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, 2023

~~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: 1-34522

~~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

74-2415696

(State or other jurisdiction of incorporation)

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

~~incorporation or organization)~~

~~Identification No.)~~

405 Colorado Street, Suite 1800, Austin, Texas

78701

~~3700 N. Capital of Texas Hwy #350~~

~~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 provideSecurities 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 4, 2023, 20,919,695 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.~~value, were outstanding.

Table of Contents

TABLE OF CONTENTS

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

Item 1.	Financial Statements (Unaudited)			1
			Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~June 3 0 , 2023 and December 31, ~~2016~~2022		3 1
			Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the Three and ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2017~~2023 and ~~2016~~June 30, 2022		4 2
			Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and June 30, 2022		3
			Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~June 30, 2022		5
			Notes to Condensed Consolidated Financial Statements		6 7
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		20 18
Item 3.			Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.			Controls and Procedures		25

PART II - OTHER INFORMATION

Item 1.			Legal Proceedings		26
Item 1A.			Risk Factors		26
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3.			Defaults upon Senior Securities		26
Item 6.4.			~~Exhibits~~Mine Safety Disclosures		26
Item 5.			Other Information		26
Item 6.			Exhibits		27

			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)

(Unaudited)

	September 30, 2017 (Unaudited)			December 31, 2016
Assets
								June 30, 2023		December 31, 2022
ASSETS							ASSETS
Current 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
Cash, cash equivalents, and restricted cash							Cash, cash equivalents, and restricted cash	$	21,613	$	17,010
Accounts receivable, net of allowance for doubtful accounts of $4,863 and $3,248 at June 30, 2023 and December 31, 2022, respectively							Accounts receivable, net of allowance for doubtful accounts of $4,863 and $3,248 at June 30, 2023 and December 31, 2022, respectively	16,629		12,123
Inventory		781			487		Inventory	134		251
Prepaid expenses and other current assets		1,899			1,256		Prepaid expenses and other current assets	3,960		10,304
Total current assets before funds held for clients		44,031			22,618		Total current assets before funds held for clients	42,336		39,688
Funds held for clients		23,217			22,981		Funds held for clients	186,517		203,588
Total current assets		67,248			45,599		Total current assets	228,853		243,276
Restricted cash		200			-
Property and equipment, net		2,763			1,878		Property and equipment, net	12,588		11,439
Goodwill		75,855			26,259		Goodwill	86,011		86,011
Intangible assets, net		34,046			12,048		Intangible assets, net	60,635		66,594
Other assets		2,225			39
Operating lease assets, net							Operating lease assets, net	5,898		7,065
Other assets, net							Other assets, net	7,033		5,523
Total assets	$	182,337		$	85,823		Total assets	$	401,018	$	419,908
Liabilities and stockholders’ equity
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Current portion of notes payable, net of debt issuance cost and debt discount	$	8,724		$	5,455
Current portion of notes payable							Current portion of notes payable	$	6,557	$	4,106
Accounts payable		1,581			1,576		Accounts payable	1,365		2,194
Accrued compensation and benefits		1,812			1,192		Accrued compensation and benefits	4,826		5,791
Operating lease liabilities, current							Operating lease liabilities, current	1,525		1,860
Other accrued liabilities		1,115			936		Other accrued liabilities	6,542		3,728
Contingent purchase consideration							Contingent purchase consideration	2,299		2,955
Deferred revenue		12,065			9,252		Deferred revenue	3,293		8,461
Total current liabilities before client fund obligations		25,297			18,411		Total current liabilities before client fund obligations	26,407		29,095
Client fund obligations		23,217			22,981		Client fund obligations	188,863		206,088
Total current liabilities		48,514			41,392		Total current liabilities	215,270		235,183
Long-term liabilities:							Long-term liabilities:
Deferred revenue		1,450			769		Deferred revenue	1,334		788
Notes payable, net of current portion of debt issuance cost and debt discount		66,980			24,581
Deferred tax liability							Deferred tax liability	1,589		1,503
Notes payable, net of current portion							Notes payable, net of current portion	30,226		30,795
Operating lease liabilities, noncurrent							Operating lease liabilities, noncurrent	5,631		6,459
Other liabilities		1,009			835		Other liabilities	154		114
Total long-term liabilities		69,439			26,185		Total long-term liabilities	38,934		39,659
Total liabilities		117,953			67,577		Total liabilities	254,204		274,842
Stockholders’ equity:							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	)
Preferred stock, $0.01 par value; 1,500 shares authorized; none issued or outstanding							Preferred stock, $0.01 par value; 1,500 shares authorized; none issued or outstanding	—		—
Common stock, $0.01 par value; 44,000 shares authorized; 21,089 and 20,628 shares issued, 20,705 and 20,244 shares outstanding at June 30, 2023 and December 31, 2022, respectively							Common stock, $0.01 par value; 44,000 shares authorized; 21,089 and 20,628 shares issued, 20,705 and 20,244 shares outstanding at June 30, 2023 and December 31, 2022, respectively	211		206
Treasury stock at cost, 384 shares at June 30, 2023 and December 31, 2022							Treasury stock at cost, 384 shares at June 30, 2023 and December 31, 2022	(5,017)		(5,017)
Additional paid-in capital		345,383			295,044		Additional paid-in capital	438,767		433,586
Accumulated deficit		(276,052	)		(271,875	)	Accumulated deficit	(284,652)		(281,226)
Accumulated other comprehensive (loss) income		(58	)		5
Accumulated other comprehensive loss							Accumulated other comprehensive loss	(2,495)		(2,483)
Total stockholders’ equity		64,384			18,246		Total stockholders’ equity	146,814		145,066
Total liabilities and stockholders’ equity	$	182,337		$	85,823		Total liabilities and stockholders’ equity	$	401,018	$	419,908

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 COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

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

(Unaudited)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue:
Recurring	$	22,960	$	19,014	$	50,916	$	42,018
Professional services, hardware and other	7,460		1,286		12,568		2,615
Total revenue	30,420		20,300		63,484		44,633
Cost of Sales	8,402		8,039		17,066		16,908
Gross profit	22,018		12,261		46,418		27,725
Operating expenses:
Sales and marketing	8,515		4,589		15,715		9,486
General and administrative	10,336		8,696		20,292		16,181
Research and development	1,325		1,472		3,304		3,293
Amortization of intangible assets	3,294		3,352		6,596		6,784
Total operating expenses	23,470		18,109		45,907		35,744
(Loss) income from operations	(1,452)		(5,848)		511		(8,019)
Interest expense, net	(1,593)		(1,085)		(3,538)		(1,901)
Other (expense) income, net	(93)		1,147		(9)		1,147
Loss from operations before income taxes	(3,138)		(5,786)		(3,036)		(8,773)
Income tax expense	627		74		390		104
Net loss	(3,765)		(5,860)		(3,426)		(8,877)
Other comprehensive loss:
Unrealized loss on marketable securities	(493)		(496)		(12)		(1,559)
Comprehensive loss	$	(4,258)	$	(6,356)	$	(3,438)	$	(10,436)

Basic and diluted loss per share
Basic	$	(0.18)	$	(0.29)	$	(0.17)	$	(0.44)
Diluted	$	(0.18)	$	(0.29)	$	(0.17)	$	(0.44)

Weighted average basic and diluted shares
Basic	20,651		20,106		20,500		20,067
Diluted	20,651		20,106		20,500		20,067

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)


	Common Stock Outstanding	Common Stock Amount		Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Other Comprehensive Loss		Total Stockholders’ Equity
Balance at December 31, 2022	20,244	$	206	$	(5,017)	$	433,586	$	(281,226)	$	(2,483)	$	145,066
Stock issued upon option exercise and vesting of restricted stock units	375	4		—		1,984		—		—		1,988
Share based compensation	—	—		—		1,337		—		—		1,337
Net income	—	—		—		—		339		—		339
Other comprehensive income	—	—		—		—		—		481		481
Balance at March 31, 2023	20,619	$	210	$	(5,017)	$	436,907	$	(280,887)	$	(2,002)	$	149,211

Stock issued upon option exercise and vesting of restricted stock units	40	—		—		42		—		—		42
Stock issued, ESPP	46	1		—		236		—		—		237
Share based compensation	—	—		—		1,582		—		—		1,582
Net loss	—	—		—		—		(3,765)		—		(3,765)
Other comprehensive loss	—	—		—		—		—		(493)		(493)
Balance at June 30, 2023	20,705	$	211	$	(5,017)	$	438,767	$	(284,652)	$	(2,495)	$	146,814

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 Loss		Total Stockholders’ Equity
Balance at December 31, 2021	20,028	$	204	$	(5,017)	$	429,912	$	(266,760)	$	(99)	$	158,240
Stock issued upon option exercise and vesting of restricted stock units	43	1		—		—		—		—		1
Share based compensation	—	—		—		729		—		—		729
Net loss	—	—		—		—		(3,017)		—		(3,017)
Other comprehensive loss	—	—		—		—		—		(1,063)		(1,063)
Balance at March 31, 2022	20,071	$	205	$	(5,017)	$	430,641	$	(269,777)	$	(1,162)	$	154,890

Stock issued upon option exercise and vesting of restricted stock units	33	—		—		—		—		—		—
Stock issued, ESPP	38	—		—		192		—		—		192
Share based compensation	—	—		—		814		—		—		814
Net loss	—	—		—		—		(5,860)		—		(5,860)
Other comprehensive loss	—	—		—		—		—		(496)		(496)
Balance at June 30, 2022	20,142	$	205	$	(5,017)	$	431,647	$	(275,637)	$	(1,658)	$	149,540

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

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ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(3,426)	$	(8,877)
Adjustments to reconcile loss to net cash provided by operations:
Depreciation and amortization	9,675		9,363
Amortization of operating lease assets	775		868
Amortization of debt financing costs and discount	355		345
Non-cash interest expense	1,431		—
Net amortization of premiums and accretion of discounts on available-for-sale securities	(31)		205
Provision for doubtful accounts	1,873		198
Provision for deferred income taxes	86		75
Gain on extinguishment of debt	—		(180)
Net realized losses on sales of available-for-sale securities	(1,024)		(406)
Share-based compensation	2,919		1,544
Loss on disposals of long-term assets	92		1
Change in fair value of contingent purchase consideration	(69)		(955)
Changes in operating assets and liabilities:
Accounts receivable	(6,379)		(627)
Inventory	118		(51)
Prepaid expenses and other assets	4,520		3,890
Operating lease right-of-use assets	189		(997)
Accounts payable	(830)		280
Accrued expenses and other long-term obligations	928		2,099
Operating lease liabilities	(485)		85
Deferred revenue	(4,621)		621
Net cash provided by operating activities	6,096		7,481
Cash flows from investing activities:
Acquisition of intangible asset	—		(2,039)
Purchases of property and equipment	(1,020)		(306)
Software capitalization costs	(3,301)		(1,805)
Purchases of available-for-sale securities	(18,885)		(19,870)
Proceeds from sales and maturities of available-for-sale securities	5,940		2,450
Net cash used in investing activities	(17,266)		(21,570)
Cash flows from financing activities:
Payments of notes payable	(643)		—
Net proceeds from issuance of common stock	2,266		192
Net change in client fund obligations	(17,225)		(32,716)
Net cash used in financing activities	(15,602)		(32,524)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	(26,772)		(46,613)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	164,042		198,743
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	137,270	$	152,130

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

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ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	21,613	$	14,594
Restricted cash and restricted cash equivalents included in funds held for clients	115,657		137,536
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	137,270	$	152,130

Supplemental information:
Cash paid for interest	$	2,119	$	1,435
Cash paid for income taxes	$	466	$	175

Non-cash investing and financing activities:
Acquisition of intangible assets	$	954	$	—
Notes payable issued for acquisitions	$	—	$	411

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

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)

NOTE 1 –- THE COMPANY AND BASIS OF PRESENTATION

Asure Software, Inc. (“Asure”, the “Company”, “we” and “our”), a Delaware corporation, is a provider of cloud-based ~~software-as-a-service~~Human Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) ~~time~~for small and medium-sized businesses (“SMBs”). We offer human resources (“HR”) tools necessary to build a thriving workforce, provide the resources to stay compliant with dynamic federal, state, and local tax jurisdictions and their respective labor ~~management~~laws, freeing cash flows so SMBs can spend their financial capital on growing their businesses rather than administrative overhead that can impede growth. Our solutions also provide new ways for employers to connect with and ~~Agile Workplace management~~to differentiate themselves with their employees in order to enhance their relationships with their talent. Asure’s HCM suite (“Asure HCM”) includes Payroll & Tax solutions, HR compliance and services, Time & Attendance software and data integrations that enable ~~organizations~~employers and their employees to ~~manage~~enhance efficiencies and take advantage of value-added solutions, which we refer to as AsureMarketplace™. AsureMarketplace™ automates interactions between our HCM systems with third-party providers to enhance efficiency, improve accuracy and to extend the range of services offered to employers and their ~~office environments as well as their~~employees. The Company’s approach to HR compliance services incorporates artificial intelligence technology to enhance scalability and efficiency while prioritizing client interactions. We offer our services directly and indirectly through our network of Reseller Partners.

We strive to be the most trusted HCM resource to SMBs. We target less densely populated U.S. metropolitan cities where fewer of our competitors have a presence. Our solutions solve three primary challenges that prevent businesses from growing: HR complexity, allocation of human ~~resource~~ and ~~payroll processes effectively~~financial capital, and ~~efficiently.~~the ability to build great teams. We have and will continue to invest in research and development to expand our solutions. Our solutions reduce the administrative burden on employers and increase employee productivity while managing the employment lifecycle. The Asure ~~develops, markets, sells~~HCM suite includes five product lines: Asure Payroll & Tax, Asure Tax Management Solutions, Asure Time & Attendance, Asure HR Compliance, and ~~supports its~~AsureMarketplace™.

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, Florida, ~~Traverse City, Michigan, Vermont,~~New Jersey, New York, Tennessee, and ~~London, United Kingdom.~~Vermont.

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, the results of operations~~2023, comprehensive loss and changes in stockholders’ equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~June 30, 2022, and ~~the~~ cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016.~~

~~You should read these condensed~~June 30, 2022. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the consolidated financial ~~statements~~position or consolidated results of operations of the Company.

These unaudited Condensed Consolidated Financial Statements should be read 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.~~2022 (our “2022 Annual Report on Form 10-K”). The Company’s results for ~~the~~any interim ~~periods~~period are not necessarily indicative of results for a full fiscal year.

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NOTE 2 –- SIGNIFICANT ACCOUNTING POLICIES

USE OF 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 Condensed Consolidated Financial Statements and the 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, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions. We base our estimates on historical experience and on various other assumptions management believes reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions.

CASH, ~~AND~~ CASH EQUIVALENTS, AND RESTRICTED CASH

~~Cash and cash equivalents include cash deposits and~~The Company considers all highly liquid investments with an original maturity of ~~three months~~90 days or less ~~when purchased.~~

~~RESTRICTED CASH~~

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

~~LIQUIDITY~~

to withdrawal or usage. As of ~~September 30, 2017, Asure’s principal sources~~December 31, 2022, the Company had a restricted cash balance of ~~liquidity consisted~~$500 related to the collateralization of ~~approximately $27,464~~a letter of ~~cash and cash equivalents, future cash generated from operations and $5,000 available for borrowing under our Wells Fargo revolver discussed~~credit issued by South State Bank 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, and the related debt covenant requirements. We continue to seek reductions in our expenses as a percentage of revenue on an annual basis and thus may utilize our cash balancesconnection with its money transmission licenses, which was released 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 leastfirst quarter of 2023. As of June 30, 2023, the ~~next twelve months from the issuance of the condensed consolidated financial statements.~~Company had no restricted cash.

Management is focused on growing our existing product offering, as well as our customer base, to increase our recurring revenues. We have made and will continue to explore additional strategic acquisitions. We expect to fund 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.

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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)~~

RECENT ACCOUNTING ~~STANDARDS~~PRONOUNCEMENTS

~~Recently Adopted Standards~~

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Simplifying the Measurement of Inventory”. Inventory within the scope 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, and transportation. This ASU is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. We adopted the provisions of ASU 2015-11 on January 1, 2017. This adoption did not have any impact on our consolidated financial statements.

In March 2016, 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 for share-based payment transactions, including the income 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 Company 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 apply the modified retrospective transition method, which would result in an adjustment to retained earnings for the cumulative effect, if any, 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 affected in the current reporting period during 2018, as compared 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 material 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~~June 2016, the FASB issued ASU No. ~~2016-02, “Leases~~2016-13, Financial Instruments — Credit Losses (Topic ~~842)”~~326), which establishes a new approach to estimate credit losses on certain financial instruments. The update requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The amended guidance will also update the impairment model for available-for-sale debt securities, requiring entities to determine whether all or a portion of the unrealized loss on such securities is a credit loss. The ~~core principle of the~~ standard is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. We will be required to adopt the new standard in the first quarter of 2019. We are currently evaluating the impact ASU 2016-02 will have on our 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 isbecame 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 cashinterim and ~~cash equivalents in the statement of cash flows. The ASU is effective for fiscal years~~annual periods beginning after December 15, ~~2017, with early~~2022. Effective January 1, 2023, the Company adopted the provisions of ASU No. 2016-13 and determined that adoption ~~permitted. We believe its adoption will~~did 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 consolidated financial ~~position, results~~statements.

ACCUMULATED OTHER COMPREHENSIVE LOSS

As of ~~operations, cash flows, or presentation thereof.~~June 30, 2023 and December 31, 2022, accumulated other comprehensive loss consisted of net unrealized gains and losses on available-for-sale securities.

~~CONTINGENCIES~~

Although Asure has been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of September 30, 2017, we were not party to any pending legal proceedings.

NOTE 3 –- BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

2022

Effective January 1, 2022, the Company acquired customer relationships of a payroll business for a cash payment of $1,970, which included $31 of transaction costs, and the delivery of a promissory note in the amount of $411. The acquired customer relationships are recorded as an intangible asset and are being amortized on a straight-line basis over eight years. In May 2023, the Company paid the remaining balance of $422 on the promissory note, consisting of $411 in principal and $11 in accrued interest. As of June 30, 2023, there are no further amounts due or owing under the subordinated promissory note.

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2021 and 2020

InSeptember 2021, the Company acquired certain assets of two payroll businesses, which were used to provide payroll processing services. In connection with these acquisitions there are two outstanding promissory notes payable in the amounts of $2,223 and $4,667 as of June 30, 2023. One promissory note also includes contingent consideration for which the Company calculated the final value to be $587 as of June 30, 2023. The contingent consideration was added as an increase to the principal balance due on the promissory note during the second quarter of 2023.

In July 2020, the Company acquired certain assets of a payroll tax business. The Asset Purchase Agreement set forth two subsequent purchase consideration payments, which are contingent on certain thresholds. The first contingent purchase consideration was paid in June 2021. The outstanding contingent purchase consideration of $2,299 was valued based on the trailing twelve-month revenue at October 31, 2021 and was paid in shares of the Company’s common stock in July 2023, see Note 12, Subsequent Events for information regarding final payment of the outstanding contingent purchase consideration occurring after June 30, 2023.

NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS

Accounting Standards Codification ~~(“ASC”)~~(ASC) 820 ~~Fair~~“Fair Value ~~Measurements and Disclosures~~Measurement” (ASC 820) defines fair value, establishes a framework for measuring fair value inunder U.S. ~~generally accepted accounting principles~~GAAP and ~~expands~~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 ~~establishes~~describes a ~~three-tier~~ fair value hierarchy ~~which is~~ based on the ~~reliability~~following three levels of inputs that may be used to measure fair value, of which the ~~inputs used in measuring fair values. These tiers include:~~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)~~

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

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~~2023 and December 31, ~~2016, respectively:~~2022, 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, 2023
Assets:
Funds held for clients
Money market funds	$	14	$	14	$	—	$	—
Available-for-sale securities	70,860		—		70,860		—
Total	$	70,874	$	14	$	70,860	$	—

Liabilities:
Contingent purchase consideration(1)	$	2,299	$	—	$	—	$	2,299
Total	$	2,299	$	—	$	—	$	2,299

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

Liabilities:
Contingent purchase consideration(1)	$	2,955	$	—	$	—	$	2,955
Total	$	2,955	$	—	$	—	$	2,955

~~NOTE 4 – ACQUISITIONS~~

~~2017~~(1)See Note 3 — Business Combinations and Asset Acquisitions

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 providers across for further discussion regarding 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 reach in the Southeast, particularly Florida.

~~Stock Purchase Agreement~~

In January 2017, we closed on the acquisition of 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”), among us, PMSI, the sellers identified therein, and the stockholders’ representative named therein. 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 underwritten public offering in 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.

contingent purchase consideration.

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

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~


	Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)		Aggregate Estimated Fair Value
June 30, 2023
Restricted cash equivalents	$	14	$	—	$	—	$	14
Available-for-sale securities:
Certificates of deposit	976		3		(2)		977
Corporate debt securities	67,108		11		(2,134)		64,985
Municipal bonds	4,774		—		(328)		4,446
U.S. Government agency securities	500		—		(48)		452
Total available-for-sale securities	73,358		14		(2,512)		70,860

Total(2)	$	73,372	$	14	$	(2,512)	$	70,874

December 31, 2022
Restricted cash equivalents	$	2,829	$	—	$	—	$	2,829
Available-for-sale securities:
Certificates of deposit	983		4		(2)		985
Corporate debt securities	52,251		1		(2,023)		50,229
Municipal bonds	5,297		—		(405)		4,892
U.S. Government agency securities	500		—		(50)		450
Total available-for-sale securities	59,031		5		(2,480)		56,556

Total(2)	$	61,860	$	5	$	(2,480)	$	59,385

~~(Unaudited)~~

~~(Amounts~~(1)Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. As of June 30, 2023 and December 31, 2022, there were 8 and 3 securities, respectively, in ~~thousands, except per share data unless otherwise noted)~~an unrealized gain position and there were 160 and 124 securities in an unrealized loss position, respectively. As of June 30, 2023, these unrealized losses were less than $82 individually and $2,512 in the aggregate. As of December 31, 2022, these unrealized losses were less than $96 individually and $2,480 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 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 credit losses. Factors considered in determining whether a loss is a credit loss include the length of time and extent to which fair value has been less than the cost basis, the credit rating of the investment, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

~~Asset Purchase Agreement~~

~~In January 2017, we closed~~(2)At June 30, 2023 and December 31, 2022, 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~~and payroll tax filing services, which are classified as client funds obligations on our Condensed Consolidated Balance Sheets.

Funds held for ~~the assets consisted of (i) $1,500 in cash, (ii) a subordinated promissory note (the “CPI Note”)~~clients have been invested 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 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 certainfollowing categories (in thousands):

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


	June 30, 2023		December 31, 2022
Restricted cash and cash equivalents held to satisfy client funds obligations	$	115,657	$	147,032
Restricted short-term marketable securities held to satisfy client funds obligations	9,762		9,174
Restricted long-term marketable securities held to satisfy client funds obligations	61,098		47,382
Total funds held for clients	$	186,517	$	203,588

~~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 CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

~~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%Expected maturities of the outstanding shares of capital stock of Compass to us for an aggregate purchase price of $6,000, subject to adjustment as provided in the Stock Purchase Agreement. The aggregate purchase price consists 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, 2023 are as follows (in thousands):

~~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.


One year or less	$	9,762
After one year through five years	61,098
Total	$	70,860

~~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 5 – - GOODWILL AND OTHER INTANGIBLE ASSETS

~~Asure accounted for its historical~~


	December 31, 2022		Acquisitions		June 30, 2023
Goodwill	$	86,011	$	—	$	86,011

We believe significant synergies are expected to arise from our strategic acquisitions and their assembled work forces. This factor contributed to a purchase price that was in ~~accordance with ASC 805,~~ ~~Business Combinations. We recorded the amount exceeding~~excess of the fair value of the net assets acquired ~~at the date of acquisition~~and, as ~~goodwill. We~~a result, 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 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 September 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~~each acquisition. A portion of ~~each year, and between annual tests, if indicators~~acquired goodwill will be amortizable for tax purposes. As of ~~potential impairment exist, using a fair-value-based approach. There~~June 30, 2023, 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:~~


Gross Intangible Assets	December 31, 2022		Acquisitions		June 30, 2023
Customer relationships	$	116,971	$	—	$	116,971
Developed technology	12,001		—		12,001
Reseller relationships	1,344		954		2,298
Trade names	880		—		880
Non-compete agreements	1,032		—		1,032
	$	132,228	$	954	$	133,182

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 and December 31, 2016~~2023 are as ~~follows:~~follows (in thousands, except weighted average periods):

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


	Weighted Average Amortization Period (in Years)	Gross		Accumulated Amortization		Net
June 30, 2023
Customer relationships	8.7	$	116,971	$	(59,235)	$	57,736
Developed technology	6.9	12,001		(10,601)		1,400
Reseller relationships	6.5	2,298		(926)		1,372
Trade names	3.0	880		(863)		17
Non-compete agreements	5.2	1,032		(922)		110
	8.4	$	133,182	$	(72,547)	$	60,635

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

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)~~

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 $6,596 and $6,784 for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 were $1,341 and $625, respectively, included in Operating Expenses.~~2022, respectively. Amortization expenses recorded in Cost of Sales were ~~$106~~$318 and ~~$106~~$593 for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively. ~~Amortization expenses for~~There was no impairment of intangibles during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 based on the qualitative assessment performed by the Company. However, if market, political and ~~2016 were $3,230~~other conditions over which we have no control continue to affect the capital markets and ~~$1,628 included~~our stock price declines, we may experience an impairment of our intangibles in ~~Operating Expenses, and $319 and $319, respectively, included in Cost of Sales.~~future quarters.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of ~~September~~June 30, ~~2017:~~2023 (in thousands):


2023	$	6,765
2024	13,498
2025	12,713
2026	9,601
2027	7,426
2028	5,957
Thereafter	4,675
	$	60,635

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

NOTE 6 –- 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	Cash Interest Rate	June 30, 2023		December 31, 2022
Subordinated Notes Payable – Acquisitions(1)	12/31/2022 – 9/30/2026	2.00% - 3.00%	$	6,890	$	6,947
Senior Credit Facility	10/1/2025	14.00%	32,190		30,607
Gross Notes Payable			$	39,080	$	37,554

(1)See Note 3 — Business Combinations and Asset Acquisitions and Subordinated Notes Payable - Acquisitions section below for further discussion regarding the notes payable related to acquisitions.

~~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, 2023
Current portion of notes payable	$	7,190	$	(633)	$	6,557
Notes payable, net of current portion	31,890		(1,664)		30,226
Total	$	39,080	$	(2,297)	$	36,783

December 31, 2022
Current portion of notes payable	$	4,774	$	(668)	$	4,106
Notes payable, net of current portion	32,780		(1,985)		30,795
Total	$	37,554	$	(2,653)	$	34,901

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

The following table summarizes the future principal payments related to our outstanding ~~debt:~~debt as of June 30, 2023 (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


2023	$	4,190
2024	6,420
2025	25,068
2026	3,402
Total	$	39,080

~~Subordinated Notes Payable- PMSI Acquisition~~

~~In January 2017, we acquired all~~

Table 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.Contents

~~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~~- Acquisitions

In January ~~2017, we acquired substantially all~~2023, the ~~assets~~Company resolved the outstanding claims for indemnification for which it was withholding payment of ~~Payroll Specialties NW, Inc., an Oregon corporation (“PSNW”), pursuant~~the subordinated note payable as security for such claim. As a result of the resolution of those claims, the remaining balance of $232 has been paid to ~~an Asset Purchase Agreement (the “PSNW Asset Purchase Agreement”). The aggregate consideration for~~ the ~~assets consisted~~Seller ($182) and to the claimant ($50) in satisfaction of ~~(i) $3,010 in cash and (ii) a~~its claim. There are no further amounts due or owing under this 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.note.

~~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~~April 2023, 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 inCompany calculated 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~~final contingent 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 the Credit Agreement with Wells Fargo. This note was paid in full in the first quarter of 2017.

~~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 anddue in connection with the ~~Credit Agreement, we and our wholly-owned active subsidiaries entered into~~acquisition of a ~~Guaranty and Security Agreement with Wells Fargo Bank. Under~~payroll business in September 2021. As a result, the Guaranty and Security Agreement, we and each of our wholly-owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets.

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

~~The Credit Agreement also provided for a revolving loan commitment in the aggregate amount of up to $3,000. The outstanding principal amount~~fair value of the ~~revolving loan is~~contingent consideration of $587 was added as an increase to the principal balance due ~~and payable in March 2019. As of September 30, 2017 and December 31, 2016, $0 was outstanding and $5,000 was available for borrowing under~~on the ~~revolver. Additionally, the Credit Agreement provided for a $10,000 uncommitted incremental term loan facility to support permitted acquisitions.~~

promissory note.

In ~~March 2017, we amended our Credit Agreement with Wells Fargo Bank, N.A to, among other things, obtain an additional term loan in~~May 2023, the ~~amount~~Company paid the outstanding balance of ~~$5,000. In the first quarter of 2017, we used the proceeds of the additional term loan to repay~~ a ~~portion of all amounts outstanding under the secured~~ subordinated note ~~we issued~~payable in connection with the ~~Mangrove acquisition.~~acquisition of customer relationships of a payroll business that took place in 2022. As a result, the Company paid the remaining balance of $422 on the promissory note consisting of $411 in principal and $11 in accrued interest. As of June 30, 2023, there are no further amounts due or owing under the subordinated note payable.

~~Amended and Restated~~Senior Credit ~~Agreement~~Facility with Structural Capital Investments III, LP

~~In May 2017, we~~On September 10, 2021, the Company entered into ~~an amended~~a Loan and ~~restated credit agreement~~Security Agreement (the ~~“Restated Credit~~“Loan Agreement”) with ~~Wells Fargo Bank, N. A., as administrative agent,~~Structural Capital Investments III, LP (“Structural” and together with the other lenders that are or become parties thereto, ~~amending~~the “Lenders”), and ~~restating~~Ocean II PLO LLC, as administrative and collateral agent for the Lenders (“Agent”), under the terms of which the ~~Credit Agreement dated~~Lenders have committed to lend us up to $50,000 in term loan financing to support our growth needs (the “Facility”). Of the amount committed by the Lenders, the Company drew $30,000 in September 2021, and the remaining $20,000 has lapsed. The Company also entered into a secured promissory note with the Agent evidencing our obligations under the Facility. The Company’s obligations are further guaranteed by each of our subsidiaries and secured by our assets and the assets of our subsidiaries.

At the onset of the agreement, we paid to the Lenders an origination fee of $500. Interest accrues on any outstanding balance at a rate equal to the greater of 9.0% or the Prime Rate, plus 5.75% (the “Basic Rate”) and is payable in advance, which as of ~~March 2014,~~June 30, 2023 was 14.00%. In addition, interest is paid in kind (“PIK”) at a rate of 1.00% or 1.25% based on our APR Ratio, measured on a quarterly basis. The PIK interest is added to our outstanding balance and accrues interest at the Basic Rate. Interest only payments are due until October 2023, with an option to extend until October 2024, dependent on certain financial or revenue metrics before the end of the first twenty-four months of the Facility.

Principal payments begin after the expiration of the interest only period, and are based on a five year amortization schedule, with a balloon payment due in October 2025. The table above in this Note 6 — Notes Payable summarizing future principal payments assumes the Company will not extend the period of interest only payments to October 2024. Upon payment in full of the obligations under the Facility, we agreed to pay Lenders a final payment fee equal to 1.0% of the increase in our market capitalization since September 10, 2021, at that time valued at $182,400.

The Company has agreed to provide the Lenders the right to participate in a future offering—whether public or private—on the same terms and conditions as ~~amended.~~other investors for an amount not to exceed $3,000.

There are no financial covenants under the agreement if our net cash position is equal to or greater than zero. If our net cash position is less than zero, the Company would be subject to the following financial covenants: (i) unrestricted cash of no less than $5,000, (ii) maintain an ARR ratio of no less than 0.70:1.00 through September 10, 2023, and (iii) maintain an ARR ratio of no less than 0.60:1.00 from September 10, 2023 through the remainder of the term of the 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 Facility (exclusive of PIK interest) and any indebtedness issued or earnouts owed to sellers in connection with acquisitions.

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~~ASURE SOFTWARE, INC.~~NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~Receivables

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

~~The Restated Credit Agreement provides~~Receivables from contracts with customers, net of allowance for andoubtful accounts of $4,863, were $16,629 at June 30, 2023. Receivables from contracts with customers, net of allowance for doubtful accounts of $3,248, were $12,123 at December 31, 2022. The increase in the ~~aggregate principal amount~~receivable balance during the first six months of ~~total commitments~~2023 is primarily due to deferred payment terms on many of our Earned Retention Tax Credit commitments. No customer represented more than 10% of our net accounts receivable balance as of June 30, 2023 and December 31, 2022, respectively.

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 $8,314 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~~$6,660 at June 30, ~~2017, stepping down to 3.25:1 at~~2023 and December 31, 2022, respectively. The amount of amortization recognized for the three and six months ended June 30, ~~2020~~2023 was $650 and ~~each quarter-end thereafter;~~

· ~~amends our fixed charge coverage ratio to be not less than 1.35:1 at June 30, 2017~~$1,147, respectively, and ~~September 30, 2017, not less than 1.45:1 at December 31, 2017,~~for the three and ~~not less than 1.50:1 beginning with the quarter ending March 31, 2018 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 at June 30, 2017 and stepping up to $60,500 atsix months ended June 30, 2022 was $435 and $780, respectively.

Deferred Revenue

During the three and six months ended June 30, 2023, revenue of $170 and $5,783, respectively, and during the three and six months ended June 30, 2022, revenue of $293 and $3,205, respectively, was recognized from the deferred revenue balance at the beginning of each ~~quarter-end thereafter.~~period.

Transaction Price Allocated to the Remaining Performance Obligations

As of ~~September~~June 30, ~~2017, we were in compliance with all covenants and all payments remain current.~~2023, approximately $23,124 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 87% 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, 2023 and 2022, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 - 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 eight 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, 2023 and 2022 are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost	$	884	$	576	$	1,415	$	1,142
Sublease income	(4)		(11)		(9)		(21)
Net rent expense	$	880	$	565	$	1,406	$	1,121

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% and 8% as of June 30, 2023 and December 31, 2022, respectively. The weighted average remaining lease term is five years as of June 30, 2023 and December 31, 2022.

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


	Six Months Ended June 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	1,439	$	1,133
Non-cash operating activities:
Operating lease assets obtained in exchange for new operating lease liabilities	$	—	$	1,512

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


2023	$	1,081
2024	2,017
2025	1,765
2026	1,313
2027	1,121
2028	1,074
Thereafter	568
Total minimum lease payments	8,939
Less: imputed interest	(1,783)
Total lease liabilities	$	7,156

NOTE ~~7 – SHARE BASED~~9 - 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 will continue to govern any outstanding awards granted thereunder. In January 2023, we granted Performance Stock Units (“PSU”) to certain members of management under the 2018 Plan. Each PSU will convert into one restricted stock unit (“RSU”) at the end of the performance period. The number of RSUs into which the PSUs convert for each member of management who received the award will be a sliding scale between 0% to 200% of the target amount based on the Company’s achievement of certain performance metrics tied to the Company’s recurring revenue and gross profit for 2023. Once converted, the RSU will vest as follows: one-third on the date the PSU is converted (which is expected to be between January 1, 2024 and March 31, 2024), one-third will vest on January 2, 2025, and one-third will vest on January 2, 2026.

The number of shares reserved for issuance under the 2018 Plan is 4,350 shares. We have an aggregate of 2,557 options, RSUs and PSUs granted and outstanding pursuant to the 2018 Plan as of June 30, 2023. As of June 30, 2023, the number of shares available for future grant under the 2018 Plan is 1,625.

Share based compensation for our stock option plans for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 were $138~~June 30, 2022 was $1,582 and ~~$60,~~$814, respectively, and ~~$363 and $166~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~June 30, 2022 was $2,919 and $1,544, respectively. We issued ~~51,000~~6 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~~2023 and ~~15,000~~issued no shares of common stock related to exercises for the three months ended ~~September~~June 30, ~~2016, respectively.~~

~~Asure has one active equity plan,~~2022. We issued 26 and 30 shares of common stock upon the ~~2009 Equity Plan (the “2009 Plan”). The 2009 Plan provides~~vesting of restricted stock units for the ~~issuance of non-qualified~~three months ended June 30, 2023 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, 2017.2022, respectively.

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)~~

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

~~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 –~~10 - NET LOSS PER SHARE

We compute net income or loss per share based on the weighted average number of common shares outstanding for the period. Diluted net ~~loss~~income per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock ~~options. We~~options or vesting of RSUs and in some cases PSUs. In periods of net income, we compute the ~~number~~adjustment to the denominator of ~~common~~our dilutive net earnings per share ~~equivalents, which includes~~calculation to include these stock options, RSUs, and PSUs, as applicable, using the treasury stock method. ~~We have excluded stock options to acquire 904,000 shares for the three and nine months ended September 30, 2017, and 452,000 shares for the nine months ended September 30, 2016 from the computation~~Regardless of the period resulting in net income or net loss, we exclude the adjustment to the denominator of our dilutive ~~stock options because~~net loss per share calculation to the ~~effect of including the stock options would have been~~extent that they are anti-dilutive.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Basic:
Net loss	$	(3,765)	$	(5,860)	$	(3,426)	$	(8,877)
Weighted-average shares of common stock outstanding	20,651		20,106		20,500		20,067
Basic loss per share	$	(0.18)	$	(0.29)	$	(0.17)	$	(0.44)

Diluted:
Net loss	$	(3,765)	$	(5,860)	$	(3,426)	$	(8,877)
Weighted-average shares of common stock outstanding	20,651		20,106		20,500		20,067
Diluted loss per share	$	(0.18)	$	(0.29)	$	(0.17)	$	(0.44)

NOTE 11 - EMPLOYEE RETENTION TAX CREDIT

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (“ERTC”): a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERTC. We qualified for the ERTC in the first three quarters of 2021. During the quarter ended September 30, ~~2017~~2021, we recorded an aggregate benefit of $10,533 in our Condensed Consolidated Statements of Comprehensive Loss to reflect the ERTC payable to us for the first three quarters in 2021 presented as other current assets within our Condensed Consolidated Balance Sheets. In 2022, the Company received cash of $3,457, reflecting a portion of our ERTC. In January and ~~2016:~~ February 2023, the Company received the remaining balance of $7,076 for the ERTC benefit.

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 1012 - SUBSEQUENT EVENTS

~~Effective October 1, 2017, we closed~~In July 2023, the ~~strategic~~Company paid the outstanding contingent purchase consideration due in connection with the acquisition of ~~Associated Data Services, Inc.,~~ a ~~leading regional human resources~~payroll tax business in July 2020, see Note 3 - Business Combinations and ~~payroll services bureau~~Asset Acquisitions for more detail on the July 2020 acquisition. As a result, the outstanding contingent consideration of $2,299 was extinguished with 214 shares of the Company’s common stock in lieu of cash and no further contingent purchase obligation remains.

On August 7, 2023, the Company entered into an amendment to the Senior Credit Facility described in Note 6 – Notes Payable, whereby the Final Payment Fee (as defined in the ~~Southeast~~Loan Agreement) was settled for $1,677 (the “Settled Amount”) which was paid on August 7, 2023. The Final Payment was originally equal to 1.0% of the increase in our market capitalization since September 10, 2021, and was due upon payment in full of the obligations under the Senior Credit Facility. The Settled Amount is subject to adjustment and any adjusted amount, if due, is expected to be immaterial in amount and would be paid no later than August 18, 2023. In addition, we also paid the Lenders a ~~current reseller~~fee equal to $250, which will be credited against reimbursable expenses owed to Lenders in a future refinancing of ~~our HCM solution, Evolution.~~the Senior Credit Facility if it occurs before December 31, 2024.

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 feet for a period of 60 months. Future minimum payments total approximately $2,073.

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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 certain statements ~~in this Report represent~~made by management that may constitute “forward-looking” statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements about our financial results may include expected or projected U.S GAAP and non-U.S. GAAP financial and other operating and non-operating results. The words “believe,” “may,” “will,” “estimate,” “projects,” “anticipate,” “intend,” “expect,” “should,” “plan,” and similar expressions are intended to identify forward-looking statements. ~~These~~Examples of “forward-looking statements” include statements ~~involve known and unknown risks, uncertainties and other factors that may cause actual results of operations, levels of activity, economic~~we make regarding our operating performance, ~~financial condition or achievements to be materially different from~~ future results of operations ~~levels of activity, economic performance,~~and financial position, revenue growth, earnings or other projections. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. The achievement or ~~achievements as~~success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions, over many of which we have no control. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the Company’s results could differ materially from the results 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 breaches of the Company’s security measures; risks associated with the Company’s rate of growth and anticipated revenue run rate, including impact of the current environment; interruptions to ~~— adverse changes~~supply chains and extended shut down of businesses; political unrest, including the current issues between Russia and Ukraine; 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; possible fluctuations in the ~~economy,~~Company’s financial ~~markets,~~ and ~~credit markets; delays or reductions in information technology spending;~~operating results; the ~~development~~expiration of major revenue streams such as Earned Retention Tax Credits; regulatory pressures on economic relief enacted as a result of the ~~market~~COVID-19 pandemic that change or cause different interpretations with respect to eligibility for ~~cloud based workplace~~such programs; privacy concerns and laws and other regulations may limit the effectiveness of our applications; ~~product development; market~~factors affecting the Company’s term loan; 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 Company’s ability to continue to release, gain customer acceptance of and provide support for new ~~products~~ and ~~product improvements; our ability to retain or increase our~~improved versions of the Company’s services; successful customer ~~base; security breaches; errors, disruptions~~deployment and utilization of the Company’s existing and future services; technological developments; the nature of the Company’s business model; interest rates; competition; various financial aspects of the Company’s subscription model; impairment of intangible assets; restrictive debt covenants; interruptions or delays in our services; privacy concerns and laws; changes in our sales cycle; competition, including pricing pressures, entry of new competitors, and new technologies; intellectual property enforcement and litigation; ourthe Company’s services or the Company’s Web hosting; access to additional capital; the Company’s ability to hire, retain and motivate ~~employees; our~~employees and manage the Company’s growth; litigation and any related claims, negotiations and settlements, including with respect to intellectual property matters or industry-specific regulations; volatility and weakness in bank and capital markets; factors affecting the Company’s deferred tax assets and ability to ~~manage our growth; our ability to realize benefits from acquisitions; the level~~value and utilize them; volatility and low trading volume of our ~~indebtedness; changes in sales may not be immediately reflected in our operating results due to our subscription model; changes in laws~~common stock; collection of receivables; and ~~regulations; changes~~general developments in the ~~Internet infrastructure;~~economy, financial markets, credit markets and ~~changes~~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 ~~accounting standards.~~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

Our Business

The following review of Asure’s financial position as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022, and ~~the~~ results of operations ~~and cash flows~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 should be read in conjunction with our ~~2016~~2022 Annual Report on Form 10-K filed with the ~~Securities and Exchange Commission.~~SEC on February 27, 2023. 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 is~~to our website are not incorporated into this Quarterly Report on Form 10-Q. However, we do post information on the investor relations page of our website that we believe may be of interest to our investors.

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Asure is a ~~leading global~~ provider of cloud-based ~~software-as-a-service~~Human Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) ~~time~~for small and medium-sized businesses (“SMBs”). We offer human resources (“HR”) tools necessary to build a thriving workforce, provide the resources to stay compliant with dynamic federal, state, and local tax jurisdictions and their respective labor ~~management~~laws, freeing cash flows so SMBs can spend their financial capital on growing their businesses rather than administrative overhead that can impede growth. Our solutions also provide new ways for employers to connect with and ~~Agile Workplace management~~to differentiate themselves with their employees in order to enhance their relationships with their talent. Asure’s HCM suite (“Asure HCM”) includes Payroll & Tax solutions, HR compliance and services, Time & Attendance software and data integrations that enable ~~companies~~employers and their employees to enhance efficiencies and take advantage of ~~all sizes~~value-added solutions, which we refer to as AsureMarketplace™. AsureMarketplace™ automates interactions between our HCM systems with third-party providers to enhance efficiency, improve accuracy and ~~complexities~~ to ~~operate more efficiently~~extend the range of services offered to employers and ~~proactively manage costs associated with~~ their ~~most expensive assets: real estate, labor~~employees. The Company’s approach to HR compliance services incorporates artificial intelligence technology to enhance scalability and ~~technology.~~efficiency while prioritizing client interactions. We offer our services directly and indirectly through our network of Reseller Partners.

~~We currently offer two main product lines, AsureSpace™ and AsureForce®. 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 100,000 SMBs across the United States. ~~Tampa-based Compass HRM is a current reseller~~Approximately 15,000 of our clients are direct and the 85,000 remaining clients are indirect, as they have contracts with Reseller Partners who white label our solutions.

We strive to be the most trusted HCM ~~offering (formerly Mangrove),~~resource to SMBs. We target less densely populated U.S. metropolitan cities where fewer of our competitors have a presence. Our solutions solve 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 and will continue to invest in research and development to expand our solutions. Our solutions reduce the administrative burden on employers and increases employee productivity while managing the employment lifecycle.

Acquisitions

On January 1, 2022, we acquired certain assets of a reseller partner, which ~~provides human resources solutions~~were used to provide payroll processing services. The partner is located in the northeastern United States. The aggregate purchase price that ~~enhance organizations, people,~~the Company paid for these assets was $2,350, as follows: (i) $1,970 in cash at closing (including $31 of transaction costs) and ~~profits through~~(ii) the delivery of a promissory note in the amount of $411. The Company paid the full amount due, including interest, on this promissory note on May 1, 2023.

OnSeptember 30, 2021, the Company acquired certain assets of two payroll businesses, which were used to provide payroll processing services. In connection with these acquisitions there are two outstanding promissory notes payable in the amounts of $2,223 and ~~HR solutions.~~$4,667 as of June 30, 2023. The acquisition ~~of Compass HRM expands our reach~~related to the promissory note in the ~~Southeast, particularly Florida.~~ amount of $4,667 also included contingent purchase consideration. As of June 30, 2023, the Company calculated the final contingent consideration due in connection with the acquisition. As a result, the fair value for the contingent consideration was determined to be $587, which was added as an increase to the principal balance due on the promissory note during the second quarter of 2023. The two outstanding promissory notes mature on September 30, 2023 and September 30, 2026.

~~For both product lines, support and professional services~~In July 2020, the Company acquired certain assets of a payroll tax business. The Asset Purchase Agreement set forth two subsequent purchase consideration payments, which are ~~other key elements~~contingent on certain thresholds. The first contingent purchase consideration was paid in June 2021. The outstanding contingent purchase consideration of ~~our software and services business.~~$2,299 was paid in July 2023 through the issuance of 214 shares of the Company’s common stock in lieu of cash. As an extension of our perpetual software product offerings, Asure offers 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 services on a ~~global scale.~~result, no further contingent purchase obligation remains.

We target our sales and marketing efforts to a wide range of audiences, from small to medium-sized businesses and divisions of enterprise organizations throughout the United States, Europe and Asia/Pacific. We generate sales of our solutions through our direct sales teams and indirectly through our channel partners. We are expanding our investment in our direct sales teams to continue to address our market opportunity.

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RESULTS OF OPERATIONS(in thousands)

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):~~Loss:


	FOR THE THREE MONTHS ENDED SEPTEMBER 30,						FOR THE NINE MONTHS ENDED SEPTEMBER 30,							Six Months Ended June 30,
	2017			2016			2017			2016				2023		2022
Revenues		100	%		100	%		100	%		100	%	Revenues	100	%	100	%
Gross margin		78.1			78.5			77.9			77.0
Selling, general and administrative		60.9			53.5			64.6			60.2
Gross profit													Gross profit	73	%	62	%
Sales and marketing													Sales and marketing	25	%	21	%
General and administrative													General and administrative	32	%	36	%
Research and development		5.7			8.1			6.4			8.6		Research and development	5	%	7	%
Amortization of intangible assets		8.6			6.6			8.3			6.3		Amortization of intangible assets	10	%	15	%
Total operating expenses		75.2			68.1			79.2			75.1		Total operating expenses	72	%	80	%
Other loss, net		(10.6	)		(6.6	)		(8.4	)		(5.7	)
Net income (loss)		(8.3	)		3.3			(10.7	)		(4.3	)
Interest expense													Interest expense	(6)	%	(4)	%
Other (expense) income, net													Other (expense) income, net	—	%	3	%
Loss from operations before income taxes													Loss from operations before income taxes	(5)	%	(20)	%
Net loss													Net loss	(5)	%	(20)	%

~~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 professional services, hardware and other revenues to remain relatively constant. While revenue mix varies by product, recurring revenue represented over 80% of total revenue in six months ended June 30, 2023, compared to 94% in six months ended June 30, 2022.

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

~~Revenue represents~~


	Three Months Ended June 30,				Variance
	2023		2022		$		%
Recurring	$	22,960	$	19,014	$	3,946	21	%
Professional services, hardware and other	7,460		1,286		6,174		480	%
Total	$	30,420	$	20,300	$	10,120	50	%


	Six Months Ended June 30,				Variance
	2023		2022		$		%
Recurring	$	50,916	$	42,018	$	8,898	21	%
Professional services, hardware and other	12,568		2,615		9,953		381	%
Total	$	63,484	$	44,633	$	18,851	42	%

Recurring Revenues

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

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

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

Recurring revenue for the three months ended June 30, 2023 was $22,960, an increase of $3,946, or 21%, from $19,014 for the three months ended June 30, 2022. Recurring revenue increase is primarily due to an increase in HR compliance revenue, an increase in interest earned on funds held for clients, and an increase in revenue from AsureMarketplace™.

Recurring revenue for the six months ended June 30, 2023 was $50,916, an increase of $8,898, or 21%, from $42,018 for the six months ended June 30, 2022. Recurring revenue increase is primarily due to an increase of approximately $3,800 in interest earned on funds held for clients, an increase of $3,200 in HR compliance revenue, and an increase of $1,900 in revenue from AsureMarketplace™.

Professional Services, Hardware and Other Revenues

Professional services, hardware and other revenues represents implementation fees, one-time consulting projects, on-premise maintenance, hardware devices to enhance our software products ~~software maintenance and support~~as well as ERTC revenues that are transactional in nature.

Professional services, ~~installation and training services~~hardware 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.

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~~Revenue~~increased $6,174, or 480%, for the three months ended ~~September~~June 30, ~~2017 was $15,527, an increase of $6,087, or 64.5%,~~2023 from the ~~$9,440 reported for the three months ended September 30, 2016. The largest increase was~~similar period in cloud revenue, which increased $5,432, or 96.5% from the third quarter of 2016. Cloud 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 the three months ended September 30, 2017, representing 68.0% of the increase in the three months ended September 30, 2017. Hardware revenue, professional services revenue and maintenance and support revenue also increased as compared to the three months ended September 30, 2016. This was 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 revenue.

~~Revenue for the nine months ended September 30, 2017 were $39,134, an increase of $13,308, or 51.5%, from the $25,826 reported for the nine months ended September 30, 2016. This increase was~~2022, primarily due to ~~an increase~~growth in ~~cloud~~non-recurring ERTC revenues. ERTC revenues are expected to wind down as ERTC tax credits under the CARES Act and such regulations will expire in 2025.

Professional services, hardware ~~revenue, of $12,843,~~and other revenue increased $9,953, or ~~86.3%~~381%, ~~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, 2023 from the ~~nine months ended September 30, 2016, reflecting our continued emphasis on selling cloud based solutions.~~similar period in 2022, primarily due to growth in non-recurring ERTC revenues.

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.~~SMBs. We continue to target ~~small and medium sized businesses and divisions of larger enterprises in these same~~SMBs 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 of ADI~~

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~~2023, was ~~$12,131,~~$22,018, an increase of ~~$4,717,~~$9,757, or ~~63.6%~~80%, from ~~the $7,414 reported~~$12,261 for the three months ended ~~September~~June 30, ~~2016.~~2022. Gross margin as a percentage of ~~revenues~~revenue was ~~78.1% and 78.5%~~72% for the three months ended ~~September~~June 30, ~~2017~~2023 as compared to 60% for the three months ended June 30, 2022. Our increase in gross margin is primarily attributable to the increase in revenue and ~~2016, respectively.~~ more efficient operations driven by consolidation and standardization efforts across the Company.

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Consolidated gross ~~margin~~profit for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 was ~~$30,474,~~$46,418, an increase of ~~$10,580~~$18,693, or ~~53.2%~~67%, from ~~the $19,894 reported~~$27,725 for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. Gross ~~margins~~margin as a percentage of ~~revenues were 77.9% and 77.0%~~revenue was 73% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively. We attribute~~2023 as compared to 62% for the six months ended June 30, 2022. Our increase in gross margin is primarily attributable to ~~a shift~~the increase in revenue and more efficient operations driven by consolidation and standardization efforts across the ~~mix~~Company.

Our cost of sales relates primarily to direct product costs, compensation for operations and related consulting expenses, hardware expenses, and the amortization of our ~~revenue between our higher margin~~purchased software development costs. We include intangible amortization related to developed and ~~lower margin~~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 and commissions. Marketing programs includes events, corporate communications and product ~~lines as well as the addition of the acquisitions in 2017.~~marketing activities.

~~Selling, General~~Sales and ~~Administrative Expenses~~

~~Selling, general and administrative (“SG&A”)~~marketing expenses for the three months ended ~~September~~June 30, ~~2017~~2023 were ~~$9,459,~~$8,515, an increase of ~~$4,413,~~$3,926, or ~~87.5%~~86%, from ~~the $5,046 reported~~$4,589 for the three months ended ~~September~~June 30, ~~2016. SG&A~~2022, primarily due to an increase in direct sales personnel, higher sales commissions owing to increased revenues, and an increase in accounts receivable reserves. Sales and marketing expenses as a percentage of ~~revenues were 60.9% and 53.5%~~revenue increased to 28% for the three months ended ~~September~~June 30, ~~2017~~2023 from 23% for the same period in 2022.

Sales and ~~2016, respectively.~~

~~Selling, general and administrative (“SG&A”)~~marketing expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 were ~~$25,286,~~$15,715, an increase of ~~$9,727,~~$6,229, or ~~62.5%~~66%, from ~~the $15,559 reported~~$9,486 for the ~~nine~~six months ended ~~September~~June 30, ~~2016. SG&A~~2022, primarily due to an increase in direct sales personnel, higher sales commissions owing to increased revenues, and an increase in accounts receivable reserves. Sales and marketing expenses as a percentage of ~~revenues were 64.6% and 60.2%~~revenue increased to 25% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 from 21% for the same period in 2022.

We expect to continue to expand and ~~2016, respectively.~~increase selling costs as we focus on hiring direct sales personnel, expanding recognition of our brand, and lead generation.

~~SG&A~~General and Administrative Expenses

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

General and administrative expenses for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2023 were $10,336, an increase of $1,640, or 19%, from $8,696 for the three months ended June 30, 2022, primarily attributable to increased personnel, share-based compensation, and contracting costs. General and administrative expenses as ~~compared~~a percentage of revenue decreased to 34% for the three months ended June 30, 2023 from 43% for the same ~~periods~~period in ~~2016~~2022.

General and administrative expenses for the six months ended June 30, 2023 were $20,292, an increase of $4,111, or 25%, from $16,181 for the six months ended June 30, 2022, primarily ~~due~~attributable to increased personnel, share-based compensation, and contracting costs. General and administrative expenses as a percentage of revenue decreased to 32% for the ~~acquisition and integration expenses related to~~six months ended June 30, 2023 from 36% for the ~~acquisition~~same period in ~~the first and second quarters of 2017. We continue to evaluate any unnecessary expenses and any increases in SG&A designed to enhance future revenue growth.~~2022.

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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.

R&D expenses for the three months ended ~~September~~June 30, ~~2017~~2023 were ~~$883, an increase~~$1,325, a decrease of ~~$122,~~$147, or ~~16.0%~~10%, from ~~the $761 reported~~$1,472 for the three months ended ~~September~~June 30, ~~2016.~~2022. The decrease in R&D expense is primarily attributable to an increase in capitalized software expenses driven by continued investments in development of our products, partially offset by higher personnel costs. R&D expenses as a percentage of ~~revenues were 5.7% and 8.1%~~revenue decreased to 4% for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~ 2023 from 7% for the same period in 2022.

~~Research and development (“~~R~~&D”)~~&D expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 were ~~$2,488, an increase of $271, or 12.2%, from the $2,217 reported~~$3,304, and remained flat compared with $3,293 for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. R&D expenses as a percentage of ~~revenues were 6.4% and 8.6%~~revenue decreased to 5% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~ 2023 from 7% for the same period in 2022.

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We plan to continue to ~~improve~~enhance our products and technologies ~~through organic improvements as well as through acquired intellectual property.~~by leveraging the latest technology stack, Robotic Process Automation (“RPA”), and artificial intelligence (“AI”), and development partnerships. We ~~believe~~expect that our expanded investment in product, engineering, SaaS hosting, mobile and hardware technologies ~~lays~~will lay the ~~ground work~~groundwork for broader market opportunities and ~~represents~~represent a key aspect of our competitive differentiation. ~~Native mobile applications, QR Code~~We also plan to expand our technological resources through organic improvements and acquired intellectual property. We expect to continue to expand the breadth of integration ~~expanded web service integration~~between our solutions, allowing direct clients and ~~other technologies~~resellers the ability to easily add and implement components across our entire solution set. Our initiatives include providing our customers with more accurate and efficient automation powered by an informed knowledge base. Consistent with that effort, our engineering team utilizes an AI development Copilot to increase their productivity and efficiency. Our operations team utilizes a digital assistant to allow for a more efficient and accurate way to automate repetitive tasks, which we believe will free up our time for more strategic work and reducing the risk of errors. We are ~~all part of our initiatives.~~committed to providing the best-in-class solutions.

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 2 and SOC II Type 2 certifications, BIPA, CCPA, and other initiatives.

Amortization of Intangible Assets

Amortization ~~expenses~~expense for the three months ended ~~September~~June 30, ~~2017 were $1,341, an increase~~2023 was $3,294, a decrease of ~~$716,~~$58, or ~~114.6%~~2%, from ~~the $625 reported~~$3,352 for the three months ended ~~September~~June 30, ~~2016.~~2022. Amortization ~~expenses~~expense as a percentage of ~~revenues were 8.6% and 6.6%~~revenue decreased to 11% for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively. Amortization expenses~~2023 from 17% for the ~~nine~~same period in 2022.

Amortization expense for the six months ended ~~September~~June 30, ~~2017 were $3,230, an increase~~2023 was $6,596, a decrease of ~~$1,602,~~$188, or ~~98.4% compared to $1,628, reported~~3%, from $6,784 for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. Amortization ~~expenses~~expense as a percentage of ~~revenues were 8.3% and 6.3%~~revenue decreased to 10% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively. The increases are due to~~2023 from 15% for the ~~amortization recorded on the intangibles acquired~~same period in ~~the acquisitions during 2017.~~2022.

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

~~Other loss~~Interest expense, net for the three months ended ~~September~~June 30, ~~2017~~2023 was ~~$1,644, an increase of $1,024, or 165.2%, from the $620 reported~~$1,593 compared to $1,085 for the three months ended ~~September~~June 30, ~~2016. Other loss~~2022. Interest expense, net as a percentage of ~~revenues~~revenue was ~~10.6% and 6.6%~~5% for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, respectively.~~ June 30, 2022. The increase in interest expense, net in the current period is primarily due to the interest rates on our borrowings under our credit facility with Structural Capital Investments II LP.

Interest expense, net for the six months ended June 30, 2023 was $3,538 compared to $1,901 for the six months ended June 30, 2022. Interest expense, net as a percentage of revenue was 6% and 4% for the six months ended June 30, 2023 and June 30, 2022, respectively. The increase in interest expense, net in the current period is primarily due to the interest rates on our borrowings under our credit facility with Structural Capital Investments II LP.

Other ~~loss~~(Expense) Income, Net

Other (expense) income, net for the three months ended ~~September~~June 30, ~~2017 and September 30, 2016 are composed primarily of interest expense on notes payable.~~

~~Other loss for the nine months ended September 30, 2017~~2023 was $3,279, an increase of $1,819, or 124.6%, from the $1,460 reported for the nine months ended September 30, 2016. Other expense as a percentage of revenues was 8.4% and 5.7% for the nine months ended September 30, 2017 and 2016, respectively. Other loss for the nine months ended September 30, 2017 and 2016 are composed primarily of interest expense on notes payable.

~~Interest expense for the three and nine months ended September 30, 2017 increased due~~$(93) compared 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~~$1,147 for the three months ended June 30, 2022. Other (expense) income, net as a percentage of revenue was negligible for the three months ended June 30, 2023 compared to 6% for the same period ended June 30, 2022. For the three months ended June 30, 2023, the amounts in other (expense) income, net primarily consisted of loss on disposal of assets. For the three months ended June 30, 2022, the amounts in other (expense) income, net primarily consisted of a fair value adjustment on contingent purchase consideration in connection with the acquisition of a payroll business in September 2021.

Other (expense) income, net for the six months ended June 30, ~~2017~~2023 was $(9) compared to $1,147 for the six months ended June 30, 2022. Other (expense) income, net as a percentage of revenue was negligible for the six months ended June 30, 2023, and ~~2016,~~3% for the six months ended June 30, 2022. For the six months ended June 30, 2023, the amounts in other (expense) income, net primarily consisted of loss on disposal of assets. For the six months ended June 30, 2022, the amounts in other (expense) income, net primarily consisted of a fair value adjustment on contingent purchase consideration in connection with the acquisition of a payroll business in September 2021.

Income Taxes

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For the three months ended June 30, 2023 and 2022, we recorded income tax expense attributable to continuing operations of $627 and $74, respectively, an increase of ~~$38,~~$553 or ~~80.9%, as a result of additional tax deductible goodwill acquired in 2017.~~747%.

~~Provision for~~For the six months ended June 30, 2023 and 2022, we recorded income tax expense ~~for the nine months ended September 30, 2017 was $368,~~attributable to continuing operations of $390 and $104, respectively, an increase of ~~$235,~~$286 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.~~275%.

Net ~~Income (Loss)~~Loss

We incurred a ~~net~~ loss of ~~$1,281,~~$3,765, or ~~$(0.10)~~$0.18 per share, during the three months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~net income~~a loss of ~~$315,~~$5,860, or ~~$0.05~~$0.29 per share, during the three months ended ~~September~~June 30, ~~2016. Net loss~~2022. Loss as a percentage of total revenues was ~~8.3%~~12% and 29% 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.~~2023 and 2022, respectively.

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We incurred a ~~net~~ loss of ~~$4,177,~~$3,426, or ~~$(0.40)~~$0.17 per share, during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, compared to a ~~net~~ loss of ~~$1,103,~~$8,877, or ~~$(0.17)~~$0.44 per share, ~~reported for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2016. Net loss~~2022. Loss as a percentage of total revenues was ~~10.7%~~5% and 20% 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.~~2023 and 2022, respectively.

We intend to continue to implement our corporate strategy for growing the 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 and there can be no assurance that we can successfully grow our revenues or achieve profitability during the remainder of fiscal year 2017.

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, 2023		December 31, 2022
Cash, cash equivalents and restricted cash(1)	$	21,613	$	17,010

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

Working Capital. We had working capital of ~~$18,734~~$13,583 at ~~September~~June 30, ~~2017,~~2023, an increase of ~~$14,527~~$5,490 from working capital of ~~$4,207~~$8,093 at December 31, ~~2016.~~2022. Working capital ~~at September~~as of June 30, ~~2017~~2023 and December 31, ~~2016~~2022 includes ~~$12,065~~$3,293 and ~~$9,252~~$8,461 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~~provided by operating activities ~~was $2,083~~of $6,096 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~~2023 was primarily driven by anon-cash adjustments to our net loss of ~~$4,177, an increase in accounts receivable of $4,450, an increase in prepaids~~approximately $16,082, primarily due to depreciation and ~~other assets of $471, and a decrease in accounts payable of $569.~~amortization. This was offset by ~~non-cash adjustments to net loss of $5,027, an increase in deferred revenue of $1,963, and an increase in accrued expenses and other long-term obligations of $881. The $730 of cash used~~changes in operating assets and liabilities, which resulted in a use of $6,560 in cash. Net cash provided by operating activities ~~during~~of $7,481 for the ~~first nine~~six months ~~of 2016~~ended June 30, 2022 was ~~primarily~~ driven ~~by a 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 adjustments to our net loss of ~~$2,996, an increase~~approximately $11,058, primarily due to depreciation and amortization, offset by our net loss of $8,877. For the six months ended June 30, 2022, changes in ~~accrued expenses~~operating assets and ~~other long-term obligations~~liabilities resulted in cash provided of ~~$951, a decrease in inventory of $169, and a decrease in prepaid expenses and other assets of $124.~~$5,300.

Investing Activities. Net cash used in investing activities ~~was $38,351 and $7,750~~of $17,266 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~~2023 is primarily due to ~~the acquisitions~~purchases of ~~PMSI, CPI~~available-for-sale securities and ~~PSNW in January 2017, and the acquisitions~~maturities of ~~iSystems and Compass in May 2017, partially~~$18,885, offset by ~~an increase in funds held for clients. The~~proceeds from sales and maturities of available-for-sale securities of $5,940. Net cash used in investing activities of $21,570 for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2022 is primarily due ~~primarily~~ to ~~the acquisition~~purchases of ~~Mangrove, offset by the increase in funds held for clients.~~available-for-sale securities and maturities of $19,870.

Financing Activities. Net cash ~~provided by~~used in financing activities was ~~$55,123~~$15,602 for the ~~nine~~six months ended ~~September~~June 30, ~~2017. We recognized~~2023, 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~~$17,225. Net cash used in financing activities was $32,524 for the six months ended June 30, 2022, which primarily consisted of a net decrease in client fund obligations of $32,716.

Principal payments on the Senior Credit Facility with Structural Capital Investments III, LP begin in October 2023 after the expiration of the interest only period, and ~~debt financing fees~~are based on a five year amortization schedule, with a balloon payment due in October 2025. The Company also has two promissory notes outstanding in connection with two payroll businesses acquired in September 2021, in the amounts of ~~$438.~~$2,223 and 4,667 as of June 30, 2023. The two outstanding promissory notes mature on September 30, 2023 and September 30, 2026.

~~Table of Contents~~

Sources of Liquidity. As of ~~September~~June 30, ~~2017, Asure’s~~2023, the Company’s principal sources of liquidity consisted of approximately ~~$27,464~~$21,613 of cash, ~~future~~cash equivalents and restricted cash, together with cash generated from operations ~~and $5,000 under~~of 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 leastbusiness over 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.

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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.~~acquisitions; however we do believe that we have sufficient liquidity to support our business operations for at least the next twelve months. Future business demands may lead to cash utilization at levels greater than recently ~~experienced.~~experienced or expected. We may need to raise additional capital in the future in order to grow our existing software operations and to seek additional strategic acquisitions in the near future. ~~However,~~Further, 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 our available cash on hand or anticipated for receipt in the ordinary course 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 to the accompanying condensed consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

~~There were no material changes~~We have prepared our Condensed Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles and included the accounts of our wholly owned subsidiaries. We have eliminated all significant intercompany transactions and balances in the consolidation. Preparation of the Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenues and expenses during the fiscal year. The more significant estimates made by management include the valuation allowance for our gross deferred tax asset, the determination of the fair value of our long-lived assets. We base our estimates on historical experience and on various other assumptions that management believes are reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the preparation of our financial statements for continued reasonableness. We prospectively apply appropriate adjustments, if any, to our estimates based upon our periodic evaluation. For a description of our critical accounting policies, ~~and estimates since December 31, 2016. For additional information on critical accounting policies, refer to “Management’s~~see Management’s Discussion and ~~Analysis”~~Analysis in our ~~2016~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our exposure from market risks from those disclosed in our 2022 Annual Report on Form 10-K.

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

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, 2023, disclosure controls and procedures were effective.

Change in Internal Controls over Financial Reporting

During the period ended ~~September~~June 30, ~~2017,~~2023, 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~~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, 2023, we were not party to any material legal proceedings.

ITEM 1A. RISK FACTORS

Except for the risk factor set forth below, there have been no material changes from the risk factors previously disclosed in the Company’s 2022 Annual Report on Form 10-K, filed with the SEC on February 27, 2023, and investors are encouraged to review these risk factors prior to making an investment in us.

Issues in the use of artificial intelligence (“AI”) in our HCM products and services may result in reputational harm or liability to us.

We are enhancing our products and technologies by leveraging artificial intelligence (“AI”) and we expect AI to be a ~~smaller reporting company as defined by Rule 12b-2~~growing element of our business offerings. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business and product offerings and their reliability. AI algorithms may be flawed. Datasets may be insufficient or of poor quality, or contain biased information. We intend that the ~~Exchange Act~~product offerings and ~~are not required to provide~~services integrating AI will assist our customers in data collection. If the information ~~required under this item.~~that AI applications assist us in producing for our customers are or are alleged to be deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, and brand or reputational harm. Though our business practices are designed to mitigate many of these risks, our ability to produce data-driven insights for our customers as we leverage AI in our HCM technology may be constrained by current and future regulatory requirements, thereby restricting our ability to use data in innovative ways to support the needs of our customers.

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

~~None~~In July 2023, the Company paid the outstanding contingent purchase consideration due in connection with the acquisition of a payroll tax business in July 2020, see Note 3 - Business Combinations and Asset Acquisitions for more detail on the July 2020 acquisition. As a result, the outstanding contingent consideration of $2,299 was extinguished with 214 shares of the Company’s common stock in lieu of cash and no further contingent obligation remains. The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, in connection with foregoing issuance of the securities.

Numbers in this Item 2 are reflected in thousands.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None~~None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

On August 7, 2023, the Company entered into an amendment to the Senior Credit Facility described in Note 6 – Notes Payable, whereby the Final Payment Fee (as defined in the Loan Agreement) was settled for $1,677 (the “Settled Amount”) which was paid on August 7, 2023. The Final Payment was originally equal to 1.0% of the increase in our market capitalization since September 10, 2021, and was due upon payment in full of the obligations under the Senior Credit Facility. The Settled Amount is subject to adjustment and any adjusted amount, if due, is expected to be immaterial in amount and would be paid no later than August 18, 2023. In addition, the Company also paid the Lenders a fee equal to $250, which will be credited against reimbursable expenses owed to Lenders in a future refinancing of the Senior Credit Facility if it occurs before December 31, 2024.

Numbers in this Item 5 are reflected in thousands.

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ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)The following documents are filed as a part of this Quarterly Report on Form 10-Q:

(1)Financial Statements:

The Financial Statements required by this item are submitted in Part II, Item 8 of this report.

(2)Financial Statement Schedules:

All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or in the notes thereto.

(3)Exhibits:

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

10.1*		Amendment No. 2 to Loan and Security Agreement between Structural Capital Investments III, LP, Ocean II PLO LLC and Asure Software, Inc., dated August 7, 2023.

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

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* *		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 Condensed Quarterly Report on Form 10-Q for the ~~quarter~~three months ended ~~September~~June 30, ~~2017,~~2023, 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, 2023, formatted as Inline XBRL and contained in Exhibit 101 (filed herewith).

* Filed ~~herewith~~herewith.

** Furnished herewith.

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SIGNATURES

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


			ASURE SOFTWARE, INC.

Date: August 7, 2023			By:
~~November 13, 2017~~	~~By:~~	/s/ PATRICK GOEPEL
				Patrick Goepel
				Chief Executive Officer

~~November 13, 2017~~Date: August 7, 2023			By:	/s/ ~~KELYN BRANNON~~ JOHN PENCE
				~~Kelyn Brannon~~John Pence
				Chief Financial Officer

	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

	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

	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