practices in modern selling that demonstrates our commitment as a partner with a focus on in-depth understanding of products, use casesleverages email, social media, and industries.isand solutions are subject to a wide range of complex U.S. and foreign laws and regulations. In addition, many of our solutions are designed to assist clients with their compliance with certain U.S. and foreign laws and regulations that apply to them.them, particularly in their capacity as employers under state and federal laws. Failure to comply with existing laws or changes in,regulations or anticipate and incorporate into our services new laws and regulations applicable toso that our businessesservices remain compliant could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.As a providerHR outsourcing solutions, we processdata is subject to strict regulatory oversight and the laws governing the collection, processing and storage of personal and sensitive data relateddiffers from jurisdiction to jurisdiction and even differs based on the type of data collected, such as biometric data. We collect and process the personal and sensitive information of clients, clients of our Reseller Partners, employees of our clients and Reseller Partners, vendors and our own employees. Data that we process and store includes personally identifying information such as names, addresses, social security numbers, bank account information, and in the case of our time and attendance products, biometric data. We are therefore subject to compliance obligations under federal, state and foreign privacy and data security-related laws. For instance, in the United States, the Health Insurance Portability and Accountability Act of 1996, including the related security provisions, applies to our COBRA, flexible spending account and health savings account benefits administration services businesses.services. We are also subject to federal and state security, privacy and foreign security breach notification laws with respect to both our own employeepersonal and sensitive data as defined under such laws. Such state and client employee data.Somefederal laws include laws such as the California Consumer Privacy Act of our solutions assist our clients in complying with certain U.S.2018, as amended and foreign lawsthe Illinois Biometric Information Privacy Act and rules and regulations that applypromulgated under the Federal Trade Commission. We have a small number of end user clients located in the European Union using our time and attendance software and accordingly, the EU’s General Data Protection Regulation applies to them. For example, our HCM solutions help clients manage their compliance with certain requirementsthe collection, processing and storage of applicable sensitive and personal data. In some instances, laws provide for civil penalties for violations as well as private rights of action for data breaches or other violations of the Patient Protectionlaw. Moreover, enforcement actions and Affordable Care Act in the United States. Our COBRA administration services and flexible spending account services in the United States are designed to help our clients comply with relevant federal guidelines relating to, respectively, employers’ benefits continuation obligations and certain requirements of the Internal Revenue Code. Although these laws and regulations apply to our clients and not to us, changes in such laws or regulations may affect our operations, products and services.8Additionally, the changing nature of privacy laws in the United States, Canada, the European Union and elsewhere may impact our processing of personal information of our employees and on behalf of our clients. For example, the European Union adopted a comprehensive general data privacy regulation (the “GDPR”) in May 2016 that will replace the current EU Data Protection Directive and related country-specific legislation. The GDPR became fully effective in May 2018. Complying with the enhanced obligations imposed by the GDPR may result in significant costs to our business and require us to amend certain of our business practices. Further, enforcement actions and consequencesforegoing description does not include an exhaustive listBank Secrecy Act of 1970, as amended by the USAPATRIOT Act of 2000, including the know-your-client due diligence requirements and related reporting of suspicious activities to applicable authorities.impactingthe preparation of Form W-2’s. Additionally, our business.OurAsure’s other core federally registered trademarks include AsureForce®, AsureSpace®AsureHCM® and Evolution®. We also use common law trademarks including Resource Scheduler™, Meeting Room Manager™, Work Space Manager™, Workplace BI™, iEmployee™, Netsimplicty™, ADI™, and Legiant Express™.2018,2020, we had a total of 564482 employees (550(471 of which are full-time employees) in the following departments:NUMBER OF
EMPLOYEESResearch and development 70 6698 93221 29293 113482 564adjustadjusts the size and composition of our workforce. We also periodically retain contractors to support our sales and marketing, information technology and administrative functions. None of our employees are represented by a collective bargaining agreement. Asure hasWe have not experienced any work stoppages and we consider our relations with our employees to be good.stoppages. Additionally, we augment our workforce capacity in research and development and customerclient service and technical support by contracting for services through third parties.9this Annual Report on Form 10-K should be carefully considered.Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” represent our view of some of the most important risks we face. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see Item 1. “Business—Forward Looking Statements” for a discussion of the forward-looking statements that are qualified by these risk factors. If any of the events or circumstances described in the following risk factors actually occurs, our business, operating results and financial condition could be materially adversely affected.$7.5$16.3 million and $5.7$42.3 million in the fiscal years ended December 31, 2018,2020, and 2017,2019, respectively. At December 31, 2018,2020, our accumulated deficit was $283.6$270.0 million and total stockholders’ equity was $102.5$145.7 million. We expect to continue to incur operating losses as a result of expenses associated with the continued development and expansion of our business. Such expenses include among others, transaction costs associated with acquisitions, sales and marketing, research and development, consulting and support services and other costs relating to the development, marketing and sale and service of our products that may not generate revenue until later periods, if at all. Any failure to increase revenue or manage our cost structure as we implement initiatives to grow our business could prevent us from achieving or sustainingcontrol.control, including the impact of the current environment, the spread of major epidemics (including coronavirus) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains and extended shut-down of businesses. We cannot be certain that we will be able to achieve or sustain profitability on a quarterly or annual basis.common stocksolution involves the collection, storage and transmission of clients’ and their employees’ confidential and proprietary information, including personal identifying information, as well as financial and payroll data. HCM software is often targeted in cyber-attacks, including computer viruses, worms, phishing attacks, malicious software programs and other information security breaches, which could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our clients’ sensitive data or otherwise disrupt our clients’ or other third parties’ business operations. If cybercriminals are able to circumvent our security measures, or if we are unable to detect an intrusion into our systems and contain such intrusion in a reasonable amount of time, our clients’ sensitive data may be compromised.tradedsince implemented measures to remediate this material weakness, including: (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.low volumes. Weour internal control over financial reporting or to avoid potential future material weaknesses. If we identify any additional material weaknesses, the accuracy and timeliness of our financial reporting may be adversely affected and we may be adversely affected. If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligationspredict whetherprovide reliable financial reports or prevent fraud, our business and results of operations could be harmed and investors could lose confidence in our reported financial information.active trading marketAnti-Money Laundering Policy and compliance program designed to mitigate the risk of our services and application being utilized for illegal purposes including money laundering and to assist in detecting fraud. Should other states or jurisdictions determine that that we are a money service business or money transmitter, we could be subject to civil and criminal fines, penalties, registration fees, cost of surety bonds or other security, reputational damage and other negative consequences that may have an adverse effect on our common stock will ever develop.Historically,financial condition.common stock has experiencedsecurity measures are breached or if personal information of our direct or indirect clients or their employees is accessed or obtained, our HCM solution may not be perceived as being secure and we may suffer reputational damage, clients and resellers may not select or continue with our services or products and we may incur significant liabilities.lacktarget in cyber attacks due to the sensitive nature of trading liquidity.data being stored, accordingly, we could be subjected to viruses, phishing, worms or other malicious software programs and other information security breaches. In the absenceevent that such attacks were able to circumvent our own security processes, or if we did not detect an intrusion in time to stop such attack, such breach could result in loss, destruction, theft, or misuse of this information. In addition to malicious acts by third parties, unauthorized access to or breach of our systems could occur through employee error or employee malfeasance. Although we have security measures in place to prevent the possibility of breach or data loss, we may not be able to adequately anticipate and operationalize all preventative and protective measures necessary. While we maintain a cyber liability insurance policy, such policy may not be adequate to cover all losses and the cost of defending a lawsuit. Moreover, if a high profile security breach occurs with respect to another SaaS provider in our market, our clients and potential clients may lose trust in the security of the SaaS business model generally, which could adversely impact our ability to retain existing clients or attract new ones. Any actual or perceived breach of our security could damage our reputation, cause existing clients and resellers to terminate our services, prevent future clients from doing business with us and result in regulatory liability and third-party liability, any of which could adversely affect our business and results of operations.active trading market: an investorpotential failure to achieve the expected benefits of the combination or acquisition;buyingof transitioning the acquired technology onto our existing platforms and sellingcustomer acceptance of multiple platforms on a temporary or permanent basis;commonother services; at the price you consider reasonable; and• market visibilityinvestments. If we finance acquisitions by issuing equity or convertible or other debt securities or loans, or issue equity as consideration for shares ofan acquisition, our common stockexisting stockholders may be limited, which may have a depressive effect ondiluted, or we could face constraints related to the market price for sharesterms of, and repayment obligations related to, the incurrence of indebtedness.common stockproducts, keep pace with technological developments or respond to future technologies, our business, operating results and financial results will be adversely affected.raise capitaladapt and innovate. To attract new clients and increase revenue from existing clients, we will need to enhance and improve our existing products and introduce new features. The success of any enhancement or make acquisitions by issuingnew feature depends on several factors, including timely completion, introduction and market acceptance. If we are unable to enhance our common stock.Our stock price has been, and likely will continueexisting products to meet client needs or successfully develop or acquire new features or products, or if such new features or products fail to be volatile.Thesuccessful, our business, operating results and financial condition will be adversely affected.stock hasstock.past been, and is likelynormal course of business, some customers have elected not to continue in the futurerenew. Even if customers elect to be, volatile. During the fiscal year ended December 31, 2017, the Nasdaq closing price of one sharerenew, they may renew for fewer subscriptions, renew for shorter contract lengths, or switch to lower cost offerings of our common stock fluctuated from a low of $9.00 to a high of $16.44. During the fiscal year ended December 31, 2018, the Nasdaq closing price of one shareservices. Moreover, certain of our common stock fluctuated fromclients have the right to cancel their agreements for convenience, subject to certain notice requirements and, in some cases, early termination fees. It is difficult to predict attrition rates given our varied customer base of enterprise, varied sizes of our customers and the number of multi-year subscription contracts. Our client renewal rates may decline or fluctuate as a lowresult of $4.39a number of factors, including their satisfaction or dissatisfaction with our products, our pricing, the prices of competing products or services, mergers and acquisitions affecting our client base, reduced hiring by our clients or reductions in our clients’ spending levels.highnumber of $19.06. Thefactors, including general economic conditions and that our customers do not react negatively to any price changes related to these additional features and services.stockstock.influenced by many factors, someexacerbated during periods of which are beyondunusual financial market volatility. Any loss or inability to access client funds could have an adverse impact on our control, including:• announcements regarding thecash position and could require us to obtainexpansionoperations.development effortspotential competitors may be acquired by usthird parties with greater available resources and the ability to initiate or withstand substantial price competition. As a result, our competitors;• announcements regardingcompetitors may be able to develop products and services better received by our markets or may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, regulations or client requirements.acquisitionfuture establish, partner or form other cooperative relationships with vendors of businessescomplementary products, technologies or companies by us or our competitors;• technological innovations orservices to enable them to offer new products and services, developed byto compete more effectively or to increase the availability of their products in the marketplace. New competitors or relationships might emerge that have greater market share, a larger client base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage. In light of these advantages, current or potential clients might accept competitive offerings in lieu of purchasing our competitors;• changesofferings. We expect intense competition to continue for these reasons, and such competition could negatively impact our sales, profitability or market share.domestic or foreign laws and regulations affecting our industry• issuance of new or changed securities analysts’ reports and/or recommendations applicable to us or our competitors;• changesconnection with the services that we have provided, resulting in financial or operational estimates or projections;• additions or departureloss to us.key personnel;• actual or anticipated fluctuationsclients, we may need to seek additional sources of short-term liquidity, which may not be available on reasonable terms, which could have a material, adverse effect on our business, financial condition and results of operations.quarterly financial andcustomers. In the course of our sales to customers, we may encounter difficulty collecting accounts receivable, which could adversely impact our operating results and degreefinancial condition. We maintain reserves for potential credit losses. However, these reserves are based on our judgment and a variety of trading liquidityfactors and assumptions.common stock;operating results for the period in which they occur, and• political or economic uncertainties.10stock markets generallythese banks have experiencedno obligation to renew their agreements with us on commercially reasonable terms, if at all. If these banks terminate their relationships with us or restrict the dollar amounts of funds that they will process on behalf of our clients, their doing so may impede our ability to process funds and could have an adverse impact on our financial results and liquidity.priceamounts of goodwill and volume volatility. This volatilityintangible assets. The impairment of a significant portion of these assets would adversely affect our business, operating results and financial condition.hadoccurred would require us to write off the impaired portion of goodwill and such intangible assets, resulting in a substantialcharge to our earnings. In 2019, we recorded an impairment of goodwill amounting to $35,060, which was reflected as an operating expense in our consolidated statements of comprehensive income (loss). In addition, any future impairment of a significant portion of goodwill or intangible assets could have a material adverse effect on our business, operating results and financial condition.market pricesSmall Business Administration does not grant forgiveness of securitiesour loan under the Paycheck Protection Program, our business operations and cash flow likely will be adversely affected, and we may be limited in our ability to grow our operations until the unforgiven portion of many public companies for reasons frequently unrelated or disproportionatethis loan is repaid.operating performancePaycheck Protection Program under Title 1 of the specific companies.Sales, or the potential for sales, of a substantial number of shares of our common stock in the public market by us or our existing stockholders could cause our stock price to fall.sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to raise capital through the sale of equity securities in the futurePPP Loan bears interest at a timefixed rate of 1.00% per annum and at a price that we deem appropriate. As of March 12, 2019, we had 15,404,865 shares of common stock outstanding.Our level of indebtedness andmatures on April 15, 2022.Second Restated Credit Agreementcredit facility with our senior lender or owed to sellers in connection with prior acquisitions, or integrate complementary acquisitions. The Unforgiven Debt, if any, could cause the price of our common stock to decline and subordinated promissory notes,otherwise have a negative impact on our operations.operationsreputation and affect our business and results of operations.plan forstore and process data or, respondin some cases, impact our ability to changesoffer our services in certain locations.businesscustomers expect us to meet voluntary certification or acquire additional businesses.other standards established by third partiesas well as other audited measures and controls. If we are unable to comply with restrictions in,maintain these certifications or cannot repay or refinance our indebtedness, the repayment of our indebtedness could be accelerated.In order to consummate our acquisitions in 2018 and January of 2019, we incurred approximately $11.0 million of subordinated indebtedness in connection with the notes issued to the sellers. In addition, as of December 31, 2018, we have approximately $115.0 million in gross senior, secured debt outstanding under our Second Restated Credit Agreement. Our high level of indebtednessmeet these standards, it could adversely affect our business in the following ways, among others:• make it more difficult for usability to satisfyprovide our financial obligations under our current debt obligations, or other indebtedness, as well as our contractual and commercial commitments,solutions to certain customers and could increaseharm our business. Even the riskperception that we may default on our debt obligations;• require us to use a substantial portionthe privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our cash flow from operations to pay interestproducts or services, and principal oncould limit adoption of our current debt obligationscloud-based solutions. other indebtedness, which would reduce the funds available for working capital, capital expenditures and other general corporate purposes;• limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other investments or general corporate purposes, which may limit the ability to execute our business strategy;• heighten our vulnerability to downturns in our business, our industry or in the general economy, and restrict us from exploiting business opportunities or making acquisitions;• place us at a competitive disadvantage compared to those of our competitorsthird-party data center hosting facilities, cloud computing platform providers or third-party service partners are compromised or breached, our services may be perceived as not being secure, our brand could be damaged, our services may be disrupted, and customers may curtail or stop using our services, all of which could reduce our revenue and earnings, increase our expenses, and expose us to legal claims and regulatory actions.have proportionately less debt;• limit management’s discretionalso conduct attacks designed to temporarily deny customers access to our services. Any security breach could result in operatinga loss of confidence in the security of our business;• limitservices, damage our flexibility in planning for, or reacting to, changes inreputation, negatively impact our future sales, disrupt our business the industry in which we operate or the general economy; and• result in higher interest expense if interest rates increase.SecondThird Restated Credit Agreement, which would allow our creditors at that time to declare all outstanding indebtedness to be due and payable. Under these circumstances, our lenders could compel us to apply all of our available cash to repay our indebtedness.Further, the interest rate on the debt we have incurred under our Second Restated Credit Agreement is calculated with reference to LIBOR. LIBOR is an interest rate used in lending transactions between banks on the London interbank market. On July 27, 2017, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. The maturity date of our indebtedness under our Second Restated Credit Agreement is after December 31, 2021, and, as a result, we may be required to renegotiate our Second Restated Credit Agreement in order to address the phase-out of the LIBOR rate, which may result in terms that are not as favorable to us, which may affect our ability to meet our debt service and repayment obligations or have an adverse effect on our operations. SecondThird Restated Credit Agreement with Wells Fargo Bank, N.A. and Goldman Sachs provides for a term loan and revolving credit facility that contains restrictive covenants, including restrictions on our ability to pay dividends to stockholders, as well as requirements to comply with certain leverage ratios and other financial maintenance tests.tests and stringent requirements around regulatory compliance. These restrictive covenants and requirements limit the amount of borrowings that are available to us. The SecondThird Restated Credit Agreement covenants may also affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. These covenants could place us at a disadvantage compared to some of our competitors, who may have fewer restrictive covenants and may not be required to operate under these restrictions.We depend on data centers and computing infrastructure operated by third parties and any disruption in these operations could adversely affect2021. The maturity date of our business.We hostindebtedness under our applications and serve our customers through a number of external data centers. While we control and have access to our servers and all the componentsThird Restated Credit Agreement is after December 31, 2021. Our Third Restated Credit Agreement allows for an adjustment of the networks that are located in our external data centers, we do not control the operations of these facilities. The owners ofinterest rate on such facilities have no obligation to renew their agreements with us on commercially reasonable terms. If we are not able to renew these contracts on commercially reasonable terms, we may be required to transfer our servers and other infrastructure to new data facilities, and we may incur significant costs and possible service interruption in doing so. Additionally, we rely on certain hosted infrastructure partners, such as Amazon Web Services (“AWS”) to provide a third party hosted environment for certain of our applications. Any disruption or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted. Problems faced by our third-party data center operations or hosted infrastructure partners could adversely affect the experience of our customers. Breaches of our clients’ data caused by errors, omissions or hostile acts of third parties within the third party hosted environment are beyond our control yet we would remain responsible for such data security incidents from a regulatory standpoint, in some instances. Our third-party data center operators or hosted infrastructure partners could decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by our third-party data center operators, our hosted infrastructure partners or any of the other service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict.If our security measures or those of our third-party data center hosting facilities, cloud computing platform providers or third-party service partners are compromised or breached, our services may be perceived as not being secure, our brand could be damaged, our services may be disrupted, and customers may curtail or stop using our services, all of which could reduce our revenue and earnings, increase our expenses, and exposure us to legal claims and regulatory actions.Our services involve the collection, transmission, processing and storing of our customers’ and our customers’ customers’ proprietary and other sensitive data, including financial information and other personal information. While we have security measures in place, they may be breachedloans as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our information technology systems, our customers’ data or our data, including our intellectual property and other confidential business information. In addition, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data, our data or our information technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, our customers may authorize third-party technology providers to access their customer data, and somephase out of our customers may not have adequate security measures in place to protect their data that is stored on our services. Because we do not control our customers or third-party technology providers, or the processing of such data by third-party technology providers,LIBOR; however, we cannot ensureguarantee that any replacement rate will be as favorable to us as the integrity or security of such transmissions or processing. Malicious third partiesLIBOR rate and this may also conduct attacks designed to temporarily deny customers access to our services. Any security breach could result in a loss of confidence in the security of our services, damage our reputation, negatively impact our future sales, disrupt our business and lead to legal liability. Moreover, if a high profile security breach occurs with respect to another SaaS provider, our clients and potential clients may lose trust in the security of the SaaS business model generally, which could adversely impactaffect our ability to meet our debt service and repayment obligations or have an adverse effect on our operations.existing clients or attract new ones.Someadditional personnel as needed in the future, it could disrupt the operation of our key components are procured from a single or limited number of suppliers. Thus, we are at risk of shortage, price increases, tariffs, changes,business, delay or discontinuation of key components, which could disruptour product development and materially and adversely affectharm our business.Some of the key components used to manufacture our products, such as the Gen2 Smartview sensors and AsureForce time clocks and air clocks, come from limited or single sources of supply. We do not have contractual commitments or guaranteed supply arrangements with our suppliers. As a result, we are subject to the risk of shortages and long lead times in the supply of our components or products. Further, our suppliers may experience financial or other difficulties as a result of uncertain and weak worldwide economic conditions. Other factors which may affect our suppliers' ability or willingness to supply components to us include internal management or reorganizational issues, such as roll-out of new equipment which may delay or disrupt supply of previously forecasted components, or industry consolidation and divestitures, which may result in changed business and product priorities among certain suppliers. It could be difficult, costly and time consuming to obtain alternative sources for these components, or to change product designs to make use of alternative components. In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a significant impactgrowth efforts.fulfill orders for our products.Additionally, various sources of supply-chain risk, including strikes or shutdowns at delivery ports orkey management personnel and technical employees. We cannot guarantee that we will continue to attract and retain personnel with the requisite capabilities and experience. The loss of one or damage to our products while they are in transit or storage, intellectual property theft, losses due to tampering, third-party vendor issues with quality or sourcing control, failure by our suppliers to comply with applicable laws and regulation, potential tariffs or other trade restrictions, or other similar problems could limit or delay the supplymore of our productskey management or harm our reputation. In the event of a shortage or supply interruption from suppliers of these components, we may not be able to develop alternate sources quickly, cost-effectively, or at all. Any interruption or delay in manufacturing, component supply, any increases in component costs, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to provide our products to customers on a timely basis. This could harm our relationships with our customers, damage our reputation in the market, prevent us from acquiring new customers, and materially and adversely affect our business.As we acquire and invest in companies or technologies, we may not realize the expected business or financial benefits. These acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and ownership and adversely affect our operating results and financial condition.As part of our business strategy, we have in the past and may in the future seek to acquire or invest in other businesses, products or technologies that we believe could complement or expand our existing platform, enhance our technical capabilities or otherwise offer growth opportunities. Acquisitions and investments involve numerous risks, including:• potential failure to achieve the expected benefits of the combination or acquisition;• difficulties in, and the cost of, integrating operations, technologies, services, platforms and personnel;• diversion of financial and managerial resources from existing operations;• the potential entry into new markets in which we have little or no experience or where competitors may have stronger market positions;• potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers;• potential loss of key employees of the acquired company;• inability to generate sufficient revenue to offset acquisition or investment costs;• inability to maintain relationships with customers and partners of the acquired business;• difficulty of transitioning the acquired technology onto our existing platforms and customer acceptance of multiple platforms on a temporary or permanent basis;• augmenting the acquired technologies and platforms to the levels that are consistent with our brand and reputation;• increasing or maintaining the security standards for acquired technology consistent with our other services;• potential unknown liabilities associated with the acquired businesses;• unanticipated expenses related to acquired technology and its integration into our existing technology;• negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation;• additional stock based compensation;• the loss of acquired deferred revenue and unbilled deferred revenue;• delays in customer purchases due to uncertainty related to any acquisition;• ineffective or inadequate controls, procedures and policies at the acquired company;• challenges caused by integrating operations over distance, and across different languages and cultures in the case of any international acquisitions;• currency and regulatory risks associated with foreign countries and potential additional cybersecurity and compliance risks resulting from entry into new markets; and• the tax effects of any such acquisitions.Any of these riskspersonnel could have ana material and adverse effect on our business, operating results and financial condition.addition,the last twelve months, we have experienced turnover within our finance team. If we are unable to facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be availableretain and successfully integrate their replacements in our business, it could have a material adverse effect on terms favorable to us, or at all, which may affectour business and the reliability of our financial statements.complete acquisitions or investments. Ifcontinually and effectively attract, train, retain, motivate and manage highly qualified and experienced individuals, specifically in our finance function. In the last year, we had significant turnover in our finance acquisitions by issuing equity or convertible or other debt securities or loans, or issue equityand accounting team, including the executive, tax, SEC reporting, treasury and audit functions and we also had a new chief financial officer and corporate controller, thereby resulting in a lack of institutional knowledge as consideration for an acquisition,to our existing stockholders may be diluted, or we could face constraints relatedfinancial operations. While none of these former employees left us due to any disagreement with management over the termsfinancial statements, the loss of and repayment obligations related to,these individuals impacts the incurrence of indebtedness. See also the risk factor below titled “We may require additional capital to support business growth, and this capital may not be available on acceptable terms, or at all.”Privacy regulations, existing and evolving regulation of cloud computing, cross-border transfer restrictions and other United States and foreign regulations could limit the usecontinuity of our servicesfinancial reporting and adversely affect our business.Regulatory focus on privacy issues continues to increase, as federal, state and foreign governments continue to adopt new laws and regulations addressing data privacy and the collection, processing, storage and use of personal information. As these laws expand and become more complex, potential risks related to our handling of our clients’ personal information will intensify. These measures include the General Data Protection Regulation (“GDPR”), effective in May, 2018, which replaces the current EU Data Protection Directive 95/46/EC and which applies to all EU member states. This law governs the processing of personal information within the EU and the processing of personal information of EU citizens generally and applies directly to our operations as a data processor. The GDPR imposes new security and privacy standards and contractual obligations on data processors and provides for significant fines and new private rights of actions in the event of breach of a data security or data privacy obligation or non- compliance in general. Non-compliance with the GDPR may result in monetary penalties of up to 4% of worldwide revenue. The GDPR and other changes in foreign and domestic laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data, biometric data, or any personal information, could increase our cost of providing our services or prevent us from offering services in jurisdictions in which we operate. These and other requirements could reduce demand for our services or restrict our ability to store and process data or, in some cases, impact our ability to offer our services in certain locations impacting our clients’ ability to deploy our solutions globally. Additionally, the law relating to the ability to exchange data outside of jurisdiction borders is complex and subject to change. For example, in October 2015, the European Court of Justice invalidated the U.S.-EU Safe Harbor framework that had been in place since 2000, which allowed companies to meet certain European legal requirements for the transfer of personal data from the European Economic Area to the United States. While other adequate legal mechanisms to lawfully transfer such data remain, the invalidation of the U.S.-EU Safe Harbor framework may result in different European data protection regulators applying differing standards for the transfer of personal data, which could result in increased regulation, cost of compliance and limitations on data transfer for us and our customers. The costs of compliance with and other burdens imposed by laws, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, lead to significant fines, penalties or liabilities for noncompliance, or slow the pace at which we close sales transactions, any of which could harm our business. In addition to governmental regulation, self-regulatory standards may place additional burdens on us. Many of our customers expect us to meet voluntary certification or other standards established by third parties, such as the International Trade Administration Privacy Shield as well as other audited measures andinternal controls. If we are unable to maintainretain and successfully integrate the current employees serving in these certifications or meet these standards,roles, it could adversely affect our ability to provide our solutions to certain customers and could harm our business. Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services, and could limit adoption of our cloud-based solutions.If we are not able to develop enhancements and new features, keep pace with technological developments or respond to future technologies,have a material impact on our business operating results and financial will be adversely affected.Our future success will depend on our ability to adapt and innovate. To attract new clients and increase revenue from existing clients, we will need to enhance and improve our existing products and introduce new features. The success of any enhancement or new feature depends on several factors, including timely completion, introduction and market acceptance. If we are unable to enhance our existing products to meet client needs or successfully develop or acquire new features or products, or if such new features or products fail to be successful, our business, operating results and financial condition will be adversely affected.15Our products are designed to operate on a variety of network, hardware and software platforms using Internet tools and protocols, and we must continuously modify and enhance our products to keep pace with changes in Internet-related hardware, software, communication, browser and database technologies. In addition, if new technologies emerge that are able to deliver a workforce management software at lower prices, more efficiently or more conveniently, we may be unable to compete with these technologies. If we are unable to respond in a timely and cost-effective manner to these rapid technological developments, our products may become less marketable and less competitive or obsolete, and our business, operating results and financial condition will be adversely affected.Our business depends substantially on clients renewing their agreements with us, purchasing additional products from us or adding additional users. If our customers do not renew their subscriptions for our services or reduce the number of paying subscriptions at the time of renewal, our revenue will decline and our business, operating results and financial condition may be adversely affected. If we cannot accurately predict subscription renewals or upgrade rates, we may not meet our revenue targets, which may adversely affect the market price of our common stock.In order for us to improve our operating results, it is important that our clients renew their agreements with us when the initial contract term expires and also purchase additional products or add additional users.Our customers have no obligation to renew their subscriptions for our services after the expiration of their contractual subscription period, which is typically one to three years, and in the normal course of business, some customers have elected not to renew. Even if customers elect to renew, they may renew for fewer subscriptions, renew for shorter contract lengths, or switch to lower cost offerings of our services. Moreover, certain of our clients have the right to cancel their agreements for convenience, subject to certain notice requirements and, in some cases, early termination fees. It is difficult to predict attrition rates given our varied customer base of enterprise, varied sizes or our customers and the number of multi-year subscription contracts. Our client renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our products, our pricing, the prices of competing products or services, mergers and acquisitions affecting our client base, reduced hiring by our clients or reductions in our clients’ spending levels.Our future success also depends in part on our ability to sell additional features and services, more subscriptions or enhanced editions of our services to our current customers. This may also require increasingly sophisticated and costly sales efforts that are targeted at senior management. Similarly, the rate at which our customers purchase new or enhanced services depends on a number of factors, including general economic conditions and that our customers do not react negatively to any price changes related to these additional features and services.In addition, if we cannot accurately predict subscription renewals or upgrade rates, we may not meet our revenue targets, which may adversely affect the market price of our common stock.We may require additional capital to support business growth, and this capital may not be available on acceptable terms, or at all.We intend to continue to make investments, including the acquisition of complementary businesses, to support our business growth and may seek additional funds to respond to business challenges, including the need to develop new features or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in additional equity or debt financings to secure additional funds. If we raise additional funds through issuances of equity or debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired.Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including subordinated promissory notes we issued in connection with our acquisitions, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations under the notes and any future indebtedness we may incur and to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance the notes or future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the notes or future indebtedness.Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could adversely affect our business, operating results and financial condition.Our operating results may vary based on changes in our industry or the impact of changes in the global economy on us or our clients. The revenue growth and potential profitability of our business depends on demand for enterprise application software and services generally and for workspace and workforce management solutions in particular. We sell our software products and services primarily to large, mid-sized and small business organizations whose businesses fluctuate based on general economic and business conditions. In addition, a portion of our revenue is attributable to the number of users of our products at each of our clients, which in turn is influenced by the employment and hiring patterns of our clients and potential clients. To the extent that economic uncertainty or weak economic conditions cause our clients and potential clients to freeze or reduce their headcount, demand for our products may be negatively affected. Historically, economic downturns have resulted in overall reductions in spending on information technology and workforce management software as well as pressure from clients and potential clients for extended billing terms. If economic conditions deteriorate, our clients and potential clients may elect to decrease their information technology and workforce management budgets by deferring or reconsidering product purchases, which would adversely affect our business, operating results and financial condition.The market for workforce management in which we participate is intensely competitive, and if we do not compete effectively, our business, operating results and financial condition could be adversely affected.The market for workforce management software is highly competitive, rapidly evolving and fragmented. Many of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories, larger marketing budgets and significantly greater resources than we do. These competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, and they may be able to compete more effectively on price and other terms. In addition, with the introduction of new technologies and market entrants, we expect competition to intensify in the future. If we fail to compete effectively, our business will be harmed. Some of our principal competitors offer their products or services at a lower price, which has resulted in pricing pressures on our products. Similarly, some competitors offer different billing terms, which has resulted in pressures on our billing terms. If we are unable to maintain our pricing levels and billing terms, our operating results could be negatively impacted. In addition, pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses or the failure of our products to achieve or maintain more widespread market acceptance, any of which could adversely affect our business, operating results and financial condition.We face competition from paper-based processes and desktop software tools. We also face competition from custom-built software that is designed to support the needs of a single organization, as well as from third-party talent and human resource application providers. These vendors include, without limitation, Dean Evans & Associates, Inc., Emergingsoft Corporation, AgilQuest Corporation and Condeco Ltd. (UK) as competitors to the AsureSpace™ line and Kronos, Replicon and Time Simplicity as competitors to the AsureForce® line. In addition, some of the parties with which we maintain business alliances offer or may offer products or services that compete with our products or services.Many of our competitors are able to devote greater resources to the development, promotion and sale of their products and services. In addition, many of our competitors have established marketing relationships, access to large client bases and major distribution agreements with consultants, system integrators and distributors. Moreover, many software vendors can bundle human resource products or offer such products at a lower price as part of a larger product sale. In addition, some competitors may offer software that addresses one or a limited number of workforce management functions at a lower price point or with greater depth than our products. For all of these reasons, we may not be able to compete successfully against our current and future competitors.Existing or future laws and regulations could increase the cost of our products and negatively affect our reputation, results of operations or financial condition, or have other adverse consequences.Our business is subject to a wide range of complex U.S. and foreign laws and regulations. As a provider of human resources outsourcing solutions, we process personal and sensitive data related to clients, employees of our clients, and our employees, and are subject to compliance obligations under federal, state and foreign privacy and data security-related laws. For instance, in the United States, the Health Insurance Portability and Accountability Act of 1996 applies to our COBRA, flexible spending account and health savings account benefits administration services businesses. We are also subject to federal, state and foreign security breach notification laws with respect to both our own employee data and client employee data.Some of our solutions assist our clients in complying with certain U.S. and foreign laws and regulations that apply to them. For example, our HCM solutions help clients manage their compliance with certain requirements of the Patient Protection and Affordable Care Act in the United States. Our COBRA administration services and flexible spending account services in the United States are designed to help our clients comply with relevant federal guidelines relating to, respectively, employers’ benefits continuation obligations and certain requirements of the Internal Revenue Code. Changes in such laws or regulations could require us to make significant modifications to our products or delay or cease sales of certain products, which could result in reduced revenues, increased expenses and write-offs.As part of our payroll processing solutions, we move client funds to taxing authorities, our clients’ employees, and other payees via electronic transfer and direct deposit. Some elements of our money transmission activities may be subject to licensing requirements under money transmitter statutes in some jurisdictions. The adoption of new money transmitter statutes in other jurisdictions, changes in regulators’ interpretation of existing state and federal money transmitter or money services business statutes or regulations, or disagreement by a regulatory authority with our interpretation of such statutes or regulations, could require additional registration or licensing, limit certain of our business activities until they are appropriately licensed, and expose us to financial penalties. These occurrences could also require changes to the manner in which we conduct some aspects of our money movement business or client funds investment strategy.Failure to comply with laws and regulations applicable to our operations or client solutions and services could result in the suspension or revocation of licenses or registrations, the limitation, suspension or termination of services, and the imposition of consent orders or civil and criminal penalties, including fines, that could damage our reputation and have a materially adverse effect on our results of operation or financial condition. In addition, changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, may decrease our revenues and earnings and may require us to change the manner in which we conduct some aspects of our business. Our business and operations are experiencing growth and organizational change. If we fail to effectively manage such growth and change, our business, operating results and financial condition could be adversely affected.We have experienced, and may continue to experience, growth and organizational change, which has placed, and may continue to place, significant demands on our management, operational and financial resources. For example, our headcount has grown from 325 employees (315 full-time) on December 31, 2017 to 564 employees (550 full-time) on December 31, 2018. We may continue to expand our operations in the future, either organically or through additional acquisitions. We have also experienced significant growth in the number of users, transactions and data that our SaaS hosting infrastructure supports. We will require significant capital expenditures and the allocation of valuable management resources to manage this growth. If we fail to manage our anticipated growth and change in an effective manner, our ability to retain and attract clients may suffer and our business, operating results and financial condition may be adversely affected.Our clients could have insufficient funds to cover payments we have made on their behalf, resulting in financial loss to us.As part of the payroll processing service, we are authorized by our clients to transfer money from their accounts to fund amounts owed to their employees and various taxing authorities. It is possible that we could be held liable for such amounts in the event the client has insufficient funds to cover them. We have in the past, and may in the future, make payments on our clients’ behalf for which we may not be reimbursed, resulting in a loss to us. Further, if we are required to advance substantial amounts of funds to cover payment obligations of our clients, we may need to seek additional sources of short-term liquidity, which may not be available on reasonable terms, which could have a material; adverse effect on our business, financial condition and results of operations.Client funds that we hold in trust are subject to market, interest rate, credit and liquidity risk. The loss of these funds could have a material adverse effect on our business, financial condition and results of operations .We invest our funds held for clients in high quality, investment-grade marketable securities, money markets, and other cash equivalents. However, these funds held for clients are subject to general market, interest rate, credit, and liquidity risks. These risks may be exacerbated during periods of unusual financial market volatility. Any loss or inability to access client funds could have an adverse impact on our cash position and could require us to obtain additional sources of liquidity, and could have a material adverse effect on our business, financial condition and results of operations.The markets in which we participate are highly competitive, and if we do not compete effectively, our operating results could be adversely affected.The market for payroll and HCM solutions is fragmented, highly competitive and rapidly changing. Our competitors vary for each of our solutions, and include (i) enterprise-focused software providers, such as Ultimate Software Group, Inc., Workday, Inc., SAP AG, Oracle Corporation and Ceridian Corporation, (ii) payroll service providers, such as Automatic Data Processing, Inc., Paychex, Inc., Paycom Software, Inc., Paycor, Inc. and (iii) other regional providers, and HCM point solutions, such as Cornerstone OnDemand, Inc.Several of our competitors are larger, have greater name recognition, longer operating histories and significantly greater resources than we do. Many of these competitors are able to devote greater resources to the development, promotion and sale of their products and services. Furthermore, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition. As a result, our competitors may be able to develop products and services better received by our markets or may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, regulations or client requirements.In addition, current and potential competitors have established, and might in the future establish, partner or form other cooperative relationships with vendors of complementary products, technologies or services to enable them to offer new products and services, to compete more effectively or to increase the availability of their products in the marketplace. New competitors or relationships might emerge that have greater market share, a larger client base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage. In light of these advantages, current or potential clients might accept competitive offerings in lieu of purchasing our offerings. We expect intense competition to continue for these reasons, and such competition could negatively impact our sales, profitability or market share.If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel as needed in the future, it could disrupt the operation of our business, delay our product development and harm our growth efforts.Our future performance depends largely on our ability to continually and effectively attract, train, retain, motivate and manage highly qualified and experienced technical, sales, marketing, managerial and executive personnel. Our future development and growth depend on the efforts of key management personnel and technical employees. We cannot guarantee that we will continue to attract and retain personnel with the requisite capabilities and experience. The loss of one or more of our key management or technical personnel could have a material and adverse effect on our business, operating results and financial condition.Any significant disruption in our SaaS hosting network infrastructure could harm our reputation, require us to provide credits or refunds, result in early terminations of client agreements or a loss of clients, and adversely affect our business, operating results and financial condition.Our SaaS hosting network infrastructure is a critical part of our business operations. Our clients access our workforce management software through a standard web browser and depend on us for fast and reliable access to our products. Our software is proprietary, and we rely on third-party data center hosting facilities and the expertise of members of our engineering and software development teams for the continued performance of our software. We have experienced, and may in the future experience, disruptions in our computing and communications infrastructure. Factors that may cause such disruptions include:• human error;• security breaches;• telecommunications outages from third-party providers;• computer viruses;• acts of terrorism, sabotage or other intentional acts of vandalism, including cyber attacks;• unforeseen interruption or damages experienced in moving hardware to a new location;• fire, earthquake, flood and other natural disasters; and• power loss.Although we generally back up our client databases hourly, store our data in more than one geographically distinct location at least weekly and perform real-time mirroring of data to disaster recovery locations, we do not currently offer immediate access to disaster recovery locations in the event of a disaster or major outage. Thus, in the event of any of the factors described above, or other failures of our computing infrastructure, clients may not be able to access their data for lengthy periods of time and it is possible that client data from recent transactions may be permanently lost or otherwise compromised. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption. Moreover, some of our agreements include performance guarantees and service level standards that obligate us to provide credits, refunds or termination rights in the event of a significant disruption in our SaaS hosting network infrastructure or other technical problems that relate to the functionality or design of our software.Even if demand for workforce management products and services increases generally, there is no guarantee that demand for SaaS products generally or our products in particular will increase to a corresponding degree, or at all.The widespread adoption of our products depends not only on strong demand for workforce management products and services generally, but also for products and services delivered via a SaaS business model in particular. A significant number of organizations do not use workforce management products, and it is unclear whether such organizations will ever use these products and, if they do, whether they will choose to use a SaaS workforce management software service or our products in particular. As a result, we cannot assure you that our SaaS workforce management software products will achieve and sustain the high level of market acceptance that is critical for the success of our business.Because of how we recognize revenue with respect to our workforce management products, a significant downturn in our business may not be immediately reflected in our operating results.Our revenues consist of SaaS offerings, time-based software subscriptions, and perpetual software license sale arrangements. We recognize revenue from our SaaS arrangements and time-based software subscription agreements monthly over the terms of these arrangements, which typically range from one to three years. As a result, a significant portion of the revenue we report in each quarter is generated from arrangements entered into during previous periods. Consequently, a decline in new subscriptions or SaaS arrangements in any one quarter may not have a significant impact on our revenue and financial performance in that quarter, but will negatively affect our revenue, or rate of revenue growth, and financial performance in future quarters.In addition, if subscription or SaaS arrangements expire and are not renewed in the same quarter, our revenue and financial performance in that quarter and subsequent quarters will be negatively affected. However, the revenue impact may not be immediately reflected in our operating results to the extent there is an offsetting increase in revenue from perpetual license sales in that same quarter.Finally, we may be unable to adjust our fixed costs in response to reduced revenue. Accordingly, the effect of significant declines in sales and market acceptance of our products may not be reflected in our short-term operating results.Because we generally recognize subscription revenue from our clients over the terms of their agreements but incur most costs associated with generating such agreements up front, rapid growth in our client base may put downward pressure on our operating income in the short term.The expenses associated with generating client agreements are generally incurred up front, while the resulting subscription revenue is generally recognized over the life of the agreements. Accordingly, increased growth in the number of our clients will result in our recognition of more costs than revenue during the early periods covered by such agreements, even in cases where the agreements are expected to be profitable for us over their full terms. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information may increase. While our general practice is to enter into confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with the parties with whom we have strategic relationships and business alliances, these agreements may not be effective in controlling access to and distribution of our products and proprietary information. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. If we fail to secure, protect and enforce our intellectual property rights, we may lose valuable assets, generate reduced revenue and incur costly litigation to protect our rights, which could adversely affect our business, operating results and financial condition.We are exposed to the credit risksSome of our customers; ifkey components are procured from a single or limited number of suppliers. Thus, we have inadequately assessed their creditworthiness, we may have more exposure to accounts receivableare at risk than we anticipate. Failure to collect our accounts receivable in amounts that we anticipateof shortage, price increases, tariffs, changes, delay, or discontinuation of key components, which could disrupt and materially and adversely affect our operating results and financial condition.We grant credit to customers in the ordinary course of business, exposing us to the credit risk of our customers. In the course of our sales to customers, we may encounter difficulty collecting accounts receivable, which could adversely impact our operating results and financial condition. We maintain reserves for potential credit losses. However, these reserves are based on our judgment and a variety of factors and assumptions.We perform credit evaluations of our customers’ financial condition. However, our evaluationbusiness.creditworthinesskey components used to manufacture our products, such as the AsureForce® time clocks and air clocks, come from limited or single sources of customers may not be accurate if theysupply. We do not provide ushave contractual commitments or guaranteed supply arrangements with timely and accurate financial information or if their situations change after we evaluate their credit. While we attempt to monitor these situations carefully, adjust our allowances for doubtful accounts as appropriate and take measures to collect accounts receivable balances, we have written down accounts receivable and written off doubtful accounts in prior periods and may be unable to avoid additional write-downs or write-offs of doubtful accounts in the future. Such write-downs or write-offs could negatively affect our operating results for the period in which they occur, and could harm our financial condition.Our effective tax rate may fluctuate assuppliers. As a result, of new tax laws and our interpretations of those new tax laws, which are subject to significant judgments and estimates. The ongoing effects of the new tax laws and the refinement of provisional estimates could make our results difficult to predict.Our effective tax rate may fluctuate as a result of new tax laws and our interpretations of those new tax laws, which are subject to significant judgments and estimates. The ongoing effects of the new tax laws and the refinement of provisional estimates could make our results difficult to predict.Our effective tax rate may fluctuate in the future as a result of the U.S. Tax Cuts and Jobs Act (the Act), which was enacted on December 22, 2017. The Act introduces significant changes to U.S. income tax law that will have a meaningful impact on our provision for income taxes once we release our valuation allowance. Accounting for the income tax effects of the Act requires significant judgments and estimates in the interpretation and calculations of the provisions of the Act.Due to the timing of the enactment and the complexity involved in applying the provisions of the Act, we made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial statements for the year ended December 31, 2017. The U.S. Treasury Department, the Internal Revenue Service (IRS), and other standard-setting bodies may issue guidance on how provisions of the Act will be applied or otherwise administered that is different from our interpretation. As we collect and prepare necessary data, and interpret the Act and any additional guidance issued by the IRS or other standard-setting bodies, we may make adjustments to the provisional amounts that could materially affect our financial position and results of operations as well as our effective tax rate in the period in which the adjustments are made. Further, foreign governments may enact local tax laws in response to the Act which may result in additional changes that could materially affect our financial position and results of operations.We face risks associated with expanding our sales outside of the United States.We believe that our future growth depends in part upon our ability to increase sales in international markets. These sales are subject to a variety of risks, including fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences and export license requirements. In addition, we are subject to the risks inherentrisk of shortages and long lead times in conducting business internationally, including political and economic instability and unexpected changes in diplomatic and trade relationships. Currency fluctuations may also increase the relative pricesupply of our productscomponents or products. Further, our suppliers may experience financial or other difficulties as a result of uncertain and weak worldwide economic conditions. Other factors which may affect our suppliers' ability or willingness to supply components to us include internal management or reorganizational issues, such as roll-out of new equipment which may delay or disrupt supply of previously forecasted components, or industry consolidation and divestitures, which may result in international marketschanged business and therebyproduct priorities among certain suppliers. It could also cause our productsbe difficult, costly and time consuming to become less affordableobtain alternative sources for these components, or less price competitive than thoseto change product designs to make use of international competitors. These risks associated with international operations mayalternative components. In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a material adverse effectsignificant impact on our revenue from or costs associated with international sales.The results of the United Kingdom’s referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets andability to fulfill orders for our business.In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. In March 2017, the United Kingdom formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The referendum was advisory, and the terms of withdrawal are subject to a negotiation period that could last until March 2019. The referendum and the ensuing process of the United Kingdom’s withdrawal from the European Union has created significant uncertainty about the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union laws to replace or replicate in the event of a withdrawal. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, operating results and financial condition.We may be subject to claims, lawsuits, governmental investigations and other proceedings that could adversely affect our business, financial condition and results of operations. We are sometimes the subject of claims, lawsuits, governmental investigations and other legal and regulatory proceedings in the ordinary course of business, including those involving, among others, breach of contract, tortious conduct and employment law matters. The results of any such claims, lawsuits, or other legal or regulatory proceedings cannot be predicted with certainty. Any claims against us, whether meritorious or not, could be time-consuming, result in costly litigation, be harmful to our reputation, require significant management attention and divert significant resources. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that could adversely affect our business, financial condition and results of operations. As a public company, we are obligatedmaintain effective internal control over financial reporting. Ifuse our internal control over financial reporting is ineffective, our financial reporting may not be accurate, completenet operating loss carryforwards and timely, and our auditorscertain other tax attributes may be unablelimited.attestuse its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its effectiveness when required, thus adversely affecting investor confidencepost-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our company.We are required, pursuant to Section 404ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. In the event that it is determined that we have in thereport by management on the effectivenessresult of future transactions in our internal control over financial reporting. Our auditors also need to audit and provide an attestation report on the effectiveness of our internal control over financial reporting.We have incurred and continue to incur significant costs assessing our system of internal control over financial reporting and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may discover, and may not be able to remediate, future significant deficiencies or material weaknesses, orstock, then we may be unable to complete our evaluation, testing or any required remediationlimited in a timely fashion. Failure of our internal control over financial reporting to be effective could cause our financial reporting to be inaccurate, incomplete or delayed. Moreover, even if there is no inaccuracy, incompletion or delay of reporting results, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert, and our auditors will be unable to affirm, that our internal control is effective, in which case investors may lose confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on the price of our common stock.To the extent that our pre-tax income or loss becomes relatively modest, our ability to concludeuse our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that a control deficiency is not a material weakness or that an accounting error does not require a restatementwe earn. Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could be adversely affected.Under the Sarbanes-Oxley Act of 2002, our management is required to assess the impact of control deficiencies based upon both quantitative and qualitative factors, and depending upon that analysis, we classify such identified deficiencies as either a control deficiency, significant deficiency or a material weakness. One element of our analysis of the significance of any control deficiency is its actual or potential financial impact. This assessment will vary depending on our level of pre-tax income or loss. For example, a smaller pre-tax income or loss will increase the likelihood of a quantitative assessment of a control deficiency as a significant deficiency or material weakness.To the extent that our pre-tax income or loss is relatively small, if management or our independent registered public accountants identify an error in our interim or annual financial statements, it is more likely that such an error may be determined to be a material weakness or be considered a material error that could, depending upon the complete quantitative and qualitative analysis, result in our having to restate previously issued financial statements.Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a significant portion of these assets would adversely affect our business, operating results, and financial condition.Asresultlack of trading liquidity. In the absence of an active trading market:acquisitions, a significant portion of our total assets consist of intangible assets, including goodwill. Goodwill and identifiable intangible assets together accounted for approximately 52% of the total assets on our balance sheet as of December 31, 2018. We may not realize the full fair value of our intangible assets and goodwill. We expect to engage in additional acquisitions, which may result in our recognition of additional identifiable intangible assets and goodwill. We will evaluate on a regular basis whethercommon stock at all or a portion of our goodwillat the price one considers reasonable; and identifiable intangible assets may be impaired. Under current accounting rules, any determination that impairment has occurred would require us to write off the impaired portion of goodwill and such intangible assets, resulting in a charge to our earnings. An impairment of a significant portion of goodwill or intangible assets could have a material adverse effect on our business, operating results and financial condition.Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.As of March 12, 2019, our officers, directors and principal stockholders each holding more than 5%collectively, control approximately 13%may be limited, which may have a depressive effect on the market price for shares of our outstandingcommon stock and on our ability to raise capital or make acquisitions by issuing our common stock. As a result, these stockholders, if they wereact together, would be, able to exert significant influence over the management and affairs of our company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This significant concentration of ownership may have the effect of delaying or preventing a change of control, including those that you may believe are in your best interests as one of our stockholders. If potential acquirers are deterred, you may lose an opportunity to profit from a possible acquisition premium in our stock price. This significant concentration of stock ownership may also adversely affect the tradingvolatile.duehas in the past been, and is likely to investors’continue in the future to be, volatile. During the fiscal year ended December 31, 2019, the Nasdaq closing price of one share of our common stock fluctuated from a low of $4.90 to a high of $10.00. During the fiscal year ended December 31, 2020, the Nasdaq closing price of one share of our common stock fluctuated from a low of $5.08 to a high of $9.08. The market price of our common stock may be influenced by many factors, some of which are beyond our control, including:conflictssuch sales could occur, could harm the prevailing market price of interestshares of our common stock. These sales, or the possibility that these sales may exist or arise.SecondThird Restated Credit Agreement contains limitations on our ability to pay dividends and make other distributions. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, capital requirements, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.As of December 31, 2018, we had federal net operating loss carryforwards of approximately $110.0 million and research and development credit carryforwards of approximately $6.2 million, which begin expiring in 2019. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre- change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. In the event that it is determined that we have in the past experienced ownership changes, or if we experience one or more ownership changes as a result of future transactions in our stock, then we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, operating results, and financial condition.2009.2019,2022, (b) the exchange or redemption of the Rights, (c) consummation of a merger or consolidation or sale of assets resulting in expiration of the Rights, (d) the consummation of a reorganization transaction entered that the board of directors determines will help prevent an “Ownership Change,” as defined in Section 382 of the Code and protect our net operating losses, (e) the repeal of Section 382 of the Internal Revenue Code or any successor statute, or any other change, if the board of directors determines the Second Amended and Restated Rights Agreement is no longer necessary for the preservation of tax benefits, or (f) the beginning of a taxable year to which the board of directors determines that no tax benefits may be carried forward.2019,2022, redeem all but not less than all the then outstanding Rights at a redemption price of $0.067 per Right (such redemption price being herein referred to as the “Redemption Price”). We may, at our option, pay the Redemption Price either in common stock (based on the current per share market price thereof) or cash; provided, that if the board of directors authorizes redemption of the Rights on or after the time a person becomes an Acquiring Person, then such authorization shall require the concurrence of a majority of the members of the board of directors then in office. In addition, after a person becomes an Acquiring Person the board of directors may exchange the Rights (other than Rights owned by the Acquiring Person or its affiliates), in whole or in part, at an exchange ratio of one common share per Right (subject to adjustment). amended and restated certificate of incorporation, as amended, and third amended and restated bylaws, as amended, contain provisions that could have the effect of delaying or preventing changes in control or changes in our management or our board of directors. These provisions include:stockholdersstockholder rights plan, the ability of our board of directors to further issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;Alabama,California, Florida, Massachusetts, Michigan, Oregon, Vermont, Washington, and the United Kingdom. As a result of the 2018 acquisitions, we also have offices in California, Iowa, Tennessee,Nebraska, New York, North Carolina, GeorgiaTennessee, Vermont, and New York.2620182020 and 2017.2019. We presently intend to continue a policy of retaining earnings for reinvestment in our business, rather than paying cash dividends.12, 2019,8, 2021, we had approximately 303254 stockholders of record of our common stock.Other than sales disclosed in previous quarterly reports on Form 10-Q or current reports on Form 8-K, there2018.20182020 with respect to shares of our common stock that we may issue under our existing equity compensation plans (share amounts in thousands). 1,639 $ 10.02 108 -0- $ -0- -0- 1,639 $ 10.02 108 A B C Plan Category Number of Securities
to be Issued Upon Exercise of
Outstanding
Options and Release of Nonvested RSUsWeighted Average
Exercise Price of
Outstanding
OptionsNumber of Securities Remaining
Available for Future Issuance
Under Equity Compensation
Plans (Excluding Securities
Reflected in Column A)(3)Equity Compensation Plan Approved by Stockholders (1) 1,713 $ 7.92 1,244 Equity Compensation Plans Not Approved by Stockholders (2) — — — Total 1,713 $ 7.92 1,244 27Asure hasAsurewe are is under no obligation to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform such statements to actual results.RESULTS OF OPERATIONSThe following table sets forth, for the fiscal periods indicated, the percentage of total revenues represented by certain items in Asure’s Consolidated Statements of Comprehensive Loss: 100.0 100.0 65.3 76.8 53.2 62.2 9.4 8.2 9.8 8.2 72.4 78.7 (9.6 (8.5 (8.5 (10.5 Asure is(“HCM”)(HCM) solutions, delivered as software-as-a-service (SaaS) for small and Workspace Management, offering intuitivemid-sized businesses (SMBs). From recruitment to retirement, our solutions help more than 80,000 SMBs across the United States grow their businesses. About 10,000 of our clients are direct and innovativethe approximately 70,000 remaining are indirect as they have contracts with Reseller Partners that white label our solutions.solutions designedsolution that provides a foundation for our clients’ digital HR strategy. We automate all the complex and ever-changing regulations associated with payroll and taxes in all U.S. jurisdictions - from wages, benefits, overtime, and garnishments to help organizations oftips, direct deposits, Fair Labor Standard Act ("FLSA"), and federal, state, and local payroll taxes.sizestheir information (e.g., pay history and complexities build companiescompany documents). With Asure HR’s dashboard, clients have convenient single-system access to every facet of the future. Ouremployee’s lifecycle. This solution improves benefits management by syncing to carriers and integrating with employee self-managed enrollment and life-event change adjustments.platforms enables clients worldwidebased and combines with complementary hardware (time clocks and data collection devices) to provide cost savings and potential ROI gains in the form of a more strategic use of labor dollars and the elimination of time theft. Mobile time tracking helps executives better manageunderstand where and when their people and space in a mobile, digital, multi-generational, and global landscape. Asure’s offerings include a fully-integrated HCM platform, flexible benefits and compliance administration, HR consulting, and timeemployees are working, providing insight into labor schedules and labor managementcosts. With our mobile solution, employees can punch in and out from remote locations, as well as a full suite of Agile Workspace solutions for conference room scheduling, desk sharing programs,geo-positioning verifies the physical coordinates. Biometric time clocks, including facial recognition, reduce time theft and real estate optimization.Asure’s platform vision ishelp combat "buddy punching." Automated system notifications, real-time dashboards, and flexible configuration options all work to help clients proactively manage costs associated with their three most expensive assets, real estate, laborstreamline operations. Finally, employees, supervisors and technology, while creating an employee experience that fosters efficiency, productivityexecutives have real-time access to data and engagement. The Asure product strategy is driven by three primary trends in the market: mobilization, globalization and technology. Asure offers four product lines: AsureSpace™, AsureForce®, AsureHCM and AsureEvolution. AsureHCM and AsureEvolution are our Mid-market and SMB/Channel HCM platforms respectively, which include AsureBenefits and AsureConsulting. AsureSpace™ Agile Workspace solutions enable organizationsbusiness intelligence to optimize labor costing, improve labor scheduling, and control labor costs.real estate investment and create a digital workspace that empowers mobile and virtual employees, while streamlining internal operations. AsureForce® Time and Labor Management helps organizations optimize their workforce while controlling labor administration costs and activities.In January 2018,businesses because we acquiredtake responsibility for all of the outstanding shares of common stock of Pay Systems of America, Inc. (“Pay Systems”), a providertraditional payroll and HR functions. We provide three core levels of HR services, ranging from a cloud-based online compliance library, to an on-demand call center for all HR questions, and to a fully outsourced HR function. We also support discreet functions like payroll administration and employeethe benefit enrollment process.services.In July 2018, we acquired all of the capital stock of USA Payroll, Inc. and assets of its affiliates, a payroll processing company based in Rochester, New York and a licensee of our Evolution software. We funded these acquisitions with cash on hand, subordinated promissory notes and shares of Asure common stock.28effortsand in research and development to drive future growth and expand our market share. Lower headcount at our clients and the other pandemic-related factors described above, which had and may continue to have, a wide rangenegative impact on recurring revenue, combined with increased sales and marketing and research and development expenses, resulted in a decrease in net income for the year ended December 31, 2020 as compared to the year ended December 31, 2019. We expect net income to be negatively affected by the impact of audiences, from smallthe pandemic on our recurring revenue and our deliberate, increased level of investment in sales and marketing and research and development to medium-sized businesses and divisions of enterprise organizations throughoutdrive the United States, Europe and Asia/Pacific. We generate salesgrowth of our solutions throughbusiness.direct sales teamsforce historically traveled frequently to sell our solution. The current remote work environment presents a unique opportunity for our sales force, in that each sales employee is able to meet virtually with a greater number of client prospects in a given day than he or she would if conducting in-person meetings. Although we have not experienced such challenges to date, if clients and indirectly throughclient prospects are not as willing or available to engage by video conference and teleconference, the shift from in-person to virtual sales meetings could negatively affect our channel partners. sales efforts, impede client acquisition and lengthen our sales cycles, which would negatively impact our business and results of operations and could impact our financial condition in the future.expandingunable to estimate the full impact that the COVID-19 pandemic could have on our investmentbusiness and results of operations in the future due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact it may have on the business of our clients and other factors identified in Part I, Item 1A “Risk Factors” in this Form 10-K. Given this, the effect of the ongoing COVID-19 pandemic may not be fully reflected in our direct sales teams to continue to address our market opportunity. Under the continued guidanceresults of operations and direction of our directors and senior leadership, Asure will continue to implement its corporate strategy for growing its software and services business. However, uncertainties and challenges remain and there can be no assurances that Asure can successfully integrate acquired business operations, grow its revenues or achieve profitability and positive cash flows during calendar year 2019.2018,2020, and over the last few years, we have completed a number of acquisitions. These acquisitions have allowed us to expand our offerings, presence and reach in various market segments of the human capital management market. Our business operates in one operating segment because our chief operating decision maker evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Since we operate as one operating segment, all required financial segment information can be found in the consolidated financial statements.2020 2019 Revenues 100.0 % 100.0 % Gross margin 58.2 59.2 Selling, general and administrative 55.5 56.8 Research and development 9.1 7.3 Amortization of intangible assets 14.6 16.1 Total operating expenses 79.1 128.1 Loss from continuing operations before income taxes (24.4) (90.8) Net income (loss) (24.9) 41.0 20182020 to 2017 $ 68,887 $ 39,267 $ 29,620 75.4 6,277 4,703 1,574 33.5 5,226 4,453 773 17.4 7,847 4,627 3,220 69.6 715 1,392 (677 (48.6 ) $ 88,952 $ 54,442 $ 34,510 63.4 Revenue 2020 2019 Increase (Decrease) % Recurring revenue 63,315 $ 70,066 $ (6,751) (9.6) Professional services, hardware and other revenue 2,192 3,084 (892) (28.9) Total revenue $ 65,507 $ 73,150 $ (7,643) (10.4) Our20182020 was $88,952$65,507 as compared to $54,442$73,150 in 2017.2019. Total revenue increaseddecreased by $34,510,$(7,643), or 63.4%(10.4)%, in 20182020 as compared to 2017. Cloud2019. Recurring revenue comprised the majority of the increasedecrease with an increasea decrease of $29,620,$(6,751), or 75.4%(9.6)%. HardwareRecurring revenue decreased primarily due to the impact of COVID and maintenance and supportlower interest rates. Hardware and professional services revenue trended upward,downward, partially offset by a decreasean increase in on premise software license revenue.Cloud revenue increased $29,620, or 75.4%, over 2017. Cloud revenue was $68,887 in 2018 as compared to $39,267 in 2017. The increase in cloud revenue is due to a combination of acquisitions, new sales and the accretive nature of recurring cloud revenue.Hardware revenue increased by $1,574, or 33.5%, over 2017. Hardware revenue was $6,277 in 2018 as compared to $4,703 in 2017. Maintenance and support revenue was $5,226 in 2018 as compared to $4,453 in 2017, or a 17.4% increase over 2017. These increases are primarily due to the timing of work performed on contracts.Professional services revenue increased by $3,220, or 69.6%, over 2017. This increase is primarily due to the timing of work performed on contracts.Other revenue is comprised of on premise software license revenue and interest on funds held for clients. On premise software license revenue was $636 in 2018 as compared to $1,392 in 2017. On premise software license revenues decreased $756, or 54.3%, as compared to 2017. This decrease is primarily a result of movements of clients from on premise to on demand, cloud-based solutions.certain industry sectors, including corporate education, healthcare, government, legal and non-profit.small to mid-size businesses. We continue to target small and medium sizedmedium-sized businesses and divisions of larger enterprises in these sameacross industries as prospective customers. Geographically, we sell our HCM products worldwide, but sales are largely concentrated in the United States, Canada and Europe. Additionally, we have reseller partners in North America, UK, South Africa and Asia Pacific. and Agile Workspace management solutions and release of new software updates and enhancements, we continue to actively explore other opportunities to acquire additional products or technologies to complement our current software and services. Through acquisitions in 2011 of ADI and Legiant, we expanded our cloud computing time and attendance software and management services business. The 2012 acquisition of PeopleCube gave us a product line that includes software to assist customers in driving integrated facility management of offices, conference rooms, video conferencing, events and training, alternative workspaces and lobby use. The 2014 acquisitions of FotoPunch and Roomtag support our vision to deliver innovative cloud-based Agile Workspace technologies. Our March 2016 acquisitions from Mangrove enable us to enter into the human resource management, payroll processing and benefits administration services businesses, which we are integrating into our existing AsureForce® product line. With respect to the three acquisitions closed in January 2017, PSNW and CPI are top regional service bureaus that resell our HCM products (formerly Mangrove) and integrate seamlessly into our business, while PMSI is a leading HCM service company that expands our solution, service, and implementation capabilities. Our May 2017 acquisition of iSystems, a leading national provider of HCM solutions, provides us with additional cross-sell revenue opportunities and cost synergies and our May 2017 acquisition of Compass HRM, an existing reseller of our HCM offerings, provides us with a regional HR and payroll service bureau in the Southeast. Our October 2017 acquisition of ADS, a leading regional human resources and payroll services bureau in the Southeast and a current reseller of our HCM solution, Evolution, was consistent with our vision to deliver a unified SaaS-based HCM platform and workspace solutions to support an evolving mobile workforce.$58,122$38,093 in 2018 and $41,8232020 as compared to $43,314 in 2017, an increase2019, a decrease of $16,299,$5,221, or 39.0%(12.1)%. Gross margin as a percentage of revenues was 65.3%58.2% for 20182020 and 76.8%59.2% for 2017. Although our gross profit increased,2019. Our decline in gross margin decreasedis attributable to lower sales volumes primarily due to ourCOVID, a growing investment in HCM service resources and Workspace product mix.$47,333$36,340 in 2018 and $33,8872020 as compared to $41,535 in 2017, an increase2019, a decrease of $13,446,$5,195, or 39.7%(12.5)%. SG&A expenses as a percentage of revenues were 53.2%55.5% and 62.2%56.8% for 20182020 and 2017,2019, respectively.increaseddecreased due to a full year of 2017 acquisition and integration related expenses and 2018 acquisition related expenses, as well as increased headcount as we continue to expand and increased selling costs as we focus on expanding recognition of our brand. Additionally, we‘ve invested into a new ERP systemWorkspace business in 2019. Our other professional services, legal fees and resourcesrent decreased partially offset from the transition services agreement with FM:Systems in relation to improve the financial reporting process.$8,360$5,959 in 2018 and $4,4592020 as compared to $5,351 in 2017,2019, an increase of $3,901,$608, or 87.5%11.4%. R&D expenses as a percentage of revenues were 9.4%9.1% and 8.2%7.3% for 20182020 and 2017,2019, respectively.The $3,901 increase is primarily due to an increase in technical resources, including increased headcount, strategic partnershipsintegration development, new hardware products for 2019 as well as investments intoenhancements are driven by feedback received from our initiative to migrate platforms to Amazon Web Services (“AWS”). Asure has also made significant investment outside of core R&D dollars into complianceexisting and certifications, including SOC II Type 2 certifications, GDPR compliance, FedRamp certification (AsureSpace)potential customers and other initiatives.Key 2018 product highlights include:• AsureHCM: Aside from significant effort into a series of enhancements in our Applicant Tracking solution (including Resume Parsing, Job Boards and Snag a Job integration), the AsureHCM team also invested heavily in infrastructure improvements for our network of bureaus and partners. This same work also is tied to our improved API and End Point sets and will serve as the basis for our first HCM native mobile application is scheduled to be released in April of 2019.• AsureForce:by gauging market trends. We have continued to expand the rollout of our new v12 product, adding Dashboards, Single Sign-On and Scheduling features, as well as enhancing our native mobile applications based on client feedback. We have also invested into API development to expand our 3rd party integration portfolio, with key partnerships to be announced in 2019. API integration also includes support for our own EvolutionHCM platform. Finally, 2018 experienced substantial investment in new hardware technologies, which are scheduled to be released in the first two quarters of 2019.• AsureSpace: AsureSpace product development continued to focus on bringing enhanced product features to market in conjunction with our strategic client base through co-innovation. This included launching a new MapView product, which is Asure’s single pane of glass view into all areas of a company’s space including Managed and Unmanaged space activity and status for traditional and Activity Based work, assigned seating and reverse hoteling features, and in 2019, team based collaboration. In April of 2018, Asure acquired Occupeye Limited, based in the UK, bringing the utilization and IoT technologies Asure had been reselling in past years in-house, enabling us to build direct integration with our Space Management suite, as well as provide investment into next generation technology. To that end, Asure will be releasing a new IoT sensor in March of 2019, adding key environmental sensors and data collection to its already leading utilization sensing technology. Asure sees expanded opportunity to integrate these controls for both soft-ROI initiatives such as employee satisfaction and engagement, as well as hard-ROI projects such as building management system integration.• EvolutionHCM: A significant initiative for the EvolutionHCM technology group was successfully migrating our Evolution Payroll and HR clients to Asure’s AWS infrastructure, building a CICD pipeline to facilitate development integration with AWS. After developing a strategic partnership to create and deploy an integrated HR platform in 2017, Asure purchased the technology outright in the second quarter of 2018 in order to bring the technology in house. This technology was also moved into AWS as mentioned early. Significant product features were built in 2018 for this integrated HR and Payroll platform including ACA, Life events and Benefits. Finally,believe we have built a new “hub” infrastructure which will serve as a next-generation, API based integrations manager, with initial deployments in the first quarter of 2019 scheduledappropriate development team to include AsureForcedesign and Hartford Insurance.Asure will finalize migration of its shared hosting infrastructures in the first quarter of 2019, allowing us to then leverageenhance our solution suite and integrated platform to develop advanced reporting and analytics across our full product suite. This new infrastructure is expected to allow us to more easily fulfill our vision of a single product user experience with integrated single sign-on and expanded web service endpoints, including TLM integration into our EvolutionHCM product at the end of the first quarter (integration already exists with the mid-market AsureHCM product). Asure also invested heavily in new hardware and IoT technology development in 2018, and should see the fruits of that investment beginning in March 2019 with our new Gen 2 IoT sensors which will include environmental data. This will be followed up in additional new hardware product launches in the second quarter of 2019.20182020 were $8,692, an increase$9,547, a decrease of $4,215,$(2,218), or 94.1%(18.9)%, as compared to $4,477$11,765 in 2017.2019. Amortization expenses as a percentage of revenues were 9.8%14.6% and 8.2%16.1% for 20182020 and 2017,2019, respectively. This increase is due toIn 2019, we accelerated the amortization relatedafter a reassessment of the useful lives of certain trade names in relation to our acquisitionsrebranding efforts, resulting in 2018an increase in amortization expense.2017.IncomenetLossOther Lossother, net was $8,514$(2,221) for the year ended 20182020 as compared to $4,626$(16,005) in the year ended 2017. Other Loss in 20182019. Interest expense and 2017 wasother, net is primarily comprised of interest expense. The increaseexpense on notes payable. Interest expense and other for the year ended 2019 is composed primarily comprised of an increase in interest expense due to the higher debt balances resulting from our Second Restated Credit Agreement and debt incurred in connection with our acquisitions.2018,2020, we had federal net operating loss carryforwards of approximately $110,136, Federal R&D$48,435, and research and development (R&D) credit carryforwards of approximately $6,257 and alternative minimum tax credit carryforwards of approximately $123.$3,579. The net operating loss and Federal R&D credit carryforwards will expire in varying amounts from 20192021 through 2038,2040, if not utilized. Federal net operating losses generated in 2018 and after are carried forward indefinitely.decreasedattributable to continuing operations increased from $96$(24,111) in 20172019 to $337 in 2020, a benefit of $7,229 in 2018, a $7,325,$(24,448), or 7630.2%(101.4)%, increase.decrease. These figures represent an effective tax rate of 48.9%(2.1)% and (1.7)%36.3% in 20182020 and 2017,2019, respectively. In 20182020, we recorded income taxes that were principally attributable to the release of valuation allowance and state and foreign taxes. A significant portion of the release of valuation allowance is attributable to acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allowed us to recognize certain deferred tax assets that had previously been offset by a valuation allowance. Additional valuation allowance was released during the yearexpense from continuing operations primarily due to deferred taxes on the creationamortization of indefinite life deferredgoodwill for tax assets related to net operating loss and disallowed interest carryforwards. The creation of these indefinite life deferred tax assets allowed us to utilize a portion our historic indefinite life deferred tax liability related to tax deductible goodwill to recognize additional deferred tax assets that had previously been offset by a valuation allowance. The foreign provision for income taxes in 2018 is principally attributable to net income generated in the United Kingdom. Because we have not generated domestic net income in any period to date, we have recorded a full valuation allowance against our domestic net deferred tax assets, exclusive of any remaining tax deductible goodwill after application of indefinite life deferred tax assets. Realization of any of our domestic deferred tax assets depends upon future earnings, the timing and amount of which are uncertain.goodwill.goodwill and jurisdictions in which we2018,2020, we decreasedincreased the valuation allowance by approximately $9,332$1,688 due primarily to operations, acquisitions and the impact of changes in tax law.We consider the undistributed earnings of our foreign subsidiaries permanently reinvested and, accordingly, we have not provided for U.S. federal or state income taxes thereon.Net Income (Loss)Net loss was $7,548 in 2018. Net loss was $5,722 in 2017. The increase in net loss was $1,826, or 31.9%. Net loss as a percentage of total revenues was 8.5% and 10.5% in 2018 and 2017, respectively. $ 11,443 17,026 15,444 27,792 (7,129 (36 (107,228 (58,492 101,788 73,541 2020 2019 Working capital $ 8,208 $ 17,854 Cash, cash equivalents and short-term investments 28,577 28,826 Net cash provided by (used in) operating activities (1,707) (4,117) Net cash provided by (used in) investing activities (201,134) 85,632 Net cash provided by (used in) financing activities 202,592 (68,018) $11,443$8,208 at December 31, 2018,2020, a decrease of $5,583$9,646 from $17,026$17,854 at December 31, 2017.2019. We attribute the decreaseincrease in our working capital primarily to a decreasean increase in cash and cash equivalents due to the divestiture of our 2018 acquisitions and net cash used by operations. This is offset by an increase in accounts receivable of $2,667 due to an increase in revenue and a decrease in short term notes payable of $4,162.Workspace Management business. Working capital at December 31, 20182020 includes $11,849$5,838 of short term deferred revenue, a decrease froman increase in short term deferred revenue of $13,078 at$338 compared to December 31, 2017.2019. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to future revenue as we perform our services, but this does not represent future payments. Deferred revenue can vary based on seasonality, expiration of initial multi-year contracts and deals that are billed after implementation rather than in advance of service delivery. $7,129$1,707 in 2018.2020. The $7,129$1,707 of cash used inprovided by operating activities during 20182020 was primarily driven by our net loss of $7,548,$16,311 and increases in inventorydeferred revenue of $128, and accounts receivable of $2,948 and $1,719, respectively, and a decreasedecreases in accrued expenses and other long-term obligations of $2,410,$4,596. This was offset by non-cash adjustments of $8,571.$36$(4,117) in 2017 as compared to cash used in operating activities of $2,012 in 2016.2019. The $36$(4,117) of cash used in operating activities during 20172019, including discontinued operations, was primarily driven by our net income (after adjustment for non-cash items) of $1,424$30,001 and an increaseincreases in deferred revenue of $5,662, and accrued expenses and other liabilitieslong-term obligations of $2,643 and $1,589, respectively,$5,649. This was offset by an increasenon-cash adjustments of $(35,215), increases in accounts receivable of $1,446 and other assetsinventory of 4,096 and $1,325, respectively,$1,581, and a decrease in accounts payable of $254.CashNet cash used in investing activities during 20182020 was $107,228. The cash used in investing activities in 2018 is$(201,134), primarily comprised of the 2018 acquisitions. Cash used in investing activities during 2017 was $58,492. The cash used in investing activities in 2017 was primarily comprised of the acquisitions of $45,390 anddue to the net change in funds held for clients and our acquisitions of $10,244$101,788$202,592 in 20182020 was primarily due to an increasethe net change in client funds of $36,750 in our indebtedness and$184,823, net proceeds of approximately $39,449 from the issuance of our common stock in an underwritten public offering we completed in June 2018, partiallyof $21,392, and proceeds from note payable of $8,856, partial offset by payments on debt of $11,645our note payables of $12,234.fees of $1,693.Cash provided by financing activities during 2017 was $73,541. We recognized net proceeds from the issuance of common stock of $28,002 in an underwritten public offering in June 2017, as well as incurred $45,777 of indebtedness in connection with the 2017 acquisitions. This was offset by payments on notes payable of $8,973 and debt financing fees of $1,433. In connection with the public offering, we issued 2,185,000 shares of common stock, including 285,000 shares of common stock pursuant to the exercise of the underwriters’ over-allotment option, at the public offering price of $13.50 per share.2018,2020, Asure’s principal sources of liquidity consisted of approximately $15,444$28,577 of cash and cash equivalents, future cash generated from operations of our business over the next twelve months, and $5,000$4,500 available for borrowing under our Wells Fargo revolver. Based on current internal projections, we believe that we have and/or will generate sufficient cash for our operational needs including any required debt payments, for at least the next twelve months.months from issuance of this Annual Report on Form 10-K. We continue to be focused on growing our existing software operations and seeking accretive and complimentary strategic acquisitions as part of our growth strategy. We believe the available sources of liquidity described above will be sufficient to fund such growth activities but may raise additional capital or incur additional indebtedness to supplement those sources as we execute on our growth plan.Shelf RegistrationApril 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). The shelf registration statement relating to these securities became effective on April 16, 2018. In June 2018,December 2020, we completed an underwritten public offering in which we sold an aggregate of 2,375,0002,990,000 shares of our common stock at a public offering price of $17.50 per share.$7.25. We realized netgross proceeds of approximately $38,900 after$21,700 before deducting underwriting discounts and estimated offering expenses.2018, there is $133,400 remaining available under the shelf registration statement.Credit AgreementIn March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo, as administrative agent, and the lenders that are party thereto. The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults, bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the defaults are subject to customary notice and grace period provisions. In March 2014 and in connection with the Credit Agreement, we and our wholly-owned active subsidiaries entered into a Guaranty and Security Agreement with Wells Fargo Bank. 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.In March 2018, we entered into a second amended and restated credit agreement (the “Second Restated Credit Agreement”) with Wells Fargo, and the lenders that are parties thereto, amending and restating the terms of the Amended and Restated Credit Agreement dated as of May 2017.The Second Restated Credit Agreement provides for a total of $175,000 in available financing consisting of (a) $105,000 in the aggregate principal amount of term loans, an increase of approximately $36,800; (b) a $5,000 line of credit, (c) a $25,000 delayed draw term loan commitment for the financing of permitted acquisitions, which is a new financing option for us; and (d) a $40,000 accordion, an increase of $30,000. The accordion allows us to increase the amount of financing we receive from our lenders at our option. Financing under the delayed draw term loan commitment and accordion are subject to certain conditions as described in the Second Restated Credit Agreement.The Second Restated Credit Agreement amends the applicable margin rates for determining the interest rate payable on the loans as follows:Leverage RatioFirst Out Revolver Base Rate MarginFirst Out Revolver LIBOR Rate MarginFirst Out TL Base Rate MarginFirst Out TL LIBOR Rate MarginLast Out Base Rate MarginLast Out LIBOR Rate Margin≤ 3.25:14.25percentage points5.25percentage points1.75 percentage points2.75 percentage points6.75 percentage points7.75percentagepoints> 3.25:14.75percentage points5.75percentage points2.25 percentage points3.25percentage points7.25 percentage points8.25 percentage pointsThe outstanding principal amount of the term loans is payable as follows:$263 beginning on June 30, 2018 and the last day of each fiscal quarter thereafter up to March 31, 2020 plus an additional amount equal to 0.25% of the principal amount of all delayed draw term loans;$656 beginning on June 30, 2020 and the last day of each fiscal quarter thereafter up to March 31, 2021, plus an additional amount equal to 0.625% of the principal amount of all delayed draw term loans; and$1,300 beginning on June 30, 2021 and the last day of each fiscal quarter thereafter, plus an additional amount equal to 1.25% of the principal amount of all delayed draw term loans.The outstanding principal balance and all accrued and unpaid interest on the term and revolving loans is due on May 25, 2022.The Second Restated Credit Agreement also:amends our leverage ratio covenant to increase the maximum ratio to 6.50:1 at March 31, 2018 and June 30, 2018, 6.00:1 at September 30, 2018 and December 31, 2018 and then stepping down each quarter-end thereafter;amends our fixed charge coverage ratio to be not less than 1.25:1 at March 31, 2018 and each quarter-end thereafter; andremoves the TTM recurring revenue covenant.In January 2019, we entered into a Consent and Amendment No. 2 to Second Amended and Restated Credit Agreement (the “Consent and Amendment No. 2”), amending and restating the terms of the Second Amended and Restated Credit Agreement.Consent and Amendment No. 2, the agent and required lenders have consented to our acquisition of Payroll Maxx LLC as a “permitted acquisition” and we borrowed a delayed draw term loan in the aggregateno amount of $8,000.The Consent and Amendment No. 2 also amends, among other things, our leverage ratio covenant to increase the maximum ratio to 6.00:1 at March 31, 2019, June 30, 2019 and September 30, 2019 and then stepping down each quarter-end thereafter through December 31, 2020, which is a change from 5.85:1 at March 31, 2019, 5.30:1 at June 30, 2019 and 5.10:1 at September 30, 2019 prior to this amendment.As of December 31, 2018 and December 31, 2017, $0 was outstanding and $5,000$4,500 and $10,000, respectively, was available for borrowing under the revolver.2018,2020, we wereare in compliance with allour financial covenants under the Amendment 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. Agreement and Guaranty and Security Agreement. Subject to the foregoing, management believes that we have sufficient capital and liquidity to fund and cultivate the growth of our current and future operations for at least the next twelve months and to maintain compliance with the terms of our debt agreements and related covenants or to obtain compliance through debt repayments made with our available cash on hand or anticipated for receipt in the ordinary course of operations. Asure’sour wholly owned subsidiaries. We have eliminated all significant intercompany transactions and balances in the consolidation. Preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year endyear-end and the reported amounts of revenues and expenses during the fiscal year. The more significant estimates made by management include the valuation allowance for our gross deferred tax asset, lease impairment, useful lives of fixed assets, the determination of the fair value of our long-lived assets and the fair value of assets acquired and liabilities assumed during acquisitions. We base our estimates on historical experience and on various other assumptions that management believes are reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the preparation of our financial statements for continued reasonableness. We prospectively apply appropriate adjustments, if any, to our estimates based upon our periodic evaluation.arrangementsagreements that also, typically include hardware, maintenance/support, and professional services elements. We recognize revenue on an output basis when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. 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.ASCAccounting Standards Codification ("ASC") 605, Revenue Recognition, and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The adoption of ASU 2014-09, using the modified retrospective approach, had no significant impact on our results of operations, cash flows, or financial position. The initial application was applied to all contracts at the date of initial application. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Results of reporting periods after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.SaaS arrangements and time-based software subscriptions typically have an initial termandsome of which are renewable on an annual basis.for successive terms. A typical SaaS/software subscription arrangement will also include hardware, setup and implementation services. Revenue allocated to the SaaS/software subscription performance obligations are recognized on an output basis ratably as the service is provided over the non-cancellable term of the SaaS/subscription service and are reported as CloudRecurring revenue on the Consolidated Statement of Comprehensive Loss. Revenue allocated to other performance obligations included in the arrangement is recognized as outlined in the paragraphs below. (typically time clocks, LCD panels, sensors and other peripheral devices) are sold as either a standard product sell arrangement where title to the hardware passes to the customer or under a hardware-as-a-service (“HaaS”) arrangement where the title to the hardware remains with Asure. Revenue allocated to hardware sold as a standard product are recognized on an output basis when title passes to the customer, typically the date we ship the hardware. Revenue allocated to hardware under a hardware-as-a-service (“HaaS”) arrangement are recognized on an output basis, recorded ratably as the service is provided over the non-cancellable term of the HaaS arrangement, typically one year. Revenue recognized from hardware devices sold to customers via either of the two above types of arrangements are reported as Hardware revenue on the Consolidated Statement of Comprehensive Loss.Loss.Cloud,SaaS/software, HaaS, Maintenance and support, and Professional services revenue. We recognize deferred revenue when we complete the service and over the terms of the arrangements, primarily ranging from one to three years.Financial Accounting Standards Board (“FASB”)FASB ASC 350, we review and evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that we may not recover their net book value. When such factors and circumstances exist, including those noted above, we compare the assets’ carrying amounts against the estimated undiscounted cash flows we expect to generate with those assets over their estimated useful lives. If the carrying amounts are greater than the undiscounted cash flows, we estimate the fair values of those assets by discounting the projected cash flows. We record any excess of the carrying amounts over the fair values as impairments in that fiscal period. In 2019, we accelerated the amortization after a reassessment of the useful lives of certain trade names in relation to our rebranding efforts. There has been no other impairment of intangible assets and long-lived assets for the periods presented.for the periods presented.in 2020. In 2019, we recognized an impairment loss on goodwill. See Notes 4 and 5 in the accompanying consolidated financial statements for additional information regarding goodwill.37REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTINGTo the Shareholders and Board of Directors ofAsure Software, Inc.Opinion on Internal Control over Financial ReportingWe have audited Asure Software, Inc.'s (the “Company”) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2018 and 2017 and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended of the Company and our report dated March 19, 2019 expressed an unqualified opinion on those financial statements.Explanatory Paragraph – Excluded SubsidiariesAs described in Management’s Report on Internal Control over Financial Reporting, management has excluded its wholly owned direct and indirect subsidiaries, Occupeye Limited, Evolution Payroll Processing LLC, and USA Payrolls, Inc., from its assessment of internal control over financial reporting as of December 31, 2018 because these entities were acquired by the Company in purchase business combinations during 2018. We have also excluded Occupeye Limited, Evolution Payroll Processing, and USA Payrolls, Inc., from our audit of internal control over financial reporting. These subsidiaries’ combined total assets and total revenues represent approximately 30.9% and 19.5%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2018.Basis for OpinionThe Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate./s/ Marcum LLPMarcum LLPCosta Mesa, CaliforniaMarch 19, 201938ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.20182020 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.20182020 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. 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 has excluded its wholly owned direct and indirect subsidiaries, Occupeye Limited, Evolution Payroll Processing LLC, and USA Payrolls, Inc., from its assessment of internal control over financial reporting as of December 31, 2018 because these entities were acquired by the Company in purchase business combinations during 2018. These subsidiaries’ combined total assets and total revenues represent approximately 30.9% and 19.5%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2018.There were no changes in our internal control over financial reporting during the year ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.3920192021 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 19, 2019:NameAgePositionPatrick Goepel56Chief Executive OfficerKelyn Brannon60Chief Financial OfficerEyal Goldstein43Chief Revenue OfficerJoe Karbowski51Chief Technical OfficerRhonda Parouty44Chief Operating OfficerPatrick 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. Ms. 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. Mr. Goldstein earned a Bachelor’s degree in English from University of Nevada, Las Vegas.Joe Karbowski has served as our Chief Technical Officer since September 2016 and previously served as our Chief Operating Officer from September 2016 to January 2019. He joined Asure in 2012 when we acquired PeopleCube, where he also served as Chief Technical Officer, evolving it from a startup he co-founded in 1999 to be a leader in the Agile Workspace market. With more than 25 years of experience in building commercial software companies, he is a featured speaker and has published numerous articles on software development techniques and methodologies. Mr. Karbowski earned a Bachelor of Science degree in Computer Science from Michigan Technological University, Houghton.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. and ZenYala. From 2016 to 2017, Ms. Parouty served as Executive Vice President, Channel Management & Consumer Brands at BrandeMuscle, 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). Ms. Parouty holds a degree in Business Administration Studies from Oakland Community College.20192021 annual meeting of shareholders under the headings “Executive Compensation,” “Equity Compensation Plan Information” and “Non-Employee Director Compensation Table.”20192021 annual meeting of shareholders under the heading “Security Ownership of Certain Beneficial Owners and Management.”20192021 annual meeting of shareholders under the heading “Approval of Transactions with Related Parties.”foefor our 20192021 annual meeting of shareholders under the heading “Item 2 – Ratification of Independent Registered Public Accounting Firm.”41StatementsStatement Schedules20182020 and 2017LossIncome (Loss) for the Years Ended December 31, 20182020 and 201720182020 and 201720182020 and 2017EXHIBIT NUMBERDOCUMENT DESCRIPTION2.12.1 2.2 3.1 2.22.32.42.53.13.2 3.23.3 3.3(Second) Certificate of Amendment to the Restated Certificate of Incorporation (7)3.4Certificate of Amendment to the Certificate of Incorporation (8)3.53.63.73.83.4 4.2 4.24.3 4.34.44.54.6Amended and Restated Registration Rights Agreement dated March 10, 2012 (14)4.74.84.4† 4.94.5 Intentionally omitted 4.1010.1 Intentionally omitted 4.11Intentionally omitted 10.3 Intentionally omitted 4.12Subordinated Promissory Note in the principal amount of $450,000 dated April 1, 2018 (28).10.1†10.2†10.3†10.4†10.5† 10.5†10.6 Intentionally omitted 10.6†Employment Letter with Steve Rodriguez, dated as of August 15, 2011 (2)10.8 Intentionally omitted 10.7Fourth Amendment to Lease Agreement with WB One & Two LTD (17)32.2 32.2101 1012018,2019, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Loss,Income (Loss), (3) the Consolidated Statements of Cash Flows, and (4) Notes to Consolidated Financial Statements.†† Management contract or compensatory plan or arrangement required to be filed as an Exhibit to the Annual Report on Form 10-K * Filed herewith Filed herewith Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2011 filed with the SEC on November 14, 2011.(2) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 30, 2012.(3) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 6, 2012.(4) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2012.(5) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended October 31, 2004 filed with the SEC on December 15, 2004.(6) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 29, 2009.(7) Incorporated by reference to Appendix C to the Company’s Proxy Statement filed with the SEC on May 23, 2012.(8) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2017.(9)(10)(11) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 20, 2017.(12)(13)October 28, 2009.(14) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 12, 2012.(15) Incorporated by reference to the Company’s 2013 Proxy Statement filed with the SEC on April 30, 2013. (16)19, 2019.(17) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2010 filed with the SEC on May 17, 2010.(18)June 5, 2013.(19) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 25, 2014.(20) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2016.(21) Incorporated by reference to the Company’s Registration Statement on Form S-8 (No. 333-215097) filed with the SEC on December 14, 2016.(22) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2017.(23) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 20, 2017.(24) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 26, 2017.(25) Incorporated by reference to the Company’s Proxy Statement filed with the SEC on April 21, 2017. (26)January 3, 2020.(27)(28)2018.2020.Toto Financial Statements and Financial Statement Schedules (Item 15(a)(1) of Part IV)46ShareholdersStockholders and20182020 and 2017,2019, the related consolidated statements of comprehensive loss, changes inincome operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2018,2020, and the related notes (collectively referred to as the “consolidated financial“financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018 and 2017,2020, 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, 2018, 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 19, 2019, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.Explanatory Paragraph – Change in Accounting PrinciplesAs discussed in Note 2 to the consolidated financial statements, the Company changed its method of recognizing revenue during the year ended December 31, 2018 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2014-09, Revenue with Contracts from Customers (Topic 606).PCAOBPublic 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.19, 201911, 2021F-1 $ 15,444 $ 27,792 16,028 13,361 3,117 509 3,120 2,588 37,709 44,250 122,206 42,328 159,915 86,578 8,948 5,217 111,387 77,348 76,760 33,554 4,090 614 $ 361,100 $ 203,311 $ 4,733 $ 8,895 3,662 1,912 2,824 2,477 2,234 862 11,849 13,078 25,302 27,224 123,170 42,328 148,472 69,552 876 1,125 1,566 1,070 107,229 66,973 439 817 110,110 69,985 258,582 139,537 - - 157 129 (5,017 (5,017 391,927 346,322 (283,643 (277,597 (906 (63 102,518 63,774 $ 361,100 $ 203,311 December 31,
2020December 31,
2019Assets Current assets: Cash and cash equivalents $ 28,577 $ 28,826 Accounts and note receivable, net of allowance for doubtful accounts of $771 and $904 at December 31, 2020 and December 31, 2019, respectively 4,852 4,808 Inventory 449 656 Prepaid expenses and other current assets 3,284 8,551 Total current assets before funds held for clients 37,162 42,841 Funds held for clients 321,069 126,625 Total current assets 358,231 169,466 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 Other assets 3,951 3,224 Total assets $ 515,423 $ 320,067 Liabilities and stockholders’ equity Current liabilities: Current portion of notes payable $ 12,310 $ 2,571 Accounts payable 1,288 1,736 Accrued compensation and benefits 2,916 3,424 Operating lease liabilities, current 1,833 1,575 Other accrued liabilities 1,380 6,556 Contingent purchase obligation 3,880 0 Deferred revenue 5,838 5,500 Total current liabilities before client fund obligations 29,445 21,362 Client fund obligations 320,578 130,250 Total current liabilities 350,023 151,612 Long-term liabilities: Deferred revenue 111 322 Deferred tax liability 888 336 Notes payable, net of current portion and debt issuance cost 12,225 24,142 Operating lease liabilities, noncurrent 5,366 5,937 Other liabilities 1,157 139 Total long-term liabilities 19,747 30,876 Total liabilities 369,770 182,488 Commitments and Contingencies (Notes 2 and 15) 0 0 Stockholders’ equity: Preferred stock, $.01 par value; 1,500 shares authorized; NaN issued or outstanding 0 0 Common stock, $.01 par value; 44,000 and 22,000 shares authorized; 19,354 and 16,098 shares issued, 18,970 and 15,714 shares outstanding at December 31, 2020 and December 31, 2019, respectively 193 161 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 Accumulated deficit (269,954) (253,642) Accumulated other comprehensive loss 604 (25) Total stockholders’ equity 145,653 137,579 Total liabilities and stockholders’ equity $ 515,423 $ 320,067 F-2LOSS $ 68,887 $ 39,267 6,277 4,703 5,226 4,453 7,847 4,627 715 1,392 88,952 54,442 30,830 12,619 58,122 41,823 47,333 33,887 8,360 4,459 8,692 4,477 64,385 42,823 (6,263 (1,000 (8,514 (4,626 (8,514 (4,626 (14,777 (5,626 7,229 (96 $ (7,548 $ (5,722 (843 (68 $ (8,391 $ (5,790 $ (0.54 $ (0.53 $ (0.54 $ (0.53 14,010,000 10,891,000 14,010,000 10,891,000 Years Ended December 31 2020 2019 Revenue: Recurring $ 63,315 $ 70,066 Professional services, hardware and other 2,192 3,084 Total revenue 65,507 73,150 Cost of sales 27,414 29,836 Gross profit 38,093 43,314 Operating expenses Selling, general and administrative 36,340 41,535 Research and development 5,959 5,351 Amortization of intangible assets 9,547 11,765 Impairment of goodwill 0 35,060 Total operating expenses 51,846 93,711 Loss from operations (13,753) (50,397) Interest expense and other, net (2,221) (16,005) Loss from continuing operations before income taxes (15,974) (66,402) Income tax expense (benefit) 337 (24,111) Loss from continuing operations (16,311) (42,291) Discontinued operations (Note 12) Gain on disposal of discontinued operations 0 94,293 Income from operations of discontinued operations 0 3,498 Income tax expense 0 (25,499) Gain on discontinued operations, net of taxes 0 72,292 Net income (loss) (16,311) 30,001 Other comprehensive income (loss): Change in unrealized gain on available for sale securities 629 6 Foreign currency translation loss 0 (597) Comprehensive income (loss) $ (15,682) $ 29,410 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 F-3 8,517 $ 89 (5,017 295,044 (271,875 5 18,246 - - - 593 - - 593 80 - - 445 - - 445 3,895 40 - 50,240 - - 50,280 - - - - (5,722 - (5,722 - - - - - (68 (68 12,492 $ 129 $ (5,017 $ 346,322 $ (277,597 $ (63 $ 63,774 - - - - 1,502 - 1,502 - - - 1,687 - - 1,687 28 - - 156 - - 156 2,762 28 - 43,762 - - 43,790 - - - - (7,548 - (7,548 - - - - - (843 (843 15,282 $ 157 $ (5,017 $ 391,927 $ (283,643 $ (906 $ 102,518 Common Stock
OutstandingCommon Stock Amount Treasury Stock Additional Paid-
in CapitalAccumulated
Deficit Accumulated Other
Comprehensive
LossTotal
Stockholders’
EquityBALANCE AT DECEMBER 31, 2018 15,282 $ 157 $ (5,017) $ 391,927 $ (283,643) $ (906) $ 102,518 Stock issued upon option exercise and vesting of restricted stock units 204 2 — 846 — — 848 Share based compensation — — — 2,268 — — 2,268 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) BALANCE AT DECEMBER 31, 2019 15,714 161 (5,017) 396,102 (253,642) (25) 137,579 Stock issued upon option exercise and vesting of restricted stock units 207 2 — 727 — 729 Stock issued under the employee stock purchase plan 59 — — 292 — — 292 Shares issued, net of issuance costs 2,990 30 — 20,341 — — 20,371 Share based compensation — — — 2,365 — 2,365 Net loss — — — — (16,311) — (16,311) Other comprehensive income — — — — — 629 629 BALANCE AT DECEMBER 31, 2020 18,970 $ 193 $ (5,017) $ 419,827 $ (269,953) $ 604 $ 145,654 F-4 $ (7,548 $ (5,722 12,927 6,058 1,451 - (489 - 504 495 (7,083 - (479 - 1,687 593 53 - (1,719 (4,096 (2,948 (17 (1,437 (1,325 1,595 (254 (2,410 1,589 (1,233 2,643 (7,129 (36 (66,984 (45,390 (1,898 (1,400 (3,896 (1,658 - 200 (34,450 (10,244 (107,228 (58,492 36,750 45,777 (7,105 (8,973 4,540 - (4,540 - (1,693 (1,433 (135 (131 39,449 28,002 34,522 10,299 101,788 73,541 221 12 (12,348 15,025 27,792 12,767 $ 15,444 $ 27,792 $ 7,819 $ 3,466 91 23 7,592 9,193 4,493 22,353 Years Ended December 31 2020 2019 Cash flows from operating activities: Net income (loss) $ (16,311) $ 30,001 Adjustments to reconcile net income (loss) to net cash used in operations: Depreciation and amortization 16,169 18,165 Impairment of goodwill 0 35,060 Amortization of debt financing costs and discount 395 1,462 Provision for doubtful accounts 372 446 Provision (benefit) from deferred income taxes 551 (1,193) Loss (gain) on extinguishment of debt (138) 2,808 Gain on sale of discontinued operations 0 (94,293) Share-based compensation 2,365 2,268 Loss on disposals of fixed assets 59 62 Change in fair value of contingent purchase consideration 1,135 0 Changes in operating assets and liabilities: Accounts receivable 1,118 (1,446) Inventory 11 (1,581) Prepaid expenses and other assets (911) (3,113) Accounts payable (448) (3,174) Accrued expenses and other long-term obligations (4,596) 5,649 Operating lease liabilities (1,606) (900) Deferred revenue 128 5,662 Net cash used in operating activities (1,707) (4,117) Cash flows from investing activities: Proceeds from sale of discontinued operations 0 118,206 Acquisitions, net of cash acquired (13,141) (7,443) Purchases of property and equipment (857) (1,017) Software capitalization costs (2,780) (3,824) Net change in funds held for clients (184,356) (20,290) Net cash provided by (used in) investing activities (201,134) 85,632 Cash flows from financing activities: Proceeds from notes payable 8,856 28,636 Payments of notes payable (12,234) (118,421) Proceeds from revolving line of credit 0 10,231 Payments of revolving line of credit 0 (10,312) Debt financing fees (245) (1,539) Payments of finance leases 0 (102) Net proceeds from issuance of common stock 21,392 820 Net change in client fund obligations 184,823 22,669 Net cash provided by (used in) financing activities 202,592 (68,018) Effect of foreign exchange rates 0 (115) Net increase (decrease) in cash and cash equivalents (249) 13,382 Cash and cash equivalents at beginning of period 28,826 15,444 Cash and cash equivalents at end of period $ 28,577 $ 28,826 Supplemental information: Cash paid for: Interest $ 1,029 $ 8,897 Income taxes 3,662 126 Non-cash Investing and Financing Activities: Notes issued in connection with acquisition 1,177 0 Contingent purchase consideration 2,745 0 Equity issued in connection with acquisitions 0 555 F-5 THE CONSOLIDATED FINANCIAL STATEMENTSCorporation,corporation, is a leading provider of cloud-based Human Capital Management (“HCM”) software solutions and, until its divestiture in December 2019, Workspace Management offering intuitivesoftware solutions. We help small and innovative cloud-based solutions designedmid-sized companies grow by helping them build better teams with skills that get them to help organizations of all sizesthe next level, stay compliant with ever changing federal, state, and complexities build companies of the future. Our cloud platforms enables clients worldwide to better manage their people and space in a mobile, digital, multi-generational, and global landscape. Asure’s offerings include a fully-integrated HCM platform, flexible benefits and compliance administration, Human Resources (“HR”) consulting, and timelocal tax jurisdictions and labor managementlaws, 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 a fullHR 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.of workspace management solutions for conference room scheduling, desk sharing programs,includes 4 product lines: Asure Payroll&Tax, Asure HR, Asure Time&Attendance, and real estate optimization. Asure HRServices.worldwidenationwide through our principal office in Austin, Texas and throughfrom our processing hubs in California, Tennessee, Nebraska, New York, Florida, Vermont, and Washington.offices in Alabama, Florida, Massachusetts, Michigan, Oregon, Vermont, Washington,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 United Kingdom. As a resultcalculation of the 2018 acquisitions,contingent purchase consideration, payments for contingent purchase consideration, if any, will be made by May 30, 2021 and December 30, 2021.also have officescompleted the sale of the assets of our Workspace Management business for an aggregate purchase price of approximately $121,500 in California, Iowa, Tennessee, North Carolina, Georgiacash. We used the proceeds to pay down debt owed to our senior lender. In July 2020, we finalized our working capital adjustment and New York.received escrow funds of $1,687. For further information regarding the transaction, see Note 12 to the accompanying consolidated financial statements. We have made certain reclassifications to the prior year’s consolidated financial statements to conform to the current year presentation.year endyear-end and the reported amounts of revenues and expenses during the reporting period. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful lives of fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions. We base our estimates on historical experience and on various other assumptions the CompanyCompany's management believes reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. We make appropriate adjustments, if any, to the estimates used prospectively based upon such periodic evaluation.2018,2020, we were not party to any pending legal proceedings.F-6ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)INVESTMENTS AVAILABLE-FOR SALEbased upon the Company’s intent, are restricted for use solelyheld for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services whichand are classified as client fund obligations on our consolidated balance sheets. Funds held for clients are held in demand deposit or brokerage 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.totaling $123,170 and $42,328 as ofat December 31, 2018 and December 31, 2017, respectively.2019 with an offsetting liability in client fund obligations. The Company collected the full $4,290 during the first quarter of 2020 and has classifiedsince disbursed $482 of these funds resulting in a segregated $3,808 in funds held for clients as a current asset totaling $122,206 and $42,328 as of December 31, 2018 and 2017, respectively, since these funds are held solely for the purposes of satisfying client funds obligations. The Company has reported cash flows related to purchases, sales and maturities of corporate and client funds marketable securities on a gross basis in the investing section of the statements of consolidated cash flows. The Company has reported cash flows related to client fund investments with original maturities of ninety days or less on a net basis within the net increase in restricted cash and cash equivalents and other restricted assets held to satisfy client fund obligations in the investing section of the statements of consolidated cash flows. The Company has reported cash flows related to cash received from and paid on behalf of clients on a net basis within the net increasean offsetting liability in client fund obligations in the financing activities section of the statements of consolidated cash flows.uncollectability.collectability.ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)credit-worthinesscredit worthiness and age of receivable balances. Our bad debts have not been material and have been within management expectations. purchased LCD panels, sensors, hosts and a full range of biometric and card recognition clocks that we sell as part of our workforce and workspace managementAsure Time&Attendance solutions. We routinely assess our on-hand inventory for timely identification and measurement of obsolete, slow-moving or otherwise impaired inventory. and capital leases which we record at cost less accumulated amortization. We record amortization of leasehold improvements and capital leases using the straight-line method over the shorter of the leasetwo-stepquantitative goodwill impairment test. If determined to be necessary,On January 1, 2019, we early adopted Accounting Standards Update ("ASU") No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the two-stepTest for Goodwill Impairment ("ASU 2017-04"). Under ASU 2017-04, an impairment test should be used to identify any potential impairment and measurecharge is based on the excess of a reporting unit's carrying amount over its fair value. In 2019, we recognized an impairment loss if any. Step one of the impairment test consists of comparing the fair value of the reporting unit with the aggregate carrying value, includingon goodwill. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, step two must be performed to determine the amount, if any, of the goodwill impairment. We tested goodwill using the qualitative factors during 2018 and 2017. There has been no impairment of goodwill for the periods presented. See Notes 4 and 5 for additional information regarding goodwill.not0t identified any other impairments of finite-lived intangible assets during any of the periods presented. See Note 5 – Goodwill and Other Intangible Assets for additional information regarding intangible assets.F-8ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except sharean asset may not be recoverable. Recoverability of assets to be held and per share data or otherwise noted)will write off the remaining amount of net original issue discounts and include them in the calculation of gain/(loss)gain or loss on retirementextinguishment in the consolidated statements of comprehensive loss.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. Results of reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. There was no impact to revenue as a result of applying Topic 606 for the year ended December 31, 2018.consistconsists 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. We recognize revenue on an output basis when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. 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 termandsome of which are renewable on an annual basis.for successive terms. A typical SaaS/software subscription arrangement will also include hardware, setup and implementation services. Revenue allocated to the SaaS/software subscription performance obligations are recognized on an output basis ratably as the service is provided over the non-cancellable term of the SaaS/subscription service and are reported as CloudRecurring revenue on the Consolidated Statement of Comprehensive Loss. Revenue allocated to other performance obligations included in the arrangement is recognized as outlined in the paragraphs below. (typically time clocks, LCD panels, sensors and other peripheral devices) are sold as either a standard product sell arrangement where title to the hardware passes to the customer or under a hardware-as-a-service (“HaaS”) arrangement where the title to the hardware remains with Asure. Revenue allocated to hardware sold as a standard product are recognized on an output basis when title passes to the customer, typically the date we ship the hardware. Revenue allocated to hardware under a hardware-as-a-service (“HaaS”) arrangement are recognized on an output basis, recorded ratably as the service is provided over the non-cancellable term of the HaaS arrangement, typically one year. Revenue recognized from hardware devices sold to customers via either of the two above types of arrangements are reported as Hardware revenue on the Consolidated Statement of Comprehensive Loss. Maintenance and support revenueRecurring on the Consolidated Statement of Comprehensive Loss.ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)Cloud,SaaS/software, HaaS, Maintenance and support, and Professional services revenue. We recognize deferred revenue when we complete the service and over the terms of the arrangements, primarily ranging from one to three years.$102$34 and $65$64 for 2018the years ended December 31, 2020 and 2017,2019, respectively. We recorded these expenses as part of sales and marketing expenses on our Consolidated Statements of Comprehensive Loss.Weoura liability to make lease obligations with scheduled rent increasespayments and an asset representing the right-of-use underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As our leases typically do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date taking into consideration necessary adjustments for collateral, depending on the facts and circumstances of the lessee and the leased asset, and term to match the lease term. The operating lease asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Operating lease assets and liabilities as shown separately in our consolidated balance sheets.basis. Accordingly, we charge the total amount of base rentalsbasis over the term of our leases to expense on a straight-line method, recording the amount of rental expense in excess of lease payments as a deferred rent liability. As of December 31, 2018term. Lease agreements that contain both lease and 2017, we had $697 and $125 deferred rent liabilities. We also recognize capital lease obligations and record the underlying assets and liabilities on our Consolidated Balance Sheets. As of December 31, 2018 and 2017, we had $102 and $24 in capital lease obligations, respectively. FOREIGN CURRENCY TRANSLATIONWe 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 2018 and 2017. We adopted Statement ASC 718 effective August 1, 2005, using the modified prospective application transition method. The modified prospective application method requires that companies recognize compensation expense on stock-based payment awards that are modified, repurchased or cancelled after the effective date. During 2018The fair value is recognized as expense over the service period, net of estimated forfeitures, using the straight-line method. The estimation of share-based awards that will ultimately vest requires judgment, and, 2017, we granted 803,000to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We primarily consider historical experience when estimating expected forfeitures.575,000 stock options, respectively.interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirements. The adoption of this guidance did not have a material impact on our consolidated financial statements.F-10 THE CONSOLIDATED FINANCIAL STATEMENTS2018,2020 and 2019, we expect to recognize $3,943also had $63,999 and $48,500, respectively, of unrecognized compensation costs related to non-vested option grants over the coursefunds held for clients invested in money market funds and other cash equivalents. Cash equivalents as of December 31, 2020 and December 31, 2019 was not material.following three years.We issued 30,000 sharesfollowing:Amortized
CostAggregate
Estimated
Fair ValueDecember 31, 2020: Certificates of deposit $ 7,370 $ 204 $ 0 $ 7,574 Corporate debt securities 9,415 297 (1) 9,711 Municipal bonds 7,531 103 (1) 7,633 US Government agency securities 500 1 0 501 Asset-backed securities 499 1 0 500 Total $ 25,315 $ 606 $ (2) $ 25,919 December 31, 2019: Certificates of deposit $ 8,828 $ 11 $ 0 $ 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 0 0 1,000 Asset-backed securities 1,067 0 (32) 1,035 Total $ 24,161 $ 23 $ (48) $ 24,136 common stock relatedcomprehensive loss. At December 31, 2020, there were 69 securities in an unrealized gain position and there were 2 securities in an unrealized loss position. These unrealized losses were less than $(1) individually and $(2) in the aggregate. These securities have not been in a continuous unrealized gain or loss position for more than 12 months. The Company does not intend to exercisessell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of stock options granted from our stock option plantheir amortized cost basis, which may be at maturity. The Company reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in 2018determining whether a loss is other-than-temporary include the length of time and 80,000 sharesextent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in 2017.RECENT ACCOUNTING PRONOUNCEMENTSRecently Adopted StandardsEffective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606),market value.ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral2019, none of Effective Date, which deferred the effective date of ASU 2014-09 by one year. Topic 606 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition,these securities were classified as cash and is basedcash equivalents on the principle that revenue is recognized to depict the transferCompany’s balance sheet.goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The adoption of ASU 2014-09, using the modified retrospective approach, had no significant impact on our results of operations, cash flows, or financial position. The initial application was applied to all contracts at the date of initial application. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Results of reporting periods after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.We recorded a $1,502 cumulative effect adjustment to opening retained earningsavailable-for-sale securities as of January 1, 2018 related to an increase in deferred commissions. There was no impact to revenue as a result of applying Topic 606.The primary impact of adopting Topic 606 is to sales commissions related to onboarding new clients that were previously expensed. Under the new standard, these costs are now capitalized as deferred commissions and amortized over the estimated customer life of five to ten years.The impact from the adoption of Topic 606 to our consolidated balance sheet and income statement as of and for the year ended December 31, 2018,2020 are as follows: $ 3,120 $ 3,359 $ (239 37,709 37,948 (239 159,915 160,154 (239 4,090 1,015 3,075 $ 361,100 $ 358,275 $ 2,825 (283,643 (286,468 2,825 102,518 99,693 2,825 $ 361,100 $ 358,275 $ 2,825 F-11 THE CONSOLIDATED FINANCIAL STATEMENTS 47,333 48,656 (1,323 64,385 65,708 (1,323 (6,263 (7,586 (1,323 (14,777 (16,100 (1,323 $ (7,548 $ (8,871 $ (1,323 $ (8,391 $ (9,714 $ (1,323 In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” which eliminates the diversity in practice related to eight cash flow classification issues. This ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires the change in restricted cash or cash equivalents to be included with other changes in cash and cash equivalents in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017. The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting,” which clarifies when to account for a change in the terms or conditions of a share-based payment award as a modification. ASU 2017-09 requires modification accounting only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. 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 AdoptedIn 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 a right-of-use asset representing its right to use the underlying asset for the lease term. We will be required to adopt the new standard in the first quarter of 2019. While we are currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements, we expect the adoption will result in a material increase in the assets and liabilities recorded on our Consolidated Balance Sheets and additional qualitative and quantitative disclosures.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. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data unless otherwise noted)NOTE 3 - INVESTMENTS AND FAIR VALUE MEASUREMENTSAt December 31, 2018, $4,256 of Funds Held for Clients were invested in short-term available-for-sale securities consisting of government and commercial bonds, including mortgage backed securities. There were no investments in securities during the first six months of 2018 and the twelve months ended December 31, 2017. At December 31, 2018, we also had approximately $8,100 in money market funds, classified as cash equivalents.Investments classified as short-term available-for-sale as of December 31, 2018 consisted of the following: $ 4,334 $ 21 $ (99 $ 4,256 (1)Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. At December 31, 2018, there were 26 securities in an unrealized gain position and there were 32 securities in an unrealized loss position. These unrealized losses wereOne year or less than $25 individually and $170 in the aggregate. These securities have not been in a continuous unrealized gain or loss position for more than 12 months. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. The Company reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.$ 5,507 After one year through five years 20,412 After five years through 10 years 0 After 10 years 0 $ 25,919 (2)At December 31, 2018, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet.Accounting Standards Codification (“ASC”)Level 1: in active markets for identical assets or liabilities;Level 2:Quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active for identical or similar assets or liabilities; and model-driven valuations whose significant inputs are observable; andLevel 3:Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.At December 31, 2018, we had $8,106 in moneyactive markets for identical assets or liabilities;funds, classified as cash equivalents. Short-term available-for-sale securities consistactivity and that are significant to the fair value of government and commercial bonds, including mortgage backed securities, and are classified as Funds Held for Clients on the accompanying consolidated balance sheet.ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share dataassets or otherwise noted)20182020 and December 31, 2017,2019, respectively: $ 15,444 $ 15,444 $ - $ - 4,256 - 4,256 �� - $ 19,700 $ 15,444 $ 4,256 $ - $ 27,292 $ 27,292 $ - $ - $ 27,292 $ 27,292 $ - $ - Fair Value Measure at December 31, 2020 Total Carrying Value at December 31, 2020 Quoted
Prices
in Active
Market
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)Assets: Cash and cash equivalents Money market funds $ 5,204 $ 5,204 $ 0 $ 0 Funds held for clients Money market funds 63,999 63,999 0 0 Available-for-sale securities 25,919 0 25,919 0 Total $ 95,122 $ 69,203 $ 25,919 $ 0 Liabilities: Contingent purchase consideration $ 3,880 $ 0 $ 0 $ 3,880 Total $ 3,880 $ 0 $ 0 $ 3,880 Fair Value Measure at December 31, 2019 Total Carrying Value at December 31, 2019 Quoted
Prices
in Active
Market
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)Assets: Funds held for clients Money market funds $ 48,500 $ 48,500 $ 0 $ 0 Available-for-sale securities 24,136 0 24,136 0 Total $ 72,636 $ 48,500 $ 24,136 $ 0 2018,2020, had a carrying value of $111,962.$24,913. This carrying value approximates fair value. The fair value is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities. Balance at January 1, 2020 $ 0 Purchase 2,745 Net realized / unrealized losses 1,135 Balance at December 31, 2020 $ 3,880 20182018,2020, we acquired allcertain assets of the outstanding shares of common stock of Pay Systems of America, Inc. (“Pay Systems”), a provider of HR, payroll and employee benefits services.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.shares consistedassets based on the trailing twelve-month revenue from the acquired assets at each of (i) $13,935 in cashApril 30, 2021 and (ii)October 31, 2021. Subject to any disagreement as to the calculation of the contingent purchase consideration, payments for contingent purchase consideration, if any, willbe made by May 30, 2021 and December 30, 2021. 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 interestof $7,365 at an annual rate of 2.0%closing 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 of $847, with principal and shares of Asure common stock.F-14 THE CONSOLIDATED FINANCIAL STATEMENTSIn 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.20182020 business acquisitions. We based the preliminary fair value estimate for the assets acquired and liabilities assumed for these acquisitions upon preliminary calculations and valuations. Our estimates and assumptions for these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). 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. 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$11,853 of intangible assets subject to amortization consist of $35,563$9,753 allocated to Customer Relationships, $2,100$2,000 for Developed Technology, $2,330and $100 for Trade Names, and $330 for Noncompete Agreements.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. ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) $ 764 $ 470 $ 643 $ 1,877 56 104 2,395 2,555 121 98 428 647 - - 121 121 100 5 995 1,100 10,976 20,439 14,013 45,428 9,606 12,644 11,966 34,216 7,240 17,643 15,440 40,323 $ 28,863 $ 51,403 $ 46,001 $ 126,267 85 39 880 1,004 1,364 3,622 2,036 7,022 946 376 2,335 3,657 - - 1,289 1,289 11,962 20,439 14,000 46,401 14,357 24,476 20,540 59,373 $ 14,506 $ 26,927 $ 25,461 $ 66,894 Total 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 Client fund obligations $ 5,505 Total liabilities assumed 5,505 Net assets acquired $ 17,360 $ 15,507 $ 27,504 $ 28,142 $ 71,153 (940 - (557 (1,497 - - (1,761 (1,761 - (287 (7 (294 (61 (290 (356 (707 $ 14,506 $ 26,927 $ 25,461 $ 66,894 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 2017-01 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: $ 10,000 450 (46 $ 10,404 $ 10,404 F-16Total Purchase price $ 13,339 Notes payable 1,177 Custodial hold back 99 Adjustment to fair value of contingent liability 2,745 Fair value of net assets acquired $ 17,360 ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)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.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. allcertain assets of the assets of a provider of outsourced human resources, consulting, and professional servicespayroll tax business in April 2018,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).third partythird-party expert to assist in determining the value of the contingent consideration as of April 1, 2018.April 1, 2018,September 30, 2020, the third partythird-party expert determined the value of the contingent consideration for the acquisition was $489. The valuation of the contingent consideration was$2,745 based on a Monte Carlo simulation model for fiscal 20172020 to 2019. Management provided revenue projections (an unobservable input) of $3,075 for fiscal 2018 (partial year), and $4,408 for fiscal 2019, respectively. Based on current projections,2021. At December 31, 2020, we releasedincreased the liability for the contingent consideration as of September 30, 2018, and recorded $489 of Other Income in the accompanying consolidated statement of operations.2017 AcquisitionsIn January 2017, we closed three strategic acquisitions of a provider of outsourced HR solutions, and two providers of payroll services.In May 2017, we closed two strategic acquisitions: iSystems Internediate HoldCo, Inc. (“iSystems”), and another company that offers payroll, tax management and HR software combined with comprehensive back-end service bureau toolsamount to service providers across the United States. The company is a current reseller of our HCM offering (formerly Mangrove), which provides human resources solutions that enhance organizations, people, and profits through payroll and HR solutions.In October 2017, we acquired a company based in Birmingham, Alabama, which is a leading regional human resources and payroll services bureau in the Southeast and a current reseller of our HCM solution, Evolution.Equity Purchase AgreementIn May 2017, we entered into an equity purchase agreement (the “Equity Purchase Agreement”) with iSystems Holdings, LLC, a Delaware limited liability company (“Seller”), and iSystems Intermediate Holdco, Inc., a Delaware corporation (“iSystems”), pursuant to which we acquired 100% of the outstanding equity interests of iSystems for an aggregate purchase price of $55,000, subject to adjustment as provided in the Equity Purchase Agreement. The aggregate purchase price consists of (i) $32,000 in cash, subject to adjustment, (ii) a secured subordinated promissory note (“iSystems Note”) in the principal amount of $5,000, subject to adjustment, and (iii) 1,526,332 shares of unregistered common stock valued at $18,000$3,880 based on a volume-weighted average of the closing prices of our common stock during a 90-day period. The iSystems Note bears interest at an annual rate of 3.5% and matures on May 25, 2019. The unpaid principal and all accrued interest under the promissory note is payable in two installments of $2,500 on May 25, 2018 and May 25, 2019, subjectdiscounted cash flow model for fiscal 2020 to adjustment. The Equity Purchase Agreement contains certain customary representations, warranties, indemnities and covenants.F-17ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)To finance the iSystems acquisition, we amended and restated our existing credit agreement with Wells Fargo Bank, National Association, as administrative agent (the “Restated Credit Agreement”) to add an additional term loan in the amount of approximately $40,000, of which we borrowed approximately $32,000 to complete the iSystems acquisition.In connection with the iSystems acquisition, we also entered into an investor rights agreement (the “Investor Rights Agreement”) with the Seller. Pursuant to the terms of the Investor Rights Agreement, until May 2018, the holders of the registrable securities received in connection with the acquisition have agreed not to directly or indirectly transfer, sell, make any short sale or otherwise dispose of any of our equity securities and not to vote any of our equity securities or solicit proxies other than in favor of each director that our board recommends for election, against any director that our board has not nominated for election, and in accordance with the recommendation of our board on any other matters, subject to certain exceptions. In addition, under the Investor Rights Agreement, holders of the registrable securities have demand registration rights which allow a registration statement to be filed on or about March 31, 2018 and piggyback registration rights which become effective in May 2018. On January 31, 2018, holders of the registrable securities exercised their demand registration rights, and we filed and caused to become effective a registration statement with the SEC on April 16, 2018 registering the resale of 1,526,332 shares of our common stock.In addition, under the terms of the Investor Rights Agreement, such holders have the right to nominate one director to our board of directors until the first date that the holders of the registrable securities no longer hold more than the lesser of (x) 5% of our outstanding common stock (as equitably adjusted for any stock splits, stock combinations, reorganizations, exchanges, merger, recapitalizations or similar transaction after the date hereof) and (y) 90% of the shares of our common stock held by such holders as of May 25, 2017. The director nominee appointed by the holders is Daniel Gill. Our board appointed him to serve as a director on June 6, 2017. Mr. Gill is a founder and a co-managing partner of Silver Oak Services Partners, a private equity firm. In 2014 Silver Oak acquired iSystems, LLC (currently, a wholly owned subsidiary of iSystems) and Mr. Gill served on the board of directors of iSystems, LLC.Purchase Price AllocationFollowing is the purchase price allocation for the 2017 acquisitions. We based the preliminary fair value estimate for the assets acquired and liabilities assumed for these acquisitions upon preliminary calculations and valuations. Our estimates and assumptions for these acquisition are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). 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 using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the dates of acquisitions. The $26,408 of intangible assets subject to amortization consist of $23,085 allocated to Customer Relationships, $1,621 for Trade Names, $1,010 for Developed Technology, and $692 for Noncompete Agreements. 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 14.0% to 17.0%, 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% to 1.7% royalty rate. We believe significant synergies are expected to arise from these strategic acquisitions. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition. A portion of acquired goodwill will be deductible for tax purposes.ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)We based the allocations on fair values at the date of acquisition: $ 211 $ 641 $ 852 951 721 1,672 200 - 200 681 179 860 699 68 767 - 9,103 9,103 42,253 8,557 50,810 15,070 11,338 26,408 $ 60,065 $ 30,607 $ 90,672 392 181 573 791 282 1,073 1,073 370 1,443 - 9,048 9,048 2,256 9,881 12,137 Net assets acquired $ 57,809 $ 20,726 $ 78,535 The following is a reconciliation of the purchase price to the fair value of net assets acquired at the date of acquisition: $ 55,000 $ 21,010 $ 76,010 202 123 325 2,880 (26 ) 2,854 (273 (381 (654 $ 57,809 $ 20,726 $ 78,535 Transaction costs for the 2017 acquisitions were $3,112 and were expensed as incurred and included in selling, general and administrative expenses.Unaudited Pro Forma Financial Information The following unaudited summary of pro forma combined results of operations for the year ended December 31, 2018 and December 31, 2017 gives effect to our 2017 and 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. $ 99,388 $ 100,989 $ (6,112 $ (16,797 $ (0.43 $ (1.42 ) 14,121 11,843 ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)2018. has beenwere 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.forand related intangible assets, we may need to record additional non-cash impairment charges in the periods presented. future.We have not identified any impairmentsIn 2019, we disposed of finite-lived intangible assets during any of the periods presented. $ 77,348 34,216 81 (258 $ 111,387 Balance at Balance at December 31, 2018 $ 99,108 Goodwill recognized upon acquisition 4,826 Adjustments to goodwill associated with acquisitions (177) Impairment loss (35,060) Balance at December 31, 2019 68,697 Goodwill recognized upon acquisition 5,261 Balance at December 31, 2020 $ 73,958 20182020 and December 31, 20172019 are as follows: 6.0 $ 14,805 $ (7,065 $ 7,740 8.5 85,094 (20,601 64,493 7.0 853 (853 - 12.2 5,187 (1,241 3,946 5.2 1,032 (451 581 8.3 $ 106,971 $ (30,211 $ 76,760 6.7 $ 11,925 $ (5,010 $ 6,915 9.5 37,096 (13,142 23,954 7.0 853 (761 92 10.4 2,915 (884 2,031 6.1 692 (130 562 8.8 $ 53,481 $ (19,927 $ 33,554 Intangible Assets Weighted Average
Amortization
Period (in Years)2020 Gross Accumulated
AmortizationNet Developed Technology 6.6 $ 12,001 $ (7,608) $ 4,393 Customer Relationships 8.9 88,310 (28,898) 59,412 Reseller Relationships 7.0 853 (853) 0 Trade Names 3.0 880 (312) 568 Noncompete Agreements 5.2 1,032 (853) 179 8.5 $ 103,076 $ (38,524) $ 64,552 F-20Intangible Assets Weighted Average
Amortization
Period (in Years)2019 Gross Accumulated
AmortizationNet Developed Technology 6.0 $ 10,001 $ (6,004) $ 3,997 Customer Relationships 8.9 78,558 (19,757) 58,801 Reseller Relationships 7.0 853 (853) 0 Trade Names 3.0 780 (78) 702 Noncompete Agreements 5.2 1,032 (682) 350 8.5 $ 91,224 $ (27,374) $ 63,850 ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)$8,692$9,547 and $4,477$11,765 for 20182020 and 2017,2019, respectively, included in Operating Expenses. Amortization expenses recorded in Cost of Sales were $1,607$1,604 and $453$1,994 for 20182020 and 2017,2019, respectively.2018:Year Ending $ 12,084 11,249 10,757 9,918 8,096 24,656 $ 76,760 Year Ending 2021 $ 11,601 2022 11,068 2023 9,942 2024 9,682 2025 8,896 Thereafter 13,363 Total $ 64,552 20182020 and 2017: 2.00% - 3.50 $ 10,964 $ 9,847 10.55 52,106 34,125 5.55 52,106 34,125 $ 115,176 $ 78,097 $ 5,864 $ 8,895 $ 109,312 $ 69,202 On January 2019: 2016, we adopted ASU 2015-03 for debt issuance costs on our term loan, on a retrospective basis. The impact of adopting ASU 2015-03 was the classification of all deferred financing costs as a deduction to corresponding debt in addition to the reclassification of deferred financing costs in other current and long-term assets to short and long-term notes payable.
0Maturity Stated Interest Rate 2020 2019 Subordinated Notes Payable- acquisitions 1/1/2021 - 7/1/2022 2.00% - 3.00% $ 6,182 $ 7,185 PPP Loan - Pinnacle Bank 4/15/2022 1.00% 8,856 0 Term Loan - Wells Fargo term loan 12/31/2024 5.25% 9,875 20,000 Total Notes Payable $ 24,913 $ 27,185 Short-term notes payable $ 12,388 $ 2,696 Long-term notes payable $ 12,525 $ 24,489 (1) 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. 20182020 and 2017: $ 5,864 $ (1,131 $ 4,733 109,312 (2,083 107,229 $ 115,176 $ (3,214 $ 111,962 $ 8,895 $ - $ 8,895 69,202 (2,229 66,973 $ 78,097 $ (2,229 $ 75,868 December 31, 2020 Gross Notes Payable Debt Issuance Costs Net Notes Payable $ 12,388 $ (78) $ 12,310 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. F-21 THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019 Gross Notes Payable Debt Issuance Costs Net Notes Payable Notes payable, current portion $ 2,696 $ (125) $ 2,571 Notes payable, net of current portion 24,489 (347) 24,142 Total Notes Payable $ 27,185 $ (472) $ 26,713 2018: $ 5,864 5,119 7,856 96,337 $ 115,176 Term Loan2020:Year Ending 2021 $ 12,388 2022 3,400 2023 500 2024 8,625 2025 0 Gross Notes Payable $ 24,913 Second 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.In March 2018, we entered into a second amended and restated credit agreement (the “Second Restated Credit Agreement”) with Wells Fargo, and the lenders that are parties thereto, amending and restating the terms of the and Restated Credit Agreement dated as of May 2017.The Second(the "Third Restated Credit Agreement provides for a total of $175,000 in available financing consisting of (a) $105,000 in the aggregate principal amount of term loans, an increase of approximately $36,750; (b) a $5,000 line of credit, (c) a $25,000 delayed draw term loan commitment for the financing of permitted acquisitions,Agreement"), which is a new financing option for us; and (d) a $40,000 accordion, an increase of $30,000. The accordion allows us to increase the amount of financing we receive from our lenders at our option. Financing under the delayed draw term loan commitment and accordion are subject to certain conditions as described in the Second Restated Credit Agreement.The Second Restated Credit Agreemententered on December 31, 2019, amends the applicable margin rates for determining the interest rate payable on the loans as follows:Leverage Ratio First Out RevolverApplicable Margin Relative
to Base Rate MarginFirst Out Revolver Applicable Margin Relative to
LIBOR Rate MarginFirst Out TL Base Rate MarginFirst Out TL LIBOR Rate MarginLast Out Base Rate MarginLast Out LIBOR Rate Margin≤ 3.25:14.255.251.75 percentage points2.75 percentage points6.75 percentage points7.75percentage points> 3.25:14.755.75≥ 3.00:1.00 2.25 3.257.25 percentage points8.25 percentage pointsF-22ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)loansloan is payable as follows:●$263 beginning on June 30, 2018 and the last day of each fiscal quarter thereafter up to March 31, 2020, plus an additional amount equal to 0.25% of the principal amount of all delayed draw term loans;●$656 beginning on June 30, 2020 and the last day of each fiscal quarter thereafter up to March 31, 2021, plus an additional amount equal to 0.625% of the principal amount of all delayed draw term loans; and●$1,313 beginning on June 30, 2021 and the last day of each fiscal quarter thereafter, plus an additional amount equal to 1.25% of the principal amount of all delayed draw term loans.and revolving loans is due on May 25, 2022.SecondThird Restated Credit Agreement also:●amends our leverage ratio covenant to increase the maximum ratio to 6.50:1 at March 31, 2018 and June 30, 2018, 6.00:1 at September 30, 2018 and December 31, 2018 and then stepping down each quarter-end thereafter;●amends our fixed charge coverage ratio to be not less than 1.25:1 at March 31, 2018 and each quarter-end thereafter; and●removes the TTM recurring revenue covenant.2018 and December 31, 2017, $02020, compliance with certain financial covenants was outstanding and $5,000 was available for borrowingnot yet required under the revolver.AsThird Restated Credit Agreement as a result of December 31, 2018, we were in compliance with all covenantsthe Amendment and all payments remain current. We expect to be in compliance or be able toIn January 2019, we entered into a Consent and Amendment No. 2Secondeffects 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 Wells Fargo Bank, National Associationour senior lender and Goldman Sachs Specialty Lending Holdings, Inc., amendingPinnacle Bank. We filed our initial application for forgiveness of this loan in December 2020, and restatingcompleted 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 Second Restated Credit. See Note 14- Subsequent Events.Paycheck Protection Program.20182020 and 20172019 are composed of the following: $ 8,213 $ 7,436 8,791 7,918 696 696 178 178 3,282 3,813 5,959 2,062 27,119 22,103 (18,171 (16,886 $ 8,948 $ 5,217 2020 2019 Furniture and equipment: 2-5 years $ 6,818 $ 7,851 Software development costs 10,308 7,529 Software: 3-5 years 2,808 3,970 Leasehold improvements: shorter of the lease term or life of the improvement 1,658 1,221 Total property and equipment 21,592 20,571 Less accumulated depreciation and amortization (13,311) (12,704) Property and equipment, net $ 8,281 $ 7,867 F-23ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)capitalfinance leases as depreciation expense on our Consolidated Statements of Comprehensive Loss. Depreciation and amortization expenses relating to property and equipment were approximately $2,616$3,504 and $1,128$2,370 for 20182020 and 2017,2019, respectively.As part of the acquisitions of Mangrove and iSystems in 2016 and 2017, wecosts. Wecosts from prior acquisitions and we continue to invest in software development. We are developing products which we intend to offer utilizing software as-a-service (“SaaS”).We. We follow the guidance of ASC 350-40, Intangibles- Goodwill and Other- Internal Use Software, for development costs related to these new products. Costs incurred in the planning stage are expensed as incurred while costs incurred in the application and infrastructure stage are capitalized, assuming such costs are deemed to be recoverable. Costs incurred in the operating stage are generally expensed as incurred except for significant upgrades and enhancements. Capitalized software costs are amortized over the software’s estimated useful life, which management has determined to be three years. During the yearyears ended December 31, 20182020 and 2017,2019, we capitalized $3,897$2,780 and $2,062$2,756 of software development costs, respectively.2020 2019 Non-trade receivables related to custodial funds 418 $ 4,118 Receivable from sale of Workspace Management 0 1,685 Prepaid expenses 1,394 1,454 Other current assets 1,472 1,294 Total 3,284 $ 8,551 2020 2019 Income taxes payable $ 0 $ 2,608 Accrued expenses and other 1,380 3,948 Total $ 1,380 $ 6,556 89 - STOCKHOLDERS’ EQUITYFebruary 2017, we filed a shelf registration statement on Form S-3 with the SEC to sell, from time to time, in one or more offerings, up to $75,000 of our common stock, preferred stock, warrants, debt securities, subscription rights, and units. In April 2017 the shelf registration statement was declared effective by the SEC. Under this shelf registration statement,December 2020, we completed an underwritten public offering in June 2017. In connection with the public offering, we issued 2,185,000of 2,990,000 shares of our common stock including 285,000 shares of common stock pursuant to the exercise of the underwriters’ over-allotment option, at thea public offering price of $13.50 per share. Net$7.25. We realized gross proceeds from the issuance of common stock was $27,800.currently effective registration statements)current S-3). The shelf registration statement relating to these securities became effective on April 16, 2018. As of December 31, 2018,2020, there is $133,438approximately $111,760 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. Pursuant to450,000 shares$5,000 of our outstanding common stock. We have repurchased a total of 384,000This new stock repurchase program is in addition to the approximately 364,446 shares for approximately $5,000 over the lifeavailable under our existing stock repurchase plan.plan. ManagementSecurities Exchange Act of 1934, as amended. The extent to which we repurchase our shares, and the timing of such repurchases, will periodically assess repurchasing additional shares, depending on our cash position,depend upon a variety of factors, including market conditions, financial covenantsregulatory requirements and other factors. Whilecorporate considerations, as determined by our management. The repurchase program may be extended, suspended or discontinued at any time. We expect to finance the program remains in place, we did not repurchase any shares during 2018 or 2017.one1 active equity plan, the 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan, approved by our shareholders, is intended to replace our 2009 Equity Incentive Plan, as amended (the “2009 Plan”), however, the terms and conditions of the 2009 Plan will continue to govern any outstanding awards granted thereunder. (“SARs”), restricted stock, restricted stock units ("RSUs"), performance bonus awards, performance stock unitsunit 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 CONSOLIDATED FINANCIAL STATEMENTS1,639,0001,713,000 options and RSUs granted and outstanding pursuant to the 2018 Plan as of December 31, 2018.$1,687$2,365 and $593$2,268 for 20182020 and 2017,2019, respectively.20182020 and 2017: 2.81 1.60 .45 .41 4.00 3.69 - - 2020 2019 Grant date fair value $ 2.44 $ 2.65 Risk-free interest rate 0.20 % 1.25 % Expected volatility 55 % 44 % Expected life in years 2.85 3.50 Dividend yield 0 0 2018,2020, we reserved shares of common stock for future issuance under the 2009 Plan and 2018 Plan as follows:Options outstanding1,639,0001,713,000 Shares available for future grant 1,244,000 108,0002,957,000 1,747,000under all Plansrelated to options during the year ended December 31, 2018 and 2017. 1,014,000 $ 9.22 614,000 $ 6.47 803,000 11.48 575,000 11.30 (30,000 6.43 (80,000 5.55 (148,000 13.21 (95,000 7.16 1,639,000 $ 10.02 1,014,000 $ 9.22 585,000 $ 8.59 247,000 $ 6.34 $ 7.80 $ 3.63 THE CONSOLIDATED FINANCIAL STATEMENTSShares Weighted
Average
Exercise
PriceWeighted 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 outstandingyear ended December 31, 2020.Shares Weighted
Average
Grant-Date Fair ValueOutstanding 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 exercisable options2019 was $528 and their exercise prices as$430, respectively. As of December 31, 2018: $ 1.68 –8.81 529,000 1.95 $ 4.58 303,000 $ 6.18 8.82 – 13.39 595,000 3.31 10.88 223,000 10.36 13.40–16.27 515,000 3.95 14.62 59,000 14.27 $ 1.68–16.27 1,639,000 2.67 $ 10.02 585,000 $ 8.59 The aggregate intrinsic value2020, total compensation cost not yet recognized related to nonvested share options was $2,238, which is expected to be recognized over a weighted average period of options outstanding and options exercisable is $748 and $11, respectively, at December 31, 2018.910 - EMPLOYEE BENEFIT PLANS$490$124 and $369$814 in 20182020 and 2017,2019, respectively.225,000475,000 shares were reserved for issuance. During the year ended December 31, 2018, 14,415issuance of which there remains 364,446 shares of common stock were issued at $11.88 per share and 55,631 shares of common stock were issued at $5.27 per share. During the year ended December 31, 2017, 17,568 shares of common stock were issued at $7.65 per share.1011 -CONTRACTS WITH CUSTOMERS ANDREVENUE CONCENTRATION$1,467,$771 were $14,291$4,852 at December 31, 2018.2020. Receivables from contracts with customers, net of allowance for doubtful accounts of $425,$904, were $12,032$4,808 at December 31, 2017.$3,675$3,792 and $636$2,697 at December 31, 20182020 and December 31, 2017,2019, respectively. The amount of amortization recognized during the December 31, 20182020 and 20172019 period was $1,079$906 and $2,210,$1,398, respectively.$12,206$3,783 was recognized during the year ended December 31, 20182020 that was included in the deferred revenue balance at the beginning of the period.ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)2018,2020, approximately $52,475$31,503 of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 56%71% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.20182020 and 2017,2019, there were no customers who individually represented 10% or more of consolidated revenue.Year Ended December 31 2019 Revenue $ 24,619 Income from discontinued operations $ 3,498 Gain on sale of discontinued operations 94,293 Income tax expense (25,499) Income from discontinued operations, net of taxes $ 72,292 Year Ended December 31 2019 Depreciation and amortization $ 1,060 Provision for doubtful accounts (87) Share based compensation 278 Capital expenditures (417) Software capitalization (1,083) Gain on sale of discontinued operations (94,293) 1113 - NET LOSS PER SHAREendingended December 201831, 2020 and 2017. $ (7,548 $ (5,722 14,010,000 10,891,000 $ (0.54 $ (0.53 2020 2019 Numerator: Loss from continuing operations $ (16,311) $ (42,291) Income from discontinued operations 0 72,292 Net income (loss) $ (16,311) $ 30,001 Denominator: Weighted-average shares of common stock outstanding, basic and diluted 15,910,000 15,511,000 Basic and diluted income (loss) per share Loss per share from continuing operations $ (1.03) $ (2.73) Income per share from discontinued operations 0.00 4.66 Income (loss) per share $ (1.03) $ 1.93 1,639,0001,713,000 and 1,014,0001,756,000 shares for 20182020 and 2017,2019, respectively, from the computation of the dilutive stock options because the effect of including the stock options would have been anti-dilutive.1214 - INCOME TAXESThe Tax Act was enacted in December 2017. The Tax Act significantly changes U.S. tax law by, among other things, lowering U.S. corporate income tax rates, implementing a modified territorial tax system and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The Tax Act reduces the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Act, we revalued our ending net deferred tax liabilities at December 31, 2017 and recognized a deferred tax benefit of $545.While the Tax Act provides for a modified territorial tax system, beginning in 2018, Global Intangible Low-Taxed Income (“GILTI”) provisions will be applied providing an incremental tax on low taxed foreign income. The GILTI provisions require us to include in our U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Under U.S. GAAP, we are required to make an accounting policy election to either (1) treat taxes due related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factor such amounts into our measurement of our deferred taxes (the “deferred method”). The Company has selected the "period cost method" as its accounting policy with respect to the new GILTI tax rules.20182020 and 20172019 are as follows: $ (14,550 $ (5,519 (227 (107 $ (14,777 $ (5,626 2020 2019 Domestic $ (15,974) $ (66,402) Foreign 0 0 Total $ (15,974) $ (66,402) F-27 THE CONSOLIDATED FINANCIAL STATEMENTS20182020 and 20172019 are as follows: $ - $ 6 37 50 116 (213 153 (157 (5,747 85 (1,554 168 (81 - (7,382 253 $ (7,229 $ 96 2020 2019 Current: Federal $ 0 $ (21,697) State (214) (1,899) Foreign (1) 42 Total current (215) (23,554) Deferred: Federal 259 (210) State 293 (347) Foreign 0 0 Total deferred 552 (557) $ 337 $ (24,111) 20182020 and 20172019 are as follows: $ 24,330 $ 28,349 5,147 4,659 123 123 1,909 - 107 11 276 299 14 - 594 318 526 260 33,026 34,019 (19,517 (28,849 13,509 5,170 (11,216 (5,180 - (309 (1,268 - (856 - (1,735 (751 (15,075 (6,240 $ (1,566 $ (1,070 2020 2019 Deferred tax assets: Net operating losses $ 11,570 $ 8,004 Research and development credit carryforwards 3,246 3,104 Minimum tax credit carryforwards 0 31 Disallowed interest expense carryforwards 54 0 Stock compensation 258 168 Deferred revenue 148 588 Accrued expenses 590 349 Lease liabilities 1,931 1,905 Goodwill 0 2,132 Other 303 347 18,100 16,628 Valuation allowance (6,892) (5,204) Net deferred tax assets 11,208 11,424 Deferred tax liabilities: Acquired intangibles (5,930) (7,828) Fixed assets (284) (125) Capitalized software (1,524) (1,353) Deferred commission (1,000) (698) Right-of-use asset (1,721) (1,756) Goodwill (1,637) 0 (12,096) (11,760) Net deferred liabilities $ (888) $ (336) 2018,2020, we had federal net operating loss carryforwards of approximately $110,136,$48,435, research and development credit carryforwards of approximately $6,257 and alternative minimum tax credit carryforwards of approximately $123.$3,579. The net operating loss and research and development credit carryforwards will expire in varying amounts from 20192021 through 2038,2040, if not utilized. FederalApproximately $16,962 of the net operating losses generated in 2018 and after are carriedloss carryforwards carry forward indefinitely.ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)itsour favorable tax attributes in future tax returns, we have placed a valuation allowance against our net deferred tax assets, exclusive of goodwill.jurisdictions in which we have net deferred tax liabilities. During the year ended December 31, 2018,2020, the valuation allowance decreasedincreased by approximately $9,332$1,688 due primarily to the results of operations, acquisitions and the impact of changes in law.We consider undistributed earnings of our foreign subsidiaries as permanently reinvested and, accordingly, we have made no provision for U.S. federal or state income taxes thereon, other than the earnings required to be recognized under IRC Section 956 or Section 965.endingended December 31, 20182020 and 20172019 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: $ (3,103 $ (1,913 (482 (6 392 21 (478 (181 (4 (198 - 14,058 5,778 2,983 (9,332 (14,668 $ (7,229 $ 96 2020 2019 Computed at statutory rate $ (3,355) $ (13,944) State taxes, net of federal benefit (632) (1,901) Permanent items and other (379) 992 Credit carryforwards (122) 2,014 Foreign income taxed at different rates 0 22 Goodwill impairment 0 3,907 Change in tax carryforwards not benefitted 3,137 (352) Change in valuation allowance 1,688 (14,849) $ 337 $ (24,111) 2018.2020. We do not anticipate any significant changes in such uncertainties and judgments during the next twelve months. To the extent we are required to recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability. The reconciliation of our unrecognized tax benefits is as follows: $ 1,219 99 11 (155 $ 1,174 246 15 - $ 1,435 Balance at December 31, 2018 $ 1,435 Additions based on tax positions related to the current year 106 Additions for tax positions of prior years 59 Reductions for tax positions of prior years (744) Balance at December 31, 2019 $ 856 Additions based on tax positions related to the current year (232) Additions for tax positions of prior years 19 Reductions for tax positions of prior years (56) Balance at December 31, 2020 $ 587 2018,2020, we had $1,435$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. 2018,2020, we recognized $0 of interest and penalties in our income tax expense. and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years ending beforeon or after December 31, 20152017 and are no longer subject to state and local or foreign income tax examinations by tax authorities for years ending beforeon or after December 31, 2014.2016. We are not currently under audit for any federal or state jurisdictions.any foreign jurisdictions.material restrictive covenants.F-29ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amountsthe lease. In the accompanying consolidated statements of comprehensive income (loss), rent expense is included in thousands, except shareoperating expenses under selling, general and per share dataadministrative expenses. The components of the rent expense for the year ended December 31, 2020 were as follows:Operating lease cost $ 2,153 Sublease income (117) Net rent expense 2,036 otherwise noted)NOTE 13 - LEASE COMMITMENTSfuture minimumincremental borrowing rate of 10% is estimated to approximate our interest rate on a collateralized basis with similar terms and payments, using a portfolio approach. The weighted average remaining lease payments under all operating and capitalterm of leases with a lease liability as of December 31, 20182020 is 5 years.Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 2,246 Non-cash operating activities: Operating lease assets obtained in exchange for new operating lease liabilities $ 1,052 $ 2,693 $ 102 2,172 - 1,962 - 1,417 - 711 - 2,977 - $ 11,932 $ 102 (223 - $ 11,709 $ 102 (102 $ - Total rent expense under all operating leases for 2018 and 2017 were $2,881 and $1,552, respectively. At December 31, 2018 and 2017, 29.3% and 29.7%, respectively, of our total operating lease obligation relates to our office facility in Vermont where iSystems is based.Total Operating Leases 2021 $2,354 2022 1,837 2023 1,142 2024 1,022 2025 828 Thereafter 1,802 Total minimum lease payments 8,985 Less imputed interest (1,786) Total lease liabilities 7,199 1416 - SUBSEQUENT EVENTS2018,2020, and events which occurred subsequent to December 31, 20182020 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 below and except as discussed in Note 13 above and as follows:.In January 2019, we entered into a Consent and Amendment No. 2 to the Second Restated Credit Agreement (the “Consent and Amendment No. 2”), with Wells Fargo Bank, National Association and Goldman Sachs Specialty Lending Holdings, Inc., amending and restating the terms of the Second Restated Credit Agreement. Under the terms and conditions of the Consent and Amendment No. 2, the agent and required lenders have consented to our acquisition of Payroll Maxx LLC as a “permitted acquisition” and we borrowed a delayed draw term loan in the aggregate amount of $8,000. The Consent and Amendment No. 2 also amends, among other things, our leverage ratio covenant to increase the maximum ratio to 6.00:1 at March 31, 2019, June 30, 2019 and September 30, 2019 and then stepping down each quarter-end thereafter through December 31, 2020, which is a change from 5.85:1 at March 31, 2019, 5.30:1 at June 30, 2019 and 5.10:1 at September 30, 2019 prior to this amendment.In January 2019, we also issued 122,850 unregistered shares of our common stock to the equity holders of Payroll Maxx LLC, a Colorado limited liability company, as part of the purchase price consideration paid in connection with the acquisition of all of the equity interests of Payroll Maxx LLC. The shares were valued at $8.14 per share, or an aggregate of $1,000, based on a volume weighted average of the closing prices of our common stock during a 60-day period.F-30ASURE SOFTWARE, INC. March 19, 201911, 2021 /s//s/ PATRICK GOEPEL
Chief Executive OfficerSignatureTitleDateSignature Title Date /s/ PATRICK GOEPEL March 19, 2019Patrick Goepel
(Principal Executive Officer)March 11, 2021 Patrick Goepel and Director/s/ KELYN BRANNONJOHN PENCEMarch 19, 2019Kelyn Brannnon
(Principal Financial and Accounting Officer)March 11, 2021 John Pence /s/ DAVID SANDBERGChairman of the BoardMarch 19, 2019David Sandberg19, 2019/s/ BENJAMIN ALLEN Director March 11, 2021 Benjamin Allen /s/ CARL DREW Director March 11, 2021 Carl Drew /s/ GRACE LEE Director March 11, 2021 Grace Lee /s/ BRADFORD OBERWAGER 19, 2019/s/ ADRIAN PERTIERRADirectorMarch 19, 2019Adrian PertierraDirector March 11, 2021 Bjorn Reynolds /s/ J. RANDALL WATERFIELDDirectorMarch 19, 2019J. Randall Waterfield