UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~Washington,~~WASHINGTON, D.C. 20549

FORM 10-Q

~~(Mark One)~~

☒	~~QUARTERLY REPORT PURSUANT TO SECTION~~
☒		Quarterly Report Pursuant to Section 13 ORor 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF~~of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2021

~~For the quarterly period ended September 30, 2017~~

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

~~For the transition period from~~ to

~~Commission file number:~~ ~~0-20008~~

ASURE SOFTWARE, INC.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in its ~~Charter)~~charter)

~~Delaware~~

~~74-2415696~~

Delaware

1-34522

74-2415696

(State or other jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

~~incorporation or organization)~~

~~Identification No.)~~

3700 N. Capital of Texas Hwy #350 Austin, Texas

78746

~~Austin, Texas~~

~~78746~~

(Address of ~~Principal Executive Offices)~~principal executive offices)

(Zip Code)

~~(512) 437-2700~~

~~(Registrant’s Telephone Number, including Area Code)~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~ ☐	~~Accelerated filer~~ ☐	~~Non-accelerated filer~~ ☐	~~Smaller reporting company~~ ☒
~~Emerging growth company~~ ☐ 512-437-2700
(Registrant’s Telephone Number, including Area Code)
None
(Former name, former address and former fiscal year, if changed since last report)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provide

Securities registered pursuant to Section ~~13(a)~~12(b) of the ~~Exchange Act.~~ ☐Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

ASUR

The Nasdaq Capital Market

Series A Junior Participating Preferred Share Purchase Rights

N/A

☒

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐

Yes

☒

As of August 6, 2021, 19,168,553 shares of the ~~Exchange Act). Yes~~ ☐ No ☒

~~As of November 9, 2017, the registrant had outstanding~~ ~~12,466,820 shares of its~~registrant’s Common Stock ~~$0.01 par value.~~were outstanding.

Table of Contents

TABLE OF CONTENTS

		~~Page~~
				Page Number
PART I - FINANCIAL INFORMATION

Item 1.			Financial Statements (Unaudited)
			Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020	3 1
			Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2017~~2021 and ~~2016~~June 30, 2020	4 2
			Condensed Consolidated Statements of Changes in Stockholders ’ Equity for the Three and Six Months Ended June 30, 2021 and June 30, 2020	3
			Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~June 30, 2020	5
			Notes to Condensed Consolidated Financial Statements	6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	20 17
Item 3.			Quantitative and Qualitative Disclosures About Market Risk	25 24
Item 4.			Controls and Procedures	25 24

PART II - OTHER INFORMATION

Item 1.			Legal Proceedings	26 25
Item 1A.			Risk Factors	26 25
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	26 25
Item 3.			Defaults upon Senior Securities	26
~~Item 6.~~	~~Exhibits~~25	26

Item 5.			Other Information	25
Item 6.			Exhibits	26

			Signatures	27

Table of Contents

PART I –- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	June 30, 2021		December 31, 2020

ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	20,292	$	28,577
Accounts receivable, net of allowance for doubtful accounts of $2,411 and $2,194 at June 30, 2021 and December 31, 2020, respectively	3,482		3,354
Inventory	279		449
Prepaid expenses and other current assets	3,202		3,284
Total current assets before funds held for clients	27,255		35,664
Funds held for clients	207,432		321,069
Total current assets	234,687		356,733
Property and equipment, net	8,617		8,281
Goodwill	73,958		73,958
Intangible assets, net	58,739		64,552
Operating lease assets, net	5,396		6,450
Other assets, net	4,225		3,953
Total assets	$	385,622	$	513,927
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable	$	3,277	$	12,310
Accounts payable	1,272		1,288
Accrued compensation and benefits	1,588		2,916
Operating lease liabilities, current	1,694		1,833
Other accrued liabilities	1,319		1,380
Contingent purchase consideration	2,096		3,880
Deferred revenue	1,279		4,343
Total current liabilities before client fund obligations	12,525		27,950
Client fund obligations	207,326		320,577
Total current liabilities	219,851		348,527
Long-term liabilities:
Deferred revenue	66		111
Deferred tax liability	1,246		888
Notes payable, net of current portion	10,088		12,225
Operating lease liabilities, noncurrent	4,360		5,366
Other liabilities	592		1,157
Total long-term liabilities	16,352		19,747
Total liabilities	236,203		368,274
Commitments
Stockholders’ equity:
Preferred stock, $0.01 par value; 1,500 shares authorized; NaN issued or outstanding	0		0
Common stock, $0.01 par value; 44,000 and 22,000 shares authorized; 19,483 and 19,354 shares issued, 19,099 and 18,970 shares outstanding at June 30, 2021 and December 31, 2020, respectively	195		193
Treasury stock at cost, 384 shares at June 30, 2021 and December 31, 2020	(5,017)		(5,017)
Additional paid-in capital	421,633		419,827
Accumulated deficit	(267,788)		(269,954)
Accumulated other comprehensive income	396		604
Total stockholders’ equity	149,419		145,653
Total liabilities and stockholders’ equity	$	385,622	$	513,927

September 30,
2017
(Unaudited)

December 31,
2016

Assets
Current assets:
Cash and cash equivalents $ 27,464 $ 12,767
Accounts and note receivable, net of allowance for doubtful accounts of $592 and $338
at September 30, 2017 and December 31, 2016, respectively
13,887 8,108
Inventory 781 487
Prepaid expenses and other current assets 1,899 1,256
Total current assets before funds held for clients 44,031 22,618
Funds held for clients 23,217 22,981
Total current assets 67,248 45,599
Restricted cash 200 -
Property and equipment, net 2,763 1,878
Goodwill 75,855 26,259
Intangible assets, net 34,046 12,048
Other assets 2,225 39
Total assets $ 182,337 $ 85,823
Liabilities and stockholders’ equity
Current liabilities:
Current portion of notes payable, net of debt issuance cost and debt discount $ 8,724 $ 5,455
Accounts payable 1,581 1,576
Accrued compensation and benefits 1,812 1,192
Other accrued liabilities 1,115 936
Deferred revenue 12,065 9,252
Total current liabilities before client fund obligations 25,297 18,411
Client fund obligations 23,217 22,981
Total current liabilities 48,514 41,392
Long-term liabilities:
Deferred revenue 1,450 769
Notes payable, net of current portion of debt issuance cost and debt discount 66,980 24,581
Other liabilities 1,009 835
Total long-term liabilities 69,439 26,185
Total liabilities 117,953 67,577
Stockholders’ equity:
Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding - -
Common stock, $.01 par value; 22,000 shares authorized; 12,805 and 8,901 shares issued, 12,421 and 8,517 shares outstanding at September 30, 2017 and December 31, 2016, respectively 128 89
Treasury stock at cost, 384 shares at September 30, 2017 and December 31, 2016 (5,017 ) (5,017 )
Additional paid-in capital 345,383 295,044
Accumulated deficit (276,052 ) (271,875 )
Accumulated other comprehensive (loss) income (58 ) 5
Total stockholders’ equity 64,384 18,246
Total liabilities and stockholders’ equity $ 182,337 $ 85,823

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

Condensed Consolidated Financial Statements.

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

~~(Unaudited)~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(unaudited)				(unaudited)
Revenue:
Recurring	$	16,072	$	13,733	$	35,314	$	32,168
Professional services, hardware and other	1,096		382		1,656		893
Total revenue	17,168		14,115		36,970		33,061
Cost of Sales	7,223		6,008		14,533		13,848
Gross profit	9,945		8,107		22,437		19,213
Operating expenses:
Sales and marketing	3,622		2,769		7,233		6,344
General and administrative	6,821		5,193		13,319		11,646
Research and development	1,343		1,377		2,467		2,551
Amortization of intangible assets	2,528		2,349		5,056		4,698
Total operating expenses	14,314		11,688		28,075		25,239
Loss from operations	(4,369)		(3,581)		(5,638)		(6,026)
Interest (expense) income and other, net	(223)		14		(447)		710
Gain on extinguishment of debt	8,654		0		8,654		0
Income (loss) from operations before income taxes	4,062		(3,567)		2,569		(5,316)
Income tax (benefit) expense	298		377		403		395
Net income (loss)	3,764		(3,944)		2,166		(5,711)
Other comprehensive income:
Unrealized gain (loss) on marketable securities	(69)		562		(208)		627
Comprehensive income (loss)	$	3,695	$	(3,382)	$	1,958	$	(5,084)

Basic and diluted earnings (loss) per share
Basic	$	0.20	$	(0.25)	$	0.11	$	(0.36)
Diluted	$	0.20	$	(0.25)	$	0.11	$	(0.36)

Weighted average basic and diluted shares
Basic	19,040		15,779		19,033		15,753
Diluted	19,203		15,779		19,198		15,753

FOR THE
THREE MONTHS ENDED
September 30,

FOR THE
NINE MONTHS ENDED
September 30,

2017 2016 2017 2016
Revenues:
Cloud revenue $ 11,062 $ 5,630 $ 27,724 $ 14,881
Hardware revenue 1,003 676 3,651 2,644
Maintenance and support revenue 1,178 1,078 3,276 3,509
On premise software license revenue 599 754 1,049 1,352
Professional services revenue 1,685 1,302 3,434 3,440
Total revenues 15,527 9,440 39,134 25,826
Cost of sales 3,396 2,026 8,660 5,932
Gross margin 12,131 7,414 30,474 19,894

Operating expenses
Selling, general and administrative 9,459 5,046 25,286 15,559
Research and development 883 761 2,488 2,217
Amortization of intangible assets 1,341 625 3,230 1,628
Total operating expenses 11,683 6,432 31,004 19,404

Income (loss) from operations 448 982 (530 ) 490

Other income (loss)
Interest expense and other (1,644 ) (620 ) (3,279 ) (1,460 )
Total other loss (1,644 ) (620 ) (3,279 ) (1,460 )

Income (loss) from operations before income taxes (1,196 ) 362 (3,809 ) (970 )
Income tax provision (85 ) (47 ) (368 ) (133 )
Net income (loss) $ (1,281 ) $ 315 $ (4,177 ) $ (1,103 )
Other comprehensive income (loss)
Foreign currency gain (loss) (6 ) 26 (63 ) 142
Other comprehensive income (loss) $ (1,287 ) 341 $ (4,240 ) $ (961 )

Basic and diluted net income (loss) per share
Basic $ (0.10 ) $ 0.05 $ (0.40 ) $ (0.17 )
Diluted $ (0.10 ) $ 0.05 $ (0.40 ) $ (0.17 )
Weighted average basic and diluted shares
Basic 12,418,000 6,534,000 10,355,000 6,383,000
Diluted 12,418,000 6,548,000 10,355,000 6,383,000

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

Condensed Consolidated Financial Statements.

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ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS’ EQUITY

(~~Amounts~~ in thousands)

~~(Unaudited)~~(unaudited)


	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	$	(269,954)	$	604	$	145,653
Stock issued upon option exercise and vesting of restricted stock units	51	1		—		131		—		—		132
Share based compensation	—	—		—		626		—		—		626
Share issuance costs	—	—		—		(23)		—		—		(23)
Net loss	—	—		—		—		(1,598)		—		(1,598)
Other comprehensive loss	—	—		—		—		—		(139)		(139)
Balance at March 31, 2021	19,021	$	194	$	(5,017)	$	420,561	$	(271,552)	$	465	$	144,651

Stock issued upon option exercise and vesting of restricted stock units	49	1		—		188		—		—		189
Stock issued, ESPP	29	—		—		170		—		—		170
Share based compensation	—	—		—		714		—		—		714
Net income	—	—		—		—		3,764		—		3,764
Other comprehensive income	—	—		—		—		—		(69)		(69)
Balance at June 30, 2021	19,099	$	195	$	(5,017)	$	421,633	$	(267,788)	$	396	$	149,419

FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,

2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,177 ) $ (1,103 )
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization 4,344 2,686
Provision for doubtful accounts 320 50
Share-based compensation 363 166
Other - 94
Changes in operating assets and liabilities:
Accounts receivable (4,450 ) (1,678 )
Inventory (287 ) 169
Prepaid expenses and other assets (471 ) 124
Accounts payable (569 ) (189 )
Accrued expenses and other long-term obligations 881 951
Deferred revenue 1,963 (2,000 )
         Net cash used in operating activities (2,083 ) (730 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions net of cash acquired (45,472 ) (12,000 )
Purchases of property and equipment (942 ) (128 )
Software capitalization costs (804 ) -
Collection of note receivable - 223
Net change in funds held for clients 8,867 4,155
         Net cash used in investing activities (38,351 ) (7,750 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 45,777 16,823
Payments on notes payable (8,098 ) (5,173 )
Debt financing fees (1,433 ) (438 )
Payments on capital leases (131 ) (158 )
Net proceeds from issuance of common stock 27,820 561
Net change in client fund obligations (8,812 ) (4,155 )
        Net cash provided by financing activities 55,123 7,460

Effect of foreign exchange rates 8 151

Net increase (decrease) in cash and cash equivalents 14,697 (869 )
Cash and cash equivalents at beginning of period 12,767 1,158
Cash and cash equivalents at end of period $ 27,464 $ 289

SUPPLEMENTAL INFORMATION:
Cash paid for:
Interest $ 2,180 $ 817

Non-cash Investing and Financing Activities:
Subordinated notes payable –acquisitions 8,165 6,000
Equity issued in connection with acquisitions 21,825 -

The accompanying notes are an integral part of these ~~consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	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, 2019	15,714	$	161	$	(5,017)	$	396,102	$	(253,642)	$	(25)	$	137,579
Stock issued upon option exercise and vesting of restricted stock units	29	—		—		106		—		—		106
Share based compensation	—	—		—		438		—		—		438
Net loss	—	—		—		—		(1,767)		—		(1,767)
Other comprehensive income	—	—		—		—		—		65		65
Balance at March 31, 2020	15,743	$	161	$	(5,017)	$	396,646	$	(255,409)	$	40	$	136,421

Stock issued, ESPP	32	—		—		157		—		—		157
Stock issued upon option exercise and vesting of restricted stock units	66	1		—		301		—		—		302
Share based compensation	—	—		—		588		—		—		588
Net loss	—	—		—		—		(3,944)		—		(3,944)
Other comprehensive income	—	—		—		—		—		562		562
Balance at June 30, 2020	15,841	$	162	$	(5,017)	$	397,692	$	(259,353)	$	602	$	134,086

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended June 30,
	2021		2020
	(unaudited)
Cash flows from operating activities:
Net income (loss)	$	2,166	$	(5,711)
Adjustments to reconcile income (loss) to net cash (used in) provided by operations:
Depreciation and amortization	7,905		7,033
Amortization of operating lease assets	830		750
Amortization of debt financing costs and discount	60		170
Net amortization of premiums and accretion of discounts on available-for-sale securities	31		112
Provision for doubtful accounts	1		142
Provision for deferred income taxes	358		71
Gain on modification of debt	0		(134)
Gain on extinguishment of debt	(8,654)		0
Net realized gains on sales of available-for-sale securities	(269)		(286)
Share-based compensation	1,340		1,025
(Gain) loss on disposals of long-term assets	(21)		52
Changes in operating assets and liabilities:
Accounts receivable	(129)		(226)
Inventory	107		58
Prepaid expenses and other assets	(190)		2,278
Operating lease right-of-use assets	(277)		(1,051)
Accounts payable	(16)		426
Accrued expenses and other long-term obligations	(1,440)		(2,553)
Operating lease liabilities	(591)		275
Deferred revenue	(3,109)		(2,781)
Net cash used in operating activities	(1,898)		(350)
Cash flows from investing activities:
Acquisition of intangible asset	0		(1,823)
Purchases of property and equipment	(86)		(547)
Software capitalization costs	(2,311)		(1,342)
Purchases of available-for-sale securities	(236)		(10,052)
Proceeds from sales and maturities of available-for-sale securities	7,813		5,634
Net cash provided by (used in) investing activities	5,180		(8,130)
Cash flows from financing activities:
Proceeds from notes payable	0		8,856
Payments of notes payable	(3,090)		(2,359)
Payments of contingent purchase consideration	(1,784)		0
Debt financing fees	0		(20)
Net proceeds from issuance of common stock	468		566
Net change in client fund obligations	(113,251)		(17,393)
Net cash used in financing activities	(117,657)		(10,350)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	(114,375)		(18,830)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	324,985		134,060
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	210,610	$	115,230
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	20,292	$	29,259
Restricted cash and restricted cash equivalents included in funds held for clients	190,318		85,971
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	210,610	$	115,230
Supplemental information:
Cash paid for interest	$	449	$	589
Cash paid for income taxes	$	378	$	381

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

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

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

Asure Software, Inc., (“Asure”, the “Company”, “we” and “our”), a Delaware ~~corporation,~~Corporation, is a leading provider of ~~cloud-based software-as-a-service~~Human Capital Management (“~~SaaS”~~HCM”) ~~time~~software solutions. We help small- and medium-sized companies grow by assisting them in building better teams with skills to stay compliant with ever-changing federal, state, and local tax jurisdictions and labor ~~management~~laws, and ~~Agile Workplace management solutions that enable organizations to manage~~better allocate cash so they can spend their ~~office environments~~financial capital on growing their business rather than back-office overhead expenses. Asure’s Human Capital Management suite, named Asure HCM, includes cloud-based Payroll, Tax Services, and Time & Attendance software as well as human resources (“HR”) services ranging from HR projects to completely outsourcing payroll and HR staff. We also offer these products and services through our network of reseller partners.

Our platform vision is to help clients grow their business and become the most trusted HCM resource to entrepreneurs everywhere. Our product strategy is driven by three primary challenges that prevent businesses from growing: HR complexity, allocation of both human ~~resource~~ and ~~payroll processes effectively~~financial capital, and ~~efficiently.~~the ability to build great teams. The Asure ~~develops, markets, sells~~HCM suite includes four product lines: Asure Payroll & Tax, Asure HR, Asure Time & Attendance, and ~~supports its~~Asure HRServices.

We develop, market, sell and support our offerings ~~worldwide~~nationwide through ~~its~~our principal office in Austin, Texas and ~~through additional offices~~from our processing hubs in ~~Tampa,~~California, Tennessee, Nebraska, New York, Florida, ~~Traverse City, Michigan, Vermont,~~ and ~~London, United Kingdom.~~Vermont. In May 2021, we closed our Washington office where we provided our HR consulting services as employees from that office now work remotely.

We have prepared the accompanying unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly, they do not include all information and footnotes required under U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements.

In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of ~~September~~June 30, ~~2017,~~2021 and the results of operations, statements of changes in stockholders’ equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~June 30, 2020, and ~~the~~our statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~June 30, 2020.

~~You~~These unaudited Condensed Consolidated Financial Statements should be read ~~these condensed consolidated financial statements~~ in conjunction with our audited ~~consolidated financial statements~~Consolidated Financial Statements and notes thereto filed with the ~~Securities and Exchange Commission~~SEC in our annual report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020 (our “2020 Annual Report on Form 10-K”). The results for the interim periods are not necessarily indicative of results for a full fiscal year.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

~~CASH AND CASH EQUIVALENTS~~USE OF ESTIMATES

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

~~RESTRICTED CASH~~

Restricted cash represents a certificate of deposit held in a cash collateral account as required by our operating lease for iSystems, LLC, which we acquired in May 2017. See Note 4- Acquisitions for further detailPreparation of the ~~acquisition.~~

~~LIQUIDITY~~

AsCondensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of ~~September 30, 2017, Asure’s principal sources~~the assets and liabilities, the disclosure of ~~liquidity consisted~~contingent assets and liabilities at the date of approximately $27,464 of cash and cash equivalents, future cash generated from operations and $5,000 available for borrowing under our Wells Fargo revolver discussed in Note 6 – Notes Payable. We believe that we have and/or will generate sufficient cash for our short- and long-term needs, including meeting the ~~requirements of our term loan,~~Condensed Consolidated Financial Statements and the ~~related debt covenant requirements.~~reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful lives of fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions. We ~~continue to seek reductions in~~base our ~~expenses as a percentage of revenue~~estimates on ~~an annual basis~~historical experience and ~~thus may utilize our cash balances~~on various other assumptions management believes reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the short-term to reduce long-term costs. Based on current internal projections, we believe that we have and/or will generate sufficient cash for our operational needs, including any required debt payments, for at least the next twelve months from the issuancepreparation of the ~~condensed consolidated financial statements.~~

~~Management is focused on growing our existing product offering, as well as our customer base, to increase our recurring revenues.~~Condensed Consolidated Financial Statements for continued reasonableness. We ~~have made and will continue to explore additional strategic acquisitions. We expect to fund~~make appropriate adjustments, if any, ~~future acquisitions with equity, available cash, future cash from operations, or debt from outside sources.~~

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. We may need to raise additional capital in the future. However, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that we have sufficient capital and liquidity to fund and cultivate the growth of our current and future operations for at least the next twelve months from the issuance of these financial statements and to maintain compliance with the terms of our debt agreements and related covenants or to obtain compliance through debt repayments made with the available cash on hand or anticipated for receipt in the ordinary course of operations.estimates used prospectively based upon such periodic evaluation.

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

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

CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes and bonds, and/or repurchase agreements, backed by such obligations. Carrying value approximates fair value. Cash and cash equivalents are deposited at various area banks, which at times may exceed federally insured limits. The Company monitors the viability of the banking institutions carrying its assets on a regular basis, and has the ability to transfer cash to various institutions during times of risk. The Company has not experienced any losses related to these cash balances, and believes its credit risk to be minimal.

SIGNIFICANT RISKS AND UNCERTAINTIES

The coronavirus (“COVID-19”) pandemic has resulted in a global economic slowdown and disruptions that have and could continue to negatively impact our business. The pandemic and numerous measures implemented to contain the virus such as business shutdowns, shelter-in-place orders and travel bans and restrictions have caused businesses, especially small- and medium-sized businesses, some of whom are our customers, to reduce headcount or cease operations as customer demand decreased. Given the economic slowdown and other risks and uncertainties associated with the pandemic, we expect that our business, financial condition, results of operations and growth prospects will be adversely affected in the future. Our business is impacted by employment levels as we have contracts that charge clients on a per-employee basis. In addition, the conditions caused by the COVID-19 pandemic could adversely affect our customers’ ability or willingness to purchase our offerings, delay prospective customers’ purchasing decisions, delay the provisioning of our offerings, lengthen payment terms, reduce the value or duration of customer subscription contracts, or affect attrition rates, all of which could adversely affect our future sales, operating results and overall financial performance.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus and potential variants, the extent and effectiveness of containment actions, including the administration of vaccinations and the impact of these and other factors on our employees, customers, partners and vendors. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

RECENT ACCOUNTING ~~STANDARDS~~PRONOUNCEMENTS

~~Recently Adopted Standards~~

In ~~July 2015,~~December 2019, the ~~Financial~~FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting ~~Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Simplifying~~for Income Taxes, which simplifies the ~~Measurement~~accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of ~~Inventory”. Inventory within the scope~~and simplify GAAP for other areas of this update is required to be measured at the lower of its cost or net realizable value, with net realizable value being the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal,Topic 740 by clarifying and ~~transportation. This ASU is~~amending existing guidance. The standard became effective ~~prospectively~~ for ~~fiscal years~~interim and ~~interim~~annual periods beginning after December 15, ~~2016,~~2020, with early adoption permitted. We adopted ASU 2019-12 during the ~~provisions of ASU 2015-11 on~~quarter beginning January 1, ~~2017. This adoption did not have any impact on our consolidated financial statements.~~

~~In March 2016,~~2021, using the ~~FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”. The purpose of ASU 2016-09 is to simplify the accounting~~prospective approach except for ~~share-based payment transactions, including the income~~hybrid tax consequences, classification of awards as either equity or liabilities, and classification of such activity on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within that year. Prospective, retrospective, or modified retrospective application may be used dependent on the specific requirements of the amendments within ASU 2016-09. Effective January 1, 2017, the Companyregimes, which we adopted ~~ASU 2016-09 on a prospective basis. As such, prior periods have not been adjusted.~~

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment (Topic 350)”, which eliminates Step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017 and should be applied prospectively. We adopted the provisions of ASU 2017-04 on January 1, 2017. The adoption did not have any impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 806): Clarifying the Definition of a Business”, which provides guidance in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for public companies for fiscal years beginning after December 15, 2017. We adopted this standard early as of January 1, 2017 as permitted under the standard. The adoption did not have any impact on our consolidated financial statements.

~~Standards Yet To Be Adopted~~

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes a majority of existing revenue recognition guidance under US GAAP, and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. Companies may need to apply more judgment and estimation techniques or methods while recognizing revenue, which could result in additional disclosures to the financial statements. In addition, in March 2016, April 2016, May 2016 and December 2016 the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”) and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”), respectively, to amend certain guidance in ASU 2014-09. Topic 606 allows for either a retrospective or cumulative effect transition method. ASU 2014-09 was originally effective for fiscal years beginning after December 15, 2016. In July 2015, the FASB approved a one-year deferral of ASU 2014-09 and all amendments to it, with a new effective date for fiscal years beginning after December 15, 2017 with early adoption permitted as of the original effective date.

We plan to adopt ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018. We have developed our plan for implementing the new standard, which includes, but is not limited to, identifying contract populations and “in scope” customer contracts, identifying performance obligations in those customer contracts, and evaluating any impact of variable consideration. The Company has evaluated the transition methods and will likely applyusing the modified retrospective ~~transition method, which would result~~approach. The adoption of ASU 2019-12 resulted in ~~an adjustment~~no material impact to ~~retained earnings~~the Company’s financial statements.

RECLASSIFICATION

The Company reclassified its presentation of restricted cash and restricted cash equivalents included in funds held for ~~the cumulative effect, if any,~~clients as of applying the standard to contracts that are not completed at the date of initial application. Under this method, we would not restate the prior financial statements presented, therefore the new standard requires us to provide additional disclosures of the amount by which each financial statement line item is affectedJune 30, 2020 in the ~~current reporting period during 2018, as compared~~Condensed Consolidated Statements of Cash Flows to conform to the ~~guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any.~~

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

The impact that the new revenue recognition standard will have on our consolidated financial statements and disclosures has not yet been fully assessed. However, we do not expect the provisions of the new standard to have a materialcurrent period presentation. Such reclassification had no effect on the timing or amount of revenue we recognize. Our assessment also includes determining the impact the new standard may have on the revenue reporting processes, including disclosures, ensuring internal controls will operate effectively with the new standard and performing gap analyses on collected data and determining the relative accounting positions where applicable. Included in our assessment of the new standard, is the potential impact on sales commissions and the term over which they will amortize.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its statement ofconsolidated financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. We will be required to adopt the new standard in the first quarter of 2019. We are currently evaluating the impact ASU 2016-02 will have on ouror consolidated ~~financial statements.~~

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” which eliminates the diversity in practice related to eight cash flow classification issues. This ASU is effective for on January 1, 2018 with early adoption permitted. We believe its adoption will not significantly impact our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires the change in restricted cash or cash equivalents to be included with other changes in cash and cash equivalents in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We believe its adoption will not significantly impact our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting,” which clarifies when to account for a change in the terms or conditions of a share-based payment award as a modification. ASU 2017-09 requires modification accounting only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations ~~cash flows, or presentation thereof.~~of the Company.

~~CONTINGENCIES~~LEGAL PROCEEDINGS

Although ~~Asure has~~we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of ~~September~~June 30, ~~2017,~~2021, we were not a party to any pending legal ~~proceedings.~~proceedings that are material to our business.

~~NOTE 3 – FAIR VALUE MEASUREMENTS~~

~~Accounting Standards Codification (“ASC”) 820,~~ ~~Fair Value Measurements and Disclosures~~ ~~defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements.~~

~~ASC 820 establishes a three-tier fair value hierarchy, which is based on the reliability of the inputs used in measuring fair values. These tiers include:~~

~~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.~~

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

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

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

As of June 30, 2021 and December 31, 2020, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities.

NOTE 3 – INVESTMENTS AND FAIR VALUE MEASUREMENTS

Accounting Standards Codification (ASC) 820 “Fair Value Measurement” (ASC 820) defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable:

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.

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except per share amounts)

The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016, respectively:~~2020, respectively (in thousands):

Fair Value Measure at September 30, 2017
Total Quoted Significant
Carrying Prices Other Significant
Value at in Active Observable Unobservable
September 30, Market Inputs Inputs
Description 2017 (Level 1) (Level 2) (Level 3)
Assets:
Cash and cash equivalents $ 27,464 $ 27,464 $ - $ -
Total $ 27,464 $ 27,464 $ - $ -

Fair Value Measure at December 31, 2016
Total Quoted Significant
Carrying Prices Other Significant
Value at in Active Observable Unobservable
December 31, Market Inputs Inputs
Description 2016 (Level 1) (Level 2) (Level 3)
Assets:
Cash and cash equivalents $ 12,767 $ 12,767 $ - $ -
Total $ 12,767 $ 12,767 $ - $ -


	Total Carrying Value		Level 1		Level 2		Level 3
June 30, 2021
Assets:
Cash equivalents
Money market funds	$	3,551	$	3,551	$	0	$	0
Funds held for clients
Money market funds	2,375		2,375		0		0
Available-for-sale securities	19,076		0		19,076		0
Total	$	25,002	$	5,926	$	19,076	$	0

Liabilities:
Contingent purchase consideration	$	2,096	$	0	$	0	$	2,096
Total	$	2,096	$	0	$	0	$	2,096

December 31, 2020
Assets:
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

~~NOTE 4 – ACQUISITIONS~~

~~2017 Acquisitions~~

In ~~January 2017,~~July 2020, we ~~closed three strategic acquisitions: Personnel Management Systems, Inc.,~~acquired certain assets of a ~~provider of outsourced HR solutions; Corporate Payroll, Inc. (Payroll Division), a provider of payroll services; and Payroll Specialties NW, Inc., a provider of payroll services.~~

~~In May 2017, we closed two strategic acquisitions: iSystems, LLC and Compass HRM. iSystems LLC, through its flagship product, Evolution HCM, offers~~ payroll tax ~~management and HR software combined with comprehensive back-end service bureau tools~~business (the “Asset Purchase Agreement”). The initial purchase price for the assets was $4,250, which we paid in cash at closing. The Asset Purchase Agreement set forth two subsequent purchase consideration payments, which are contingent on certain thresholds. The first contingent purchase consideration of $1,975, was offset by certain net amounts owed to ~~service providers across~~us by the United States. Tampa-based Compass HRM is a current reseller of our HCM offering (formerly Mangrove), which provides human resources solutions that enhance organizations, people, and profits through payroll and HR solutions. The acquisition of Compass HRM expands our reachseller related to transition services in the ~~Southeast, particularly Florida.~~

~~Stock Purchase Agreement~~

~~In January 2017, we closed~~amount of $191, was paid in June 2021 (a total payment of $1,784). The second and final contingent purchase consideration, will be based on the ~~acquisition of all~~trailing twelve-month revenue at October 31, 2021, and will generally be made by April 30, 2022. We utilized a Monte Carlo simulation to determine the fair value of the ~~outstanding shares~~contingent consideration. There was no adjustment to the fair value of common stock (the “Shares”) of Personnel Management Systems, Inc., a Washington corporation (“PMSI”), pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), among us, PMSI, the ~~sellers identified therein, and the stockholders’ representative named therein. The aggregate~~contingent consideration for the Shares consisted of (i) $3,875 in cash and (ii) a subordinated promissory note (the “PMSI Note”) in the principal amount of $1,125 subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from our recent underwritten public offering inat June ~~2017. The PMSI Note bears interest at an annual rate of 2.0% and matures on April~~ 30, 2018. The entire unpaid principal and all accrued interest under the PMSI Note is payable at maturity. The Stock Purchase Agreement contains certain customary representations, warranties, indemnities and covenants.2021.

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

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

Restricted cash equivalents and investments classified as available-for-sale within funds held for clients consisted of the following (in thousands):

~~Asset Purchase Agreement~~


	Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)		Aggregate Estimated Fair Value
June 30, 2021
Restricted cash equivalents	$	1,962	$	0	$	0	$	1,962
Available-for-sale securities:
Certificates of deposit	5,399		137		0		5,536
Corporate debt securities	7,398		205		(9)		7,594
Municipal bonds	3,427		62		0		3,489
U.S. Government agency securities	500		0		(5)		495
Total available-for-sale securities	16,724		404		(14)		17,114

Total(2)	$	18,686	$	404	$	(14)	$	19,076

December 31, 2020
Restricted cash equivalents	$	1,258	$	0	$	0	$	1,258
Available-for-sale securities:
Certificates of deposit	7,370		204		0		7,574
Corporate debt securities	8,914		295		(1)		9,208
Municipal bonds	7,276		103		(1)		7,378
U.S. Government agency securities	500		1		0		501
Total available-for-sale securities	24,060		603		(2)		24,661

Total(2)	$	25,318	$	603	$	(2)	$	25,919

~~In January 2017,~~(1)Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. As of June 30, 2021 and December 31, 2020, there were 53 and 69 securities, respectively, in an unrealized gain position and there were 2 securities in an unrealized loss position for both periods. As of June 30, 2021, these unrealized losses were less than $9 individually and $14 in the aggregate. As of December 31, 2020, these unrealized losses were less than $2 individually and $2 in the aggregate. These securities have not been in a continuous unrealized gain or loss position for more than 12 months. We do not intend to sell these investments and we ~~closed~~do not expect to sell these investments before recovery of their amortized cost basis, which may be at maturity. We review our investments to identify and evaluate investments that indicate possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2)At June 30, 2021 and December 31, 2020, none of these securities were classified as cash and cash equivalents on the ~~acquisition~~accompanying Condensed Consolidated Balance Sheets.

Funds held for clients represent assets that the Company has classified as restricted for use solely for the purposes of ~~substantially all~~satisfying the ~~assets of Corporate Payroll, Inc., an Ohio corporation (“CPI”),~~obligations to remit funds relating to ~~its~~the Company’s payroll service bureau business, pursuant to an Asset Purchase Agreement (the “CPI Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $1,500 in cash, (ii) a subordinated promissory note (the “CPI Note”) in the principal amount of $500 and ~~(iii) 112,166 shares of~~payroll tax filing services, which are classified as client funds obligations on our common stock valued at $1,000, subject to adjustment as provided in the CPI Asset Purchase Agreement. We funded the cash payment with proceeds from our recent underwritten public offering in June 2017. The CPI Note bears no interest and matures on April 30, 2018. The entire unpaid principal under the CPI Note is payable at maturity. The recipient of the shares of our common stock entered into a six month lock-up agreement with us. The CPI Asset Purchase Agreement contains certainCondensed Consolidated Balance Sheets.

~~customary representations, warranties, indemnities and covenants.~~

~~Asset Purchase Agreement~~

In January 2017, we closed on the acquisition of substantially all the assets of Payroll Specialties NW, Inc., an Oregon corporation (“PSNW”), pursuant to an Asset Purchase Agreement (the “PSNW Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $3,010 in cash and (ii) a subordinated promissory note (the “PSNW Note”) in the principal amount of $600, subject to adjustment as provided in the PSNW Asset Purchase Agreement. We funded the cash payment with proceeds from our recent underwritten public offering in June 2017. The PSNW Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PSNW Note is payable at maturity. The PSNW Asset Purchase Agreement contains certain customary representations, warranties, indemnities and covenants.

~~Equity Purchase Agreement~~

In May 2017, we entered into an equity purchase agreement (the “Equity Purchase Agreement”) with iSystems Holdings, LLC, a Delaware limited liability company (“Seller”), and iSystems Intermediate Holdco, Inc., a Delaware corporation (“iSystems”), pursuant to which we acquired 100% of the outstanding equity interests of iSystems for an aggregate purchase price of $55,000, subject to adjustment as provided in the Equity Purchase Agreement. The aggregate purchase price consists of (i) $32,000 in cash, subject to adjustment, (ii) a secured subordinated promissory note (“iSystems Note”) in the principal amount of $5,000, subject to adjustment, and (iii) 1,526,332 shares of unregistered common stock valued at $18,000 based on a volume-weighted average of the closing prices of our common stock during a 90-day period. The iSystems Note bears interest at an annual rate of 3.5% and matures on May 25, 2019. The unpaid principal and all accrued interest under the promissory note is payable in two installments of $2.5 million on May 25, 2018 and May 25, 2019, subject to adjustment. The Equity Purchase Agreement contains certain customary representations, warranties, indemnities and covenants.

To finance the iSystems acquisition, we amended and restated our existing credit agreement with Wells Fargo Bank, National Association, as administrative agent (the “Restated Credit Agreement”) to add an additional term loan in the amount of approximately $40,000, of which we borrowed approximately $32,000 to complete the iSystems acquisition. See Note 6- Notes Payable for further detail.

In connection with the iSystems acquisition, we also entered into an investor rights agreement (the “Investor Rights Agreement”) with the Seller. Pursuant to the terms of the Investor Rights Agreement, until May 2018, the holders of the registrable securities received in connection with the acquisition have agreed not to directly or indirectly transfer, sell, make any short sale or otherwise dispose of any of our equity securities and not to vote any of our equity securities or solicit proxies other than in favor of each director that our board recommends for election, against any director that our board has not nominated for election, and in accordance with the recommendation of our board on any other matters, subject to certain exceptions. In addition, under the Investor Rights Agreement, holders of the registrable securities have demand registration rights which allow a registration statement to be filed on or about March 31, 2018 and piggyback registration rights which become effective in May 2018. In addition, under the terms of the Investor Rights Agreement, such holders have the right to nominate one director to our board of directors until the first date that the holders of the registrable securities no longer hold more than the lesser of (x) 5% of our outstanding common stock (as equitably adjusted for any stock splits, stock combinations, reorganizations, exchanges, merger, recapitalizations or similar transaction after the date hereof) and (y) 90% of the shares of our common stock held by such holders as of May 25, 2017. The director nominee appointed by the holders is Daniel Gill. Our board appointed him to serve as a director on June 6, 2017. Mr. Gill is a founder and a co-managing partner of Silver Oak Services Partners, a private equity firm. In 2014 Silver Oak acquired iSystems, LLC (currently, a wholly owned subsidiary of iSystems) and Mr. Gill served on the board of directors of iSystems, LLC.

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

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

~~Stock Purchase Agreement~~

In May 2017, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Compass HRM, Inc. (“Compass”) and the sellers and seller representative named therein, pursuant to which the sellers sold 100% of the outstanding shares of capital stock of Compass to usFunds held for ~~an aggregate purchase price of $6,000, subject to adjustment as provided~~clients have been invested in the ~~Stock Purchase Agreement. The aggregate purchase price consists~~following categories (in thousands):


	June 30, 2021		December 31, 2020
Restricted cash and cash equivalents held to satisfy client funds obligations	$	190,318	$	296,408
Restricted short-term marketable securities held to satisfy client funds obligations	2,027		4,249
Restricted long-term marketable securities held to satisfy client funds obligations	15,087		20,412
Total funds held for clients	$	207,432	$	321,069

Expected maturities of $4,500 in cash and a subordinated promissory note (“Compass Note”) in the principal amount of $1,500, subject to adjustment. The Compass Note bears interest at an annual rate of 2.0% and matures on May 25, 2022. The Compass Note is payable in five annual installments of $300 on the anniversary of the closing date, subject to adjustment. Compass is headquartered in Tampa, Florida, and provides cloud-based human resource management software, including payroll, benefits, time and attendance, and performance management.

To finance the Compass acquisition, we incurred approximately $4,500 of additional indebtedness pursuant to an additional term loan under our Restated Credit Agreement. See Note 6 –Notes Payable for further details.

~~Purchase Price Allocation~~

~~Following is the purchase price allocation for the 2017 acquisitions.~~ We based the preliminary fair value estimate for the assets acquired and liabilities assumed for these acquisitions upon preliminary calculations and valuations. Our estimates and assumptions for these acquisition are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). The primary areas of those preliminary estimates that we have not yet finalized relate to certain tangible assets and liabilities acquired, and income and non-income based taxes.

~~We recorded the transactions using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value~~available-for-sale securities as of the dates of acquisitions. The $24,628 of intangible assets subject to amortization consist of $21,505 allocated to Customer Relationships, $1,521 for Trade Names, $1,010 for Developed Technology, and $592 for Noncompete. To value the Trade Names, we employed the relief from royalty method under the market approach. For the Noncompetes, we employed a form of the income approach which analyzes the Company’s profitability with these assets in place, in contrast to the Company’s profitability without them. For the Customer Relationships and Developed Technology, we employed a form of the excess earnings method, which is a form of the income approach. The discount rate used in valuing these assets ranged from 14.0% to 17.0%, which reflects the risk associated with the intangible assets related to the other assets and the overall business operations to us. We estimated the fair values of the Trade Names using the relief from royalty method based upon a 1.7% royalty rate. June 30, 2021 are as follows (in thousands):


One year or less	$	3,487
After one year through five years	15,589
	$	19,076

~~We believe significant synergies are expected to arise~~from these strategic acquisitions. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition. A portion of acquired goodwill will be deductible for tax purposes.

~~We based the allocations on fair values at the date of acquisition:~~

Assets Acquired CPI PMSI PSNW iSystems Compass Total
Cash & cash equivalents $ 126 131 53 211 207 $ 728
Accounts receivable 22 347 111 951 241 1,672
Restricted cash - - - 200 - 200
Fixed assets - 130 7 681 38 856
Other assets - 17 17 699 33 766
Funds held for clients 2,809 - 6,294 - - 9,103
Goodwill 1,190 2,247 1,579 42,253 2,049 49,318
Intangibles 1,563 2,646 1,879 15,070 3,470 24,628
Total assets acquired $ 5,710 5,518 9,940 60,065 6,038 $ 87,271

Liabilities assumed
Accounts payable 51 19 28 392 65 555
Accrued other liabilities - 191 40 791 45 1,067
Deferred revenue - 370 - 1,073 - 1,443
Client fund obligations 2,754 - 6,294 - - 9,048
Total liabilities assumed 2,805 580 6,362 2,256 110 12,113

Net assets acquired $ 2,905 4,938 3,578 57,809 5,928 $ 75,158

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

~~The following is a reconciliation of the purchase price to the fair value of net assets acquired at the date of acquisition:~~

CPI PMSI PSNW iSystems Compass Total
Purchase price $ 3,000 5,000 3,610 55,000 6,000 $ 72,610
Working capital adjustment - - - 202 81 283
Adjustment to fair value of Asure’s stock issued (54 ) - - 2,880 - 2,826
Debt discount (41 ) (62 ) (32 ) (273 ) (153 ) (561 )
Fair value of net assets acquired $ 2,905 4,938 3,578 57,809 5,928 $ 75,158

~~Transaction costs for the 2017 acquisitions were $1,387 and were expensed as incurred and included in selling, general and administrative expenses.~~

~~2016 Acquisitions~~

Through the stock and asset purchases described below, we have entered into the human resource management, payroll processing and benefits administration services businesses, which we intend to integrate into our existing AsureForce® product line.

~~Stock Purchase Agreement~~

In March 2016, we acquired all of the issued and outstanding shares of common stock (the “Shares”) of Mangrove Employer Services, Inc. of Tampa, Florida (“Mangrove”). Pursuant to this stock purchase, we acquired the payroll division of Mangrove, which is engaged in the human resource management and payroll processing businesses. The aggregate consideration for the Shares consisted of (i) $11,348 in cash, a portion of which was used to pay certain obligations of Mangrove and (ii) a secured subordinated promissory note (the “Note”) in the principal amount of $6,000, subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from our credit agreement with Wells Fargo. The Note was paid in full in the first quarter of 2017. The Stock Purchase Agreement contains certain customary representations, warranties, indemnities and covenants. Details regarding the financing of the acquisition are described under Note 6- Notes Payable. Transaction costs for this acquisition were $706 and we expensed them as incurred and included in selling, general and administrative expenses.

~~Asset Purchase Agreement~~

In March 2016, we also acquired substantially all the assets of Mangrove COBRAsource Inc., a benefits administration services business which then was a wholly owned subsidiary of Mangrove. The aggregate consideration for the assets was $1,036, which Mangrove COBRAsource applied to pay off certain loan balances. The Asset Purchase Agreement contains certain customary representations, warranties, indemnities and covenants.

~~Purchase Price Allocation~~

~~Following is the purchase price allocation for the acquisition of Mangrove.~~

We recorded the transaction using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date of acquisition. The $8,700 of intangible assets subject to amortization consist of $1,200 allocated to Customer Relationships, $6,900 in Developed Technology and $600 for Trade Names. We estimated the fair value of the Customer Relationships and Developed Technology using the excess earnings method, a form of the income approach. We discounted cash flow projections using a rate of 18.1%, which reflects the risk associated with the intangible asset related to the other assets and the overall business operations to us. We estimated the fair value of the Trade Names using the relief from royalty method based upon a 1.2% royalty rate for the payroll division and 0.5% for the benefits administration services business.

~~We believe significant synergies are expected to arise~~from this strategic acquisition. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill. A portion of acquired goodwill will be deductible for tax purposes.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

~~We based the allocations on fair values at the date of acquisition:~~

Amount
Assets acquired
Accounts receivable $ 523
Funds held for clients 16,419
Fixed assets 258
Other assets 28
Goodwill 9,016
Intangibles 8,700
Total assets acquired $ 34,944

Liabilities assumed
Accounts payable 64
Accrued other liabilities 461
Client fund obligations 16,419
Total liabilities assumed $ 16,944
Net assets acquired $ 18,000

~~Unaudited Pro Forma Financial Information~~

The following unaudited summary of pro forma combined results of operations for the three and nine months ended September 30, 2017 and 2016 gives effect to the acquisitions of Mangrove, PMSI, iSystems and Compass and the acquisition of assets of COBRAsource, PSNW and CPI as if we had completed them on January 1, 2016. This pro forma summary does not reflect any operating efficiencies, cost savings or revenue enhancements that we may achieve by combining operations. In addition, we have not reflected certain non-recurring expenses, such as legal expenses and other transactions expenses for the first 12 months after the acquisition, in the pro forma summary. We present this pro forma summary for informational purposes only and it is not necessarily indicative of what our actual results of operations would have been had the acquisitions taken place as January 1, 2016, nor is it indicative of future consolidated results of operations.

FOR THE THREE
MONTHS ENDED

FOR THE THREE
MONTHS ENDED

SEPTEMBER 30, SEPTEMBER 30,
2017 2016
Revenues $ 15,527 $ 14,905
Net income (loss) $ (927 ) $ 185
Net income (loss) per common share:
Basic and diluted $ (0.07 ) $ 0.02

Weighted average shares outstanding:
Basic and diluted 12,418 8,186

FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,

FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,

2017 2016
Revenues $ 45,743 $ 45,416
Net loss $ (4,552 ) $ (4,221 )
Net loss per common share:
Basic and diluted $ (0.40 ) $ (0.53 )

Weighted average shares outstanding:
Basic and diluted $ 11,272 $ 8,021

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

NOTE 54 – GOODWILL AND OTHER INTANGIBLE ASSETS

~~Asure accounted for its historical acquisitions in accordance with ASC 805,~~ ~~Business Combinations~~. We recorded the amount exceeding the fair value of net assets acquired at the date of acquisition as goodwill. We recorded intangible assets apart from goodwill if the assets had contractual or other legal rights or if the assets could be separated and sold, transferred, licensed, rented or exchanged. Asure’s goodwill relates to the following acquisitions: ADI and Legiant in 2011, PeopleCube in 2012, FotoPunch and Roomtag in 2014, Mangrove in 2016, PMSI, CPI and PSNW in January 2017, and iSystems and Compass in May 2017.

As ~~part~~ of ~~the acquisition~~June 30, 2021 and December 31, 2020, goodwill was $73,958. As of iSystems in May 2017, we acquired software development costs. We continue to invest in software development. We are developing products which we intend to offer utilizing software as-a-service (“SaaS”).We follow the guidance of ASC 350-40, ~~Intangibles- Goodwill and Other- Internal Use Software~~, for development costs related to these new products. Cost incurred in the planning stage are expensed as incurred while costs incurred in the application and infrastructure stage are capitalized, assuming such costs are deemed to be recoverable. Costs incurred in the operating stage are generally expensed as incurred except for significant upgrades and enhancements. Capitalized software costs are amortized over the software’s estimated useful life, which management has determined to be three years. During the three and nine months ended SeptemberJune 30, ~~2017, we capitalized $702 and $804, respectively, of software development costs. No software development costs were recorded in 2016.~~

~~In accordance with ASC 350,~~ ~~Intangibles-Goodwill and Other,~~ we review and evaluate our long-lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that we may not recover their net book value. 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. There2021, there has been no impairment of goodwill ~~for~~based on the ~~periods presented. We amortize intangible assets not considered to have an indefinite useful life using~~qualitative assessments performed by the straight-line method over their estimated period of benefit, which generally ranges from one to nine years. Each reporting period, we evaluate the estimated remaining useful life of intangible assets and assess whether events or changes in circumstances warrant a revision to the remaining period of amortization or indicate that impairment exists. We have not identified any impairments of finite-lived intangible assets during any of the periods presented. Company.

~~The following table summarizes the changes in our goodwill:~~

Balance at December 31, 2016 $ 26,259
Goodwill recognized upon acquisitions of PMSI, CPI, PSNW, iSystems and Compass 49,318
Adjustment to Goodwill associated with acquisition of Mangrove 272
Foreign exchange adjustment to goodwill 6
Balance at September 30, 2017 $ 75,855

The gross carrying amount and accumulated amortization of our intangible assets as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 are as ~~follows:~~

September 30, 2017
Intangible Assets
Weighted Average
Amortization
Period (in Years)
Gross
Accumulated
Amortization
Net

Developed Technology 11.8 $ 11,925 $ (4,585 ) $ 7,340
Customer Relationships 7.5 35,516 (12,354 ) 23,162
Reseller Relationships 7.0 853 (731 ) 122
Trade Names 14.8 2,815 (787 ) 2,028
Noncompete 2.9 592 (108 ) 484
Software development costs 3.0 919 (9 ) 910
8.7 $ 52,620 $ (18,574 ) $ 34,046

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in~~follows (in thousands, except ~~share and per share data unless otherwise noted)~~weighted average periods):


	Weighted Average Amortization Period (in Years)	Gross		Accumulated Amortization		Net
June 30, 2021
Customer relationships	8.9	$	88,310	$	(33,803)	$	54,507
Developed technology	6.6	12,001		(8,365)		3,636
Reseller relationships	7.0	853		(853)		0
Trade names	3.0	880		(446)		434
Noncompete agreements	5.2	1,032		(870)		162
	8.5	$	103,076	$	(44,337)	$	58,739

December 31, 2020
Customer relationships	8.9	$	88,310	$	(28,898)	$	59,412
Developed technology	6.6	12,001		(7,608)		4,393
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

December 31, 2016
Intangible Assets
Weighted Average
Amortization
Period (in Years)
Gross
Accumulated
Amortization
Net

Developed Technology 12.7 $ 10,915 $ (3,408 ) $ 7,507
Customer Relationships 7.3 14,011 (10,270 ) 3,741
Reseller Relationships 7.0 853 (640 ) 213
Trade Names 14.5 1,294 (707 ) 587
9.8 $ 27,073 $ (15,025 ) $ 12,048

We record amortization ~~expense~~expenses using the straight-line method over the estimated useful lives of the intangible assets, as noted above. Amortization expenses recorded in Operating Expenses were $2,528 and $2,349 for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 were $1,341 and $625, respectively, included in Operating Expenses.~~2020, respectively. Amortization expenses recorded in Cost of Sales were ~~$106~~$379 and ~~$106~~$397 for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

Table of Contents

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except per share amounts)

Amortization expenses recorded in Operating Expenses were $5,056 and $4,698 for the six months ended June 30, 2021 and 2020, respectively. Amortization expenses ~~for the nine months ended September 30, 2017 and 2016 were $3,230 and $1,628 included in Operating Expenses, and $319 and $319, respectively, included~~recorded in Cost of ~~Sales.~~Sales were $757 and $828 for the six months ended June 30, 2021 and 2020, respectively. There was 0 impairment of intangibles during the six months ended June 30, 2021 based on the qualitative assessment performed by the Company.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of ~~September~~June 30, ~~2017:~~2021 (in thousands):

Calendar Years
2017 (July to December) $ 1,438
2018 5,424
2019 4,650
2020 3,803
2021 3,848
Thereafter 14,079
Subtotal $ 33,242
Software development costs not yet placed in service 804
$ 34,046


2021 (six months)	$	5,788
2022	11,068
2023	9,942
2024	9,682
2025	8,896
2026	5,785
Thereafter	7,578
	$	58,739

NOTE 6 5 – NOTES PAYABLE

The following table summarizes our outstanding debt as of the dates ~~indicated:~~indicated(in thousands):

Notes Payable Maturity
Stated Interest
Rate

Balance as of
September 30, 2017

Balance as of
December 31, 2016

Subordinated Notes Payable- Mangrove acquisition 3/18/2018 3.50 % $ - $ 6,000
Subordinated Notes Payable- PMSI acquisition 4/30/2018 2.00 % 1,125 -
Subordinated Notes Payable- CPI acquisition 4/30/2018 - % 500 -
Subordinated Notes Payable- PSNW acquisition 3/31/2018 2.00 % 600 -
Subordinated Notes Payable- iSystems acquisition 5/25/2019 3.50 % 5,000 -
Subordinated Notes Payable- Compass acquisition 5/25/2022 2.0 % 1,500 -
Term Loan – Wells Fargo Syndicate Partner 5/25/2022 9.53 % 34,562 -
Term Loan - Wells Fargo 5/25/2022 4.53 % 34,563 24,715
Total Notes Payable $ 77,850 $ 30,715
Short-term notes payable $ 8,869 $ 5,455
Long-term notes payable $ 68,981 $ 25,260


	Maturity	Stated Interest Rate		June 30, 2021		December 31, 2020
Subordinated Notes Payable – acquisitions	7/1/2021 – 7/1/2022	2.00% - 3.00%		$	3,933	$	6,182
PPP Loan – Pinnacle Bank(1)	6/30/2021	1.00	%	0		8,856
Term Loan – Wells Fargo Syndicate Partner	12/31/2024	5.25	%	9,750		9,875
Total Notes Payable				$	13,683	$	24,913
Short-term Notes Payable				3,398		12,388
Long-term Notes Payable				$	10,285	$	12,525

15(1)See the PPP Loan section that follows in this Note 5 — Notes Payable.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

The following table summarizes the debt issuance costs as of the dates ~~indicated:~~indicated (in thousands):


	Gross Notes Payable		Debt Issuance Costs and Debt Discount		Net Notes Payable
June 30, 2021
Current portion of notes payable(1)	$	3,398	$	(121)	$	3,277
Notes payable, net of current portion(2)	10,285		(197)		10,088
Total	$	13,683	$	(318)	$	13,365

December 31, 2020
Current portion of notes payable(1)	$	12,388	$	(78)	$	12,310
Notes payable, net of current portion(2)	12,525		(300)		12,225
Total	$	24,913	$	(378)	$	24,535

Notes Payable
Gross Notes Payable at
September 30, 2017
Debt Issuance Costs and Debt Discount
Net Notes Payable at
September 30, 2017

Notes payable, current portion $ 8,869 $ (145 ) $ 8,724
Notes payable, net of current portion 68,981 (2,001 ) 66,980
Total Notes Payable $ 77,850 $ (2,146 ) $ 75,704

Notes Payable
Gross Notes Payable at
December 31, 2016
Debt Issuance Costs and Debt Discount
Net Notes Payable at
December 31, 2016

Notes payable, current portion $ 5,455 $ - $ 5,455
Notes payable, net of current portion 25,260 (679 ) 24,581
Total Notes Payable $ 30,715 $ (679 ) $ 30,036

(1)Current portion of notes payable includes $0 and $6,866 of Gross Notes Payables and $0 and $0 of Debt Issuance Cost and Debt Discount for the periods ended June 30, 2021 and December 31, 2020, respectively, related to our PPP loan with Pinnacle Bank. See the PPP Loan section that follows in this Note 5 — Notes Payable.

Table of Contents

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except per share amounts)

(2)Notes Payable, net of current portion includes $0 and $1,989 of Gross Notes Payables and $0 and $0 Debt Issuance Cost and Debt Discount for the periods ended June 30, 2021 and December 31, 2020, respectively, related to our PPP loan with Pinnacle Bank. See the PPP Loan section that follows in this Note 5 — Notes Payable.

The following table summarizes the future principal payments related to our outstanding ~~debt:~~debt as of June 30, 2021 (in thousands):

Year Ended Gross Amount
December 31, 2017 (October to December) $ 875
December 31, 2018 8,525
December 31, 2019 6,300
December 31, 2020 3,800
December 31, 2021 3,800
Thereafter 54,550
Gross Notes Payable $ 77,850


Year Ending	Amount
2021 (six months)	$	3,148
2022	1,410
2023	500
2024	8,625
Total	$	13,683

~~Subordinated Notes Payable- PMSI Acquisition~~

In January 2017, we acquired all of the outstanding shares of common stock (the “Shares”) of Personnel Management Systems, Inc., a Washington corporation (“PMSI”), pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”). The aggregate consideration for the Shares consisted of (i) $3,875 in cash and (ii) a subordinated promissory note (the “PMSI Note”) in the principal amount of $1,125 subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from our recent public stock offering. The PMSI Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PMSI Note is payable at maturity.

~~Subordinated Notes Payable- CPI Acquisition~~

In January 2017, we acquired substantially all the assets of Corporate Payroll, Inc., an Ohio corporation (“CPI”), relating to its payroll service bureau business, pursuant to an Asset Purchase Agreement (the “CPI Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $1,500 in cash, (ii) a subordinated promissory note (the “CPI Note”) in the principal amount of $500 and (iii) 112,166 shares of our common stock valued at $1,000, subject to adjustment as provided in the CPI Asset Purchase Agreement. We funded the cash payment with proceeds from our recent public stock offering. The CPI Note bears no interest and matures on April 30, 2018. The entire unpaid principal under the CPI Note is payable at maturity.

~~Subordinated Notes Payable – PSNW Acquisition~~

In January 2017, we acquired substantially all the assets of Payroll Specialties NW, Inc., an Oregon corporation (“PSNW”), pursuant to an Asset Purchase Agreement (the “PSNW Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $3,010 in cash and (ii) a subordinated promissory note (the “PSNW Note”) in the principal amount of $600, subject to adjustment as provided in the PSNW Asset Purchase Agreement. We funded the cash payment with proceeds from our recent public stock offering. The PSNW Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PSNW Note is payable at maturity.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

~~Subordinated Notes Payable- iSystems Acquisition~~

In May 2017 we acquired 100% of the outstanding equity interests of iSystems Intermediate Holdco, Inc., a Delaware corporation (“iSystems”), pursuant to an equity purchase agreement (the “Equity Purchase Agreement”). The aggregate purchase price consisted of (i) $32,000 in cash, subject to adjustment as provided in the Equity Purchase Agreement, (ii) a secured subordinated promissory note (“iSystems Note”) in the principal amount of $5,000, subject to adjustment as provided in the Equity Purchase Agreement, and (iii) 1,526,332 shares of unregistered common stock valued at $18,000. The iSystems Note bears interest at an annual rate of 3.5% and matures on May 25, 2019. The unpaid principal and all accrued interest under the promissory note is payable in two installments of $2.5 million on May 25, 2018 and May 25, 2019, subject to adjustment.

~~Subordinated Notes Payable- Compass Acquisition~~

In May 2017, we acquired 100% of the outstanding shares of capital stock of Compass HRM, Inc. (“Compass”) pursuant to a stock purchase agreement (the “Stock Purchase Agreement”). The aggregate purchase price consisted of $4,500 in cash and a subordinated promissory note (“Compass Note”) in the principal amount of $1,500, subject to adjustment as provided in the Stock Purchase Agreement. The Compass Note bears interest at an annual rate of 2.0% and matures on May 25, 2022. The Compass Note is payable in five annual installments of $300 on the anniversary of the closing date, subject to adjustment.

~~Subordinated Notes Payable- Mangrove Acquisition~~

In March 2016, we acquired all of the issued and outstanding shares of common stock (the “Shares”) of Mangrove. The aggregate consideration for the Shares consisted of (i) $11,348 in cash, a portion of which was used to pay certain obligations of Mangrove and (ii) a secured subordinated promissory note (the “Note”) in the principal amount of $6,000, subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from theSenior Credit ~~Agreement~~Facility with Wells ~~Fargo. This note was paid in full in the first quarter of 2017.~~Fargo N.A.

~~Term Loan - Wells Fargo~~

In March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo, ~~Bank, N.A.,~~ as administrative agent, and the lenders that are party thereto. The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults, bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the defaults are subject to customary notice and grace period provisions. In March 2014 and in connection with the Credit Agreement, we and our ~~wholly-owned~~wholly owned active subsidiaries entered into a Guaranty and Security Agreement with Wells Fargo Bank. Under the Guaranty and Security Agreement, we and each of our ~~wholly-owned~~wholly owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets. The Credit Agreement has been amended and restated multiple times, with the most recent amendment and restatement effective December 31, 2019. The Credit Agreement was also amended, but not restated, on August 10, 2020.

~~The~~Following the amendment, the Credit Agreement provided for $10,000 in term loans and a ~~term loan in the amount of $15,000 maturing in March 2019.~~

~~The Credit Agreement also~~$5,000 revolver and provided for ~~a revolving loan commitment~~new applicable margin rates for determining the interest payable on loans and amended certain of our financial covenants as described in our 2020 Annual Report on Form 10-K. We expect to be in compliance with these amended financial covenants over the ~~aggregate amount of up to $3,000. The outstanding principal amount of the revolving loan is due and payable in March 2019. As of September~~next twelve months. For both periods ending June 30, ~~2017~~2021, and December 31, ~~2016, $0~~2020, 0 amount was outstanding and ~~$5,000~~$4,500 was available for borrowing under the revolver. ~~Additionally,~~

PPP Loan

Due to the ~~Credit Agreement provided for a $10,000 uncommitted incremental term loan facility~~effects of COVID-19 on our business and the related need to support ~~permitted acquisitions.~~

~~In March 2017,~~our operations, we ~~amended our Credit Agreement with Wells Fargo Bank, N.A to, among other things, obtain~~received an ~~additional term~~unsecured Paycheck Protection Program loan in the amount of ~~$5,000.~~$8,856 (the “PPP Loan”) in April 2020 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 ~~first quarter~~Small Business Administration (“SBA”) had approved our application for forgiveness of ~~2017,~~our PPP Loan. The amount forgiven of $8,560 was the amount we ~~used~~requested in our forgiveness application but was less than the ~~proceeds~~original principal balance due, in part, to changes in SBA guidance following the date of our original loan application. Following the grant of forgiveness, we had an outstanding principal balance of $296 and an additional immaterial amount of accrued interest in our PPP Loan, both of which we paid in full in June 2021. During the three months ended June 30, 2021 the Company recorded a gain on the forgiveness of the ~~additional term loan to repay a portion~~PPP Loan and accrued interest in the amount of ~~all amounts outstanding under~~$8,654. The gain on the ~~secured subordinated note we issued in connection with the Mangrove acquisition.~~

~~Amended and Restated Credit Agreement~~

In May 2017, we entered into an amended and restated credit agreement (the “Restated Credit Agreement”) with Wells Fargo Bank, N. A., as administrative agent, and the lenders that are parties thereto, amending and restating the termsforgiveness of the ~~Credit Agreement dated~~PPP Loan is reflected on our Condensed Consolidated Statements of Comprehensive Income, and is a non-taxable event.

NOTE 6 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables

Receivables from contracts with customers, net of allowance for doubtful accounts of $2,411, were $3,482 at June 30, 2021. Receivables from contracts with customers, net of allowance for doubtful accounts of $2,194, were $3,354 at December 31, 2020. No customers represented more than 10% of our net accounts receivable balance as of ~~March 2014, as amended.~~

June 30, 2021 and December 31, 2020, respectively.

Table of Contents

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

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

amounts)

~~The Restated Credit Agreement provides for an increase in the aggregate principal amount of total commitments~~

Deferred Commissions

Deferred commission costs from ~~approximately $32,714 to $75,000. This increase includes an additional term loan commitment of approximately $40,286~~contracts with customers were $4,388 and an additional revolver commitment of $2,000. The term loan consists of a $35,000 “First Out Loan Obligation” funded by Wells Fargo as administrative agent, and a $35,000 “Last Out Loan Obligation” funded by Wells Fargo’s syndicate partner, Goldman Sachs.

~~The Restated Credit Agreement amends the applicable margin rates for determining the interest rate payable on outstanding First Out and Last Out loan obligations as follows:~~

~~Leverage Ratio~~	~~First Out Base~~ ~~Rate Margin~~	~~First Out LIBOR~~ ~~Rate Margin~~	~~Last Out Base~~ ~~Rate Margin~~	~~Last Out LIBOR~~ ~~Rate Margin~~
~~< 3.25:1~~	~~2.00 Percentage Points~~	~~3.00 Percentage Points~~	~~7.00 Percentage Points~~	~~8.00 Percentage Points~~
~~> 3.25:1~~	~~2.50 Percentage Points~~	~~3.50 Percentage Points~~	~~7.50 Percentage Points~~	~~8.50 Percentage Points~~

The outstanding principal amount of the term loan is payable in equal installments of $875 beginning on September 30, 2017 and the last day of each fiscal quarter thereafter. The outstanding principal balance and all accrued and unpaid interest on the term loan is due on May 25, 2022.

~~The Restated Credit Agreement also:~~

· ~~amends our leverage ratio covenant to increase the maximum ratio to 5.75:1~~$3,792 at June 30, ~~2017, stepping down to 3.25:1 at~~2021 and December 31, 2020, respectively. The amount of amortization recognized for the three and six months ended June 30, 2021 was $307 and $539, respectively, and for the three and six months ended June 30, 2020 was $190 and ~~each quarter-end thereafter;~~$471, respectively.

· ~~amends our fixed charge coverage ratio to be not less than 1.35:1 at~~Deferred Revenue

During the three and six months ended June 30, ~~2017~~2021, revenue of $442 and ~~September 30, 2017, not less than 1.45:1 at December 31, 2017,~~$3,848, and ~~not less than 1.50:1 beginning with~~ the ~~quarter ending March 31, 2018~~three and ~~each quarter-end thereafter; and~~

· adds a Trailing Twelve Months (“TTM”) recurring revenue covenant, requiring software-as-a-service, hardware-as-a-service and cloud subscription and maintenance support revenues to be at least $41,000 atsix months ended June 30, ~~2017~~2020, revenue of $689 and ~~stepping up~~$3,393, respectively, was recognized from the deferred revenue balance at the beginning of each period.

Transaction Price Allocated to ~~$60,500 at June 30, 2022 and each quarter-end thereafter.~~the Remaining Performance Obligations

As of ~~September~~June 30, ~~2017, we were in compliance with all covenants and all payments remain current.~~2021, approximately $24,801 of revenue is expected to be recognized from remaining performance obligations. We expect to ~~be in compliance or be able to obtain compliance through debt repayments with available cash~~recognize revenue on ~~hand or cash we expect to generate from the ordinary course~~approximately 71% of ~~operations~~these remaining performance obligations over the next ~~twelve months.~~ 12 months, with the balance recognized thereafter.

Revenue Concentration

During the three and six months ended June 30, 2021 and 2020, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 7 – LEASES

We have entered into office space lease agreements, which qualify as operating leases under ASU No. 2016-02, “Leases (Topic 842)”. Under such leases, the lessors receive annual minimum (base) rent. The leases have original terms (excluding extension options) ranging from one year to ten years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We record base rent expense under the straight-line method over the term of the lease. In the accompanying Condensed Consolidated Statements of Comprehensive Loss, rent expense is included in operating expenses under general and administrative expenses. The components of the rent expense for the three and six months ended June 30, 2021 and 2020 were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating lease cost	$	544	$	521	$	1,114	$	1,073
Sublease income	(11)		(48)		(21)		(96)
Net rent expense	$	533	$	473	$	1,093	$	977

For purposes of calculating the operating lease assets and lease liabilities, extension options are not included in the lease term unless it is reasonably certain we will exercise the option, or the lessor has the sole ability to exercise the option. The weighted average discount rate of our operating leases is 9% as of June 30, 2021 and December 31, 2020, respectively. The weighted average remaining lease term is five years and six years as of June 30, 2021 and December 31, 2020, respectively.

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except per share amounts)

Supplemental cash flow information related to operating leases for the six months ended June 30, 2021 and 2020 are as follows (in thousands):


	Six Months Ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	1,198	$	1,117
Non-cash operating activities:
Operating lease assets obtained in exchange for new operating lease liabilities	$	325	$	1,052

Future minimum commitments over the life of all operating leases, which exclude variable rent payments, are as follows (in thousands):


	Operating Leases
2021 (six months)	$	1,086
2022	1,632
2023	1,148
2024	1,037
2025	828
2026	610
Thereafter	1,192
Total minimum lease payments	7,533
Less: imputed interest	(1,479)
Total lease liabilities	$	6,054

NOTE 7 8 – ~~SHARE BASED~~ SHARE-BASED COMPENSATION

We have one active equity plan, the 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan, approved by our shareholders, replaced our 2009 Equity Incentive Plan, as amended (the “2009 Plan”), however, the terms and conditions of the 2009 Plan continue to govern any outstanding awards previously granted under the 2009 Plan.

The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) 2,350,000 shares, and (ii) any shares subject to issued and outstanding awards under the 2009 Plan as of the effective date of the 2018 Plan that expire, are canceled or otherwise terminate following the effective date of the 2018 Plan. We have outstanding options to purchase 1,910,803 shares at a weighted average exercise price of $7.95. During the three and six months ending June 30, 2021 we issued 596,000 and 903,500 of employee stock options, respectively. The weighted average exercise price of these awards was $7.86 and $7.75 for the three and six months ended June 30, 2021, respectively. These awards will vest over a three year period. We also had 261,616 outstanding restricted stock units as of June 30, 2021.

As of June 30, 2021, we had 1,607,763 shares available for grant pursuant to the 2018 Plan.

Share based compensation for our stock option plans for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 were $138~~June 30, 2020 was $714 and ~~$60,~~$587, respectively and ~~$363 and $166~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~June 30, 2020 was $1,340 and $1,025, respectively. We issued ~~51,000~~84,829 and 58,479 shares of common stock related to exercises of stock options ~~granted from our Stock Option Plan~~ for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~15,000~~2020, respectively. We issued 27,793 and 7,213 shares of common stock related to the issuance of vested restricted stock units for the three months ended ~~September~~June 30, ~~2016,~~2021 and 2020, respectively.

Asure has one active equity plan, the 2009 Equity Plan (the “2009 Plan”). The 2009 Plan provides for the issuance of non-qualified and incentive stock options to our employees and consultants. We generally grant stock options with exercise prices greater than or equal to the fair market value at the time of grant. The options generally vest over three to four years and are exercisable for a period of five to ten years beginning with date of grant. Our shareholders approved an amendment to the 2009 Plan in June 2017 to increase the number of shares reserved under the plan from 1,400,000 to 1,700,000. We have 904,000 options granted and outstanding and 176,000 available for grant pursuant to the 2009 Plan as of September 30, 2017.

~~NOTE 8 – OTHER COMPREHENSIVE LOSS~~

Comprehensive income (loss) represents a measure of all changes in equity that result from recognized transactions and other economic events other than those resulting from investments by and distributions to shareholders. Our other comprehensive income (loss) includes foreign currency translation adjustments.

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

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

~~The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax:~~

Foreign Currency Items
Accumulated Other
Comprehensive Loss Items

Beginning balance, December 31, 2016 $ 5 $ 5
Other comprehensive loss before reclassifications (63 ) (63 )
Amounts reclassified from accumulated other comprehensive income (loss) — —
Net current-period other comprehensive loss (63 ) (63 )
Ending balance, September 30, 2017 $ (58 ) $ (58 )

~~The following table presents the tax benefit (expense) allocated to each component of other comprehensive income (loss):~~

Three Months Ended September 30, 2017
Before Tax Tax Benefit Net of Tax
Foreign currency translation adjustments $ (6 ) $ — $ (6 )

Other comprehensive loss $ (6 ) $ — $ (6 )

Nine Months Ended September 30, 2017
Before Tax Tax Benefit Net of Tax
Foreign currency translation adjustments $ (63 ) $ — $ (63 )

Other comprehensive loss $ (63 ) $ — $ (63 )

NOTE 9 – NET ~~LOSS~~EARNINGS (LOSS) PER SHARE

We compute net ~~loss~~earnings (loss) per share based on the weighted average number of common shares outstanding for the period. Diluted net ~~loss~~earnings (loss) per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options. We compute the number of common share equivalents, which includes stock options, using the treasury stock method. We have excluded stock options ~~to acquire 904,000~~and restricted stock units of approximately 2,172 and 2,172 shares for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 and ~~452,000 shares for the nine months ended September 30, 2016~~2020, respectively, from the computation of the ~~dilutive stock options~~diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net ~~income~~earnings (loss) per common share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016:~~ June 30, 2020 (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Basic:
Net income (loss)	$	3,764	$	(3,944)	$	2,166	$	(5,711)
Weighted-average shares of common stock outstanding	19,040		15,779		19,033		15,753
Basic earnings (loss) per share	$	0.20	$	(0.25)	$	0.11	$	(0.36)

Diluted:
Net income (loss)	$	3,764	$	(3,944)	$	2,166	$	(5,711)
Weighted-average shares of common stock outstanding	19,203		15,779		19,198		15,753
Diluted earnings (loss) per share	$	0.20	$	(0.25)	$	0.11	$	(0.36)

For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2017 2016 2017 2016
Net income (loss) $ (1,281 ) $ 315 $ (4,177 ) $ (1,103 )

Weighted-average shares of common stock outstanding 12,418,000 6,534,000 10,355,000 6,383,000
Dilutive effect of employee stock options - 14,000 - -
Weighted average shares for diluted net income (loss) per share 12,418,000 6,548,000 10,355,000 6,383,000
Basic net (loss) income per share $ (0.10 ) $ 0.05 $ (0.40 ) $ (0.17 )
Diluted net (loss) income per share $ (0.10 ) $ 0.05 $ (0.40 ) $ (0.17 )

NOTE 10 -– SUBSEQUENT EVENTS

~~Effective October 1, 2017,~~On August 9, 2021, we ~~closed~~entered into a commitment letter (the “Commitment Letter”) with Structural Capital Investments III, LP (“Structural”) pursuant to which Structural has agreed, subject to the ~~strategic acquisition of Associated Data Services, Inc., a leading regional human resources and payroll services bureau~~conditions set forth in the ~~Southeast~~Commitment Letter, to provide us up to $50 million in acquisition and ~~a current reseller~~term loan financing to support our growth needs (the “New Credit Facility”). The Loan and Security Agreement and Ancillary Terms attached to the Commitment Letter provide the material terms and conditions of the New Credit Facility. Subject to the satisfaction of certain closing conditions, the parties are expected to close and fund up to $25 million of the New Credit Facility on or around September 15, 2021; however the closing may be extended to September 30, 2021 upon our request, and at Structural’s reasonable discretion. If the closing conditions are not satisfied by September 30, 2021 (if the extension is granted), the Commitment Letter will expire.

The New Credit Facility would replace our existing facility with Wells Fargo N.A. and on August 9, 2021, we provided Wells Fargo N.A. with notice of our ~~HCM solution, Evolution.~~intent to terminate the existing facility. We expect to pay off all of our outstanding obligations to Wells Fargo N.A. in connection with the closing of the New Credit Facility.

Effective October 9, 2017, our headquarters moved locations in Austin, Texas. Our prior office lease terminated on the date the new lease commenced. The new office space is approximately 14,500 square feetSee Item 5. Other Information for ~~a period~~an expanded explanation of ~~60 months. Future minimum payments total approximately $2,073.~~this event.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

~~Certain~~This Form 10-Q contains forward-looking statements ~~in this Report represent~~about our financial results, which may include expected U.S GAAP and non-U.S. GAAP financial and other operating and non-operating results, including revenue, net income, diluted earnings per share, operating cash flow growth, operating margin improvement, deferred revenue growth, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, amortization of debt discount and shares outstanding. The achievement or success of the matters covered by such forward-looking ~~statements. These~~ statements ~~involve known and unknown~~involves risks, uncertainties and ~~other factors that may cause actual~~assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the Company’s results ~~of operations, levels of activity, economic performance, financial condition or achievements to be~~could differ materially ~~different~~ from ~~future~~the results ~~of operations, levels of activity, economic performance, financial condition or achievements as~~ expressed or implied by ~~such forward-looking statements. Asure has attempted to identify these~~the forward-looking statements with the words “believes,” “estimates,” “plans,” “expects,” “anticipates,” “may,” “could” and other similar expressions. Although these forward-looking statements reflect management’s current plans and expectations, which we ~~believe are reasonable as of the filing date of this report, they inherently are subject to certain risks and uncertainties. These~~make. The risks and uncertainties ~~include —~~ referred to above include—but are not limited to—risks associated with possible fluctuations in the Company’s financial and operating results; the Company’s rate of growth and anticipated revenue run rate, including impact of the current environment, the spread of major pandemics or epidemics (including COVID-19) and other related uncertainties such as government-imposed travel restrictions, interruptions to ~~— adverse~~supply chains and extended shut down of businesses, reductions in employment and an increase in business failures, specifically among our clients, the Company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the Company’s services or the Company’s Web hosting; breaches of the Company’s security measures; domestic and international regulatory developments, including changes to or applicability to our business of privacy and data securities laws, money transmitter laws and anti-money laundering laws; the financial and other impact of any previous and future acquisitions; the nature of the Company’s business model, including risks related to government contracts; the Company’s ability to continue to release, gain customer acceptance of and provide support for new and improved versions of the Company’s services; successful customer deployment and utilization of the Company’s existing and future services; changes in the ~~economy,~~Company’s sales cycle; competition; various financial ~~markets, and credit markets; delays or reductions in information technology spending; the development~~aspects of the ~~market for cloud based workplace applications; product development; market acceptance of~~Company’s subscription model; unexpected increases in attrition or decreases in new ~~products and product improvements; our~~business; the Company’s ability to ~~retain~~realize benefits from strategic partnerships and strategic investments; the emerging markets in which the Company operates; unique aspects of entering or ~~increase our customer base; security breaches; errors, disruptions or delays~~expanding in ~~our services; privacy concerns and laws; changes in our sales cycle; competition,~~international markets, including ~~pricing pressures, entry of new competitors, and new technologies; intellectual property enforcement and litigation; our~~the compliance with United States export control laws, the Company’s ability to hire, retain and motivate ~~employees; our ability to~~employees and manage ~~our~~the Company’s growth; our ability to realize benefits from acquisitions; the level of our indebtedness; changes in sales may not be immediately reflected in our operating results due to our subscription model; changes in laws and regulations; changes in the ~~Internet infrastructure;~~Company’s customer base; technological developments; litigation and any related claims, negotiations and settlements, including with respect to intellectual property matters or industry-specific regulations; unanticipated changes in the Company’s effective tax rate; factors affecting the Company’s term loan and revolving credit facility; fluctuations in the number of Company shares outstanding and the price of such shares; collection of receivables; interest rates; factors affecting the Company’s deferred tax assets and ability to value and utilize them; the potential negative impact of indirect tax exposure; the risks and expenses associated with the Company’s real estate and office facilities space; and general developments in the economy, financial markets, credit markets and the impact of current and future accounting pronouncements and other financial reporting standards.

Further information on these and other factors that could affect the Company’s financial results is included in the reports on Forms 10-K, 10-Q and 8-K, and in other filings we make with the SEC from time to time. These documents are available on the SEC Filings section of the Investor Information section of the Company’s website at investor.asuresoftware.com.

Asure ~~is under~~assumes no obligation and does not intend to update ~~any of the~~these forward-looking statements, ~~after the date of this Form 10-Q to conform such statements to actual results.~~except as required by law.

OVERVIEW

The following review of Asure’s financial position as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020, and ~~the~~ results of operations ~~and cash flows~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 should be read in conjunction with our ~~2016~~2020 Annual Report on Form 10-K filed with the ~~Securities and Exchange Commission.~~SEC on March 11, 2021. Asure’s internet website address is ~~http://~~www.asuresoftware.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our internet website free of charge as soon as reasonably practicable after they are electronically filed, or furnished to, the ~~Securities and Exchange Commission.~~SEC. Asure’s internet website and the information contained ~~therein~~in our website or connected ~~thereto~~to our website is not incorporated into this Quarterly Report on Form 10-Q.

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Asure is a leading ~~global~~ provider of cloud-based ~~software-as-a-service~~Human Capital Management (“~~SaaS”~~HCM”) ~~time~~software and services. We help small- and medium-sized businesses grow by offering the HR tools necessary to build a better workforce, providing the resources to stay compliant with ever changing federal, state, and local tax jurisdictions and labor ~~management~~laws, ultimately freeing their cash flows so they can spend their financial capital on growing their business rather than back-office overhead that suffocates growth. Asure’s Human Capital Management suite, named AsureHCM, includes cloud-based Payroll & Tax, HR, and ~~Agile Workplace management solutions that enable companies~~Time & Attendance software as well as HR Services ranging from HR projects to completely outsourcing payroll and HR staff. We also offer these products and services through our network of ~~all sizes and complexities to operate more efficiently and proactively manage costs associated with their most expensive assets: real estate, labor and technology.~~reseller partners.

We ~~currently offer two main product lines, AsureSpace™~~are a leading provider of cloud-based HCM solutions, delivered as a software-as-a-service (SaaS) for small- and ~~AsureForce®~~medium-sized businesses (SMBs). ~~Our AsureSpace™ Agile Workplace management solutions enable organizations~~From recruitment to ~~manage their office environments and optimize real estate utilization. Our AsureForce® time and labor management~~retirement, our solutions help organizations optimize labor and labor administration costs and activities. With our acquisitions of Mangrove Employer Services, Inc. and the assets of Mangrove COBRAsource Inc. in March 2016, we have entered into the human resource management, payroll processing and benefits administration services businesses, which we are integrating into our existing AsureForce® product line. In January 2017, we closed three strategic acquisitions: Personnel Management Systems, Inc., a provider of outsourced HR solutions; Corporate Payroll, Inc. (Payroll Division), a provider of payroll services; and Payroll Specialties NW, Inc., a provider of payroll services. In May 2017, we closed two strategic acquisitions: iSystems, LLC and Compass HRM. iSystems LLC, through its flagship product, Evolution HCM, offers payroll, tax management and HR software combined with comprehensive back-end service bureau tools to service providersmore than 80,000 SMBs across the United ~~States. Tampa-based Compass HRM is a current reseller~~States grow their businesses. About 10,000 of our clients are direct and approximately 70,000 remaining clients are indirect as they have contracts with Reseller Partners that white label our solutions.

We strive to be the most trusted HCM ~~offering (formerly Mangrove),~~resource to entrepreneurs 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 intend to continue to invest in, research and development to expand our solution. Asure HCM, our user-friendly solution, reduces the administrative burden on employers and increases employee productivity while managing the complete employment lifecycle.

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 certain 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 ~~provides human resources solutions~~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 June 1, 2021, we have opened our offices and resumed in person work. We continue to take proactive measures, including regular cleaning of the offices, and monitoring of the Center for Disease Control guidelines for return to work. We will continue to actively monitor the situation and may take further actions that ~~enhance organizations, people, and profits through payroll and HR solutions. The acquisition of Compass HRM expands~~alter our ~~reach~~business operations as may be required by federal, state or local authorities or that we determine are in the ~~Southeast, particularly Florida.~~

~~For both product lines, support and professional services are other key elements~~best interests of our ~~software~~employees and ~~services business. As an extension~~clients.

Beginning in 2020, the COVID-19 pandemic disrupted the operations of our ~~perpetual software product offerings, Asure offers~~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 customers maintenance and support contracts that provide ready access to qualified support staff, software patches and upgrades to our software products. We also provide installation of and training on our products, add-on software customization and other professional servicesclients on a ~~global scale.~~per-employee basis for certain services we provide, decreases in the headcounts of 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.

~~We target our~~In 2020, we continued to aggressively invest in sales and marketing ~~efforts~~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 ~~wide range~~negative impact on recurring revenue, combined with increased sales and marketing and research and development expenses, cumulatively had an adverse impact on our operating results for the year ended December 31, 2020. We expect net income to be negatively affected by the impact of ~~audiences, from small~~the pandemic on our recurring revenue and our deliberate, increased level of investment in sales and marketing and research and development to ~~medium-sized businesses and divisions of enterprise organizations throughout~~drive the ~~United States, Europe and Asia/Pacific. We generate sales~~growth of our ~~solutions through~~business.

Prior to the COVID-19 pandemic, our ~~direct~~ sales ~~teams~~force historically traveled frequently to market our solution set. The current remote work environment presents a unique opportunity for our sales force because each sales employee is able to meet virtually with a greater number of client prospects in a given day than he or she would if conducting in-person meetings. Although we have not experienced such challenges to date, if clients and ~~indirectly through~~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 ~~channel partners. We are expanding~~sales efforts, impede client acquisition and lengthen our ~~investment~~sales cycles, which would negatively impact our business and results of operations and could impact our financial condition in ~~our direct sales teams to continue to address our market opportunity.~~ the future.

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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 occurrence of variant strains, 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 our Form 10-K. As a result, 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.

RESULTS OF OPERATIONS

($ in thousands)

Three and Six Months Ended June 30, 2021 Compared to Three and Six Months Ended June 30, 2020

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 Condensed Consolidated Statements of Comprehensive Income (Loss):


	FOR THE THREE MONTHS ENDED SEPTEMBER 30,						FOR THE NINE MONTHS ENDED SEPTEMBER 30,							Three Months Ended June 30,				Six Months Ended June 30,
	2017			2016			2017			2016				2021		2020		2021		2020
Revenues		100	%		100	%		100	%		100	%	Revenues	100	%	100	%	100	%	100	%
Gross margin		78.1			78.5			77.9			77.0		Gross margin	58	%	57	%	61	%	58	%
Selling, general and administrative		60.9			53.5			64.6			60.2
Sales and marketing													Sales and marketing	21	%	20	%	20	%	19	%
General and administrative													General and administrative	40	%	37	%	36	%	35	%
Research and development		5.7			8.1			6.4			8.6		Research and development	8	%	10	%	7	%	8	%
Amortization of intangible assets		8.6			6.6			8.3			6.3		Amortization of intangible assets	15	%	17	%	14	%	14	%
Total operating expenses		75.2			68.1			79.2			75.1		Total operating expenses	83	%	83	%	76	%	76	%
Other loss, net		(10.6	)		(6.6	)		(8.4	)		(5.7	)
Net income (loss)		(8.3	)		3.3			(10.7	)		(4.3	)
Interest expense and other, net													Interest expense and other, net	(1)	%	—	%	(1)	%	2	%
Gain on extinguishment of debt													Gain on extinguishment of debt	50	%	—	%	23	%	—	%
Gain (loss) from operations before income taxes													Gain (loss) from operations before income taxes	24	%	(25)	%	7	%	(16)	%
Net gain (loss) from continuing operations													Net gain (loss) from continuing operations	22	%	(28)	%	6	%	(17)	%

~~THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (Amounts in thousands)~~

Revenue

Revenues are comprised of recurring revenues, 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 and other revenues to remain relatively constant.

Recurring Revenues

Recurring revenues include fees for our payroll, payroll tax, time and labor management, and other Asure 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 fee per employee or transaction processed or (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 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.

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 in the first quarter, 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.

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This revenue line also includes interest earned on funds held for clients. 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.

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.

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

FOR THE THREE
MONTHS ENDED
September 30,

Increase (Decrease)

Revenue 2017 2016 %
Cloud revenue $ 11,062 $ 5,630 $ 5,432 96.5
Hardware revenue 1,003 676 327 48.4
Maintenance and support revenue 1,178 1,078 100 9.3
On premise software license revenue 599 754 (155 ) (20.6 )
Professional services revenue 1,685 1,302 383 29.4
Total revenue $ 15,527 $ 9,440 $ 6,087 64.5

FOR THE NINE
MONTHS ENDED
September 30,

Increase (Decrease)

Revenue 2017 2016 %
Cloud revenue $ 27,724 $ 14,881 $ 12,843 86.3
Hardware revenue 3,651 2,644 1,007 38.1
Maintenance and support revenue 3,276 3,509 (233 ) (6.6 )
On premise software license revenue 1,049 1,352 (303 ) (22.4 )
Professional services revenue 3,434 3,440 (6 ) .2
Total revenue $ 39,134 $ 25,826 $ 13,308 51.5


	Three Months Ended June 30,				Variance
	2021		2020		$		%
Recurring	$	16,072	$	13,733	$	2,339	17.0	%
Professional services, hardware and other	1,096		382		714		186.9	%
Total	$	17,168	$	14,115	$	3,053	21.6	%

~~Revenue~~


	Six Months Ended June 30,				Variance
	2021		2020		$		%
Recurring	$	35,314	$	32,168	$	3,146	9.8	%
Professional services, hardware and other	1,656		893		763		85.4	%
Total	$	36,970	$	33,061	$	3,909	11.8	%

Total revenue represents our consolidated revenues, including sales of our ~~scheduling software,~~payroll and tax services, time and attendance and human resource software, as well as complementary hardware devices to enhance our software ~~products, software~~products. Recurring revenue consists of cloud revenue, recurring HR consulting revenue, hardware as a service, maintenance and support revenue and interest earned on client funds. Professional services, ~~installation~~hardware and ~~training~~other revenue consists of hardware revenue, on-premise software license revenue as well as installation services and other professional ~~services.~~

Our product offerings are categorized into AsureSpace™ and AsureForce®. AsureSpace™ offers workplace management solutions that enable organizations to manage their office environments and optimize real estate utilization, and AsureForce® offers time and labor management solutions which help organizations optimize labor and labor administration costs and activities. Both product groupings include cloud revenue, hardware revenue, maintenance and support revenue, on premise software license revenue and professional services revenue. ~~AsureSpace™ revenues include PeopleCube, Meeting Room Manager and Roomtag revenues. AsureForce® revenues include ADI, Legiant, iEmployee, FotoPunch, Mangrove, iSystems and Compass revenues.~~While revenue mix varies by product, recurring revenue represented over 90% of total revenue in the second quarter.

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Revenue for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~$15,527,~~$17,168, an increase of ~~$6,087,~~$3,053, or ~~64.5%~~21.6%, from ~~the $9,440 reported~~$14,115 for the three months ended ~~September~~June 30, ~~2016.~~2020. Revenue increased evenly, approximately, between organic and inorgranic growth. The ~~largest~~inorganic growth was driven by an increase ~~was~~ in ~~cloud~~clients from our acquisitions in the second half of 2020. Higher account balances in funds held for clients increased interest revenue ~~which increased $5,432, or 96.5% from~~compared to the ~~third quarter of 2016. Cloud~~prior year. Professional services, hardware and other revenue increased ~~due to our continued emphasis on selling integrated cloud based solutions, as well as cloud revenue primarily from 2017 acquisitions. iSystems and PMSI recognized $4,139 of cloud revenue in~~$714, or 186.9%, for the three months ended ~~September~~June 30, ~~2017, representing 68.0%~~2021 from the similar period in 2020 due to the continued success of ~~the increase in~~our Employee Retention Tax Credit (“ERTC”) service launch, which we anticipate to have a positive impact on our operating results through 2021. Revenue for the three months ended ~~September~~June 30, ~~2017. Hardware revenue, professional services revenue and maintenance and support revenue also increased as compared to~~2021, decreased sequentially $2,634 or 13.3%, from $19,802 for the three months ended ~~September 30, 2016. This was~~March 31, 2021 primarily due to year end W-2/ACA revenue that is recognized in the first quarter, offset by ~~a small decrease in on premise software license revenue of $155, or 20.6%, as compared to the three months ended September 30, 2016, which is consistent with our focus on cloud~~Professional services, hardware and other revenue.

Revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017 were $39,134,~~2021 was $36,970, an increase of ~~$13,308,~~$3,909, or ~~51.5%~~11.8%, from ~~the $25,826 reported~~$33,061 for the ~~nine~~six months ended ~~September~~June 30, ~~2016. This increase was~~2020. Recurring revenue increased primarily due to an increase in ~~cloud~~clients due to our acquisitions in 2020 and higher account balances in funds held for clients and correlated interest revenue. Professional services, hardware and other revenue ~~of $12,843,~~increased $763, or ~~86.3%~~85.4%, ~~and $1,007, or 38.1%, respectively. This was offset by smaller decreases in maintenance and support revenue, on premise software license revenue and professional services revenue, with~~for the ~~largest decrease in on premise software license revenue of $303, or 22.4%~~six months ended June 30, 2021 from the ~~nine months ended September 30, 2016, reflecting~~similar period in 2020, due to the implementation of our ~~continued emphasis on selling cloud based solutions.~~ERTC service in 2021.

Although our total customer base is widely spread across industries, our sales are concentrated in ~~certain industry sectors, including corporate, education, healthcare, government, legal and non-profit.~~small- to medium-sized businesses. We continue to target ~~small~~small- and ~~medium sized~~medium-sized businesses ~~and divisions of larger enterprises in these same~~across industries as prospective customers. Geographically, we sell our products ~~worldwide, but sales are largely concentrated~~primarily in the United States, Canada and Europe. Additionally, we have a distribution partner in Australia. As the overall workforce management solutions market continues to experience significant growth related to SaaS products, we will continue to focus on sales of Meeting Room Manager, On Demand, PeopleCube and ADI SaaS products.States.

In addition to continuing to develop our workforce ~~and Agile Workplace management~~ solutions and release of new software updates and enhancements, we continue to actively explore other opportunities to acquire additional products or technologies to complement our current software and services. ~~Through acquisitions in 2011~~

Table of ~~ADI~~Contents

Gross Profit and Legiant, we expanded our cloud computing time and attendance software and management services business. The 2012 acquisition of PeopleCube gave us a product line that includes software to assist customers in driving integrated facility management of offices, conference rooms, video conferencing, events and training, alternative workspaces and lobby use. The 2014 acquisitions of FotoPunch and Roomtag support our vision to deliver innovative cloud-based Agile Workplace technologies. Our March 2016 acquisitions from Mangrove enable us to enter into the human resource management, payroll processing and benefits administration services businesses, which we are integrating into our existing AsureForce® product line. With respect to the three acquisitions closed in January 2017, PSNW and CPI are top regional service bureaus that resell our HCM products (formerly Mangrove) and integrate seamlessly into our business, while PMSI is a leading HCM service company that expands our solution, service, and implementation capabilities. Our May 2017 acquisition of iSystems, a leading national provider of HCM solutions, provides us with additional cross-sell revenue opportunities and cost synergies and our May 2017 acquisition of Compass HRM, an existing reseller of our HCM offerings, provides us with a regional HR and payroll service bureau in the Southeast.

Gross Margin

Consolidated gross ~~margin~~profit for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~$12,131,~~$9,945, an increase of ~~$4,717,~~$1,838, or ~~63.6%~~22.7%, from ~~the $7,414 reported~~$8,107 for the three months ended ~~September~~June 30, ~~2016.~~2020. Gross margin as a percentage of ~~revenues~~revenue was ~~78.1% and 78.5%~~57.9% for the three months ended ~~September~~June 30, ~~2017~~2021 as compared to 57.4% for the three months ended June 30, 2020. Our increase in gross margin is primarily attributable to the increase in revenue and ~~2016, respectively.~~ more efficient operations.

Consolidated gross ~~margin~~profit for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was ~~$30,474,~~$22,437, an increase of ~~$10,580~~$3,224, or ~~53.2%~~16.8%, from ~~the $19,894 reported~~$19,213 for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. Gross ~~margins~~margin as a percentage of ~~revenues were 77.9% and 77.0%~~revenue was 60.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively. We attribute~~2021 as compared to 58.1% for the six months ended June 30, 2020. Our increase in gross margin is primarily attributable to ~~a shift~~the increase in revenue and more efficient operations.

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 ~~mix~~amortization of our ~~revenue between our higher margin~~purchased software development costs. We include intangible amortization related to developed and ~~lower margin product lines~~acquired technology within cost of sales.

Sales and Marketing Expenses

Sales and marketing expenses primarily consist of salaries and related expenses for sales and marketing staff, including stock-based expenses, commissions, as well as ~~the addition of the acquisitions in 2017.~~marketing programs, which include events, corporate communications and product marketing activities.

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

~~Selling, general and administrative (“SG&A”)~~marketing expenses for the three months ended ~~September~~June 30, ~~2017~~2021 were ~~$9,459,~~$3,622, an increase of ~~$4,413,~~$853, or ~~87.5%~~30.8%, from ~~the $5,046 reported~~$2,769 for for the three months ended ~~September~~June 30, ~~2016. SG&A~~2020. The increase in sales and marketing is primarily due to increased personnel costs offset by lower discretionary marketing spend as we focus on hiring direct sales personnel. Sales and marketing expenses as a percentage of ~~revenues were 60.9% and 53.5%~~revenue increased to 21.1% for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2021 from 19.6% for the same period in 2020.

Selling ~~general~~ and ~~administrative (“SG&A”)~~marketing expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 were ~~$25,286,~~$7,233, an increase of ~~$9,727,~~$889, or ~~62.5%~~14.0%, from ~~the $15,559 reported~~$6,344 for the ~~nine~~six months ended ~~September~~June 30, ~~2016. SG&A~~2020, primarily due to increased personnel costs offset by lower discretionary marketing spend as we focus on hiring direct sales personnel. Selling and marketing expenses as a percentage of ~~revenues were 64.6% and 60.2%~~revenue increased to 19.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~

~~SG&A expenses were higher in the three and nine months ended September 30, 2017 as compared to~~2021 from 19.2% for the same ~~periods~~period in ~~2016 primarily due to the acquisition and integration expenses related to the acquisition in the first and second quarters of 2017.~~ 2020.

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

General and Administrative Expenses

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

General and administrative expenses for the three months ended June 30, 2021 were $6,821, an increase of $1,628, or 31.3%, from $5,193 for the three months ended June 30, 2020, primarily attributable to increased personnel, contracting and placement costs. General and administrative expenses as a percentage of revenue increased to 39.7% for the three months ended June 30, 2021 from 36.8% for the same period in ~~SG&A designed~~2020.

General and administrative expenses for the six months ended June 30, 2021 were $13,319, an increase of $1,673, or 14.4%, from $11,646 for the six months ended June 30, 2020, primarily attributable to ~~enhance future~~increased personnel, contracting and placement costs. General and administrative expenses as a percentage of revenue ~~growth.~~increased to 36.0% for the six months ended June 30, 2021 from 35.2% for the same period in 2020.

We continue to drive efficiencies within our payroll operations and continually reevaluate our vendor relationships.

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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.

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R&D expenses for the three months ended ~~September~~June 30, ~~2017~~2021 were ~~$883, an increase~~$1,343, a decrease of ~~$122,~~$34, or ~~16.0%~~2.5%, from ~~the $761 reported~~$1,377 for the three months ended ~~September~~June 30, ~~2016.~~2020. The decrease in R&D expense is primarily attributable to an increase in investment costs offset by an increase in capitalization costs. R&D expenses as a percentage of revenues ~~were 5.7% and 8.1%~~decreased to 7.8% for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~ 2021 from 9.8% for the same period in 2020.

~~Research and development (“~~R~~&D”)~~&D expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 were ~~$2,488,~~$2,467, a decrease of $84, or 3.3%, from $2,551 for the six months ended June 30, 2020. The decrease in R&D expense is primarily attributable to an increase ~~of $271, or 12.2%, from the $2,217 reported for the nine months ended September 30, 2016.~~in investment costs offset by an increase in capitalization costs. R&D expenses as a percentage of revenues ~~were 6.4% and 8.6%~~decreased to 6.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~ 2021 from 7.7% for the same period in 2020.

We will continue to ~~improve~~enhance our products and technologies through ~~organic improvements~~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 lays the ~~ground work~~groundwork for broader market opportunities and represents a key aspect of our competitive differentiation. Native mobile applications, ~~QR Code integration,~~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 ~~further improve~~enhance our ~~workforce management solutions.~~solution suite and integrated platform. We have also made significant investments outside of core R&D into compliance and certifications, including SOC I Type 1 and SOC II Type 2 certifications, GDPR, CCPA, and other initiatives.

Amortization of Intangible Assets

Amortization expense in operating expenses for the three months ended ~~September~~June 30, ~~2017 were $1,341,~~2021 was $2,528, an increase of ~~$716,~~$179, or ~~114.6%~~7.6%, from ~~the $625 reported~~$2,349 for the three months ended ~~September~~June 30, ~~2016.~~2020. Amortization ~~expenses~~expense as a percentage of ~~revenues were 8.6%~~revenue was 14.7% and ~~6.6%~~16.6% for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

Amortization expense in operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017 were $3,230,~~2021 was $5,056, an increase of ~~$1,602,~~$358, or ~~98.4% compared to $1,628, reported~~7.6%, from $4,698 for for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. Amortization ~~expenses~~expense as a percentage of ~~revenues were 8.3%~~revenue was 13.7% and ~~6.3%~~14.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. ~~The increases are due to the amortization recorded on the intangibles acquired in the acquisitions during 2017.~~

~~Other~~Interest (Expense) Income and ~~Loss~~Other, Net

~~Other loss~~Interest (expense) income and other, net for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~$1,644, an increase~~a loss of ~~$1,024, or 165.2%, from the $620 reported~~$223 compared to a gain of $14 for the three months ended ~~September~~June 30, ~~2016. Other loss~~2020. Interest (expense) income and other, net as a percentage of ~~revenues~~revenue was ~~10.6%~~at (1.3)% and ~~6.6%~~0.1% for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~June 30, 2020, respectively. ~~Other loss~~Interest (expense) income and other, net for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~September 30, 2016 are~~2020 is composed primarily of interest expense on notes payable.

~~Other loss~~Interest (expense) income and other, net for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was ~~$3,279, an increase~~a loss of ~~$1,819, or 124.6%, from the $1,460 reported~~$447 compared to a gain of $710 for the ~~nine~~six months ended ~~September~~June 30, ~~2016. Other expense~~2020. Interest (expense) income and other, net as a percentage of ~~revenues~~revenue was ~~8.4%~~at (1.2)% and ~~5.7%~~2.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~June 30, 2020, respectively. ~~Other loss~~Interest (expense) income and other, net for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 are~~2020 is composed primarily of interest expense on notes payable.

Interest expense for the three and nine months ended September 30, 2017 increased due to the additional debt amount incurred in May 2017 through our amended and restated credit agreement we entered into with Wells Fargo and Goldman Sachs and a higher interest rate incurred on the debt held with Goldman Sachs.

Income Taxes

~~Provision for income tax expense was $85 and $47 for~~For the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, we recorded an income tax expense attributable to continuing operations of $298 and $377, respectively, a decrease of $79 or 21.0%.

For the six months ended June 30, 2021 and 2020, we recorded an income tax expense attributable to continuing operations of $403 and $395, respectively, an increase of ~~$38,~~$8 or ~~80.9%, as a result of additional tax deductible goodwill acquired in 2017.~~2.0%.

Provision for income tax expense for the nine months ended September 30, 2017 was $368, an increase of $235, or 176.7%, from the $133 reported for the nine months ended September 30, 2016, respectively, as a result of additional tax deductible goodwill acquired in 2017.Loss From Operations

~~Net Income (Loss)~~

We incurred a ~~net~~ loss from operations of ~~$1,281,~~$4,369, or ~~$(0.10)~~$0.23 per share, during the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~net income~~a loss from operations of ~~$315,~~$3,581, or ~~$0.05~~$0.25 per share, during the three months ended ~~September~~June 30, ~~2016. Net loss~~2020. Loss from continuing operations as a percentage of total revenues was ~~8.3%~~21.9% and 27.9% for the three months ended ~~September~~June 30, ~~2017 compared to net income of 3.3% of total revenues for the three months ended September 30, 2016.~~

2021 and 2020, respectively.

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We incurred a ~~net~~ loss from operations of ~~$4,177,~~$5,638, or ~~$(0.40)~~$0.30 per share, during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to a ~~net~~ loss from operations of ~~$1,103,~~$6,026, or ~~$(0.17)~~$0.36 per share, ~~reported for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2016. Net loss~~2020. Loss from continuing operations as a percentage of total revenues was ~~10.7%~~5.9% and 17.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 compared to net loss of 4.3% of total revenues for the nine months ended September 30, 2016.~~2021 and 2020, respectively.

We intend to continue to implement our corporate strategy for growing ~~the~~our software and services business by ~~modestly~~ investing in areas that directly generate revenue and positive cash flows for the Company. However, uncertainties and challenges remain, including the effects of COVID-19, and there can be no assurance that we can successfully grow our revenues or achieve profitability during the remainder of fiscal year ~~2017.~~2021.

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

September 30, December 31,
2017 2016

Working capital $ 18,734 $ 4,207
Cash and cash equivalents 27,464 12,767

For the Nine Months Ended
September 30,
2017 2016

Net Cash used in operating activities $ (2,083 ) $ (730 )
Net Cash used in investing activities (38,351 ) (7,750 )
Net Cash provided by financing activities 55,123 7,460


	June 30, 2021		December 31, 2020
Cash and cash equivalents(1)	$	20,292	$	28,577

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

Working Capital. We had working capital of ~~$18,734~~$14,836 at ~~September~~June 30, ~~2017,~~2021, an increase of ~~$14,527~~$6,630 from working capital of ~~$4,207~~$8,206 at December 31, ~~2016.~~2020. Working capital ~~at September~~as of June 30, ~~2017~~2021 and December 31, ~~2016~~2020 includes ~~$12,065~~$1,279 and ~~$9,252~~$4,343 of short-term deferred revenue, 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. We attribute the increase in our working capital to the issuance of stock in an underwritten public offering and proceeds from notes payable, offset by the acquisitions of PMSI, CPI and PSNW in the first quarter of 2017 and the acquisitions of iSystems and Compass in the second quarter of 2017.

Operating Activities. Net cash used in operating activities ~~was $2,083~~of $1,898 for the ~~nine~~six months ended ~~September~~June 30, ~~2017. The $2,083 of cash used in operating activities during the first nine months of 2017~~2021 was primarily driven by changes in operating assets and liabilities, which resulted in a ~~net loss~~use of ~~$4,177, an increase~~$5,645 in ~~accounts receivable of $4,450, an increase in prepaids and other assets of $471, and a decrease in accounts payable of $569.~~cash. This was offset by non-cash adjustments to our net ~~loss~~income of ~~$5,027, an increase in deferred revenue~~approximately $1,581, primarily due to depreciation and amortization, and net income of ~~$1,963, and an increase in accrued expenses and other long-term obligations of $881. The $730 of~~$2,166. Net cash used in operating activities ~~during~~of $350 for the ~~first nine~~six months ~~of 2016~~ended June 30, 2020 was primarily driven by aour net loss of ~~$1,103, an increase in accounts receivable of $1,678, a decrease in deferred revenue of $2,000, and a decrease in accounts payable of $189. This was offset by non-cash~~$5,711. Non-cash adjustments to our net loss was approximately $8,935, primarily due to depreciation and amortization. Changes in operating assets and liabilities resulted in a use of ~~$2,996, an increase~~$3,574 in ~~accrued expenses and other long-term obligations of $951, a decrease in inventory of $169, and a decrease in prepaid expenses and other assets of $124.~~cash.

Investing Activities. Net cash provided by investing activities of $5,180 for the six months ended June 30, 2021 is primarily due to proceeds from sales and maturities of available-for-sale securities. Net cash used in investing activities ~~was $38,351 and $7,750~~of $8,130 for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and September 30, 2016, respectively. Cash used in investing for the nine months ended September 30, 2017~~2020 is primarily due to the ~~acquisitions~~purchase and sale of ~~PMSI, CPI and PSNW in January 2017, and the acquisitions of iSystems and Compass in May 2017, partially offset by an increase in funds held for clients. The~~available-for-sale securities.

Financing Activities. Net cash used in ~~investing for the nine months ended September 30, 2016 is due primarily to the acquisition of Mangrove, offset by the increase in funds held for clients.~~

~~Financing Activities. Net cash provided by~~ financing activities was ~~$55,123~~$117,657 for the ~~nine~~six months ended ~~September~~June 30, ~~2017. We recognized~~2021, which primarily consisted of a net proceeds from the issuance of common stock of $27,820 in an underwritten public offering in June 2017, as well as incurred $45,777 of indebtedness in connection with the 2017 acquisitions. This was offset by payments on notes payable of $8,098 and debt financing fees of $1,433. In connection with the public offering, we issued 2,185,000 shares of common stock, including 285,000 shares of common stock pursuant to the exercise of the underwriters' over-allotment option, at the public offering price of $13.50 per share. Net cash provided by financing activities was $7,460 for the nine months ended September 30, 2016. We incurred $16,823 of debt, primarily due to the cash used in the acquisition of Mangrove, and proceeds from the exercise of options of $561. This was offset by payments on notes payable of $5,173, the decrease in client fund obligations of ~~$4,155~~$113,251 and ~~debt~~payments of notes payable of $3,090. Net cash used in financing ~~fees~~activities was $10,350 for the six months ended June 30, 2020, which primarily consisted of ~~$438.~~a net decrease in client fund obligations of $17,393.

~~Table of Contents~~

Sources of Liquidity. As of ~~September~~June 30, ~~2017, Asure’s~~2021, the Company’s principal sources of liquidity consisted of approximately ~~$27,464~~$20,292 of cash, future cash generated from operations and $5,000 under our Restated Credit Agreement. We believe that we have and/or will generate sufficient cash for our short- and long-term needs. Based on current internal projections, we believe that we have and/or will generate sufficient cash for our operational needs, including any required debt payments, for at least the next twelve months. We currently project that we can generate positive cash flows from our operating activities for at least the next twelve months.

Our management team is focused on growing our existing software operations and is also seeking additional strategic acquisitions for the near future. At present, we plan to fund any future acquisition with equity, existing cash and cash equivalents, cash generated from ~~future~~ operations ~~and/or cash or debt raised from outside sources.~~

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. We may need to raise additional capital in the future. However, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that we have sufficient capital and liquidity to fund and cultivate the growth of our ~~current and future operations for at least~~business over the next twelve months, ~~from~~and $4,500 available for borrowing under our Wells Fargo revolver. Furthermore, following the ~~issuance~~end of ~~these~~the quarter, we signed a commitment letter with Structural Capital Investments III, LP for a new credit facility, see Item 5. Other Information.

As of June 30, 2021 and December 31, 2020, no amount was outstanding and $4,500 was available for borrowing under the revolver.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP 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 consolidated financial statements and ~~to maintain compliance with~~ the ~~terms~~reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful lives of fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions. We base our ~~debt agreements~~estimates on historical experience and ~~related covenants or to obtain compliance through debt repayments made with our available cash~~ on ~~hand or anticipated for receipt~~various other assumptions management believes reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the ~~ordinary course~~preparation of ~~operations.~~

~~Capital Resources. At September 30, 2017, we had $69,125 outstanding under our Restated Credit Agreement with Wells Fargo. Available funds were $5,000 under~~ the ~~revolving credit facility at September 30, 2017. For further discussion regarding our Restated Credit Agreement and debt financing arrangements, see Note 6~~Condensed Consolidated Financial Statements for continued reasonableness. We make appropriate adjustments, if any, to the ~~accompanying condensed consolidated financial statements.~~estimates used prospectively based upon such periodic evaluation. Information regarding recent accounting pronouncements is provided in Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements. Such information is incorporated by reference herein.

~~CRITICAL ACCOUNTING POLICIES~~

There were no material changes to our critical accounting policies and estimates since December 31, 2016. For additional information on critical accounting policies, refer to “Management’s Discussion and Analysis” in our 2016 Annual Report on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~We are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not required~~There have been no material changes to ~~provide the information required under this item.~~our exposure from market risks from those disclosed in our 2020 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for us. 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 ourThe Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act ~~were effective as of as of September 30, 2017~~that are designed to ~~provide reasonable assurance~~ensure that information required to be disclosed in the reports filed or submitted by ~~us in reports that we file or submit under~~Asure to the ~~Exchange Act~~SEC is ~~(i)~~ recorded, processed, summarized, and reported, within the time periods specified inby the ~~Securities and Exchange Commission~~SEC’s rules and forms, and ~~(ii)~~is accumulated and communicated to ~~our~~ management including ~~our principal executive officer~~the Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation to conclude with reasonable assurance that Asure’s disclosure controls and procedures were designed and operating effectively to report the information each company is required to disclose in the reports they file with the SEC on a timely basis. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer of Asure have concluded that as of June 30, 2021, disclosure controls and procedures were effective.

Change in Internal Controls over Financial Reporting

During the period ended ~~September~~June 30, ~~2017,~~2021, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~None~~Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of June 30, 2021, we were not party to any pending legal proceedings that are material to our business.

ITEM 1A. RISK FACTORS

WeThere have been no material changes from the risk factors previously disclosed in the Company’s 2020 Annual Report on Form 10-K, filed with the SEC on March 11, 2021, and investors are ~~a smaller reporting company as defined by Rule 12b-2 of~~encouraged to review these risk factors prior to making an investment in the ~~Exchange Act and are not required to provide the information required under this item.~~Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None~~None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None~~None.

ITEM 5. OTHER INFORMATION

On August 9, 2021, we entered into a commitment letter (the “Commitment Letter”) with Structural Capital Investments III, LP (“Structural”) pursuant to which Structural has agreed, subject to the conditions set forth in the Commitment Letter, to provide us up to $50 million in term loan financing to support our growth needs (the “New Credit Facility”). The Loan and Security Agreement and Ancillary Terms attached to the Commitment Letter provide the material terms and conditions of the New Credit Facility. Subject to the satisfaction of certain closing conditions, the parties are expected to close and fund up to $25 million of the New Credit Facility on or around September 15, 2021; however the closing may be extended to September 30, 2021 upon our request, and at Structural’s reasonable discretion. If the closing conditions are not satisfied by September 30, 2021 (if the extension is granted), the Commitment Letter will expire. There is no assurance as to the timing or whether the closing conditions of the New Credit Facility will be satisfied.

The New Credit Facility, if consummated following the satisfaction of all closing conditions, would provide for up to $50.0 million of term loans, which we can draw upon until March 31, 2022; however we may request an extension of our right to draw loans under the New Credit Facility until June 30, 2022 with Structural’s approval. We would pay a non-utilization fee on any portions of the available commitment that we have not yet drawn in the amount of 0.25% of the unused commitment amount. We would expect to draw a portion of the term loan at the closing of the New Credit Facility up to the amount of $25 million.

Interest will accrue on any outstanding balance at a rate equal to the greater of 9.0% or the Prime Rate, plus 5.75% (the “Basic Rate”). In addition, interest will also be paid in kind (“PIK”) at a rate of 1.00% or 1.25% based on our ARR Ratio (discussed below) , measured on a quarterly basis. The PIK interest would be added to our outstanding balance and would begin accruing interest at the Basic Rate.

Interest only payments would be due for the first twenty-four months of the New Credit Facility. We could extend our interest only payments for another 12 months if we have achieved an annualized EBITDA of $8.0 million, or $90.0 million of annual recurring revenue before the end of the first twenty-four months of the New Credit Facility.

Principal payments would begin after the expiration of the interest only period (as extended, if applicable) and will be based on a five year amortization schedule, with a balloon payment due on the maturity date (which is expected to be four (4) years after the closing date).

Upon payment in full of the obligations under the New Credit Facility, we would pay to Structural a final payment fee equal to 1.0% of the change in our market capitalization during the term of the New Credit Facility.

We will also agree to provide Structural (together with other lender parties to the New Credit Facility) the right to participate in a future offering (whether public or private) on the same terms and conditions as other investors for an amount not to exceed $3.0 million.

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There will be no financial covenants if our net cash position is equal to or greater than zero. If our net cash position is less than zero, we would be subject to the following financial covenants:

•We must have unrestricted cash of no less than $5.0 million

•We must maintain an ARR ratio of no less than 0.70:1.00 for the first twenty-four months after the closing; and

•We must maintain an ARR ratio of no less than 0.60:1.00 for the remainder of the term of the New Credit Facility.

The ARR ratio would be the ratio of our tested debt to our annual recurring revenue and would be measured on a quarterly basis. Our Tested Debt consists of our outstanding obligations under the New Credit Facility (exclusive of PIK interest) and any indebtedness issued or earnouts owed to sellers in connection with acquisitions.

We expect to use the loans under the New Credit Facility for refinancing the Wells Fargo N.A. debt, growth related initiatives and acquisitions. In connection with the signing of the Commitment Letter, we paid a commitment signing fee equal to $375,000, which will be credited against the 1.0% facility fee payable to Structural at the closing of the New Credit Facility.

The New Credit Facility would replace our existing facility with Wells Fargo N.A. and on August 9, 2021, we provided Wells Fargo N.A. with notice of our intent to terminate the existing facility. We expect to pay off all of our outstanding obligations to Wells Fargo N.A. in connection with the closing of the New Credit Facility, which, at June 30, 2021, was a term loan with an outstanding principal balance of $9.75 million.

The foregoing description of the New Credit Facility and Structural’s commitment to us does not purport to be complete and is qualified in its entirety by reference to the full text of the Commitment Letter and its exhibits (including the negotiated form of Loan and Security Agreement), which is filed as Exhibit 10.1 to this Form 10-Q and is incorporated herein by reference.

ITEM 6. EXHIBITS

~~EXHIBIT NUMBER~~	~~DESCRIPTION~~
31.1*EXHIBIT NUMBER		DESCRIPTION

10.1		Commitment Letter, dated August 9, 2021, between Structural Capital Investments III, LP and Asure Software, Inc.*

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002 (filed herewith).

31.2* 31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002 (filed herewith).
32.1*
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002 (furnished herewith).

32.2* 32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002 (furnished herewith).
101*
101		The following materials from Asure Software, Inc.’s Quarterly Report on Form 10-Q for the ~~quarter~~three and six months ended ~~September~~June 30, ~~2017,~~2021, formatted in ~~XBRL (Extensible Business Reporting Language):~~Inline XBRL: (1) the Condensed Consolidated Balance Sheets, (2) the Condensed Consolidated Statements of Comprehensive Loss, (3) the Condensed Consolidated Statements of Changes in Stockholders’ Equity, (4) the Condensed Consolidated Statements of Cash Flows, and ~~(4)~~(5) Notes to Condensed Consolidated Financial ~~Statements.~~Statements (filed herewith).

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted as Inline XBRL and contained in Exhibit 101 (filed herewith).

* ~~Filed herewith~~

Certain schedules and exhibits have been omitted pursuant to SK Rule 601(a)(5).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ASURE SOFTWARE, INC.

Date: August 9, 2021

By:

~~November 13, 2017~~

~~By:~~

/s/ PATRICK GOEPEL

Patrick Goepel

Chief Executive Officer

~~November 13, 2017~~Date: August 9, 2021

By:

/s/ ~~KELYN BRANNON~~ JOHN PENCE

~~Kelyn Brannon~~John Pence

Chief Financial Officer,

Principal Financial Officer, Principal Accounting Officer

	September 30, 2017 (Unaudited)			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	27,464		$	12,767
Accounts and note receivable, net of allowance for doubtful accounts of $592 and $338 at September 30, 2017 and December 31, 2016, respectively		13,887			8,108
Inventory		781			487
Prepaid expenses and other current assets		1,899			1,256
Total current assets before funds held for clients		44,031			22,618
Funds held for clients		23,217			22,981
Total current assets		67,248			45,599
Restricted cash		200			-
Property and equipment, net		2,763			1,878
Goodwill		75,855			26,259
Intangible assets, net		34,046			12,048
Other assets		2,225			39
Total assets	$	182,337		$	85,823
Liabilities and stockholders’ equity
Current liabilities:
Current portion of notes payable, net of debt issuance cost and debt discount	$	8,724		$	5,455
Accounts payable		1,581			1,576
Accrued compensation and benefits		1,812			1,192
Other accrued liabilities		1,115			936
Deferred revenue		12,065			9,252
Total current liabilities before client fund obligations		25,297			18,411
Client fund obligations		23,217			22,981
Total current liabilities		48,514			41,392
Long-term liabilities:
Deferred revenue		1,450			769
Notes payable, net of current portion of debt issuance cost and debt discount		66,980			24,581
Other liabilities		1,009			835
Total long-term liabilities		69,439			26,185
Total liabilities		117,953			67,577
Stockholders’ equity:
Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding		-			-
Common stock, $.01 par value; 22,000 shares authorized; 12,805 and 8,901 shares issued, 12,421 and 8,517 shares outstanding at September 30, 2017 and December 31, 2016, respectively		128			89
Treasury stock at cost, 384 shares at September 30, 2017 and December 31, 2016		(5,017	)		(5,017	)
Additional paid-in capital		345,383			295,044
Accumulated deficit		(276,052	)		(271,875	)
Accumulated other comprehensive (loss) income		(58	)		5
Total stockholders’ equity		64,384			18,246
Total liabilities and stockholders’ equity	$	182,337		$	85,823

	FOR THE THREE MONTHS ENDED September 30,						FOR THE NINE MONTHS ENDED September 30,
	2017			2016			2017			2016
Revenues:
Cloud revenue	$	11,062		$	5,630		$	27,724		$	14,881
Hardware revenue		1,003			676			3,651			2,644
Maintenance and support revenue		1,178			1,078			3,276			3,509
On premise software license revenue		599			754			1,049			1,352
Professional services revenue		1,685			1,302			3,434			3,440
Total revenues		15,527			9,440			39,134			25,826
Cost of sales		3,396			2,026			8,660			5,932
Gross margin		12,131			7,414			30,474			19,894

Operating expenses
Selling, general and administrative		9,459			5,046			25,286			15,559
Research and development		883			761			2,488			2,217
Amortization of intangible assets		1,341			625			3,230			1,628
Total operating expenses		11,683			6,432			31,004			19,404

Income (loss) from operations		448			982			(530	)		490

Other income (loss)
Interest expense and other		(1,644	)		(620	)		(3,279	)		(1,460	)
Total other loss		(1,644	)		(620	)		(3,279	)		(1,460	)

Income (loss) from operations before income taxes		(1,196	)		362			(3,809	)		(970	)
Income tax provision		(85	)		(47	)		(368	)		(133	)
Net income (loss)	$	(1,281	)	$	315		$	(4,177	)	$	(1,103	)
Other comprehensive income (loss)
Foreign currency gain (loss)		(6	)		26			(63	)		142
Other comprehensive income (loss)	$	(1,287	)		341		$	(4,240	)	$	(961	)

Basic and diluted net income (loss) per share
Basic	$	(0.10	)	$	0.05		$	(0.40	)	$	(0.17	)
Diluted	$	(0.10	)	$	0.05		$	(0.40	)	$	(0.17	)
Weighted average basic and diluted shares
Basic		12,418,000			6,534,000			10,355,000			6,383,000
Diluted		12,418,000			6,548,000			10,355,000			6,383,000

			Fair Value Measure at September 30, 2017
	Total		Quoted		Significant
	Carrying		Prices		Other		Significant
	Value at		in Active		Observable		Unobservable
	September 30,		Market		Inputs		Inputs
Description	2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	27,464	$	27,464	$	-	$	-
Total	$	27,464	$	27,464	$	-	$	-

			Fair Value Measure at December 31, 2016
	Total		Quoted		Significant
	Carrying		Prices		Other		Significant
	Value at		in Active		Observable		Unobservable
	December 31,		Market		Inputs		Inputs
Description	2016		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	12,767	$	12,767	$	-	$	-
Total	$	12,767	$	12,767	$	-	$	-

Assets Acquired	CPI		PMSI		PSNW		iSystems		Compass		Total
Cash & cash equivalents	$	126		131		53		211		207	$	728
Accounts receivable		22		347		111		951		241		1,672
Restricted cash		-		-		-		200		-		200
Fixed assets		-		130		7		681		38		856
Other assets		-		17		17		699		33		766
Funds held for clients		2,809		-		6,294		-		-		9,103
Goodwill		1,190		2,247		1,579		42,253		2,049		49,318
Intangibles		1,563		2,646		1,879		15,070		3,470		24,628
Total assets acquired	$	5,710		5,518		9,940		60,065		6,038	$	87,271

Liabilities assumed
Accounts payable		51		19		28		392		65		555
Accrued other liabilities		-		191		40		791		45		1,067
Deferred revenue		-		370		-		1,073		-		1,443
Client fund obligations		2,754		-		6,294		-		-		9,048
Total liabilities assumed		2,805		580		6,362		2,256		110		12,113

Net assets acquired	$	2,905		4,938		3,578		57,809		5,928	$	75,158

	FOR THE THREE MONTHS ENDED			FOR THE THREE MONTHS ENDED
	SEPTEMBER 30,			SEPTEMBER 30,
	2017			2016
Revenues	$	15,527		$	14,905
Net income (loss)	$	(927	)	$	185
Net income (loss) per common share:
Basic and diluted	$	(0.07	)	$	0.02

Weighted average shares outstanding:
Basic and diluted		12,418			8,186

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,			FOR THE NINE MONTHS ENDED SEPTEMBER 30,
	2017			2016
Revenues	$	45,743		$	45,416
Net loss	$	(4,552	)	$	(4,221	)
Net loss per common share:
Basic and diluted	$	(0.40	)	$	(0.53	)

Weighted average shares outstanding:
Basic and diluted	$	11,272		$	8,021

Balance at December 31, 2016	$	26,259
Goodwill recognized upon acquisitions of PMSI, CPI, PSNW, iSystems and Compass		49,318
Adjustment to Goodwill associated with acquisition of Mangrove		272
Foreign exchange adjustment to goodwill		6
Balance at September 30, 2017	$	75,855

			September 30, 2017
Intangible Assets	Weighted Average Amortization Period (in Years)		Gross		Accumulated Amortization			Net

Developed Technology		11.8	$	11,925	$	(4,585	)	$	7,340
Customer Relationships		7.5		35,516		(12,354	)		23,162
Reseller Relationships		7.0		853		(731	)		122
Trade Names		14.8		2,815		(787	)		2,028
Noncompete		2.9		592		(108	)		484
Software development costs		3.0		919		(9	)		910
		8.7	$	52,620	$	(18,574	)	$	34,046

			December 31, 2016
Intangible Assets	Weighted Average Amortization Period (in Years)		Gross		Accumulated Amortization			Net

Developed Technology		12.7	$	10,915	$	(3,408	)	$	7,507
Customer Relationships		7.3		14,011		(10,270	)		3,741
Reseller Relationships		7.0		853		(640	)		213
Trade Names		14.5		1,294		(707	)		587
		9.8	$	27,073	$	(15,025	)	$	12,048

Calendar Years
2017 (July to December)	$	1,438
2018		5,424
2019		4,650
2020		3,803
2021		3,848
Thereafter		14,079
Subtotal	$	33,242
Software development costs not yet placed in service		804
	$	34,046

Notes Payable	Maturity	Stated Interest Rate			Balance as of September 30, 2017		Balance as of December 31, 2016
Subordinated Notes Payable- Mangrove acquisition	3/18/2018		3.50	%	$	-	$	6,000
Subordinated Notes Payable- PMSI acquisition	4/30/2018		2.00	%		1,125		-
Subordinated Notes Payable- CPI acquisition	4/30/2018		-	%		500		-
Subordinated Notes Payable- PSNW acquisition	3/31/2018		2.00	%		600		-
Subordinated Notes Payable- iSystems acquisition	5/25/2019		3.50	%		5,000		-
Subordinated Notes Payable- Compass acquisition	5/25/2022		2.0	%		1,500		-
Term Loan – Wells Fargo Syndicate Partner	5/25/2022		9.53	%		34,562		-
Term Loan - Wells Fargo	5/25/2022		4.53	%		34,563		24,715
Total Notes Payable					$	77,850	$	30,715
Short-term notes payable					$	8,869	$	5,455
Long-term notes payable					$	68,981	$	25,260

Notes Payable	Gross Notes Payable at September 30, 2017		Debt Issuance Costs and Debt Discount			Net Notes Payable at September 30, 2017
Notes payable, current portion	$	8,869	$	(145	)	$	8,724
Notes payable, net of current portion		68,981		(2,001	)		66,980
Total Notes Payable	$	77,850	$	(2,146	)	$	75,704

Notes Payable	Gross Notes Payable at December 31, 2016		Debt Issuance Costs and Debt Discount			Net Notes Payable at December 31, 2016
Notes payable, current portion	$	5,455	$	-		$	5,455
Notes payable, net of current portion		25,260		(679	)		24,581
Total Notes Payable	$	30,715	$	(679	)	$	30,036

Year Ended	Gross Amount
December 31, 2017 (October to December)	$	875
December 31, 2018		8,525
December 31, 2019		6,300
December 31, 2020		3,800
December 31, 2021		3,800
Thereafter		54,550
Gross Notes Payable	$	77,850

	Foreign Currency Items			Accumulated Other Comprehensive Loss Items
Beginning balance, December 31, 2016	$	5		$	5
Other comprehensive loss before reclassifications		(63	)		(63	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			—
Net current-period other comprehensive loss		(63	)		(63	)
Ending balance, September 30, 2017	$	(58	)	$	(58	)

	Three Months Ended September 30, 2017
	Before Tax			Tax Benefit		Net of Tax
Foreign currency translation adjustments	$	(6	)	$	—	$	(6	)

Other comprehensive loss	$	(6	)	$	—	$	(6	)

	Nine Months Ended September 30, 2017
	Before Tax			Tax Benefit		Net of Tax
Foreign currency translation adjustments	$	(63	)	$	—	$	(63	)

Other comprehensive loss	$	(63	)	$	—	$	(63	)

	For the Three Months					For the Nine Months
	Ended September 30,					Ended September 30,
	2017			2016		2017			2016
Net income (loss)	$	(1,281	)	$	315	$	(4,177	)	$	(1,103	)

Weighted-average shares of common stock outstanding		12,418,000			6,534,000		10,355,000			6,383,000
Dilutive effect of employee stock options		-			14,000		-			-
Weighted average shares for diluted net income (loss) per share		12,418,000			6,548,000		10,355,000			6,383,000
Basic net (loss) income per share	$	(0.10	)	$	0.05	$	(0.40	)	$	(0.17	)
Diluted net (loss) income per share	$	(0.10	)	$	0.05	$	(0.40	)	$	(0.17	)

	FOR THE THREE MONTHS ENDED September 30,				Increase (Decrease)
Revenue	2017		2016		Increase (Decrease)			%
Cloud revenue	$	11,062	$	5,630	$	5,432			96.5
Hardware revenue		1,003		676		327			48.4
Maintenance and support revenue		1,178		1,078		100			9.3
On premise software license revenue		599		754		(155	)		(20.6	)
Professional services revenue		1,685		1,302		383			29.4
Total revenue	$	15,527	$	9,440	$	6,087			64.5

	For the Nine Months Ended
	September 30,
	2017			2016

Net Cash used in operating activities	$	(2,083	)	$	(730	)
Net Cash used in investing activities		(38,351	)		(7,750	)
Net Cash provided by financing activities		55,123			7,460