Table of our service offerings. Service providers include for example our banking and ach transaction partners, mail services, outsourced consumer health care administration service providers, and Amazon Web Services hosting services. Failure of these providers to deliver their services in a compliant, timely manner could result in material disruption to our business, result in reputational damage, expose us to greater liability from our clients than we can recover from the third parties, any of which may adversely affect our results of operations.Contents

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.

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Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, 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 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.

~~Volatility and weakness in bank and capital markets may adversely affect credit availability and related financing costs for us.~~

Banking and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be adversely affected. Although we currently can access the bank and capital markets, there is no assurance that such markets will continue to be a reliable source of financing for us. These factors, including the tightening of credit markets, could adversely affect our ability to obtain cost-effective financing. Increased volatility and disruptions in the financial markets also could make it more difficult and more expensive for us to refinance outstanding indebtedness and to obtain financing. In addition, the adoption of new statutes and regulations, the implementation of recently enacted laws, or new interpretations or the enforcement of older laws and regulations applicable to the financial markets or the financial services industry could result in a reduction in the amount of available credit or an increase in the cost of credit. Disruptions in the financial markets can also adversely affect our lenders, insurers, customers, and other counterparties. Any of these results could have a material adverse effect on our business, financial condition, and results of operations.

Further, the interest rate on debt we have incurred under our Third 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 Third Restated Credit Agreement is after December 31, 2021. Our Third Restated Credit Agreement allows for an adjustment of the interest rate on such loans as a result of the phase out of LIBOR; however, we cannot guarantee that any replacement rate will be as favorable to us as the LIBOR rate and this may affect our ability to meet our debt service and repayment obligations or have an adverse effect on our operations.

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.

~~In the last twelve months, we have experienced~~

We continue to experience turnover within our finance team. If we are unable to retain and successfully integrate their replacements in our business, it could have a material adverse effect on our business and the reliability of our financial statements.

Our future performance depends largely on our ability to continually 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 and 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 to our financial operations. While none of these former employees left us due to any disagreement with management over the financial statements, the loss of these individuals impacts the continuity of our financial reporting and related internal controls. If we are unable to retain and successfully integrate the current employees serving in these roles, it could have a material impact on our business and financial results.

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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.

Our services depend on the ability of our registered users to access the Internet. Currently, this access is provided by companies that have significant market power in the broadband and Internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies and government-owned service providers. Laws or regulations that adversely affect the growth, popularity or use of the Internet, including changes to laws or regulations impacting Internet neutrality, could decrease the demand for our products, increase our operating costs, require us to alter the manner in which we conduct our business and/or otherwise adversely affect our business. For example, the Federal Communications Commission (the “FCC”) recently adopted an order repealing rules that prohibit Internet service providers (“ISPs”) from blocking or throttling Internet traffic, and from engaging in practices that prioritize particular Internet content in exchange for payment (also known as “paid prioritization”). The order is not yet effective and has been challenged in court, which could result in further changes to the governing law. There is also uncertainty regarding how the FCC’s new framework, if upheld, and new oversight by the Federal Trade Commission (“FTC”) will be applied. Depending on ongoing appellate proceedings and future action by the FCC and FTC, we could experience discriminatory or anti-competitive practices that could cause us to incur additional expense or otherwise adversely affect our business, operating results and financial condition. In particular, the repeal of restrictions on paid prioritization could enable ISPs to impose higher fees and otherwise adversely affect our business.

In addition, the rapid and continual growth of traffic on the Internet has resulted at times in slow connection and download speeds of Internet users. Our business may be harmed if the Internet infrastructure cannot handle our clients’ demands or if hosting capacity becomes insufficient. If our clients become frustrated with the speed at which they can utilize our products over the Internet, our clients may discontinue the use of our software and choose not to renew their contracts with us. Further, the performance of the Internet has also been adversely affected by viruses, worms, hacking, phishing attacks, denial of service attacks and other similar malicious programs, as well as other forms of damage to portions of its infrastructure, which have resulted in a variety of Internet outages, interruptions and other delays. These service interruptions could diminish the overall attractiveness of our products to existing and potential users and could cause demand for our products to suffer.

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.

Our success is dependent, in part, upon protecting our proprietary technology. We rely on a combination of trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights in our products and services. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our licensed products may be unenforceable under the laws of certain jurisdictions and foreign countries. 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.

~~The use of open-source software in our applications may expose us to risks and harm our intellectual property rights.~~

The use of open-source software in our products may expose us to additional risks and harm our intellectual property rights. There have been claims in the past challenging the ownership of open-source software against companies that incorporate such software into their products or applications. As a result we could be subject to intellectual property related claims around ownership rights to what we believe to be open-source software. In addition, if we were to combine our applications with open-source software in a certain manner, we could, under certain of the open-source licenses, be required to release the source code of our applications. If we inappropriately use open-source software, we

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may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition.

Inability to maintain the third-party licensed software we use in our applications at the current costs could result in increased costs or reduced service levels, which could adversely affect our business.

We use certain third-party software in our applications that we obtain from other companies and will continue to rely on such third party software. If we were required to find alternatives to such software for whatever reason, it may be expensive to replace, and could require significant investment of time and resources to find alternatives and integrate with our software. Additionally, error or issues in that software could adversely affect our own software and errors or defects may not be readily apparent to use, resulting in a failure of our applications.

We may be sued by third parties for infringement of their proprietary rights.

There is considerable intellectual property development activity in our industry. Our success depends upon our not infringing upon the intellectual property rights of others. Third parties, including our competitors, may own or claim to own intellectual property relating to our products or services and may claim that we are infringing their intellectual property rights. We may be found to be infringing upon such rights, even if we are unaware of their intellectual property rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, obtain licenses, modify applications, prevent us from offering our services, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers, vendors or partners in connection with any such claim or litigation. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel form our business operations. Any such events could have a material adverse effect on our business, financial condition and results of operations.

Some 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, delay, or discontinuation of key components, which could disrupt and materially and adversely affect our business.

Some of the key components used to manufacture our products, such as the 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 impact on our ability to fulfill orders for our products.

Even if demand for HCM 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 HCM 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 HCM 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 software service or our HCM products in particular. As a result, we cannot assure you that our SaaS HCM software products will achieve and sustain the high level of market acceptance that is critical for the success of our business.

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Our failure to comply with existing laws and regulations may result in adverse effects on our business, service and financial condition and failure to comply with changing laws and regulations through modifications, developments, and enhancements to our products and services could have a material adverse effect on our business and results of operations.

Our services are subject to various laws and regulations including COBRA, HIPAA, laws and regulations promulgated by state wage and hour authorities and anti-money laundering regulations. Failure to comply with the multiple laws and regulations that impact us may result in civil liability from our clients for noncompliance, regulatory fines, and loss of reputation in the event of a public regulatory investigation or consent order or civil lawsuit. Moreover, many of our solutions are designed to assist our clients with their compliance with myriad government regulations and laws that continually change. For example, regulatory changes in 2020 in response to the COVID-19 pandemic necessitated multiple product modifications to accommodate changes relevant to the collection and remittance of payroll tax, including payroll tax deferments. The introduction of new regulatory requirements or changes in interpretation of existing laws or regulations could increase our cost of doing business. As with the development changes necessitated with new regulations in response to COVID-19, changing regulatory requirements may require the introduction of new applications or enhancements, or may make new modifications or new applications more expensive or could prevent the introduction of new applications. Changes in laws could also impact applications under development, rendering them in applicable or obsolete mid development which could result in wasted time and development money. Any failure to anticipate and respond to these legal regulations and changes and provide tools and applications to solve for these changes in a timely fashion could adversely affect our reputation and affect our business and results of operations.

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, impact licenses that are necessary or required to operate our business, 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.

We incur significant costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives. We may fail to comply with the rules that apply to public companies, which could result in sanctions or other penalties that would harm our business.

We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and regulations regarding corporate governance practices. The listing requirements of The Nasdaq Capital Market require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, new reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.

To the extent that our pre-tax income or loss becomes relatively modest, our ability to conclude that a control deficiency is not a material weakness or that an accounting error does not require a restatement 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.

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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.

Volatility and weakness in bank and capital markets may adversely affect credit availability and related financing costs for us.

Banking and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be adversely affected. Although we currently can access the bank and capital markets, there is no assurance that such markets will continue to be a reliable source of financing for us. These factors, including the tightening of credit markets, could adversely affect our ability to obtain cost effective financing. Increased volatility and disruptions in the financial markets also could make it more difficult and more expensive for us to refinance outstanding indebtedness and to obtain financing. In addition, the adoption of new statutes and regulations, the implementation of recently enacted laws, or new interpretations or the enforcement of older laws and regulations applicable to the financial markets or the financial services industry could result in a reduction in the amount of available credit or an increase in the cost of credit. Disruptions in the financial markets can also adversely affect our lenders, insurers, customers, and other counterparties. Any of these results could have a material adverse effect on our business, financial condition, and results of operations.

Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

The use of open-source software in our applications may expose us to risks and harm our intellectual property rights.

The use of open-source software in our products may expose us to additional risks and harm our intellectual property rights. There have been claims in the past challenging the ownership of open-source software against companies that incorporate such software into their products or applications. As a result, we could be subject to intellectual property related claims around ownership rights to what we believe to be open-source software. In addition, if we were to combine our applications with open-source software in a certain manner, we could, under certain of the open-source licenses, be required to release the source code of our applications. If we inappropriately use open-source software, we may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition.

We may be adversely affected by failure of third parties in providing their services.

We rely on multiple third-party service providers to provide services to our clients as part of our service offerings. Service providers include for example our banking and ACH transaction partners, mail services, outsourced consumer health care administration service providers, and Amazon Web Services hosting services. Failure of these providers to deliver their services in a compliant, timely manner could result in material disruption to our business, result in reputational damage, expose us to greater liability from our clients than we can recover from the third parties, any of which may adversely affect our results of operations.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2020, we had federal net operating loss carryforwards of approximately $48,435 and research and development credit carryforwards of approximately $3,579, which begin expiring in 2021.

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

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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.

~~Risks Related~~

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Our software and solutions may not function adequately, which could damage our reputation and give rise to claims against us, which could harm our business and operating results.

Our ~~Securities~~software and solutions are complex and operate in an environment of intricate federal, state and local regulations that pertain to human resources, taxes, payroll, benefits and other areas of the Human Capital Management marketplace. To the extent to which our software contains defects or errors our clients might assert claims against us in the future alleging that they suffered damages due to a defect, error or other failure of our software or solutions.

While our agreements with our clients may contain provisions intended to limit our exposure to such claims, they may not be effective in limiting our exposure. A successful claim for product or service liability brought against us could result in substantial cost to us. We maintain insurance to cover such claims, however, it may be inadequate or may not be available in the future on acceptable terms or at all. In addition, the cost of defending a suit, regardless of its merit, could be costly and divert management’s attention.

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Adverse tax laws or regulations could be enacted, or existing laws could be applied to us or our clients, which could increase the costs of our services and adversely impact our business.

The application of federal, state, and local tax laws to services provided electronically often involve complex issues and significant judgment. New laws or changes to existing income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, possibly with retroactive effect, and could be applied solely or disproportionately to services provided over the Internet. These enactments could adversely affect our business, results of operations and financial condition due to the inherent cost increase. Moreover, each state has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that change over time. We review these rules and regulations periodically and, when we believe we are subject to sales and use taxes in a particular state, we may voluntarily engage state tax authorities to determine how to comply with that state’s rules and regulations. We cannot, however, assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we currently believe no such taxes are required. If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our services, we might be liable for past taxes and the associated interest and penalty charges, in addition to taxes going forward, which will adversely affect our business, sales activity, results of operations and financial condition.

RISKS RELATED TO OUR SECURITIES

Our common stock has traded in low volumes. We cannot predict whether an active trading market for our common stock will ever develop.

Historically, our common stock has experienced a lack of trading liquidity. In the absence of an active trading market:

•an investor may have difficulty buying and selling our common stock at all or at the price one considers reasonable; and

•market visibility for shares of our common stock may be limited, which may have a depressive effect on the market price for shares of our common stock and on our ability to raise capital or make acquisitions by issuing our common stock.

Our stock price has been, and likely will continue to be, volatile.

The market price of our common stock has in the past been and is likely to continue in the future to be, volatile. During the fiscal year ended December 31, ~~2019,~~2022, the Nasdaq closing price of one share of our common stock fluctuated from a low of ~~$4.90~~ $5.04 to a high ~~of $10.00.~~ of $10.50. During the fiscal year ended December 31, ~~2020,~~2021, the Nasdaq closing price of one share of our common stock fluctuated from a ~~low~~low of ~~$5.08~~$7.22 to a high of ~~$9.08.~~$9.80. The market price of our common stock may be influenced by many factors, some of which are beyond our control, including:

•announcements regarding the results of expansion or development efforts by us or our competitors;

•announcements regarding the acquisition of businesses or companies by us or our competitors;

•technological innovations or new products and services developed by us or our competitors;

•changes in 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;

•changes in financial or operational estimates or projections;

•additions or departure of our key personnel;

•actual or anticipated fluctuations in our quarterly financial and operating results and degree of trading liquidity in our common stock; and

•political or economic uncertainties, including the continuing impact of the coronavirus, the Russian invasion of Ukraine and other developments onthat affect the equity trading ~~markets.~~markets

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In addition, stock markets generally have experienced significant price and volume volatility. This volatility has had a substantial effect on the market prices of securities of many public companies for reasons frequently unrelated or disproportionate to the operating performance 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.

The 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 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.~~

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We do not intend to pay dividends for the foreseeable future, and you must rely on increases in the market price of our common stock for returns on equity investment.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. In addition, our ~~Third Restated~~Senior Credit Agreement with Structural Capital Investments III LP 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 stockholder rights plan, or “poison pill,” includes terms and conditions which could discourage a takeover or other transaction that stockholders may consider favorable.

On October 28, 2009, stockholders of record at the close of business on that date received a dividend of one right (a “Right”) for each outstanding share of common stock. Each Right entitles the registered holder to purchase one one-thousandth of a share of Series A junior participating preferred stock of the Company (the “Preferred Stock”), at a price of $11.63 per one thousandth of a share of Preferred Stock, subject to adjustment (the “Exercise Price”). The Rights are not exercisable until the Distribution Date referred to below. The description and terms of the Rights are set forth in the ~~Second~~Third Amended and Restated Rights Agreement between the Company and American Stock Transfer & Trust Company LLC, dated as of ~~April 17, 2019,~~October 28, 2022, which extended the expiration date of the Rights to October 28, ~~2022.~~2025.

The ~~Second~~Third Amended and Restated Rights Agreement imposes a significant penalty upon any person or group that acquires 4.9% or more (but less than 50%) of our then-outstanding common stock without the prior approval of the board of directors. Stockholders who own 4.9% or more of our then-outstanding common stock as of the close of business on the Record Date will not trigger the ~~Second~~Third Amended and Restated Rights Agreement so long as they do not increase their ownership of the common stock after the Record Date by more than one-half of 1% of the then-outstanding common stock. A person or group that acquires shares of our common stock in excess of the above-mentioned applicable threshold, subject to certain limited exceptions, is called an “Acquiring Person.” Any rights held by an Acquiring Person are void and may not be exercised. The Rights will not be exercisable until 10 days after a public announcement by us that a person or group has become an Acquiring Person. On the date (if any) that the Rights become exercisable (the “Distribution Date”), each Right would allow its holder to purchase one one-thousandth of a share of Preferred Stock for a purchase price of $11.63. In addition, if a person or group becomes an Acquiring Person after the Distribution Date or already is an Acquiring Person and acquires more shares after the Distribution Date, all holders of Rights, except the Acquiring Person, may exercise their rights to purchase a number of shares of the common stock (in lieu of Preferred Stock) with a market value of twice the Exercise Price, upon payment of the purchase price.

The Rights will expire on the earliest of (a) October 28, ~~2022,~~2025, (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~~Third 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.

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We may, at our option and with the approval of the board of directors, at any time prior to the close of business on the earlier of (i) the tenth day following the first date of public announcement by us or an Acquiring Person that an Acquiring Person has become such or such later date as may be determined by action of a majority of the members of the board of directors then in office and publicly announced by us or (ii) October 28, ~~2022,~~2025, 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).

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

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not approved by the board of directors. On the other hand, the Rights should not interfere with any merger or other business combination approved by the board of directors since the Rights may be redeemed by us at the Redemption Price prior to the date ten days after the public announcement that a person or group has become the beneficial owner of 4.9% or more of the common stock, and any securities which a person or any of such person’s affiliates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between us and such person may be excluded from the calculation of their beneficial ownership if such agreement has been approved by the board of directors prior to them becoming an Acquiring Person.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of our management and board of directors.

Our 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:

•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

•in addition to our current stockholder 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;

•the requirement that a special meeting of stockholders may be called only by the Chairman of the board of directors, the Chief Executive Officer or the Secretary at the request of the board of directors or upon the written request, stating the purpose of the meeting, of stockholders who together own of record 10% of the outstanding shares of each class of stock entitled to vote at such meeting, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

•advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

We are also subject to certain anti-takeover provisions under Delaware law. Under Delaware law, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. We have not opted out of this provision of Delaware law.

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Our business could be negatively affected as a result of actions of activist stockholders, and such activism could impact the trading value of our securities.

Stockholders may, from time to time, engage in proxy solicitations or advance stockholder proposals, or otherwise attempt to effect changes and assert influence on our board of directors and management. Activist campaigns that contest or conflict with our strategic direction or seek changes in the composition of our board of directors could have an adverse effect on our operating results and financial condition. A proxy contest would require us to incur significant legal and advisory fees, proxy solicitation expenses and administrative and associated costs and require significant time and attention by our board of directors and management, diverting their attention from the pursuit of our business strategy. Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our board of directors or senior management team arising from a proxy contest could lead to the perception of a change in the direction of our business or instability which may result in the loss of potential business opportunities, make it more difficult to pursue our strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners, any of which could adversely affect our business and operating results. If individuals are ultimately elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our stockholders. We may choose to initiate, or may become subject to, litigation as a result of the proxy contest or matters arising from the proxy contest, which would serve as a further distraction to our board of directors and management and would require us to incur significant additional costs. In addition, actions such as those described above could cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal offices are located in Austin, Texas where we occupy approximately ~~15,000~~9,500 square feet of office ~~space under one operating lease that expires in July 2022.~~space. We also lease office suites in California, Florida, Nebraska, New Jersey, New York, ~~North Carolina,~~ Tennessee ~~Vermont,~~ and ~~Washington.~~Vermont.

Management believes that the leased properties described above are adequate to meet Asure’s current operational requirements and can accommodate further physical expansion of office space as needed.

ITEM 3. LEGAL PROCEEDINGS

~~Asure is periodically~~

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of ~~business. No pending~~business, as of December 31, 2022, we were not party to any material legal ~~proceedings to which we are a party are material to us.~~proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II – OTHER INFORMATION

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

Our common stock trades on the Nasdaq Capital Market under the symbol “ASUR.”

~~DIVIDENDS~~

We did not pay cash dividends on our common stock during fiscal years 2020 and 2019. We presently intend to continue a policy of retaining earnings for reinvestment in our business, rather than paying cash dividends. In addition, our Third Restated Credit Agreement contains limitations on our ability to pay dividends and make other distributions.

HOLDERS

As of ~~March 8, 2021,~~February 24, 2023, we had ~~approximately 254 stockholders~~approximately 253 stockholders of record of our common stock.

UNREGISTERED SALE OF EQUITY SECURITIES

There were no unregistered sales of equity securities by us during the year ended December 31, ~~2020.~~2022 that were not reported in our quarterly reports on Form 10-Q or our current reports on Form 8-K.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table provides information as of December 31, ~~2020~~2022 with respect to shares of our common stock that we may issue under our existing equity compensation plans (share amounts in thousands).:

A B C
Plan Category Number of Securities
to be Issued Upon Exercise of
Outstanding
Options and Release of Nonvested RSUs 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)(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


	A		B		C
	Number of Securities to be Issued Upon Exercise of Outstanding Options and Release of Nonvested RSUs		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)(3)
Equity Compensation Plan Approved by Stockholders(1)	$	2,212	$	7.30	$	2,343
Equity Compensation Plans Not Approved by Stockholders(2)	—		—		—
Total	$	2,212	$	7.30	$	2,343

(1)Consists of stock option ~~awards granted under the 2009 Equity Incentive Plan and stock option~~ and restricted stock unitawards granted under our 2018 Incentive Award ~~Plan, which plan replaced our 2009 Equity Incentive~~ Plan.

(2)Our stockholders have previously approved our existing equity compensation plan.

~~(3)~~In December 2019, we offered to exchange certain outstanding options to purchase shares of our common stock previously granted under our prior and current equity incentive plans that have an exercise price per share higher than the greater of $8.50 or the closing trading price of our common stock on the offer expiration date for new restricted stock units. Subsequent to December 31, 2019, 280,500 additional shares became available for issuance as a result of the exchange.

ITEM 6. ~~SELECTED FINANCIAL DATA~~

~~We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.~~RESERVED

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

~~CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS~~

Certain statements in this Report represent forward-looking statements. Forward-looking statements include but are not limited to statements regarding our strategy, future operations, financial condition, results of operations, projected costs, and plans and objectives of management. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described in this Report and in our other SEC filings.

We have attempted to identify these forward-looking statements with the words “believes,” “estimates,” “plans,” “expects,” “anticipates,” “may,” “will,” “could,” “should” and other similar expressions. Although these forward-looking statements reflect management’s current plans and expectations, which we believe reasonable as of the filing date of this Report, they inherently are subject to certain risks and uncertainties. Additionally, we are is under no obligation to update any of the forward-looking statements after the date of this Annual Report on Form 10-K or to conform such statements to actual results.

OVERVIEW

~~Overview~~

We are a ~~leading~~ provider of ~~cloud-based~~ Human Capital Management ~~(HCM)~~(“HCM”) solutions, delivered as ~~software-as-a-service (SaaS) for small and mid-sized businesses (SMBs). From recruitment to retirement, our solutions help more than 80,000 SMBs across~~software-as-a-service. Our product suite manages the ~~United States grow their businesses. About 10,000 of~~entire employment lifecycle, allowing our clients ~~are direct and~~to better serve their employees by providing the ~~approximately 70,000 remaining are indirect as they have contracts with Reseller Partners that white label our solutions.~~tools necessary to field a human resources department without the traditional overhead costs.

We strive to be the most trusted HCM resource to ~~entrepreneurs~~small and medium-sized businesses (“SMBs”) and are focused on less densely populated U.S. metropolitan cities where fewer of our competitors have a presence. Our solution strategy solves three primary challenges that prevent businesses from growing: HR complexity, allocation of human and financial capital, and the ability to build great teams. We have invested in, and we intend to continue to invest in, research and development to expand our solutions. Asure HCM, our user-friendly solution, reduces the administrative burden on employers and increases employee productivity while managing the complete employment lifecycle. The primary functions of our solutions address:

•~~Payroll and Tax~~ - Asure Payroll & Tax is an integrated cloud-based solution 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 tips, direct deposits, Fair Labor Standard Act ("FLSA"), and federal, state, and local payroll taxes.

•~~Human Resources~~ - Asure HR’s cloud-based functionality handles HR complexities that SMBs face, including employee self-service so employees can access all their information (e.g., pay history and company documents). With Asure HR’s dashboard, clients have convenient single-system access to every facet of the employee’s lifecycle. This solution improves benefits management by syncing to carriers and integrating with employee self-managed enrollment and life-event change adjustments.

•~~Time and Attendance~~ – Asure Time & Attendance is primarily cloud based 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 understand where and when their employees are working, providing insight into labor schedules and labor costs. With our mobile solution, employees can punch in and out from remote locations, as geo-positioning verifies the physical coordinates. Biometric time clocks, including facial recognition, reduce time theft and help combat "buddy punching." 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 control labor costs.

•~~HR Services~~ - Our recurring HR Services allows clients to focus on running their businesses because we take responsibility for all of the traditional 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 the benefit enrollment process.

•~~Data Integration~~ ~~- Our solutions also enable data integration with related third-party systems, such as 401(k), benefits, and insurance provider systems.~~

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In addition to state-of-the-art platforms that are hosted in Amazon AWS and regular upgrades and releases, we provide clients with easy access to our skilled support team. Our services and support representatives are knowledgeable not just in the Asure solution, but also about best practices and change management strategies in the payroll and HCM industry. Many of Asure’s 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 client experience on a national scale.

We sell our solutions through both direct and partner models. Prospective clients learn about Asure in a variety of ways, including advertising, web site searches, sales calls, public relations, referral channels, direct marketing, and social media. When prospective clients show an interest in Asure, they are connected with a sales representative, who works to close the sale, via Asure’s web site, phone, or a face-to-face meeting by discussing solutions that meet their needs. We track our marketing and sales activities to provide immediate insights into activities, leads and pipeline opportunities. Our account management teams also work with clients to promote and sell additional solutions that are relevant for each client.channels. We supplement our direct sales efforts with partner ~~programs. By working with partners, we gain~~programs that afford us access to opportunities in various geographic and industry niches.

Asure has two ~~distinct levels~~types of partners: Reseller Partners ~~and Referral Partners.~~

~~Reseller Partners.~~ ~~Reseller Partners pay us recurring license fees to~~that white label our ~~solutions and then they focus on~~products while providing ~~value-add~~value-added services to their clients (our indirect clients)~~. There are generally two types of Reseller Partners: regional payroll providers~~ and SMB trusted advisors (CPA, regional banks, and benefit brokers). Regional payroll providers typically focus on a specific geographic area or industry. They have proven to be attractive alternatives for SMBs’ payroll and HCM needs versus the one-size-fits-all national payroll companies that do not necessarily understand the local needs of many businesses. Since trusted advisors are relied on by entrepreneurs and executives at SMBs to advise on payroll and HR decisions, white labeling our solutions allows them to provide additional solutions directly to their clients. This deepens their client relationships and grows their revenue.

Asure’s Reseller Partners are also the primary source of Asure’s acquisitions. Since they already white label Asure’s solutions, technology integration risk is lessened. By acquiring Reseller Partners, we gain a presence in specific geographic (typically less densely populated U.S. metropolitan cities) and industry niches. These acquisitions help Asure gain scale by assuming all of the Reseller Partner's revenue instead of just a recurring licensing fees (which is typically a small percentage of their total revenue). Reseller Partners can continue to license our solutions with the opportunity to expand their available solutions, or they can come under the Asure umbrella.

~~Referral Partners.~~Referral Partners ~~are typically the aforementioned trusted advisors (e.g., regional banks, CPAs, and benefit 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~~

As 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 referral relationships develop and they become more comfortable in the HCM space.

We generate revenues from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. We do not require clients to enter into long-term contractual commitments with us. Our billing period varies by client based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. We serve a diverse client base in terms of industry and geography. None of our clients constitutedDecember 31, 2022, Asure had more than ~~one-half~~100,000 clients, split between approximately 15,000 direct and the remaining 85,000 indirect clients who have contracts with Reseller Partners.

Asure has several forms of ~~one percent of~~revenue that result from our ~~revenues~~business model:

Software-as-a-service revenue is generated when clients utilize our product suite for their recurring human resource needs—primarily payroll, tax, HR compliance, time and ~~no industry represented over 10% of our~~attendance, and AsureMarketplace™. This also contains revenue ~~for the year ended December 31, 2020. Our revenues are~~ generated ~~through our salesforce that solicits new clients~~from quarterly and ~~our client relations representatives who sell new applications~~annual reporting requirements to ~~existing clients as well as Reseller Partner recurring license fees.~~

~~Our continued growth depends on attracting new clients through further penetration of our existing markets~~local, state and ~~geographic expansion into new markets~~federal regulatory agencies. Examples include Form W-2 and reporting mandated by strategically acquiring Reseller Partners, targeting a high degree of client employee usage across our solution, and introducing new applications to our existing client base. We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase revenues in the future. Furthermore, we believe the challenges of managing the ever-changing complexity of payroll and human resources will continue to drive companies to turn to outsourced providers for help with their HCM needs. The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, changes to the minimum wage laws or overtime rules, and legislation from federal, state or municipal taxation authorities. The implementation of the Affordable Care Act (the “ACA”).

Hardware-as-a-service revenue is generated when clients choose not to purchase our hardware, but rather rent the devices. This hardware includes a variety of clocks used to track time and attendance. Hardware revenue is generated when our clients buy our devices outright.

Maintenance and support revenue is generated from servicing our hardware on our clients’ behalf and providing training on how to operate both our hardware and software products.

Professional services revenue is generated from our clients’ needs that would normally be fulfilled by an ~~example~~internal payroll system or human resources department.

Our tax management solutions revenue is derived from providing clients with innovative payroll tax processing software and service solutions and includes revenue generated from Employee Retention Tax Credit tax filing activity related to the CARES Act.

Interest from client funds is generated when we gain possession of ~~legislation~~funds intended to be disbursed based on the clients’ needs. We invest the monies in short and long-term securities that ~~has created demand~~may be held to maturity before disbursement.

2022 Highlights

•Consolidated revenue of $95,828 for 2022, representing a 26% increase over revenue in the HCM industry. We generate ACA-related revenues (i) on an annual basis in connection with processing and filing Forms 1094 and 1095 on behalf of clients and (ii) from clients who have purchased our Enhanced ACA application as part of the fixed, bundled price charged per billing period.2021

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~~While we were incorporated in 1985 and became publicly traded in 1992, we view ourselves as a young pure-play SaaS~~•Launch of AsureMarketplace™, to automate interactions between Asure’s HCM ~~provider~~systems with ~~the appropriate people, processes, and technology~~third-party providers to execute on our strategy. Our primary source of revenue is derived from Payroll & Tax solutions, which came with the acquisitions of Mangrove Software in 2016 and iSystems in 2017. Beginning in 2016, we rolled-up approximately 15 of our Reseller Partners that white labeled Mangrove and iSystems’ solutions. With our sale of our Workspace Management business in December 2019 and the subsequent transition services agreement that ended in June 2020, we became a pure-play SaaS HCM provider.

~~Impact of the COVID-19 Pandemic~~

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. In response, federal, state and local governments imposed various restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the disease, and many such restrictions remain in place. Beginning in February 2020, we took various actions in order to minimize the risk of COVID-19 to our employees, our clients, and the communities in which we operate, and in March 2020, we prohibited all business-related travel until further notice and began transitioning our employees to work-from-home arrangements. As of December 31, 2020, more than 90% of our employees were working remotely. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and clients.

In addition, the COVID-19 pandemic has disrupted the operations of our clients and client prospects and may continue to do so for an indefinite period of time. Across many industries, temporary and permanent business closures as well as business occupancy limitations have resulted in significant layoffs and employee furloughs since late March 2020. Because we charge our clients on a per-employee basis for certain services we provide, decreases in headcount at our clients as of the onset of the pandemic negatively impacted our recurring revenue during 2020, and we expect that our recurring revenue in future periods will continue to be negatively impacted by such headcount reductions until employment levels among such client base return to pre-pandemic levels. Further, at the onset of the COVID-19 pandemic, a limited number of new clients temporarily delayed service implementation. As the COVID-19 pandemic continues to create uncertainty and the potential for ongoing business disruptions, we may experience similar client-driven delays in service implementation in the future.

During 2019, interest earned on funds held for clients contributed to growth in recurring revenue, due to both higher average interest rates and an increased average funds held for clients balance. Between August 2019 and March 2020, the Federal Open Market Committee reduced the target range for short-term interest rates several times, with the most significant rate cut occurring in March 2020 to support the economy and potentially reduce the impacts of the COVID-19 pandemic. Further, a provision in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) allowed employers to delay the payment of the employer’s share of Social Security taxes to a future date. To the extent our clients made such an election, we collected less money from them to hold and then remit to the appropriate taxing authorities, which adversely affected our average funds held for clients balance and, consequently, interest earned on funds held for clients. During 2020, despite the growth in the number of clients in our base, employee headcount reductions at our clients as well as clients electing to defer payment of their share of Social Security taxes under the CARES Act resulted in nominal growth in our average funds held for clients balance, relative to 2019. Due to significantly lower average interest rates in 2020enhance efficiency, improve accuracy and to ~~a lesser extent,~~extend the ~~lack~~range of growth of our average funds held for clients balance, interest earned on funds held for clients for the year ended December 31, 2020 decreased from the year ended December 31, 2019, which had a negative effect on recurring revenue growth. The balance of funds held for clients was approximately $321,069 at December 31, 2020, compared with approximately $126,625 at December 31, 2019. Much of this increase was dueservices offered to ~~acquisitions in 2020.~~employers and their employees.

In 2020, we continued to aggressively invest in sales and marketing and 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 negative 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 the pandemic on our recurring revenue and our deliberate, increased level of investment in sales and marketing and research and development to drive the growth of our business.

Prior to the COVID-19 pandemic, our sales force 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 client 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 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.OPERATING SEGMENT

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We are unable to estimate the full impact that the COVID-19 pandemic could have on our business 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 results of operations and overall financial performance until future periods.

~~Operating Segment~~

We operate as one operating segment. Operating segments are defined as components of an enterprise for which the chief operating decision maker, who in our case is the ~~chief executive officer,~~Chief Executive Officer, in deciding how to allocate resources and assess performance, evaluates separate financial information regularly. ~~During 2020, and over~~Over the last ~~few~~seven 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~~Because we operate as one operating segment, all required financial segment information can be found in the ~~consolidated financial statements.~~Consolidated Financial Statements.

RESULTS OF OPERATIONS(in thousands)

The following discussions of our results of continuing operations exclude the results related to the Workspace Management business which was sold in 2019. This business has been segregated from continuing operations and is reflected as a discontinued operation.

The following table sets forth, for the fiscal periods indicated, the percentage of total revenues represented by certain items in ~~Asure’s~~the Company’s Consolidated Statements of Comprehensive ~~Income~~ (Loss): Income:

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

~~Comparison of Fiscal 2020 to 2019~~

~~Basis of Presentation~~


	Year Ended December 31,
	2022		2021
Revenues	100	%	100	%
Gross profit	65	%	61	%
Sales and marketing	21	%	20	%
General and administrative	35	%	36	%
Research and development	6	%	7	%
Amortization of intangible assets	14	%	14	%
Total operating expenses	77	%	78	%
Interest expense and other, net	(5)	%	(3)	%
Gain on extinguishment of debt	—	%	11	%
Employee retention tax credit	—	%	14	%
Gain (loss) from operations before income taxes	(15)	%	5	%
Net income (loss)	(15)	%	4	%

Revenue

Revenues are comprised of recurring revenues, ~~and implementation~~professional services, hardware, and other revenues. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenues, we expect our mix of recurring revenues, and ~~implementation~~professional services, hardware and other revenues to remain relatively constant. While revenue mix varies by product, recurring revenue represented over 90% of total revenue in the year ended 2022, compared to 93% in 2021.

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


	Year Ended December 31,				Variance
	2022		2021		$		%
Recurring	$	86,222	$	71,078	$	15,144	21	%
Professional services, hardware and other	9,606		4,986		4,620		93	%
Total	$	95,828	$	76,064	$	19,764	26	%

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Recurring Revenues

Recurring revenues include fees for our payroll, payroll tax, tax management, time and labor management, HR compliance services, AsureMarketplace and other Asure ~~HCM~~ solutions as well as fees charged for form filings and delivery of client payroll checks and reports. These revenues are derived from ~~(i)~~ fixed amounts charged per billing period ~~plus a~~and sometimes an additional fee per employee or transaction ~~processed or (ii) fixed amounts charged per billing period.~~processed. We do not require clients to enter into long-term contractual commitments ~~with us.~~for our services. Our billing period varies by client based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. We also generate recurring revenue from our Reseller Partners that license our solutions. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues increase as our clients hire more employees. Recurring revenues are recognized in the period services are rendered.

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Recurring revenues include revenues relating to the annual processing of payroll forms, such as Form W-2 and Form 1099, and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. Because payroll forms are typically processed in the first quarter of the year and many of our clients are subject to ~~ACA~~ form filing requirements inmandated by the ~~first quarter,~~ACA, first quarter revenues and margins are generally higher than in subsequent quarters. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, we often experience increased revenues during the fourth quarter due to unscheduled payroll runs for our clients that occur before the end of the year. Therefore, we expect the seasonality of our revenue cycle to decrease to the extent clients utilize more of our non-payroll applications.

~~Professional Services, Hardware and Other Revenues~~

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

This revenue line also includes interest earned on funds held for ~~clients. We~~clients as well as revenues generated via fixed fee arrangements for provisioning and filing for ERTC credits. Interest earned is generated from funds we collect ~~funds~~ from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, commercial paper, fixed income securities and certificates of deposit until they are paid to the applicable tax or regulatory agencies or to client employees. The amount of interest we earn from the investment of client funds is also impacted by changes in interest rates. Asure also generates revenues from provisioning and filing for Earned Retention Tax Credits. Revenue generated for such activity is based on multi-year contracts with volume commitments and is recorded as recurring revenues.

~~Our~~

Recurring revenue for the year ended December 31, 2022 was ~~derived~~$86,222, an increase of $15,144, or 21%, from $71,078 for the year ended December 31, 2021. Recurring revenue increased due to organic growth within our client base, the impact of acquisitions, higher interest revenue and from the ~~following sources (Amounts in thousands):~~ AsureMarketplace™.

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)

~~Total revenue~~Professional Services, Hardware and Other Revenues

Professional Services, Hardware and Other Revenues represents ~~our consolidated revenues, including sales of our scheduling software, time and attendance and human resource software, as well as complementary~~implementation fees, one-time consulting projects, on-premise maintenance, hardware devices to enhance our software ~~products. Most product groupings include cloud revenue, hardware revenue, maintenance and support revenue, on premise software license revenue~~products as well as ~~installation and~~ERTC revenues that are transactional in nature.

Professional services, hardware and other ~~professional services revenue. Revenue mix varies by product.~~

~~Excluding~~ revenue increased $4,620, or 93%, for the year ended December 31, 2022 from ~~discontinued operations, our total revenue~~the similar period in ~~2020 was $65,507 as compared to $73,150 in 2019. Total revenue decreased by $(7,643)~~2021, ~~or (10.4)%, in 2020 as compared to 2019. Recurring revenue comprised the majority of the decrease with a decrease of $(6,751), or (9.6)%. Recurring revenue decreased primarily~~ due to ~~the impact of COVID and lower interest rates. Hardware and professional services revenue trended downward, partially offset by an increase in on premise software license revenue.~~higher ERTC revenues.

Although our total customer base is widely spread across industries, our ~~HCM~~ sales are concentrated in ~~small to mid-size businesses.~~SMBs. We continue to target ~~small and medium-sized businesses~~SMBs across industries as prospective customers. Geographically, we sell our ~~HCM~~ products primarily in the United States.

In addition to continuing to develop our workforce 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.

GrossProfit and Gross Margin

~~Margin~~

Consolidated gross profit for the year ended December 31, 2022 was ~~$38,093 in 2020 as compared to $43,314 in 2019, a decrease~~$62,510, an increase of ~~$5,221,~~$15,946, or ~~(12.1)%.~~34%, from $46,564 for the year ended December 31, 2021. Gross margin as a percentage of ~~revenues~~revenue was ~~58.2%~~65% for ~~2020 and 59.2%~~the year ended December 31, 2022 as compared to 61% for ~~2019.~~the year ended December 31, 2021. Our ~~decline~~increase in gross margin is primarily attributable to ~~lower sales volumes primarily due to COVID, a growing investment~~the increase in ~~HCM service resources~~revenue and ~~personnel, maintaining COVID related tax codes, increased amortization~~more efficient operations.

Table of ~~capitalized software costs as well as migration to secure cloud hosting services.~~Contents

Our cost of sales relates primarily to direct product costs, compensation for operations and related consulting expenses, hardware expenses, facilities and related expenses and the amortization of our purchased software development costs. We include intangible amortization related to developed and acquired technology within cost of sales.

34Sales and Marketing Expenses

~~Table~~

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

Selling ~~General~~ and ~~Administrative Expenses~~

marketing expenses for the year ended December 31, 2022 were $20,260, an increase of $4,812, or 31%, from $15,448 for the year ended December 31, 2021, primarily due to increased personnel costs, higher sales commissions owing to increased revenues and higher advertising expense. Selling ~~general~~ and ~~administrative (“SG&A”) expenses were $36,340 in 2020 as compared to $41,535 in 2019, a decrease of $5,195, or (12.5)%. SG&A~~marketing expenses as a percentage of ~~revenues were 55.5%~~revenue increased to 21% for the year ended December 31, 2022 from 20% for the same period in 2021.

We continue to expand and ~~56.8% for 2020 and 2019, respectively.~~

~~SG&A decreased due to~~increase selling costs as we focus on hiring direct sales personnel, expanding recognition of our ~~Workspace business in 2019. Our other~~brand, and lead generation.

General and Administrative Expenses

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

General and administrative expenses for the year ended December 31, 2022 were $33,924, an increase of $6,204, or 22%, from $27,720 for the year ended December 31, 2021, primarily attributable to increased personnel, contracting and bank charges. General and administrative expenses as a percentage of revenue decreased ~~partially offset~~to 35% for the year ended December 31, 2022 from 36% for the ~~transition services agreement with FM:Systems~~same period in ~~relation to the sale of the Workspace business in 2019,~~2021.

We may incur significant additional legal expenses and/or professional services-related expenses in the future if we pursue further acquisitions of products or businesses, even if we ultimately do not consummate any acquisition.continue to drive efficiencies within our payroll operations by continually reevaluating our vendor relationships.

Research and Development Expenses

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

R&D expenses for the year ended December 31, 2022 were ~~$5,959 in 2020 as compared to $5,351 in 2019,~~$6,147, an increase of ~~$608,~~$737, or ~~11.4%.~~14%, from $5,410 for the year ended December 31, 2021. The increase in R&D expense is primarily attributable to an increase in personnel costs. R&D expenses as a percentage of revenues ~~were 9.1%~~decreased to 6% for the year ended December 31, 2022 from 7% for the same period in 2021.

We will continue to enhance our products and ~~7.3%~~technologies through expansion of our technological resources by increasing headcount and development partnerships, as well as through organic improvements and acquired intellectual property. We will continue to expand the breadth of integration between our solutions, allowing direct clients and resellers the ability to easily add and implement components across our entire solution set. We believe that our expanded investment in product, engineering, SaaS hosting, mobile and hardware technologies lay the groundwork for ~~2020~~broader market opportunities and ~~2019, respectively.~~represents a key aspect of our competitive differentiation. Native mobile applications, common user interface, expanded web service integration and other technologies are all part of our initiatives.

Our development efforts for future releases and enhancements are driven by feedback received from our existing and potential customers and by gauging market trends. We believe we have the appropriate development team to design and enhance our solution suite and integrated platform. We have also made significant investments outside of core R&D into compliance and certifications, including SOC I Type 2 and SOC II Type 2 certifications, BIPA, CCPA, and other initiatives.

Amortization of Intangible Assets

Amortization expense in operating expenses ~~in 2020 were $9,547, a decrease~~for the year ended December 31, 2022 was $13,486, an increase of ~~$(2,218)~~$2,538, or 23%, ~~or (18.9)%, as compared to $11,765 in 2019.~~from $10,948 for the year ended December 31, 2021. Amortization ~~expenses~~expense as a percentage of ~~revenues were 14.6% and 16.1%~~revenue was 14% for ~~2020 and 2019, respectively. In 2019, we accelerated~~ the ~~amortization after a reassessment of the useful lives of certain trade names in relation to our rebranding efforts, resulting in an increase in amortization expense.~~

~~Impairment of Goodwill~~

There was no goodwill impairment recognized in 2020. During fiscal 2019, we determined that the estimated fair value of our HCM reporting unit was less than its carrying value. Therefore, we compared the carrying value of the reporting unit to its fair value in order to determine if an impairment exists. In addition to performing the income based approach discussed above we compared the market value of our common stock to our HCM reporting unit’s carrying value noting its carrying value exceeded market value. A non-cash, before-tax impairment charge of $35,060 was recognized to reduce the carrying amount of the goodwill to its estimated fair value as ofyears ended December 31, ~~2019.~~2022 and 2021, respectively.

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Interest Expense and Other, ~~net~~Net

Interest expense and other, net ~~was $(2,221)~~ for the year ended ~~2020 as~~December 31, 2022 was an expense of $4,438 compared to ~~$(16,005) in~~an expense of $2,038 for the year ended ~~2019.~~December 31, 2021. The increase in interest expense and other, net relative to the prior year is attributable to higher average borrowings under our credit facility with Structural Capital Investments III LP. Interest expense and other, net ~~is primarily comprised~~as a percentage of ~~interest~~revenue was an expense ~~on notes payable.~~of 5% and 3% for the years ended December 31, 2022 and December 31, 2021, respectively. Interest ~~expense and other~~expenses for the year ended ~~2019~~December 31, 2022 and 2021 is composed primarily of interest expense on notes payable.

Gain on Extinguishment of Debt

There was no gain on extinguishment of debt for the year ended December 31, 2022, compared with a gain of $8,312 for the year ended December 31, 2021. The gain in 2021 was primarily related to the forgiveness of an unsecured Paycheck Protection Program (“PPP”) loan from Pinnacle Bank (the “Lender”) under the Coronavirus Aid, Relief and Economic Security Act. In June 2021, we received notice from our Lender that the Small Business Administration (“SBA”) had approved our application for forgiveness of our PPP loan. The amount forgiven was $8,654.

Employee Retention Tax Credit

There was no Employee Retention Tax Credit (“ERTC”) recorded for the year ended December 31, 2022. An ERTC of $10,533 was recorded in the year ended December 31, 2021. The ERTC is a refundable tax credit against certain employment taxes provided under the CARES Act. We qualified for the ERTC in 2021 and recorded an aggregate benefit of $10,533 in the third quarter of 2021.

Income Taxes

AtFor the year ended December 31, ~~2020,~~2022 and 2021, we had federal net operating loss carryforwards of approximately $48,435, and research and development (R&D) credit carryforwards of approximately $3,579. The net operating loss and R&D credit carryforwards will expire in varying amounts from 2021 through 2040, if not utilized.

~~Income~~recorded an income tax expense attributable to continuing operations ~~increased from $(24,111) in 2019 to $337 in 2020,~~of $112 and $802, respectively, a ~~$(24,448),~~decrease of $690 or (101.4)%, decrease. These figures represent an effective tax rate of (2.1)% and 36.3% in 2020 and 2019, respectively. In 2020, we recorded income tax expense from continuing operations primarily due to deferred taxes on the amortization of goodwill for tax purposes.

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

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

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~~have net deferred tax liabilities. During 2020, we increased the valuation allowance by approximately $1,688 due primarily to operations.~~86%.

Income (Loss) From Operations

We incurred a loss from operations of $(14,466), or $(0.72) per share, during the year ended December 31, 2022, compared to income from operations of $3,193, or $0.17 per share, during the years ended December 31, 2021. Loss and income from operations as a percentage of total revenues was (15)% and 4% for the years ended December 31, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES ~~(Amounts~~ (in thousands)

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)


	December 31, 2022		December 31, 2021
Cash and cash equivalents(1)	$	17,010	$	13,427

(1)This balance excludes cash equivalents in funds held for clients

Working Capital. We had working capital of ~~$8,208~~$8,093 at December 31, ~~2020,~~2022, a decrease of ~~$9,646~~$8,913 from ~~$17,854~~working capital of $17,006 at December 31, ~~2019. We attribute the increase in our working capital primarily to an increase in cash and cash equivalents due to the divestiture of our Workspace Management business.~~2021. Working capital atas of December 31, ~~2020~~2022 and December 31, 2021 includes ~~$5,838~~$8,461 and $3,750 of ~~short term~~short-term deferred revenue, ~~an increase in short term deferred revenue of $338 compared to December 31, 2019.~~respectively. 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.

Operating Activities. Net cash ~~used~~provided by operating activities of $13,674 for the year ended December 31, 2022 was primarily driven by non-cash adjustments to our net loss of approximately $22,875. This was offset by changes in operating ~~activities was $1,707~~assets and liabilities, which resulted in ~~2020. The $1,707~~cash provided of $5,265. Net cash provided by operating activities ~~during 2020~~of $1,378 for the year ended December 31, 2021 was ~~primarily~~ driven ~~by our net loss of $16,311 and increases in deferred revenue of $128, and decreases in accrued expenses and other long-term obligations of $4,596. This was offset~~ by non-cash adjustments to our net income of ~~$20,908, decreases in accounts receivable of $1,118~~approximately $12,975, primarily due to depreciation and ~~increases in inventory of $11, and decreases in accounts payable of $448 and $911 of prepaid expenses and other assets.~~

~~Net cash used in operating activities was $(4,117) in 2019. The $(4,117) of cash used in operating activities during 2019, including discontinued operations, was primarily driven~~amortization, offset by our net income of ~~$30,001~~$3,193. For the year ended December 31, 2021, changes in operating assets and ~~increases~~liabilities resulted in ~~deferred revenue~~a use of ~~$5,662, and accrued expenses and other long-term obligations~~$14,790 in cash.

Table of ~~$5,649. This was offset by non-cash adjustments of $(35,215), increases in accounts receivable of $1,446 and inventory of $1,581, and a decrease in accounts payable of $3,174.~~Contents

Investing Activities. Net cash used in investing activities ~~during 2020 was $(201,134),~~of $35,999 for the year ended December 31, 2022 is primarily due to purchases of available-for-sale securities of $37,232. Net cash used in investing activities of $36,970 for the year ended December 31, 2021 is primarily due to the ~~net change in funds held for clients~~purchase and our acquisitions of 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.~~available-for-sale securities as well as acquisitions.

Financing Activities. Net cash ~~provided by~~used in financing activities was $12,376 for the year ended December 31, 2022, which primarily consisted of ~~$202,592 in 2020 was primarily due to the~~a net ~~change~~decrease in client ~~funds~~fund obligations of ~~$184,823, net proceeds from issuance~~$11,055 and payments of ~~our common stock of $21,392, and proceeds from note~~notes payable of ~~$8,856, partial offset by payments of our note payables of $12,234.~~

$1,688. Net cash used in financing activities was $90,650 for the year ended December 31, 2021, which primarily consisted of ~~$(68,018)~~a net decrease in ~~2019 was primarily due to the payments~~client fund obligations of ~~our notes payable and debt financing costs.~~$103,434.

Sources of Liquidity. As of December 31, ~~2020, Asure’s~~2022, the Company’s principal sources of liquidity consisted of approximately ~~$28,577~~$17,010 of cash, ~~and~~ cash equivalents ~~future~~and restricted cash, and cash generated from operations of our business over ~~the next~~ twelve months, and ~~$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~~$3,457 of Employee Retention Tax Credit cash for our operational needs for at least the next twelve 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 acquisitionsreceived 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.

~~Underwriting Agreement~~

In December 2020, we completed an underwritten public offering 2,990,000 shares of our common stock at a public offering price of $7.25. We realized gross proceeds of approximately $21,700 before deducting underwriting discounts and estimated offering expenses.

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~~Credit Agreement~~

Due to the effects of COVID-19 on our business, we were not in compliance with our minimum EBITDA financial covenant as of March 31, 2020. This covenant was set in December 31, 2019, before the COVID-19 pandemic and its possible effects on our business were known to our senior lender or us. On July 10, 2020, our senior lender issued a reservation of rights letter related to our failure to comply with the minimum EBITDA financial covenant, along with other technical defaults. Following this default, we negotiated and entered a waiver and amendment to our Credit Agreement and our Amended and Restated Guaranty and Security Agreement (the “Amendment”) on August 10, 2020.

The Amendment reduced our facility from $30,000 to $15,000, consisting of $10,000 in term loans and a $5,000 revolver. As a result, we were required to make a principal payment of $9,750 on our outstanding term loans. The Amendment provides for an accordion feature to our term loan that would allow us to borrow up to an additional $15,000 in term loans subject to certain conditions following the Covenant Conversion Date, which is described below.

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

The Amendment does not require that we meet our fixed charge ratio or leverage ratio covenant until the Covenant Conversion Date. The Coverage Conversion Date is the earlier of August 10, 2022 or the date in which we have satisfied the fixed charge coverage ratio and leverage ratio for two consecutive reporting periods. Until such time, we are only obligated to comply with our minimum EBITDA and minimum recurring revenue covenants.

In addition to the requirement that we pay $9,750 on our outstanding term loans, we were also required to pay our senior lender an amendment fee of $225. Our senior lender waived any prepayment penalty that would have otherwise been due on the $9,750 payment toward our term loan and agreed that we would not owe a prepayment penalty if we were to refinance our facility before December 31, 2020. Finally, as a condition to the amendment, our senior lender required that we agree to obtain lender consent for any acquisitions until the later of August 10, 2021 or the Covenant Conversion Date. Previously certain types of acquisitions were deemed permitted acquisitions, which did not require our lender’s consent. We do not anticipate an issue with obtaining consent from our lender for accretive acquisitions.

We had sufficient cash on hand to make the required payment of $9,750 in connection with the Amendment and expect to have enough cash on hand to meet our future business needs. Further, we expect to comply with our financial covenants in future quarters under the Credit Agreement, as amended by the Amendment.

Also, due to the effects of Covid-19 on our business and the related need to support our operations, we applied for and received a loan from Pinnacle Bank under the Paycheck Protection Program during the second quarter of 2020. Under the terms of our note with Pinnacle Bank, principal payments would have begun in November 2020. However, the Small Business Administration, who administers loans issued under the Paycheck Protection Program, has issued guidance, deferring all payments that would be owed on this loan until the Small Business Administration makes a decision on our loan forgiveness application. While we expect that the entire loan will be forgiven, we cannot be certain that the Small Business Administration will grant forgiveness of our entire loan. If we do not receive forgiveness of our entire loan, we will be obligated to begin repaying the portion of the principal and interest that is not forgiven such that it is fully paid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank. Further, if the portion of the PPP Loan that is not forgiven (the “Unforgiven Debt”) exceeds $3,250 or requires monthly payments of principal and interest in excess of $185, it is likely we will be in default under our Credit Agreement unless we obtain a waiver from our senior lender or are otherwise able to negotiate acceptable terms with our senior lender and Pinnacle Bank. We applied our initial application for forgiveness of this loan in December 2020 and completed this application in early Febuary 2021. Given this, we expect that payments we may owe, if any, would not start until second quarter of 2021. Under GAAP, we are required to report this entire loan as outstanding debt in our financial statements and further identify the current portion of this debt (e.g. amounts which would be payable in the next 12 months) with reference to the actual terms of our note with Pinnacle Bank. Notwithstanding how this loan is reported in our financial statements, we do not expect to make any payments on this note until at least second quarter of 2021, and then only to the extent that any portion of this note is not forgiven in accordance with the terms of the Paycheck Protection Program.

As of December 31, ~~2020 and~~2022. Additionally, $7,076 of Employee Retention Tax Credit cash was received subsequent to December 31, ~~2019, no amount was outstanding and $4,500 and $10,000, respectively, was available for borrowing under the revolver.~~2022.

As of December 31, 2020, we are in compliance with our 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.

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~~See Note 6 - Notes Payable in the accompanying consolidated financial statements for more information about the Credit Agreement.~~

We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. However, we believe to have sufficient liquidity as of December 31, 2022 to support our business operations for the next 12 months. We may need to raise additional capital in the future in order to grow our existing software operations and to ~~seek~~seem additional strategic acquisitions in the near future. However, we cannot ~~assure~~ensure that we will be able to raise additional capital on acceptable terms, or at all.

CRITICAL ACCOUNTING POLICIES

We have prepared our ~~consolidated financial statements~~Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles and included the accounts of our wholly owned subsidiaries. We have eliminated all significant intercompany transactions and balances in the consolidation. Preparation of the ~~consolidated financial statements~~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-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.

~~We believe the following are our critical accounting policies:~~

Revenue Recognition

Our revenue consists of software-as-a-service (“SaaS”) offerings and time-based software subscription license agreements 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.

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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 Accounting 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.

We recorded a $1,500 cumulative effect adjustment to opening retained earnings 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~~Under the new standard, these costs are now capitalized as deferred commissions and amortized over the estimated customer life of five to ten years.

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The terms of our contracts with customers range from month to month for some Asure HCM direct clients to longer terms ranging from one to three years, some of which are renewable for successive terms. A ~~typical~~ SaaS/software subscription arrangement ~~will~~may 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 Recurring revenue on the Consolidated ~~Statement~~Statements of Comprehensive ~~Loss.~~Income (Loss). Revenues generated via fixed fee arrangements for provisioning and filing for Employee Retention Tax Credits with referral partners are also recorded as recurring revenue. Revenue allocated to other performance obligations included in the arrangement is recognized as outlined in the paragraphs below.

Hardware devices sold to customers 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”)~~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~~Statements of Comprehensive ~~Loss.~~Income (Loss).

Our professional services offerings typically include data migration, set up, training, and implementation services. Set up and implementation services typically occur at the start of the software arrangement while certain other professional services, depending on the nature of the services and customer requirements, may occur several months later. We can reasonably estimate professional services performed for a fixed fee and we recognize allocated revenue on an output basis on a proportional performance basis as the service is provided. We recognize allocated revenue on an output basis for professional services engagements billed on a time and materials basis as the service is provided. We recognize allocated revenue on an output basis on all other professional services engagements upon the earlier of the completion of the service’s deliverable or the expiration of the customer’s right to receive the service. Revenues generated for provisioning and filing for ERTC credits that are based on percentage of recovery are recorded as professional services revenues. Revenue recognized from professional services offerings are reported as Professional service revenue on the Consolidated ~~Statement~~Statements of Comprehensive ~~Loss.~~Income (Loss).

We recognize allocated revenue for ~~maintenance/~~maintenance and support on an output basis ratably over the non-cancellable term of the support agreement. Initial ~~maintenance/~~maintenance and support terms are typically one to three years and are renewable on an annual basis. Revenue recognized from ~~maintenance/~~maintenance and support are reported as Maintenance and support revenue on the Consolidated ~~Statement~~Statements of Comprehensive Income (Loss).

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~~Reseller Partners do not allow for any rights of return.

Our payment terms vary by the type of customer and the customer’s payment history and the products or services offered. The term between invoicing and when payment is due is not significant and as such our contracts do not include a significant financing component. The transaction prices of our contracts do not include consideration amounts that are variable and do not include noncash consideration.

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Deferred revenue includes amounts invoiced to customers in excess of revenue we recognize, and is comprised of deferred SaaS/software, HaaS, Maintenance and support, ~~and~~ Professional services revenue and ERTC revenue. We recognize deferred revenue when we complete the service and over the terms of the arrangements, primarily ranging from one to three years.

Intangible Assets and Goodwill

We record the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Valuation of intangible assets and in-process research and development entails significant estimates and assumptions including, but not limited to, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the continuation of customer relationships and renewal of customer ~~contracts and approximating the useful lives of the intangible assets acquired.~~contracts. U.S. generally accepted accounting principles (“GAAP”) require that we not amortize intangible assets other than goodwill with an indefinite life until we determine their life as finite. We must amortize all other intangible assets over their useful lives. We currently amortize our acquired intangible assets with definite lives over periods ranging from one to nine years. We have assessed the fair value of our customer relationship intangible assets as of December 31, ~~2020,~~2022, 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.

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Impairment of Intangible Assets and Long-Lived Assets

In accordance with 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.

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired in a business combination. We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. There ~~has been~~was no impairment of goodwill 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.~~either 2022 or 2021.

Income Taxes

We account for income taxes using the liability method under ASC 740, Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements. Under the liability method, we determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which we expect the differences to reverse. We reduce deferred tax assets by a valuation allowance when it is more likely than not that we will not realize some component or all of the deferred tax assets.

~~See Note 2 – Significant Account Policies in the accompanying consolidated financial statements for more information about Recent Accounting Pronouncements.~~

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have operations in the United States, ~~and internationally,~~ and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange, inflation and counterparty risks, as well as risks relating to changes in the general economic ~~conditions in the countries where we conduct business.~~conditions. To reduce certain of these risks, we monitor the financial condition of our large clients and limit credit exposure by principally collecting in advance and setting credit limits as we deem appropriate. In addition, our investment strategy has been to invest in financial instruments, including U.S. treasury securities and money market funds backed by United States Treasury Bills within the guidelines established under our investment policy. ~~We also make strategic investments in privately-held companies in the development stage.~~ To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives for trading or speculative purposes.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

~~The financial statements and supplementary data required by this Item 8 are listed in Items 15(a)(1) and (2) of Part IV of this Report (Exhibits, Financial Statement Schedules~~).

~~Table of Contents~~

~~ITEM 9A. CONTROLS AND PROCEDURES~~

~~Evaluation of Disclosure Control and Procedures~~

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

~~Management’s Report on Internal Control over Financial Reporting~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

~~Remediation of Material Weakness in Internal Control Over Financial Reporting~~

During the fourth quarter of 2019, Management identified a deficiency related to the design effectiveness of the Company's controls surrounding the safeguarding of assets. Specifically, the Company did not maintain appropriate access to certain systems and did not maintain appropriate segregation of duties related to processes associated with those systems.

Management has implemented measures designed to remediate the material weakness. The remediation actions include: (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.

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

~~Changes in Internal Control Over Financial Reporting~~

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

~~ITEM 9B. OTHER INFORMATION~~

~~None~~

~~Table of Contents~~

~~PART III~~

~~ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT~~

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

~~ITEM 11. EXECUTIVE COMPENSATION~~

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the headings “Executive Compensation,” “Equity Compensation Plan Information” and “Non-Employee Director Compensation Table.”

~~ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the heading “Security Ownership of Certain Beneficial Owners and Management.”

~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

The information required under this Item is incorporated by reference to the information set forth in our definitive proxy statement for our 2021 annual meeting of shareholders under the heading “Approval of Transactions with Related Parties.”

~~ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

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

~~Table of Contents~~

~~PART IV~~

~~ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~

~~(a) Financial Statements and Financial Statement Schedules~~

~~(1) Financial Statements:~~

~~Report of Independent Registered Public Accounting Firm~~

~~Consolidated Financial Statements~~

~~Consolidated Balance Sheets as of December 31, 2020 and 2019~~

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

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

~~Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019~~

~~Notes to Consolidated Financial Statements~~

~~(2) Financial Statement Schedules:~~

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

~~(b) Exhibits~~


~~EXHIBIT NUMBER~~		~~DOCUMENT DESCRIPTION~~
~~2.1~~	~~Asset and Equity Purchase Agreement, dated as of October 7, 2019, between Asure Software, Inc., FM Systems Group, LLC and FMS Bidco UK Limited**(1~~0 )
~~2.2~~	~~Asset Purchase Agreement among Asure Payroll Tax Management LLC, Payroll Tax Management, Inc., Financial Business Group Holdings, and Alden J. Blowers, dated as of July 1, 2020 (1~~8 )
~~3.1~~	~~Restated Certificate of Incorporation (2)~~
~~3.2~~	~~Certificate of Amendment to Certificate of Incorporation (1~~7 )
~~3.3~~	~~Third Amended and Restated Bylaws (~~9 )
~~3.4~~	~~Amendment to No. 1 to Third Amended and Restated Bylaws~~(1 3 )
~~4.1~~	~~Specimen Certificate for the Common Stock (4)~~
~~4.2~~	~~Second Amended and Restated Rights Agreement, dated as of April 17, 2019 between Asure Software, Inc. and American Stock Transfer & Trust Company (5)~~
~~4.3~~	~~Letter Agreement from Patrick Goepel relating to forfeiture of option rights (1)~~
~~4.4†~~	~~Stock Option Agreement for Patrick Goepel (1)~~
~~4.5~~	~~Intentionally omitted~~
~~4.6~~	Description of the Company’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934* ~~(12)~~
~~10.1~~	~~Intentionally omitted~~
~~10.2~~	~~Intentionally omitted~~
~~10.3~~	~~Intentionally omitted~~
~~10.4†~~	~~Stock Purchase Agreement dated September 25, 2009 with Patrick Goepel (~~6 )
~~10.5†~~	~~Amended and Restated Employment Agreement dated July 2, 2011 with Patrick Goepel (1)~~
~~10.6~~	~~Intentionally omitted~~
~~10.7~~	~~Intentionally omitted~~
~~10.8~~	~~Intentionally omitted~~
~~10.9~~	~~Intentionally omitted~~

~~Table of Contents~~


~~10.10~~			~~Intentionally omitted~~
~~10.11~~			Third Amended Restated Credit Agreement dated as of December 31, 2019, by the lenders identified by the Signature Pages thereto, Wells Fargo Bank, National Association, as Administrative Agent, and Asure Software, Inc. (7 )
~~10.12~~			Amendment No. 1 To Third Amended and Restated Credit Agreement, dated February 21, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (1 6 )
~~10.13~~			Amendment No. 2 To Third Amended and Restated Credit Agreement, dated April 24, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (1 6 )
~~10.14~~			Waiver and Amendment No. 3 To Third Amended and Restated Credit Agreement, dated June 30, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (19 )
~~10.15~~			~~Waiver and Amendment No. 4 to Third Amended and Restated Credit Agreement and Amendment No. 2 to theAmended and Restated Guaranty and Security Agreement, dated August 10, 2020, by and among AsureSoftware, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent foreach member of the Lender Group and the Bank Product Providers identified on the signature pages thereto (~~19 )
~~10.16~~			~~Intentionally omitted~~
~~10.17~~			~~Intentionally omitted~~
~~10.18~~			~~Intentionally omitted~~
~~10.19†~~			~~Employee Stock Purchase Plan, as amended on May 27, 2020 (1~~5 )
~~10.20~~			~~Intentionally omitted~~
~~10.21~~			~~Intentionally omitted~~
~~10.23~~			~~Intentionally omitted~~
~~10.24~~			~~Intentionally omitted~~
~~10.25~~			~~Intentionally omitted~~
~~10.26†~~			~~Form of Indemnification Agreement (8)~~
~~10.27†~~			~~Executive Change in Control Severance Plan (8)~~
~~10.28~~			~~Intentionally omitted~~
~~10.29~~			~~Intentionally omitted~~
~~10.30~~			~~Asure Software, Inc. 2018 Incentive Award Plan, as amended on March 29, 2019 (16)~~
~~10.31~~			Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2018 Incentive Award Plan*
~~10.32~~			Form of Stock Option Grant Notice and Stock Option Agreement under the 2018 Incentive Award Plan*
~~10.33~~			~~Transition Services Agreement, dated as of December 2, 2019, between Asure Software, Inc. and FM Systems Group, LLC (1~~1 )
~~10.34~~			~~General Release and Separation Agreement between Asure Software, Inc. and Kelyn J. Brannnon, dated August 11, 2020 (2~~0 )
~~10.35~~			~~Promissory Note, dated April 15, 2020, between Asure Software, Inc. and Pinnacle Bank (1~~4 )
~~10.36~~			~~Underwriting Agreement, dated December 18, 2020, between Asure Software, Inc. and Roth Capital Partners,LLC, as representative (2~~1 )
~~14.1~~			~~Code of Business Conduct and Ethics (3)~~
~~21.1~~			Subsidiaries of the Company*
~~23.1~~			Consent of Marcum LLP*
~~31.1~~			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
~~31.2~~			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
~~32.1~~			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished, not filed)*

~~Table of Contents~~


~~32.2~~			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished, not filed)*
~~101~~			The following materials from Asure Software, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Income (Loss), (3) the Consolidated Statements of Cash Flows, and (4) Notes to Consolidated Financial Statements.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



†Page			~~Management contract or compensatory plan or arrangement required to be filed as an Exhibit to the Annual Report on Form 10-K~~
*			~~Filed herewith~~
**			~~Schedules and similar attachments to the agreement has been omitted pursuant to Item 601(b)(2) of Regulation S-K.~~

~~(1) 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.~~

~~(2) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2017 filed with the SEC on May 11, 2017.~~

~~(3) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2012.~~

~~(4) Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 filed with the SEC on December 13, 2012.~~

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

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

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

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

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

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

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

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

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

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

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

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

~~filed with the SEC on May 11, 2020.~~

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

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

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

~~filed with the SEC on August 10, 2020.~~

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

~~Table of Contents~~

~~2020 filed with the SEC on November 9, 2020.~~

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

~~Table of Contents~~

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

4734

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Asure Software, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Asure Software, Inc. (the “Company”) as of December 31, ~~2020~~2022 and ~~2019,~~2021, the related consolidated statements of comprehensive income ~~operations,~~(loss), changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, ~~2020,~~2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2020~~2022 and ~~2019,~~2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2020,~~2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit ~~matter~~matters communicated below ~~is a matter~~are matters arising from the current period audit of the financial statements that ~~was~~were communicated or required to be communicated to the audit committee and that: (1) ~~relates~~relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit ~~matter does~~matters do not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit ~~matter~~matters below, providing separate opinions on the critical audit ~~matter~~matters or on the accounts or disclosures to which they relate.

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

As described in Note 1 to the ~~consolidated~~ financial statements, the Company performed a recoverability test of its long-lived assets by comparing the estimated future cash flows from its asset group to its carrying value. As described in Note 5 to the ~~consolidated~~ financial statements, the Company performed its annual evaluation of goodwill for impairment by comparing the estimated fair value of the reporting unit to its carrying value. The Company determined that as of the valuation date there was only one asset group and one reporting unit. The Company used a discounted cash flow model to estimate the fair value of the reporting ~~unit,~~unit. The Company’s cash flow model used to test the recoverability of its long-lived assets and evaluate goodwill for impairment requires management to make subjective estimates and assumptions, particularly related to the forecast of future revenues.

Table of Contents

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

~~F-1~~

~~Table of Contents~~

management’s identification of reporting unit and asset group, and management’s estimates and assumptions used in the forecasts and discounted cash flow ~~models.~~models, and the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating evidence in connection with forming our overall audit opinion on the ~~consolidated~~ financial statements. These procedures included, among others, (i) evaluating management’s determination of a single reporting unit; (ii) evaluating management’s determination of a single asset group; and (iii) testing management’s process of estimating forecasted cash flows by comparing the forecasts to historical results, internal communications to management and board of directors, forecast information included in analyst and industry reports for the Company, and other macroeconomic indicators. In addition, our procedures to evaluate the recoverability of goodwill included a sensitivity analysis of the implied control premium by comparing the fair value determined by the Company against the market capitalization of the Company at the valuation date.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the fair value of the reporting unit

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2016.

~~Costa Mesa,~~Los Angeles, California

~~March 11, 2021~~February 27, 2023

~~F-2~~36

Table of Contents

ASURE SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(~~Amounts~~ in ~~thousands)~~thousands, except per share amounts)


		December 31, 2020		December 31, 2019			December 31, 2022			December 31, 2021
Assets
									December 31, 2022			December 31, 2021
ASSETS						ASSETS
Current assets:	Current assets:					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
Cash, cash equivalents, and restricted cash						Cash, cash equivalents, and restricted cash	$	17,010		$	13,427
Accounts receivable, net of allowance for doubtful accounts of $3,248 and $2,210 at December 31, 2022 and December 31, 2021, respectively						Accounts receivable, net of allowance for doubtful accounts of $3,248 and $2,210 at December 31, 2022 and December 31, 2021, respectively	12,123			5,308
Inventory	Inventory	449		656		Inventory	251			246
Prepaid expenses and other current assets	Prepaid expenses and other current assets	3,284		8,551		Prepaid expenses and other current assets	10,304			13,475
Total current assets before funds held for clients	Total current assets before funds held for clients	37,162		42,841		Total current assets before funds held for clients	39,688			32,456
Funds held for clients	Funds held for clients	321,069		126,625		Funds held for clients	203,588			217,376
Total current assets	Total current assets	358,231		169,466		Total current assets	243,276			249,832
Property and equipment, net	Property and equipment, net	8,281		7,867		Property and equipment, net	11,439			8,945
Goodwill	Goodwill	73,958		68,697		Goodwill	86,011			86,011
Intangible assets, net	Intangible assets, net	64,552		63,850		Intangible assets, net	66,594			78,573
Operating lease assets, net	Operating lease assets, net	6,450		6,963		Operating lease assets, net	7,065			5,748
Other assets		3,951		3,224
Other assets, net						Other assets, net	5,523			4,136
Total assets	Total assets	$	515,423	$	320,067	Total assets	$	419,908		$	433,245
Liabilities and stockholders’ equity
LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of notes payable	Current portion of notes payable	$	12,310	$	2,571	Current portion of notes payable	$	4,106		$	1,907
Accounts payable	Accounts payable	1,288		1,736		Accounts payable	2,194			565
Accrued compensation and benefits	Accrued compensation and benefits	2,916		3,424		Accrued compensation and benefits	5,791			3,568
Operating lease liabilities, current	Operating lease liabilities, current	1,833		1,575		Operating lease liabilities, current	1,860			1,551
Other accrued liabilities	Other accrued liabilities	1,380		6,556		Other accrued liabilities	3,728			2,436
Contingent purchase obligation		3,880		0
Contingent purchase consideration						Contingent purchase consideration	2,955			1,905
Deferred revenue	Deferred revenue	5,838		5,500		Deferred revenue	8,461			3,750
Total current liabilities before client fund obligations	Total current liabilities before client fund obligations	29,445		21,362		Total current liabilities before client fund obligations	29,095			15,682
Client fund obligations	Client fund obligations	320,578		130,250		Client fund obligations	206,088			217,144
Total current liabilities	Total current liabilities	350,023		151,612		Total current liabilities	235,183			232,826
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Deferred revenue	Deferred revenue	111		322		Deferred revenue	788			36
Deferred tax liability	Deferred tax liability	888		336		Deferred tax liability	1,503			1,595
Notes payable, net of current portion and debt issuance cost		12,225		24,142
Notes payable, net of current portion						Notes payable, net of current portion	30,795			33,120
Operating lease liabilities, noncurrent	Operating lease liabilities, noncurrent	5,366		5,937		Operating lease liabilities, noncurrent	6,459			4,746
Contingent purchase consideration						Contingent purchase consideration	—			2,424
Other liabilities	Other liabilities	1,157		139		Other liabilities	114			258
Total long-term liabilities	Total long-term liabilities	19,747		30,876		Total long-term liabilities	39,659			42,179
Total liabilities	Total liabilities	369,770		182,488		Total liabilities	274,842			275,005
Commitments and Contingencies (Notes 2 and 15)		0		0
Stockholders’ equity:	Stockholders’ equity:					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)
Preferred stock, $0.01 par value; 1,500 shares authorized; none issued or outstanding						Preferred stock, $0.01 par value; 1,500 shares authorized; none issued or outstanding	—			—
Common stock, $0.01 par value; 44,000 shares authorized; 20,628 and 20,412 shares issued, 20,244 and 20,028 shares outstanding at December 31, 2022 and December 31, 2021, respectively						Common stock, $0.01 par value; 44,000 shares authorized; 20,628 and 20,412 shares issued, 20,244 and 20,028 shares outstanding at December 31, 2022 and December 31, 2021, respectively	206			204
Treasury stock at cost, 384 shares at December 31, 2022 and December 31, 2021						Treasury stock at cost, 384 shares at December 31, 2022 and December 31, 2021	(5,017)			(5,017)
Additional paid-in capital	Additional paid-in capital	419,827		396,102		Additional paid-in capital	433,586			429,912
Accumulated deficit	Accumulated deficit	(269,954)		(253,642)		Accumulated deficit	(281,226)			(266,760)
Accumulated other comprehensive loss		604		(25)
Accumulated other comprehensive income						Accumulated other comprehensive income	(2,483)			(99)
Total stockholders’ equity	Total stockholders’ equity	145,653		137,579		Total stockholders’ equity	145,066			158,240
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	515,423	$	320,067	Total liabilities and stockholders’ equity	$	419,908		$	433,245


~~(512) 437-2700~~512-437-2700
(Registrant’s Telephone Number, including Area Code)
None
(Former name, former address and former fiscal year, if changed since last report)


		Page
PART I

Item 1.	Business	3
Item 1A.	Risk Factors	98
Item 1B.	Unresolved Staff Comments	2824
Item 2.	Properties	2824
Item 3.	Legal Proceedings	2824
Item 4.	Mine Safety Disclosures	2824

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2925
Item 6.	~~Selected Financial Data~~Reserved	2925
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3026
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	4033
Item 8.	Financial Statements and Supplementary Data	4033
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	4162
Item 9A.	Controls and Procedures	4162
Item 9B.	Other Information	4162
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	62

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	4263
Item 11.	Executive Compensation	4263
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	4263
Item 13.	Certain Relationships, ~~and~~ Related Transactions and Director Independence	4263
Item 14.	Principal Accountant Fees and Services	4263

PART IV

Item 15.	Exhibits and Financial Statement Schedules	4364
Item 16.	Form 10-K Summary	4465

Signatures and Certifications		4567


~~FUNCTION~~			NUMBER OF EMPLOYEES

~~Research and development~~			70
~~Sales and marketing~~			98
~~Customer service and technical support~~			~~221~~
~~Finance, human resources and administration~~			93
~~Total~~			~~482~~


			~~PAGE~~

Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)			F-135
~~Financial Statements:~~
Consolidated Balance Sheets ~~as of December 31, 20~~2 0 ~~and 20~~19			F-337

Consolidated Statements of Comprehensive Income (Loss) ~~for the Years Ended December 31, 20~~2 0 ~~and 20~~1 9			F-438

Consolidated ~~Statements of~~ Changes in Stockholders’ Equity ~~for the Years Ended December 31, 20~~2 0 ~~and 20~~19			F-539

Consolidated Statements of Cash Flows ~~for the Years Ended December 31, 20~~2 0 ~~and 20~~19			F-640

Notes to the Consolidated Financial Statements			F-842


		Years Ended December 31					Year Ended December 31,
		2020		2019			2022		2021
Revenue:	Revenue:					Revenue:
Recurring	Recurring	$	63,315	$	70,066	Recurring	$	86,222	$	71,078
Professional services, hardware and other	Professional services, hardware and other	2,192		3,084		Professional services, hardware and other	9,606		4,986
Total revenue	Total revenue	65,507		73,150		Total revenue	95,828		76,064
Cost of sales		27,414		29,836
Cost of Sales						Cost of Sales	33,318		29,500
Gross profit	Gross profit	38,093		43,314		Gross profit	62,510		46,564
Operating expenses
Selling, general and administrative		36,340		41,535
Operating expenses:						Operating expenses:
Sales and marketing						Sales and marketing	20,260		15,448
General and administrative						General and administrative	33,924		27,720
Research and development	Research and development	5,959		5,351		Research and development	6,147		5,410
Amortization of intangible assets	Amortization of intangible assets	9,547		11,765		Amortization of intangible assets	13,486		10,948
Impairment of goodwill		0		35,060
Total operating expenses	Total operating expenses	51,846		93,711		Total operating expenses	73,817		59,526
Loss from operations	Loss from operations	(13,753)		(50,397)		Loss from operations	(11,307)		(12,962)
Interest expense and other, net						Interest expense and other, net	(4,438)		(2,038)
Gain on extinguishment of debt						Gain on extinguishment of debt	—		8,312
Employee retention tax credit						Employee retention tax credit	—		10,533
Other income, net						Other income, net	1,391		150
(Loss) income from operations before income taxes						(Loss) income from operations before income taxes	(14,354)		3,995
Income tax expense						Income tax expense	112		802
Net (loss) income						Net (loss) income	(14,466)		3,193
Other comprehensive loss:						Other comprehensive loss:
Unrealized loss on marketable securities						Unrealized loss on marketable securities	(2,384)		(703)
Comprehensive (loss) income						Comprehensive (loss) income	$	(16,850)	$	2,490

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 and diluted (loss) earnings per share						Basic and diluted (loss) earnings per share
Basic	Basic	$	(1.03)	$	(2.73)	Basic	$	(0.72)	$	0.17
Diluted	Diluted	$	(1.03)	$	(2.73)	Diluted	$	(0.72)	$	0.16
Basic and diluted net income (loss) per share
Basic		$	(1.03)	$	1.93
Diluted		$	(1.03)	$	1.93

Weighted average basic and diluted shares	Weighted average basic and diluted shares					Weighted average basic and diluted shares
Basic	Basic	15,910,000		15,511,000		Basic	20,117		19,313
Diluted	Diluted	15,910,000		15,511,000		Diluted	20,117		19,509


☒			~~ANNUAL REPORT PURSUANT TO SECTION~~Annual Report Pursuant to Section 13 ORor 15(d) ~~OF THESECURITIES EXCHANGE ACT OF~~of the Securities Exchange Act of 1934 for the calendar year ended December 31, 2022


☐			~~TRANSITION REPORT PURSUANT TO SECTION~~Transition Report Pursuant to Section 13 ORor 15(d) ~~OF THE~~of the Securities Exchange Act of 1934 for the transition period from __ to __~~SECURITIES EXCHANGE ACT OF 1934~~


	A	B		C
Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options and Release of Nonvested RSUs	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)(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


	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)


	Common Stock Outstanding	Common Stock Amount		Treasury Stock		Additional Paid- in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
BALANCE 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


	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, 2020	18,970	$	193	$	(5,017)	$	419,827	$	(269,953)	$	604	$	145,654
Stock issued upon option exercise and vesting of restricted stock units	235	2		—		359		—		—		361
Stock issued, ESPP	56	1		—		339		—		—		340
Stock issued — acquisitions	767	8		—		6,420						6,428
Share based compensation	—	—		—		2,990		—		—		2,990
Share issuance costs	—	—		—		(23)		—		—		(23)
Net income	—	—		—		—		3,193		—		3,193
Other comprehensive loss	—	—		—		—		—		(703)		(703)
Balance at December 31, 2021	20,028	$	204	$	(5,017)	$	429,912	$	(266,760)	$	(99)	$	158,240

Stock issued upon option exercise and vesting of restricted stock units	136	$	1	$	—	$	89	$	—	$	—	$	90
Stock issued, ESPP	80	1		—		406		—		—		407
Stock issued — acquisitions	—	—		—		—		—		—		—
Share based compensation	—	—		—		3,179		—		—		3,179
Share issuance costs	—	—		—		—		—		—		—
Net loss	—	—		—		—		(14,466)		—		(14,466)
Other comprehensive loss	—	—		—		—		—		(2,384)		(2,384)
Balance at December 31, 2022	20,244	$	206	$	(5,017)	$	433,586	$	(281,226)	$	(2,483)	$	145,066


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


Level 1:						Quoted prices 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; and

Level 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.


	Total Carrying Value		Level 1		Level 2		Level 3
December 31, 2022
Assets:
Funds held for clients
Money market funds	$	2,829	$	2,829	$	—	$	—
Available-for-sale securities	56,556		—		56,556		—
Total	$	59,385	$	2,829	$	56,556	$	—

Liabilities:
Contingent purchase consideration(1)	$	2,954	$	—	$	—	$	2,954
Total	$	2,954	$	—	$	—	$	2,954

December 31, 2021
Assets:
Cash equivalents
Money market funds	$	—	$	—	$	—	$	—
Funds held for clients
Money market funds	1,116		1,116		—		—
Available-for-sale securities	32,060		—		32,060		—
Total	$	33,176	$	1,116	$	32,060	$	—

Liabilities:
Contingent purchase consideration(1)	$	4,329	$	—	$	—	$	4,329
Total	$	4,329	$	—	$	—	$	4,329


December 31, 2021	$	4,329
Contingent purchase consideration paid	(130)
Change in fair value of contingent liability	(1,245)
Issued for acquisitions	—
December 31, 2022	$	2,954


Commission File Number: 1-34522


	Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)		Aggregate Estimated Fair Value
December 31, 2020:
Funds Held for Clients (2)
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:
Funds Held for Clients (2)
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


	2022		2021
Restricted cash and cash equivalents held to satisfy client funds obligations	$	147,032	$	185,316
Restricted short-term marketable securities held to satisfy client funds obligations	9,174		5,559
Restricted long-term marketable securities held to satisfy client funds obligations	47,382		26,501
Total funds held for clients	$	203,588	$	217,376


One year or less	$	~~5,507~~9,174
After one year through five years	~~20,412~~47,382
~~After five years through 10 years~~	0
~~After 10 years~~	0
	$	~~25,919~~


			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


~~Balance at January 1, 2020~~	$	0
~~Purchase~~	~~2,745~~
~~Net realized / unrealized losses~~	~~1,135~~
~~Balance at December 31, 2020~~	$	~~3,880~~56,556


	~~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~~


	~~Total~~
~~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~~


~~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~~


Intangible Assets	Weighted Average Amortization Period (in Years)	2020
		Gross		Accumulated Amortization		Net
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


Year Ending
2021	$	11,601
2022	11,068
2023	9,942
2024	9,682
2025	8,896
Thereafter	13,363
Total	$	64,552


	Estimated Useful Life (in years)	2022		2021
Furniture and equipment	2 to 5	$	7,552	$	6,935
Software development costs	3	18,678		14,449
Software	2 to 5	2,808		2,808
Leasehold improvements	2 to 5	1,878		1,638
Gross property and equipment		30,916		25,830
Less: accumulated depreciation and amortization		(19,477)		(16,885)
Property and equipment, net		$	11,439	$	8,945


	Maturity	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.


	December 31, 2020
	Gross Notes Payable		Debt Issuance Costs		Net Notes Payable
Notes payable, current portion1	$	12,388	$	(78)	$	12,310
Notes payable, net of current portion2	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.


	December 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


~~Leverage Ratio~~	Applicable Margin Relative to Base Rate Loans	Applicable Margin Relative to LIBOR Rate Loans
~~< 2.00:1.00~~	~~2.25% percentage points~~	~~3.25% percentage points~~
~~≤ 3.00:1.00, and ≥ 2.00:1.00~~	~~2.75% percentage points~~	~~3.75% percentage points~~
~~≥ 3.00:1.00~~	~~3.25% percentage points~~	~~4.25% percentage points~~


	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


Gross Intangible Assets	2021		Acquisitions		2022
Customer relationships	$	114,611	$	2,360	$	116,971
Developed technology	12,001		—		12,001
Reseller relationships	1,012		332		1,344
Trade names	880		—		880
Non-compete agreements	1,032		—		1,032
	$	129,536	$	2,692	$	132,228


	Weighted Average Amortization Period (in Years)	Gross		Accumulated Amortization		Net
December 31, 2022
Customer relationships	8.7	$	116,971	$	(52,700)	$	64,271
Developed technology	6.6	12,001		(10,283)		1,718
Reseller relationships	6.9	1,344		(889)		455
Trade names	3.0	880		(847)		33
Non-compete agreements	5.2	1,032		(915)		117
	8.4	$	132,228	$	(65,634)	$	66,594

December 31, 2021
Customer relationships	8.7	$	114,611	$	(39,535)	$	75,076
Developed technology	6.6	12,001		(9,098)		2,903
Reseller relationships	7.2	1,012		(864)		148
Trade names	3.0	880		(579)		301
Non-compete agreements	5.2	1,032		(887)		145
	8.4	$	129,536	$	(50,963)	$	78,573