UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTIONQuarterly Report Pursuant to Section 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OFof the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2024 |
For the quarterly period ended September 30, 2017
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTIONTransition Report Pursuant to Section 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OFof 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 Namename of Registrantregistrant as Specifiedspecified in its Charter)charter)
| | | | | | | | | | | | | | |
Delaware | | | |
74-2415696 |
(State or other jurisdiction of incorporation) | | | | (I.R.S. Employer Identification No.) |
| incorporation or organization) | | | |
405 Colorado Street, Suite 1800, Austin, Texas | | | Identification No.) | 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 ☒ 512-437-2700 |
Emerging growth company ☐ (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 |
| | | | | | | | | | | | | | |
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 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 | ☐ | No |
| | | | | | | | | | | | | | | | | |
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 | ☐ | |
| | | | | | | | | | | | | | |
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 provided pursuant to Section 13(a) of the Exchange Act. |
|
| ☐ | | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | | | | |
| ☐ | Yes | ☒ | No |
As of May 1, 2024, 25,813,067 shares of the Exchange Act). Yes ☐ No ☒
As of November 9, 2017, the registrant had outstanding 12,466,820 shares of itsregistrant’s Common Stock, $0.01 par value.value, were outstanding.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION |
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Item 1. | | |
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Item 2. | | 20 |
Item 3. | | 25 |
Item 4. | | 25 |
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Item 1. | | 26 |
Item 1A. | | 26 |
Item 2. | | 26 |
Item 3. | | 26 |
Item 6.4. | | 26 |
Item 5. | | |
Item 6. | | |
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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 | | | | | | |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
ASSETS | |
Current 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 and cash equivalents | |
Cash and cash equivalents | |
Accounts receivable, net of allowance for credit losses of $5,108 and $4,787 at March 31, 2024 and December 31, 2023, respectively | |
Inventory | | | 781 | | | | 487 | |
Prepaid expenses and other current assets | | | 1,899 | | | | 1,256 | |
Total current assets before funds held for clients | | | 44,031 | | | | 22,618 | |
Funds held for clients | | | 23,217 | | | | 22,981 | |
Total current assets | | | 67,248 | | | | 45,599 | |
Restricted cash | | | 200 | | | | - | |
Property and equipment, net | | | 2,763 | | | | 1,878 | |
Goodwill | | | 75,855 | | | | 26,259 | |
Intangible assets, net | | | 34,046 | | | | 12,048 | |
Other assets | | | 2,225 | | | | 39 | |
Operating lease assets, net | |
Other assets, net | |
Total assets | | $ | 182,337 | | | $ | 85,823 | |
Liabilities and stockholders’ equity | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
Current liabilities: | | | | | | | | |
Current portion of notes payable, net of debt issuance cost and debt discount | | $ | 8,724 | | | $ | 5,455 | |
Current liabilities: | |
Current liabilities: | |
Current portion of notes payable | |
Current portion of notes payable | |
Current portion of notes payable | |
Accounts payable | | | 1,581 | | | | 1,576 | |
Accrued compensation and benefits | | | 1,812 | | | | 1,192 | |
Operating lease liabilities, current | |
Other accrued liabilities | | | 1,115 | | | | 936 | |
Deferred revenue | | | 12,065 | | | | 9,252 | |
Total current liabilities before client fund obligations | | | 25,297 | | | | 18,411 | |
Client fund obligations | | | 23,217 | | | | 22,981 | |
Total current liabilities | | | 48,514 | | | | 41,392 | |
Long-term liabilities: | | | | | | | | |
Deferred revenue | | | 1,450 | | | | 769 | |
Notes payable, net of current portion of debt issuance cost and debt discount | | | 66,980 | | | | 24,581 | |
Deferred revenue | |
Deferred revenue | |
Deferred tax liability | |
Notes payable, net of current portion | |
Operating lease liabilities, noncurrent | |
Other liabilities | | | 1,009 | | | | 835 | |
Total long-term liabilities | | | 69,439 | | | | 26,185 | |
Total liabilities | | | 117,953 | | | | 67,577 | |
Stockholders’ equity: | | | | | | | | |
Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding | | | - | | | | - | |
Common stock, $.01 par value; 22,000 shares authorized; 12,805 and 8,901 shares issued, 12,421 and 8,517 shares outstanding at September 30, 2017 and December 31, 2016, respectively | | | 128 | | | | 89 | |
Treasury stock at cost, 384 shares at September 30, 2017 and December 31, 2016 | | | (5,017 | ) | | | (5,017 | ) |
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 | |
Preferred stock, $0.01 par value; 1,500 shares authorized; none issued or outstanding | |
Common stock, $0.01 par value; 44,000 shares authorized; 25,749 and 25,382 shares issued, 25,749 and 24,998 shares outstanding at March 31, 2024 and December 31, 2023, respectively | |
Treasury stock at cost, zero(1) and 384 shares at March 31, 2024 and December 31, 2023, respectively | |
Additional paid-in capital | | | 345,383 | | | | 295,044 | |
Accumulated deficit | | | (276,052 | ) | | | (271,875 | ) |
Accumulated other comprehensive (loss) income | | | (58 | ) | | | 5 | |
Accumulated other comprehensive loss | |
Total stockholders’ equity | | | 64,384 | | | | 18,246 | |
Total liabilities and stockholders’ equity | | $ | 182,337 | | | $ | 85,823 | |
(1) The aggregate Treasury stock of prior repurchases of the Company's own common stock was retired and subsequently issued effective January 1, 2024. See the Condensed | | (1) The aggregate Treasury stock of prior repurchases of the Company's own common stock was retired and subsequently issued effective January 1, 2024. See the Condensed |
Consolidated Statement of Changes in Stockholders' Equity for the impact of this transaction. | | Consolidated Statement of Changes in Stockholders' Equity for the impact of this transaction. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Financial Statements.
3
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
(LOSS) INCOME
(LOSS)(Amounts in thousands, except share and per share data)amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | 2024 | | 2023 |
Revenue: | | | | | | |
Recurring | | | | $ | 30,273 | | | $ | 27,956 | |
Professional services, hardware and other | | | | 1,379 | | | 5,108 | |
Total revenue | | | | 31,652 | | | 33,064 | |
Cost of Sales | | | | 9,045 | | | 8,664 | |
Gross profit | | | | 22,607 | | | 24,400 | |
Operating expenses: | | | | | | |
Sales and marketing | | | | 7,767 | | | 7,200 | |
General and administrative | | | | 10,063 | | | 9,956 | |
Research and development | | | | 1,769 | | | 1,979 | |
Amortization of intangible assets | | | | 3,449 | | | 3,302 | |
Total operating expenses | | | | 23,048 | | | 22,437 | |
(Loss) income from operations | | | | (441) | | | 1,963 | |
Interest income | | | | 336 | | | 349 | |
Interest expense | | | | (180) | | | (2,293) | |
Other income, net | | | | 10 | | | 83 | |
(Loss) income from operations before income taxes | | | | (275) | | | 102 | |
Income tax expense (benefit) | | | | 33 | | | (237) | |
Net (loss) income | | | | (308) | | | 339 | |
Other comprehensive (loss) income: | | | | | | |
Unrealized (loss) income on marketable securities | | | | (244) | | | 481 | |
Comprehensive (loss) income | | | | $ | (552) | | | $ | 820 | |
| | | | | | |
Basic and diluted (loss) income per share | | | | | | |
Basic | | | | $ | (0.01) | | | $ | 0.02 | |
Diluted | | | | $ | (0.01) | | | $ | 0.02 | |
| | | | | | |
Weighted average basic and diluted shares | | | | | | |
Basic | | | | 25,334 | | | 20,347 | |
Diluted | | | | 25,334 | | | 21,041 | |
| | FOR THE THREE MONTHS ENDED September 30, | | | FOR THE NINE MONTHS ENDED September 30, | |
| | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Revenues: | | | | | | | | | | | | |
Cloud revenue | | $ | 11,062 | | | $ | 5,630 | | | $ | 27,724 | | | $ | 14,881 | |
Hardware revenue | | | 1,003 | | | | 676 | | | | 3,651 | | | | 2,644 | |
Maintenance and support revenue | | | 1,178 | | | | 1,078 | | | | 3,276 | | | | 3,509 | |
On premise software license revenue | | | 599 | | | | 754 | | | | 1,049 | | | | 1,352 | |
Professional services revenue | | | 1,685 | | | | 1,302 | | | | 3,434 | | | | 3,440 | |
Total revenues | | | 15,527 | | | | 9,440 | | | | 39,134 | | | | 25,826 | |
Cost of sales | | | 3,396 | | | | 2,026 | | | | 8,660 | | | | 5,932 | |
Gross margin | | | 12,131 | | | | 7,414 | | | | 30,474 | | | | 19,894 | |
| | | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 9,459 | | | | 5,046 | | | | 25,286 | | | | 15,559 | |
Research and development | | | 883 | | | | 761 | | | | 2,488 | | | | 2,217 | |
Amortization of intangible assets | | | 1,341 | | | | 625 | | | | 3,230 | | | | 1,628 | |
Total operating expenses | | | 11,683 | | | | 6,432 | | | | 31,004 | | | | 19,404 | |
| | | | | | | | | | | | | | | | |
Income (loss) from operations | | | 448 | | | | 982 | | | | (530 | ) | | | 490 | |
| | | | | | | | | | | | | | | | |
Other income (loss) | | | | | | | | | | | | | | | | |
Interest expense and other | | | (1,644 | ) | | | (620 | ) | | | (3,279 | ) | | | (1,460 | ) |
Total other loss | | | (1,644 | ) | | | (620 | ) | | | (3,279 | ) | | | (1,460 | ) |
| | | | | | | | | | | | | | | | |
Income (loss) from operations before income taxes | | | (1,196 | ) | | | 362 | | | | (3,809 | ) | | | (970 | ) |
Income tax provision | | | (85 | ) | | | (47 | ) | | | (368 | ) | | | (133 | ) |
Net income (loss) | | $ | (1,281 | ) | | $ | 315 | | | $ | (4,177 | ) | | $ | (1,103 | ) |
Other comprehensive income (loss) | | | | | | | | | | | | | | | | |
Foreign currency gain (loss) | | | (6 | ) | | | 26 | | | | (63 | ) | | | 142 | |
Other comprehensive income (loss) | | $ | (1,287 | ) | | | 341 | | | $ | (4,240 | ) | | $ | (961 | ) |
| | | | | | | | | | | | | | | | |
Basic and diluted net income (loss) per share | | | | | | | | | | | | | | | | |
Basic | | $ | (0.10 | ) | | $ | 0.05 | | | $ | (0.40 | ) | | $ | (0.17 | ) |
Diluted | | $ | (0.10 | ) | | $ | 0.05 | | | $ | (0.40 | ) | | $ | (0.17 | ) |
Weighted average basic and diluted shares | | | | | | | | | | | | | | | | |
Basic | | | 12,418,000 | | | | 6,534,000 | | | | 10,355,000 | | | | 6,383,000 | |
Diluted | | | 12,418,000 | | | | 6,548,000 | | | | 10,355,000 | | | | 6,383,000 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Financial Statements.
4
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWSCHANGES 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, 2023 | 24,998 | | | $ | 254 | | | $ | (5,017) | | | $ | 487,973 | | | $ | (290,440) | | | $ | (1,115) | | | $ | 191,655 | |
Stock issued upon option exercise and vesting of restricted and performance stock units | 301 | | | 3 | | | — | | | 173 | | | — | | | — | | | 176 | |
Stock issued for acquisitions | 450 | | | 5 | | | — | | | 4,489 | | | — | | | — | | | 4,494 | |
Share based compensation | — | | | — | | | — | | | 1,902 | | | — | | | — | | | 1,902 | |
Retirement and reissuance of treasury shares | — | | | (4) | | | 5,017 | | | — | | | (5,013) | | | — | | | — | |
Net loss | — | | | — | | | — | | | — | | | (308) | | | — | | | (308) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (244) | | | (244) | |
Balance at March 31, 2024 | 25,749 | | | $ | 258 | | | $ | — | | | $ | 494,537 | | | $ | (295,761) | | | $ | (1,359) | | | $ | 197,675 | |
| | 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.
5
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, 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 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net (loss) income | $ | (308) | | | $ | 339 | |
Adjustments to reconcile (loss) income to net cash (used) in provided by operations: | | | |
Depreciation and amortization | 4,860 | | | 4,789 | |
Amortization of operating lease assets | 335 | | | 307 | |
Amortization of debt financing costs and discount | 142 | | | 169 | |
Non-cash interest expense | — | | | 982 | |
Net accretion of discounts on available-for-sale securities | (78) | | | (14) | |
Provision for expected losses | 46 | | | 652 | |
Provision for (recovery of) deferred income taxes | 24 | | | (73) | |
Net realized gains on sales of available-for-sale securities | (652) | | | (453) | |
Share-based compensation | 1,902 | | | 1,337 | |
Loss on disposals of long-term assets | — | | | 160 | |
Change in fair value of contingent purchase consideration | — | | | (69) | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | (919) | | | (3,290) | |
Inventory | (50) | | | 33 | |
Prepaid expenses and other assets | (473) | | | 4,850 | |
Operating lease right-of-use assets | 30 | | | — | |
Accounts payable | (960) | | | (450) | |
Accrued expenses and other long-term obligations | (2,665) | | | (123) | |
Operating lease liabilities | (141) | | | (219) | |
Deferred revenue | (5,040) | | | (4,339) | |
Net cash (used) in provided by operating activities | (3,947) | | | 4,588 | |
Cash flows from investing activities: | | | |
Acquisition of intangible asset | (710) | | | — | |
Purchases of property and equipment | (240) | | | (726) | |
Software capitalization costs | (2,435) | | | (1,158) | |
Purchases of available-for-sale securities | (3,516) | | | (10,189) | |
Proceeds from sales and maturities of available-for-sale securities | 2,406 | | | 5,426 | |
Net cash used in investing activities | (4,495) | | | (6,647) | |
Cash flows from financing activities: | | | |
Payments of notes payable | — | | | (232) | |
Payments made on amounts due for the acquisition of intangible assets | (236) | | | — | |
Net proceeds from issuance of common stock | 176 | | | 1,988 | |
Net change in client fund obligations | 21,122 | | | 19,372 | |
Net cash provided by financing activities | 21,062 | | | 21,128 | |
Net increase in cash and cash equivalents | 12,620 | | | 19,069 | |
Cash and cash equivalents, beginning of period | 177,622 | | | 164,042 | |
Cash and cash equivalents, end of period | $ | 190,242 | | | $ | 183,111 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Reconciliation of cash and cash equivalents to the Condensed Consolidated Balance Sheets |
Cash and cash equivalents | $ | 23,166 | | | $ | 21,438 | |
Cash and cash equivalents included in funds held for clients | 167,076 | | | 161,673 | |
Total cash and cash equivalents | $ | 190,242 | | | $ | 183,111 | |
| | | |
Supplemental information: | | | |
Cash paid for interest | $ | — | | | $ | 1,038 | |
Cash paid for income taxes | $ | — | | | $ | 82 | |
| | | |
Non-cash investing and financing activities: | | | |
Acquisition of intangible assets | $ | 6,345 | | | $ | — | |
Notes payable issued for acquisitions | $ | 827 | | | $ | — | |
Shares issued for acquisitions | $ | 4,494 | | | $ | — | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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-serviceHuman Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) timefor 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 managementlaws, 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 their employees in order to enhance their relationships with their talent. Asure’s HCM suite (“Asure HCM”) includes Payroll & Tax solutions, HR compliance and Agile Workplace management solutionsservices, Time & Attendance software and data integrations that enable organizationsemployers and their employees to manageenhance 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 theiremployees. Our 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 effectivelyfinancial 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, sellsHCM suite includes five product lines: Asure Payroll & Tax, Asure Tax Management Solutions, Asure Time & Attendance, Asure HR Compliance, and supports itsAsureMarketplace™.
We develop, market, sell and support our offerings worldwidenationwide through itsour principal office in Austin, Texas and through additional officesfrom our processing hubs in Tampa, Alabama, 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 statementsCondensed 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 30, 2017, the results of operationsMarch 31, 2024, comprehensive (loss) income and changes in stockholders’ equity for the three and nine months ended September 30, 2017March 31, 2024 and 2016,March 31, 2023, and the cash flows for the ninethree months ended September 30, 2017March 31, 2024 and 2016.
You should read these condensedMarch 31, 2023. 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 statementsposition or consolidated results of operations of the Company.
These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited consolidated financial statementsConsolidated Financial Statements and notes thereto filed with the Securities and Exchange CommissionSEC in our annual report on Form 10-K for the fiscal year ended December 31, 2016.2023 (our “2023 Annual Report on Form 10-K”). The Company’s results for theany interim periodsperiod are not necessarily indicative of results for a full fiscal year.
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
Cash and cash equivalents include cash deposits andWe consider all highly liquid investments with an original maturity of three months90 days or less when purchased.
RESTRICTED CASH
Restrictedat the time of purchase to be cash represents a certificate of deposit heldequivalents. Cash equivalents include investments in a cash collateral account as required by our operating lease for iSystems, LLC,an institutional money market fund, which we acquiredinvests in May 2017. See Note 4- Acquisitions for further detail of the acquisition.
LIQUIDITY
As of September 30, 2017, Asure’s principal sources of liquidity consisted of approximately $27,464 of cashU.S. Treasury bills, notes and cash equivalents, future cash generated from operations and $5,000 available for borrowing under our Wells Fargo revolver discussed in Note 6 – Notes Payable. We believe that we havebonds, and/or will generate sufficient cash for our short- and long-term needs, including meetingrepurchase agreements, backed by such obligations. Carrying value approximates fair value.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2023, the requirements of our term loan, and the related debt covenant requirements. We continueFASB issued ASU No. 2023-09, Improvements to seek reductions in our expenses as a percentage of revenue on an annual basis and thus may utilize our cash balances in the short-termIncome Tax Disclosures (Topic 740), which requires companies to reduce long-term costs. Based on current internal projections, we believe that we have and/or will generate sufficient cash for our operational needs, including any required debt payments, for at least the next twelve months from the issuance of the condensed consolidated financial statements.
Management is focused on growing our existing product offering,disaggregate information about their effective tax rate reconciliation as well as our customer base,information on income taxes paid. The standard applies to increase our recurring revenues. We have made and will continueall entities subject 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 balancesincome taxes. The standard becomes effective 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 operationspublic entities 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.
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
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 interimannual periods beginning after December 15, 2016, with early adoption permitted.2024. We adoptedare currently evaluating this standard and the provisionspotential effects of ASU 2015-11 on January 1, 2017. This adoption did not have any impact onthese changes to our consolidated financial statements.statements and will adopt this new standard in the fiscal year beginning January 1, 2025.
In March 2016,November 2023, the FASB issued ASU 2016-09, “Compensation – Stock CompensationNo. 2023-07, Segment Reporting (Topic 718)280): Improvements to Employee Share-Based Payment Accounting.”.Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses for interim and annual periods. In addition, the standard requires public entities that have a single reportable segment to provide all the disclosures required by the standard and all existing segment disclosures in Topic 280. 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 2016-09standard is effective for fiscal years beginning after December 15, 2016, including2023, and for 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.2024. 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 inare currently 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 asand the potential effects 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 companiesthese changes 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.
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 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. We will be required to adopt thethis 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 is effective for onfiscal year beginning January 1, 2018 with early adoption permitted. We believe its adoption will not significantly impact our consolidated financial statements.2024.
In November 2016, the FASB issued ASU 2016-18, “StatementACCUMULATED OTHER COMPREHENSIVE LOSS
As of Cash Flows (Topic 230): Restricted Cash,” which requires the change in restricted cash or cash equivalents to be included withMarch 31, 2024 and December 31, 2023, accumulated other changes in cashcomprehensive loss consisted of net unrealized gains and cash equivalents in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We believe its adoption will not significantly impact our consolidated financial statements.losses on available-for-sale securities.
In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting,” which clarifies when to account for a change in the terms or conditions of a share-based payment award as a modification. ASU 2017-09 requires modification accounting only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.
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
2024
Effective February 22, 2024, we acquired certain assets of a payroll processing and benefits brokerage servicer based in New Jersey. The aggregate purchase price paid for the acquisition of these assets was $6,000, consisting of $500 paid in cash on hand, 450 shares of Asure common stock, having an agreed value of $4,500, and the remaining $1,000 in the form of a promissory note. The acquired customer relationships are recorded as an intangible asset and are being amortized on a straight-line basis over eight years. As of March 31, 2024, the promissory note had an outstanding balance of $1,000 and matures on February 22, 2026.
2023
Effective October 1, 2023, we acquired certain assets of an Alabama based reseller partner, which were used to provide payroll processing services. The aggregate purchase price paid for these assets was $8,391, paid as follows: (i) $6,891 in cash of which $6,545 was paid at closing and (ii) the delivery of a promissory note in the amount of $1,500. The acquired customer relationships are recorded as an intangible asset and are being amortized on a straight-line basis over eight years. As of March 31, 2024, the promissory note had an outstanding balance of $1,500 and matures on October 1, 2025.
NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS
Accounting Standards Codification (“ASC”)(ASC) 820 Fair“Fair Value Measurements and DisclosuresMeasurement” (ASC 820) defines fair value, establishes a framework for measuring fair value inunder U.S. generally accepted accounting principlesGAAP and expandsenhances 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 establishesdescribes a three-tier fair value hierarchy which is based on the reliabilityfollowing 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. |
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 for the periods presented below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Carrying Value | | Level 1 | | Level 2 | | Level 3 |
March 31, 2024 | | | | | | | |
Assets: | | | | | | | |
Funds held for clients | | | | | | | |
Money market funds | $ | 2,316 | | | $ | 2,316 | | | $ | — | | | $ | — | |
Available-for-sale securities | 72,732 | | | — | | | 72,732 | | | — | |
Total | $ | 75,048 | | | $ | 2,316 | | | $ | 72,732 | | | $ | — | |
| | | | | | | |
December 31, 2023 | | | | | | | |
Assets: | | | | | | | |
Funds held for clients | | | | | | | |
Money market funds | $ | 3,431 | | | $ | 3,431 | | | $ | — | | | $ | — | |
Available-for-sale securities | 71,770 | | | — | | | 71,770 | | | — | |
Total | $ | 75,201 | | | $ | 3,431 | | | $ | 71,770 | | | $ | — | |
Cash equivalents and investments classified as available-for-sale within funds held for clients consisted of September 30, 2017the following for the periods presented below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Gross Unrealized Gains (1) | | Gross Unrealized Losses (1) | | Aggregate Estimated Fair Value |
March 31, 2024 | | | | | | | |
Cash equivalents | $ | 2,320 | | | $ | 1 | | | $ | (4) | | | $ | 2,316 | |
Available-for-sale securities: | | | | | | | |
Certificates of deposit | 842 | | | 2 | | | (1) | | | 843 | |
Corporate debt securities | 66,607 | | | 130 | | | (1,232) | | | 65,505 | |
Municipal bonds | 4,241 | | | — | | | (222) | | | 4,019 | |
U.S. Government agency securities | 2,398 | | | 1 | | | (34) | | | 2,365 | |
Total available-for-sale securities | 74,088 | | | 133 | | | (1,489) | | | 72,732 | |
| | | | | | | |
Total(2) | $ | 76,408 | | | $ | 134 | | | $ | (1,493) | | | $ | 75,048 | |
| | | | | | | |
December 31, 2023 | | | | | | | |
Cash equivalents | $ | 3,447 | | | $ | — | | | $ | (16) | | | $ | 3,431 | |
Available-for-sale securities: | | | | | | | |
Certificates of deposit | 845 | | | 2 | | | (1) | | | 846 | |
Corporate debt securities | 67,277 | | | 258 | | | (1,090) | | | 66,445 | |
Municipal bonds | 4,251 | | | — | | | (239) | | | 4,012 | |
U.S. Government agency securities | 500 | | | — | | | (33) | | | 467 | |
Total available-for-sale securities | 72,873 | | | 260 | | | (1,363) | | | 71,770 | |
| | | | | | | |
Total(2) | $ | 76,320 | | | $ | 260 | | | $ | (1,379) | | | $ | 75,201 | |
(1)Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. As of March 31, 2024 and December 31, 2016, respectively:2023, there were 32 and 54 securities, respectively, in an unrealized gain position and there were 141 and 113 securities in an unrealized loss position, respectively. As of March 31, 2024, these unrealized losses were less than $60 individually and $1,489 in the aggregate. As of December 31, 2023, these unrealized losses were less than $61 individually and $1,363 in the aggregate. We invest in high quality securities with roughly 70% of our portfolio made up of A ratings and above with unrealized losses primarily attributable to macroeconomic factors rather than credit related. 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 possible 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.
| | | | | 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 | | | $ | - | | | $ | - | |
(2)At March 31, 2024 and December 31, 2023, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets.
NOTE 4 – ACQUISITIONS
2017 Acquisitions
In January 2017, we closed three strategic acquisitions: Personnel Management Systems, Inc., a providerFunds held for clients represent assets that the Company has classified for use solely for the purposes of outsourced HR solutions; Corporate Payroll, Inc. (Payroll Division), a provider ofsatisfying the obligations to remit funds relating to the Company’s 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 the United States. Tampa-based Compass HRM is a current reseller offiling services, which are classified as client funds obligations on 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 reachCondensed Consolidated Balance Sheets.
Funds held for clients have been invested 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 considerationfollowing categories 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.periods presented below (in thousands):
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Cash and cash equivalents held to satisfy client funds obligations | $ | 167,076 | | | $ | 147,305 | |
Short-term marketable securities held to satisfy client funds obligations | 13,881 | | | 10,042 | |
Long-term marketable securities held to satisfy client funds obligations | 58,851 | | | 61,728 | |
Total funds held for clients | $ | 239,808 | | | $ | 219,075 | |
9
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except per share data unless otherwise noted)
Asset Purchase Agreement
In January 2017, we closed on the acquisitionExpected maturities of 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 considerationavailable-for-sale securities are as follows 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 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 certainperiod presented below (in thousands):
customary representations, warranties, indemnities and covenants.
| | | | | |
| March 31, 2024 |
One year or less | $ | 13,881 | |
After one year through five years | 58,851 | |
Total | $ | 72,732 | |
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.
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% 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 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.
We believe significant synergies are expected to arisefrom these strategic acquisitions. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition. A portion of acquired goodwill will be deductible for tax purposes.
We based the allocations on fair values at the date of acquisition:
Assets Acquired | | CPI | | | PMSI | | | PSNW | | | iSystems | | | Compass | | | Total | |
Cash & cash equivalents | | $ | 126 | | | | 131 | | | | 53 | | | | 211 | | | | 207 | | | $ | 728 | |
Accounts receivable | | | 22 | | | | 347 | | | | 111 | | | | 951 | | | | 241 | | | | 1,672 | |
Restricted cash | | | - | | | | - | | | | - | | | | 200 | | | | - | | | | 200 | |
Fixed assets | | | - | | | | 130 | | | | 7 | | | | 681 | | | | 38 | | | | 856 | |
Other assets | | | - | | | | 17 | | | | 17 | | | | 699 | | | | 33 | | | | 766 | |
Funds held for clients | | | 2,809 | | | | - | | | | 6,294 | | | | - | | | | - | | | | 9,103 | |
Goodwill | | | 1,190 | | | | 2,247 | | | | 1,579 | | | | 42,253 | | | | 2,049 | | | | 49,318 | |
Intangibles | | | 1,563 | | | | 2,646 | | | | 1,879 | | | | 15,070 | | | | 3,470 | | | | 24,628 | |
Total assets acquired | | $ | 5,710 | | | | 5,518 | | | | 9,940 | | | | 60,065 | | | | 6,038 | | | $ | 87,271 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities assumed | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | | 51 | | | | 19 | | | | 28 | | | | 392 | | | | 65 | | | | 555 | |
Accrued other liabilities | | | - | | | | 191 | | | | 40 | | | | 791 | | | | 45 | | | | 1,067 | |
Deferred revenue | | | - | | | | 370 | | | | - | | | | 1,073 | | | | - | | | | 1,443 | |
Client fund obligations | | | 2,754 | | | | - | | | | 6,294 | | | | - | | | | - | | | | 9,048 | |
Total liabilities assumed | | | 2,805 | | | | 580 | | | | 6,362 | | | | 2,256 | | | | 110 | | | | 12,113 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net assets acquired | | $ | 2,905 | | | | 4,938 | | | | 3,578 | | | | 57,809 | | | | 5,928 | | | $ | 75,158 | |
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 arisefrom 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.
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 | |
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, 2023 | | Acquisitions | | March 31, 2024 |
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 exceedingexcess of the fair value of the net assets acquired at the date of acquisitionand, as goodwill. Wea 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 quartereach acquisition. A portion of each year, and between annual tests, if indicatorsacquired goodwill will be amortizable for tax purposes. As of potential impairment exist, using a fair-value-based approach. ThereMarch 31, 2024, there has been no impairment of goodwill forbased on the periods presented. We amortize intangible assets not considered to have an indefinite useful life usingqualitative 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, 2023 | | Acquisitions | | March 31, 2024 |
Customer relationships | $ | 127,843 | | | $ | 12,376 | | | $ | 140,219 | |
Developed technology | 12,001 | | — | | | 12,001 |
Trade names | 880 | | — | | | 880 |
Non-compete agreements | 1,032 | | — | | | 1,032 |
Total | $ | 141,756 | | | $ | 12,376 | | | $ | 154,132 | |
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 30, 2017 and December 31, 2016 are as follows:follows for the periods presented below (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 |
March 31, 2024 | | | | | | | | |
Customer relationships | | 8.6 | | $ | 140,219 | | | $ | (70,630) | | | $ | 69,589 | |
Developed technology | | 6.9 | | 12,001 | | | (10,731) | | | 1,270 | |
Trade names | | 4.3 | | 880 | | | (880) | | | — | |
Non-compete agreements | | 5.2 | | 1,032 | | | (931) | | | 101 | |
| | 8.4 | | $ | 154,132 | | | $ | (83,172) | | | $ | 70,960 | |
| | | | | | | | |
December 31, 2023 | | | | | | | | |
Customer relationships | | 8.5 | | $ | 127,843 | | | $ | (67,165) | | | $ | 60,678 | |
Developed technology | | 6.9 | | 12,001 | | | (10,701) | | | 1,300 | |
Trade names | | 4.3 | | 880 | | | (880) | | | — | |
Non-compete agreements | | 5.2 | | 1,032 | | | (928) | | | 104 | |
| | 8.3 | | $ | 141,756 | | | $ | (79,674) | | | $ | 62,082 | |
14
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 expenseexpenses using the straight-line method over the estimated useful lives of the intangible assets, as noted above. Amortization expenses recorded in Operating Expenses were $3,449 and $3,302 for the three months ended September 30, 2017March 31, 2024 and 2016 were $1,341 and $625, respectively, included in Operating Expenses.2023, respectively. Amortization expenses recorded in Cost of Sales were $106$50 and $106$268 for the three months ended September 30, 2017March 31, 2024 and 2016,2023, respectively. Amortization expenses forThere was no impairment of intangibles during the ninethree months ended September 30, 2017March 31, 2024 based on the qualitative assessment performed by the Company. However, if market, political and 2016 were $3,230other conditions over which we have no control continue to affect the capital markets and $1,628 includedour 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 30, 2017:for the period presented below (in thousands):
| | | | | |
| March 31, 2024 |
2024 | $ | 12,047 | |
2025 | 15,292 | |
2026 | 12,177 | |
2027 | 9,983 | |
2028 | 8,537 | |
2029 | 6,694 | |
Thereafter | 6,230 | |
| $ | 70,960 | |
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 | | March 31, 2024 | | December 31, 2023 |
Subordinated Notes Payable – Acquisitions(1) | 10/31/25 - 9/30/26 | | 2.00% - 5.00% | | $ | 6,700 | | | $ | 5,700 | |
Gross Notes Payable | | | | | $ | 6,700 | | | $ | 5,700 | |
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):
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 | |
| | | | | | | | | | | | | | | | | |
| Gross Notes Payable | | Debt Issuance Costs and Debt Discount | | Net Notes Payable |
March 31, 2024 | | | | | |
Current portion of notes payable | $ | 420 | | | $ | (397) | | | $ | 23 | |
Notes payable, net of current portion | 6,280 | | | (1,024) | | | 5,256 | |
Total | $ | 6,700 | | | $ | (1,421) | | | $ | 5,279 | |
| | | | | |
December 31, 2023 | | | | | |
Current portion of notes payable | $ | 420 | | | $ | (393) | | | $ | 27 | |
Notes payable, net of current portion | 5,280 | | | (998) | | | 4,282 | |
Total | $ | 5,700 | | | $ | (1,391) | | | $ | 4,309 | |
The following table summarizes the future principal payments related to our outstanding debt:
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 | |
Subordinated Notes Payable- PMSI Acquisition
In January 2017, we acquired all of the outstanding shares of common stock (the “Shares”) of Personnel Management Systems, Inc., a Washington corporation (“PMSI”), pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”). The aggregate consideration debt 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.period presented below (in thousands):
| | | | | |
| March 31, 2024 |
2024 | $ | 420 | |
2025 | 1,878 | |
2026 | 4,402 | |
Total | $ | 6,700 | |
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,February 2024, we acquired substantially all thecertain assets of Payroll Specialties NW, Inc., an Oregon corporation (“PSNW”), pursuant to an Asset Purchase Agreement (the “PSNW Asset Purchase Agreement”). The aggregate consideration fora payroll processing and benefits brokerage servicer based in New Jersey. In connection with the assets consisted of (i) $3,010 in cash and (ii)acquisition that took place, we delivered a subordinated promissory note (the “PSNW Note”) into the principal amountseller. As of $600, subject to adjustment as provided inMarch 31, 2024, the PSNW Asset Purchase Agreement. We funded the cash payment with proceeds from our recent public stock offering. The PSNW Note bears interest atpromissory note had an annual rateoutstanding balance of 2.0%$1,000 and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PSNW Note is payable at maturity.February 22, 2026.
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 2017October 2023, we acquired 100%certain assets of an Alabama based reseller partner, which were used to provide payroll processing services. In connection with the outstanding equity interests of iSystems Intermediate Holdco, Inc.,acquisition that took place, we delivered a Delaware corporation (“iSystems”), pursuant to an equity purchase agreement (the “Equity Purchase Agreement”). The aggregate purchase price consisted of (i) $32,000 in cash, subject to adjustment as provided in the Equity Purchase Agreement, (ii) a secured subordinated promissory note (“iSystems Note”) into the principal amountseller. As of $5,000, subject to adjustment as provided inMarch 31, 2024, the Equity Purchase Agreement, and (iii) 1,526,332 sharespromissory note had an outstanding balance of unregistered common stock valued at $18,000. The iSystems Note bears interest at an annual rate of 3.5%$1,500 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.October 1, 2025.
Subordinated Notes Payable- Compass Acquisition
In May 2017,April 2023, we acquired 100% ofcalculated 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 aggregatefinal 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 intoacquisition of a Guaranty and Security Agreement with Wells Fargo Bank. Underpayroll 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 amountfair value of the revolving loan iscontingent consideration of $587 was added as an increase to the principal balance due and payable in March 2019.on the promissory note. As of September 30, 2017 and DecemberMarch 31, 2016, $0 was2024, the promissory note had an outstanding and $5,000 was available for borrowing under the revolver. Additionally, the Credit Agreement provided for a $10,000 uncommitted incremental term loan facility to support permitted acquisitions.
balance of $4,200.
In March 2017,January 2023, we amended our Credit Agreement with Wells Fargo Bank, N.A to, among other things, obtain an additional term loan inresolved the amountoutstanding claims for indemnification for which we were withholding payment 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 wepayable issued in connection with the Mangrove acquisition.purchase of a business acquired in 2020. Payment on the principal balance was withheld as security for outstanding claims for which we were entitled to indemnification under the purchase agreement. As a result of the resolution of those claims, the remaining balance of $232 was paid to the Seller ($182) and to the claimant ($50) in satisfaction of its claim. As of March 31, 2024, there are no further amounts due or owing under this subordinated promissory note.
AmendedSee Note 3 — Business Combinations for further discussion regarding the issuance of subordinated notes payable related to acquisitions.
Senior Credit Facility with Structural Capital Investments III, LP
On September 12, 2023, we terminated the Loan and Restated CreditSecurity Agreement (the “Loan Agreement”), among the Company, Structural Capital Investments III, LP (“Structural” and together with the other lenders that were parties thereto, the “Lenders”), and Ocean II PLO LLC, as administrative and collateral agent for the Lender and repaid the outstanding balance on the secured promissory note issued under the Loan Agreement (the “Note”). In connection with the termination, the Company paid the Agent for the benefit of the Lenders an aggregate amount of $30,927 (the “Payoff Amount”) in full payment of our outstanding obligations under the Loan Agreement. The Payoff Amount represented $30,617 of outstanding principal and interest on the unpaid principal balance, a 1.0% prepayment fee in the amount of $306 and $5 for the accrued non-utilization fee and lender expenses associated with the extinguishment. As of March 31, 2024, there are no further amounts due or owing under the Facility.
In May 2017,On August 7, 2023, we entered into an amended and restated credit agreementamendment to the Loan Agreement, whereby the Final Payment Fee (as defined in the Loan Agreement) was settled for $1,677 (the “Restated Credit Agreement”“Settled Amount”) with Wells Fargo Bank, N. A., as administrative agent, and the lenders that are parties thereto, amending and restating the termswhich was paid on August 7, 2023. The Final Payment Fee was originally equal to 1.0% of the Credit Agreement datedincrease in our market capitalization since September 10, 2021, and was due upon payment in full of the obligations under the Loan Agreement. We also paid the Lenders a breakup fee equal to $250.
NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION
Receivables
Receivables from contracts with customers, net of allowance for credit losses of $5,108, were $15,074 at March 31, 2024. Receivables from contracts with customers, net of allowance for credit losses of $4,787, were $14,202 at December 31, 2023. We had a provision for expected losses of $46, write-offs charged against the allowance for credit losses of $3, and recoveries on previously written off receivables of $279 during the three months ended March 31, 2024. No customer represented more than 10% of our net accounts receivable balance as of March 2014,31, 2024 and December 31, 2023, respectively.
Deferred Commissions
Deferred commission costs from contracts with customers were $10,378 and $10,302 at March 31, 2024 and December 31, 2023, respectively. The amount of amortization recognized for the three months ended March 31, 2024 and 2023 was $611 and $496, respectively. The increase in amortization during the three months ended March 31, 2024 is primarily due to an increased focus on sales of recurring revenue streams in the prior year that are now being amortized.
Deferred Revenue
During the three months ended March 31, 2024 and 2023, revenue of $5,118 and $5,613, respectively, was recognized from the deferred revenue balance at the beginning of each period.
Transaction Price Allocated to the Remaining Performance Obligations
As of March 31, 2024, approximately $18,713 of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 76% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter. These amounts exclude remaining performance obligations related to contracts for professional services for tax and payroll offerings whose remaining contractual term is less than one year as amended.of March 31, 2024.
Revenue Concentration
During the three months ended March 31, 2024 and 2023, 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) Income, rent expense is included in operating expenses under general and administrative expenses. The components of the rent expense are as follows for the periods presented below (in thousands):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Operating lease cost | $ | 446 | | | $ | 531 | |
Sublease income | (4) | | | (5) | |
Net rent expense | $ | 442 | | | $ | 526 | |
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 10% as of March 31, 2024 and December 31, 2023. The weighted average remaining lease term is five years as of March 31, 2024 and December 31, 2023.
17
Supplemental cash flow information related to operating leases are as follows for the periods presented below (in thousands):
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Cash paid for amounts included in the measurement of lease liabilities: | | | |
Operating cash outflows from operating leases | $ | 500 | | | $ | 494 | |
(Unaudited)
(Amounts in thousands, except share and per share data unless otherwise noted)
The Restated Credit Agreement provides for an increase in the aggregate principal amount of totalFuture minimum commitments from approximately $32,714 to $75,000. This increase includes an additional term loan commitment of approximately $40,286 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 at June 30, 2017, stepping down to 3.25:1 at June 30, 2020 and each quarter-end thereafter;
· amends our fixed charge coverage ratio to be not less than 1.35:1 at June 30, 2017 and September 30, 2017, not less than 1.45:1 at December 31, 2017, 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 at June 30, 2022 and each quarter-end thereafter.
As of September 30, 2017, we were in compliance with all covenants and all payments remain current. We expect to be in compliance or be able to obtain compliance through debt repayments with available cash on hand or cash we expect to generate from the ordinary course of operations over the next twelve months. life of all operating leases, which exclude variable rent payments, are as follows for the period presented below (in thousands):
| | | | | |
| March 31, 2024 |
2024 | $ | 1,505 | |
2025 | 1,679 | |
2026 | 1,217 | |
2027 | 1,000 | |
2028 | 995 | |
Thereafter | 855 | |
Total minimum lease payments | 7,251 | |
Less: imputed interest | (1,460) | |
Total lease liabilities | $ | 5,791 | |
NOTE 7 – SHARE BASED9 - SHARE-BASED COMPENSATION
We have one active equity plan, the 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan, approved by our stockholders, 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.
The number of shares reserved for issuance under the 2018 Plan is 4,350 shares. We have an aggregate of 2,612 options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted and outstanding pursuant to the 2018 Plan as of March 31, 2024. As of March 31, 2024, the number of shares available for future grant under the 2018 Plan is 1,040.
Share based compensation for our stock option plans for the three months ended September 30, 2017March 31, 2024, and 2016 were $138March 31, 2023, was $1,902 and $60, respectively, and $363 and $166 for the nine months ended September 30, 2017 and 2016,$1,337, respectively. We issued 51,00026 and 277 shares of common stock related to exercises of stock options granted from our Stock Option Plan for the three months ended September 30, 2017March 31, 2024 and 15,0002023, respectively. We issued 166 and 98 shares of common stock upon the vesting of restricted stock units for the three months ended September 30, 2016,March 31, 2024 and 2023, respectively.
Asure has one active equity plan, We issued 109 shares of common stock upon the 2009 Equity Plan (the “2009 Plan”). The 2009 Plan providesvesting of RSUs converted from PSUs for the issuancethree months ended March 31, 2024.
Effective January 1, 2023, the Compensation Committee of non-qualifiedthe Board of Directors (the “Compensation Committee”) approved the grant of performance stock units (“PSUs”) pursuant to a PSU Award Grant Notice and incentive stock optionsPSU Award Agreement (the “2023 PSU Award Agreement”) under the 2018 Plan to our employees and consultants. We generally grant stock options with exercise prices greater than or equalexecutive officers payable in the form of RSUs. The number of RSUs into which the PSUs converted for each executive officer was a sliding scale between 0% to 200% of the target amount based on the Company’s achievement of certain performance metrics tied to the fair market valueCompany’s recurring revenue and gross profit for 2023. On February 26, 2024, the PSUs converted to RSUs at 200% of target based on the timeachievement of grant.set performance metrics, and we paid out a total of 325 RSUs to our executive officers.
Effective January 1, 2024, the Compensation Committee approved the grant of PSUs pursuant to a PSU Award Grant Notice and PSU Award Agreement (the “2024 PSU Award Agreement”) under the 2018 Plan to our executive officers payable in the form of RSUs. The options generally vest over threenumber of RSUs into which the PSUs convert for each executive officer is a sliding scale between 0% to four years and are exercisable for a period200% of five to ten years beginning with datethe target amount based on the Company’s achievement of grant. Our shareholders approved an amendmentcertain performance metrics tied 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 grantedCompany’s recurring revenue and outstanding and 176,000 availablegross profit for grant pursuant to the 2009 Plan as of September 30, 2017.
NOTE 8 – OTHER COMPREHENSIVE LOSS
Comprehensive income (loss) represents a measure of all changes in equity that result from recognized transactions and other economic events other than those resulting from investments by and distributions to shareholders. Our other comprehensive income (loss) includes foreign currency translation adjustments.
2024.
18
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 lossincome per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options. Weoptions or vesting of RSUs and in some cases PSUs. In periods of net income, we compute the numberadjustment to the denominator of commonour dilutive net earnings per share equivalents, which includescalculation 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 computationRegardless of the period resulting in net income or net loss, we exclude the adjustment to the denominator of our dilutive stock options becausenet loss per share calculation to the effect of including the stock options would have beenextent that they are anti-dilutive.
The following table sets forth the computation of basic and diluted net income (loss)loss per common share for the three and nine months ended September 30, 2017 and 2016: periods presented below (in thousands, except per share amounts):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Basic: | | | |
Net (loss) income | $ | (308) | | | $ | 339 | |
Weighted-average shares of common stock outstanding | 25,334 | | | 20,347 | |
Basic (loss) income per share | $ | (0.01) | | | $ | 0.02 | |
| | | |
Diluted: | | | |
Net (loss) income | $ | (308) | | | $ | 339 | |
Weighted-average shares of common stock outstanding | 25,334 | | | 21,041 | |
Diluted (loss) income per share | $ | (0.01) | | | $ | 0.02 | |
| | 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 1011 - SUBSEQUENT EVENTS
Effective October 1, 2017,On April 9, 2024, we closedfiled a universal shelf registration statement on Form S-3 with the strategicSecurities and Exchange Commission (“SEC”) to provide access to additional capital, if needed. Pursuant to the shelf registration statement, we may from time to time offer to sell in one or more offerings shares of our common stock or other securities having an aggregate value of up to $150,000 (which includes [1,480] of unsold securities that were previously registered on a prior registration statement effective at the time of the filing of our current S-3). The shelf registration statement relating to these securities became effective on April 19, 2024.
On April 9, 2024, we filed an acquisition shelf registration statement on Form S-4 with the SEC to allow for us to issue securities in future business combinations. Pursuant to the acquisition shelf registration statement, we may from time to time issue up to 12,500 shares of Associated Data Services, Inc.,our common stock as consideration in future business combinations. The registration statement relating to these securities became effective on April 19, 2024.
On April 30, 2024, we acquired certain assets of a leading regional human resources andreseller partner, which were used to provide payroll services bureauprocessing services. The partner is located in Ohio. The aggregate purchase price that we paid for these assets was $3,000, consisting of $2,300 paid in cash on hand, $700 in the Southeastform of a promissory note with the principal balance due on October 30, 2025, and a current reseller50 shares of our HCM solution, Evolution.Asure common stock.
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.
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
CertainThis Quarterly Report on Form 10-Q contains certain statements in this Report representmade 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 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. TheseExamples 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, economicwe 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 assuccess 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, our results could differ materially from the results expressed or implied by such forward-looking statements. Asure has attempted to identify thesethe 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. Thesemake. The risks and uncertainties include — referred to above include—but are not limited to— the expiration of major revenue streams such as Employee Retention Tax Credits (“ERTC”) and the impact of the Internal Revenue Service (“IRS”) recent measures regarding Employee Retention Tax Credits claims; 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 [economic] environment; the Company’s ability to — adverse changesconvert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue; privacy concerns and laws and other regulations may limit the effectiveness of our applications; 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 and improved versions of the Company’s services; successful customer deployment and utilization of the Company’s existing and future services; interruptions to supply chains and extended shut down of businesses; issues in the economy, financial markets,use of artificial intelligence in our HCM products and credit markets; delays or services; political unrest, including the current issues between Russia and Ukraine and the ongoing conflict between Israel and Hamas; reductions in information technology spending;employment and an increase in business failures, specifically among our clients; possible fluctuations in the developmentCompany’s financial and operating results; regulatory pressures on economic relief enacted as a result of the marketCOVID-19 pandemic that change or cause different interpretations with respect to eligibility for cloud based workplace applications; product development; market acceptancesuch programs; domestic and international regulatory developments, including changes to or applicability to our business of new productsprivacy and product improvements; our ability to retain or increase our customer base; security breaches; errors, disruptionsdata securities laws; 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; 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; ouremployees 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 levelvalue 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 lawscommon stock; collection of receivables; and regulations; changesgeneral developments in the Internet infrastructure;economy, financial markets, credit markets and changesthe 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 Securities and Exchange Commission (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 underassumes no obligation and does not intend to update any of thethese forward-looking statements, after the date of this Form 10-Q to conform such statements to actual results.except as required by law.
OVERVIEW
The following review of Asure’s financial position as of September 30, 2017March 31, 2024 and December 31, 20162023, and the results of operations and cash flows for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 should be read in conjunction with our 20162023 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Asure’s internet website address is http://www.asuresoftware.com.SEC on February 26, 2024. 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 thereinin our website or connected thereto isto 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. Asure’s internet website address is www.asuresoftware.com.
Asure is
Our Business
We are a leading global provider of cloud-based software-as-a-serviceHuman Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) timefor 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 managementlaws, 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 their employees in order to enhance their relationships with their talent. Asure’s HCM suite (“Asure HCM”) includes Payroll & Tax solutions, HR compliance and Agile Workplace management solutionsservices, Time & Attendance software and data integrations that enable companiesemployers and their employees to enhance efficiencies and take advantage of all sizesvalue-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 operateextend the range of services offered to employers and their employees. Our 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.
From recruitment to retirement, our solutions help more efficientlythan 100,000 SMBs across the United States. Approximately 15,000 of our clients are direct and proactively manage costs associatedthe 85,000 remaining clients are indirect, as they have contracts with their most expensive assets: real estate, labor and technology.reseller partners who white label our solutions.
We currently offer two main product lines, AsureSpace™strive to be the most trusted HCM resource to SMBs and AsureForce®.are focused on less densely populated U.S. metropolitan cities where fewer of our competitors have a presence. Our AsureSpace™ Agile Workplace management solutions enable organizations to manage their office environmentssolve three primary challenges that prevent businesses from growing: HR complexity, allocation of human and optimize real estate utilization. Our AsureForce® time and labor management solutions help organizations optimize labor and labor administration costs and activities. With our acquisitions of Mangrove Employer Services, Inc.financial capital, and the ability to build great teams. We sell our solutions through both direct and partner channels. We supplement our direct sales efforts with partner programs that afford us access to opportunities in various geographic and industry niches. We have two types of partners: reseller partners that white label our products while providing value-added services to their clients (or indirect clients) and referral partners that provide us with SMB leads but do no resell our solutions. 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.
Acquisitions
On April 30, 2024, we acquired certain assets of Mangrove COBRAsource Inc.a reseller partner, which were used to provide payroll processing services. The partner is located in March 2016,Ohio. The aggregate purchase price that we have entered intopaid for these assets was $3,000, consisting of $2,300 paid in cash on hand, $700 in the human resource management,form of a promissory note with the principal balance due on October 30, 2025, and 50 shares of Asure common stock.
On February 22, 2024, we acquired certain assets of a 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 providers acrossbrokerage servicer based in New Jersey. The aggregate purchase price paid for 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 reachthese assets was $6,000, consisting of $500 paid in cash on hand, 450 shares of Asure common stock, having an agreed value of $4,500, and the remaining $1,000 in the Southeast, particularly Florida. form of a promissory note. As of March 31, 2024, the promissory note had an outstanding balance of $1,000 and matures on February 22, 2026.
For both product lines, supportOn October 1, 2023, we acquired certain assets of an Alabama based reseller partner, which were used to provide payroll processing services. The aggregate purchase price paid for these assets was $8,391, paid as follows: (i) $6,891 in cash of which $6,545 was paid at closing and professional services are other key elements(ii) the delivery of our softwarea promissory note in the amount of $1,500. As of March 31, 2024, the promissory note had an outstanding balance of $1,500 and services business. 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 trainingmatures on our products, add-on software customization and other professional services on a global scale.October 1, 2025.
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.
20
RESULTS OF OPERATIONS(in thousands)
The following table sets forth, for the fiscal periods indicated, the percentage of total revenuesrevenue represented by certain items in Asure’sthe Company’s Condensed Consolidated Statements of Comprehensive Income (Loss): Income:
| | FOR THE THREE MONTHS ENDED SEPTEMBER 30, | | | FOR THE NINE MONTHS ENDED SEPTEMBER 30, | |
| | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Revenues | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
Gross margin | | | 78.1 | | | | 78.5 | | | | 77.9 | | | | 77.0 | |
Selling, general and administrative | | | 60.9 | | | | 53.5 | | | | 64.6 | | | | 60.2 | |
Research and development | | | 5.7 | | | | 8.1 | | | | 6.4 | | | | 8.6 | |
Amortization of intangible assets | | | 8.6 | | | | 6.6 | | | | 8.3 | | | | 6.3 | |
Total operating expenses | | | 75.2 | | | | 68.1 | | | | 79.2 | | | | 75.1 | |
Other loss, net | | | (10.6 | ) | | | (6.6 | ) | | | (8.4 | ) | | | (5.7 | ) |
Net income (loss) | | | (8.3 | ) | | | 3.3 | | | | (10.7 | ) | | | (4.3 | ) |
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
Revenue | | 100 | % | | 100 | % |
Gross profit | | 71 | % | | 74 | % |
Sales and marketing | | 25 | % | | 22 | % |
General and administrative | | 32 | % | | 30 | % |
Research and development | | 6 | % | | 6 | % |
Amortization of intangible assets | | 11 | % | | 10 | % |
Total operating expenses | | 73 | % | | 68 | % |
Interest income | | 1 | % | | 1 | % |
Interest expense | | (1) | % | | (7) | % |
Other income, net | | — | % | | — | % |
(Loss) income from operations before income taxes | | (1) | % | | — | % |
Net (loss) income | | (1) | % | | 1 | % |
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (Amounts in thousands)
Revenue
Revenue is comprised of recurring revenue, professional services, hardware, and other revenue. We expect our revenue to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenue, we expect our mix of recurring revenue, and professional services, hardware and other revenue to remain relatively constant. While revenue mix varies by product, recurring revenue represented over 95% of total revenue in three months ended March 31, 2024, compared to 84% in three months ended March 31, 2023.
Our revenue was derived from the following sources:sources (in thousands):
| | FOR THE THREE MONTHS ENDED September 30, | | | Increase (Decrease) | | | | |
Revenue | | 2017 | | | 2016 | | | | | % | |
Cloud revenue | | $ | 11,062 | | | $ | 5,630 | | | $ | 5,432 | | | | 96.5 | |
Hardware revenue | | | 1,003 | | | | 676 | | | | 327 | | | | 48.4 | |
Maintenance and support revenue | | | 1,178 | | | | 1,078 | | | | 100 | | | | 9.3 | |
On premise software license revenue | | | 599 | | | | 754 | | | | (155 | ) | | | (20.6 | ) |
Professional services revenue | | | 1,685 | | | | 1,302 | | | | 383 | | | | 29.4 | |
Total revenue | | $ | 15,527 | | | $ | 9,440 | | | $ | 6,087 | | | | 64.5 | |
| | FOR THE NINE MONTHS ENDED September 30, | | | Increase (Decrease) | | | | |
Revenue | | 2017 | | | 2016 | | | | | % | |
Cloud revenue | | $ | 27,724 | | | $ | 14,881 | | | $ | 12,843 | | | | 86.3 | |
Hardware revenue | | | 3,651 | | | | 2,644 | | | | 1,007 | | | | 38.1 | |
Maintenance and support revenue | | | 3,276 | | | | 3,509 | | | | (233 | ) | | | (6.6 | ) |
On premise software license revenue | | | 1,049 | | | | 1,352 | | | | (303 | ) | | | (22.4 | ) |
Professional services revenue | | | 3,434 | | | | 3,440 | | | | (6 | ) | | | .2 | |
Total revenue | | $ | 39,134 | | | $ | 25,826 | | | $ | 13,308 | | | | 51.5 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
Recurring | $ | 30,273 | | | $ | 27,956 | | | $ | 2,317 | | | 8 | % |
Professional services, hardware and other | 1,379 | | | 5,108 | | | (3,729) | | | (73) | % |
Total | $ | 31,652 | | | $ | 33,064 | | | $ | (1,412) | | | (4) | % |
Recurring Revenue represents
Recurring revenue includes fees for our consolidatedpayroll, 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 salesare 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 revenue from our reseller partners that license our solutions. Because recurring revenue is based, in part, on fees for use of our scheduling software, timeapplications and attendancethe delivery of checks and human resource software, complementaryreports that are levied on a per-employee basis, our recurring revenue increases as our clients hire more employees. Recurring revenue is recognized in the period services are rendered.
Recurring revenue includes 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.
This revenue line also includes interest earned on funds held for clients. 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.
Recurring revenue for the three months ended March 31, 2024 was $30,273, an increase of $2,317, or 8%, from $27,956 for the three months ended March 31, 2023. The 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™.
Professional Services, Hardware and Other Revenue
Professional services, hardware and other revenue represents implementation fees, one-time consulting projects, on-premise maintenance, hardware devices to enhance our software products software maintenanceas well as revenue generated for provisioning and supportfiling for ERTC.
Professional services, installation and training serviceshardware 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.
Revenuedecreased $3,729, or 73%, for the three months ended September 30, 2017 was $15,527, an increase of $6,087, or 64.5%,March 31, 2024 from the $9,440 reported for the three months ended September 30, 2016. The largest increase wassimilar 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 was2023, primarily due to a decrease in non-recurring ERTC revenue. ERTC revenue was originally expected to expire during 2024 and 2025; however, it is possible that the government could make changes to or revoke the program prior to its scheduled expiration. For example, in January 2024, the United States House of Representatives passed the Tax Relief for American Families Act of 2024, which set an increase in cloud and hardware revenue,expiration date of $12,843, or 86.3%, and $1,007, or 38.1%, respectively. This was offsetJanuary 31, 2024, on additional claims for ERTC that can potentially apply retroactively. If approved by smaller decreases in maintenance and support revenue,other branches of government, this will have an effect on premise software licenseour ERTC revenue and professional services revenue,cash collections. Additionally, in September 2023, the IRS announced a moratorium through the end of the year on processing new ERTC claims due to concerns over questionable or fraudulent claims. The moratorium may potentially delay the processing and collections of previously filed ERTC claims. Refer to “Risk Factors” previously disclosed in our Annual Report on Form 10-K, filed with the largest decrease inSEC on premise software license revenue of $303, or 22.4% from the nine months ended September 30, 2016, reflectingFebruary 26, 2024, for more information about risks related to our continued emphasis on selling cloud based solutions.ERTC business.
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 sameSMBs across industries as prospective customers. Geographically, we sell our products worldwide, but sales are largely concentratedprimarily 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 marginprofit for the three months ended September 30, 2017March 31, 2024, was $12,131, an increase$22,607, a decrease of $4,717,$1,793, or 63.6%7%, from the $7,414 reported$24,400 for the three months ended September 30, 2016.March 31, 2023. Gross margin as a percentage of revenuesrevenue was 78.1% and 78.5%71% for the three months ended September 30, 2017 and 2016, respectively. Consolidated gross marginMarch 31, 2024 as compared to 74% for the ninethree months ended September 30, 2017 was $30,474, an increaseMarch 31, 2023. The decrease is primarily attributable to the decrease in professional services, hardware and other revenue during the period.
Our cost of $10,580 or 53.2%, fromsales relates primarily to direct product costs, compensation for operations and related consulting expenses, hardware expenses, facilities and related expenses and the $19,894 reported for the nine months ended September 30, 2016. Gross margins as a percentage of revenues were 77.9% and 77.0% for the nine months ended September 30, 2017 and 2016, respectively. We attribute the increase in gross margin to a shift in the mixamortization of our revenue between our higher marginpurchased software development costs. We include intangible amortization related to developed and lower margin product linesacquired technology within cost of sales.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of salaries and related expenses for sales and marketing staff, including stock-based expenses, commissions, as well as the addition of the acquisitions in 2017.marketing programs, which include events, corporate communications and product marketing activities.
Selling, GeneralSales and Administrative Expenses
Selling, general and administrative (“SG&A”)marketing expenses for the three months ended September 30, 2017March 31, 2024 were $9,459,$7,767, an increase of $4,413,$567, or 87.5%8%, from the $5,046 reported$7,200 for the three months ended September 30, 2016. SG&AMarch 31, 2023. The increase is primarily due to an increase in direct sales personnel, and an increase in marketing initiatives; partially offset by a decrease in referral fees and bad debt expense. Sales and marketing expenses as a percentage of revenues were 60.9% and 53.5%revenue increased to 25% for the three months ended September 30, 2017March 31, 2024 from 22% for the same period in 2023.
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.
Selling, generalGeneral and Administrative Expenses
General and administrative (“SG&A”)expenses primarily consist of salaries and related expenses, including stock-based expenses for finance and accounting, legal, internal audit, human resources and management information systems personnel, legal costs, professional fees, and other corporate expenses such as transaction costs for acquisitions.
General and administrative expenses for the ninethree months ended September 30, 2017March 31, 2024 were $25,286,$10,063, an increase of $9,727,$107, or 62.5%1%, from the $15,559 reported$9,956 for the ninethree months ended September 30, 2016. SG&AMarch 31, 2023. The increase is primarily attributable to increased personnel and share-based compensation expenses, partially offset by a decrease in bonus expense in 2024. General and administrative expenses as a percentage of revenues were 64.6% and 60.2%revenue increased to 32% for the ninethree months ended September 30, 2017 and 2016, respectively.
SG&A expenses were higher in the three and nine months ended September 30, 2017 as compared toMarch 31, 2024 from 30% for the same periodsperiod in 2016 primarily due to the acquisition and integration expenses related to the acquisition 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.2023.
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 30, 2017March 31, 2024 were $883, an increase$1,769, a decrease of $122,$210, or 16.0%11%, from the $761 reported$1,979 for the three months ended September 30, 2016.March 31, 2023. The decrease is primarily attributable to an increase in capitalized software expenses driven by continued investments in the development of our products, partially offset by an increase in personnel costs. R&D expenses as a percentage of revenues were 5.7% and 8.1%revenue remained flat at 6% for the three months ended September 30, 2017 and 2016, respectively. March 31, 2024 compared to the same period in 2023.
Research and development (“R&D”) expenses for the nine months ended September 30, 2017 were $2,488, an increase of $271, or 12.2%, from the $2,217 reported for the nine months ended September 30, 2016. R&D expenses as a percentage of revenues were 6.4% and 8.6% for the nine months ended September 30, 2017 and 2016, respectively.
We plan to continue to improveenhance 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 believeexpect that our expanded investment in product, engineering, SaaS hosting, mobile and hardware technologies layswill lay the ground workgroundwork for broader market opportunities and representsrepresent a key aspect of our competitive differentiation. Native mobile applications, QR CodeWe 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 integrationbetween our solutions, allowing direct clients and other technologiesresellers 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 reduce 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 improveenhance our workforce management solutions.solution suite and integrated platform.
Amortization of Intangible Assets
Amortization expensesexpense for the three months ended September 30, 2017 were $1,341,March 31, 2024 was $3,449, an increase of $716,$147, or 114.6%4%, from the $625 reported$3,302 for the three months ended September 30, 2016.March 31, 2023. Amortization expensesexpense as a percentage of revenues were 8.6% and 6.6%revenue increased to 11% for the three months ended September 30, 2017 and 2016, respectively. Amortization expensesMarch 31, 2024 from 10% for the ninesame period in 2023. The increase in amortization expense in the three months ended September 30, 2017 were $3,230, an increase of $1,602, or 98.4% compared to $1,628, reported for the nine months ended September 30, 2016. Amortization expenses as a percentage of revenues were 8.3% and 6.3% for the nine months ended September 30, 2017 and 2016, respectively. The increases areMarch 31, 2024 is primarily due to the amortization recorded on the intangibles acquirednew asset acquisitions in the acquisitions during 2017.fourth quarter of 2023.
OtherInterest Income and LossExpense
Other lossInterest income for the three months ended September 30, 2017March 31, 2024 was $1,644, an increase$336 compared to interest income of $1,024, or 165.2%, from the $620 reported$349 for the three months ended September 30, 2016. Other lossMarch 31, 2023. Interest income as a percentage of revenuesrevenue was 10.6% and 6.6%1% for the three months ended September 30, 2017March 31, 2024 and 2016, respectively. Other loss2023. Interest expense for the three months ended March 31, 2024 was $180 compared to interest expense of $2,293 for the three months ended September 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 was $3,279, an increase of $1,819, or 124.6%, from the $1,460 reported for the nine months ended September 30, 2016. OtherMarch 31, 2023. Interest expense as a percentage of revenuesrevenue 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 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 $471% for the three months ended September 30, 2017 and 2016, respectively, an increaseMarch 31, 2024 compared to 7% for the three months ended March 31, 2023. The decrease in interest expense in the three months ended March 31, 2024 is primarily due to our payoff of $38, or 80.9%,the outstanding debt under the credit facility with Structural Capital Investments II LP in the third quarter of 2023.
Other Income, Net
Other income, net for the three months ended March 31, 2024 was $10 compared to $83 for the three months ended March 31, 2023. Other income, net as a resultpercentage of additional tax deductible goodwill acquired in 2017.revenue was negligible for the three months ended March 31, 2024, and for the three months ended March 31, 2023.
Provision forIncome Taxes
For the three months ended March 31, 2024 and 2023, we recorded income tax expense for the nine months ended September 30, 2017 was $368,attributable to continuing operations of $33 and an increaseincome tax benefit of $235, or 176.7%, from the $133 reported for the nine months ended September 30, 2016,$237, respectively, as a resultdecrease of additional tax deductible goodwill acquired in 2017.$270.
Net (Loss) Income (Loss)
We incurred a net loss of $1,281,$308, or $(0.10)$0.01 per share, during the three months ended September 30, 2017,March 31, 2024, compared to net income of $315,$339, or $0.05$0.02 per share, during the three months ended September 30, 2016. Net lossMarch 31, 2023. Loss and income as a percentage of total revenuesrevenue was 8.3%1% and 1% for the three months ended September 30, 2017 compared to net income of 3.3% of total revenues for the three months ended September 30, 2016.March 31, 2024 and 2023, respectively.
We incurred a net loss of $4,177, or $(0.40) per share, during the nine months ended September 30, 2017, compared to a net loss of $1,103, or $(0.17) per share reported for the nine months ended September 30, 2016. Net loss as a percentage of total revenues was 10.7% for the nine months ended September 30, 2017 compared to net loss of 4.3% of total revenues for the nine months ended September 30, 2016.
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 | |
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Cash and cash equivalents | $ | 23,166 | | | $ | 30,317 | |
(1)This balance excludes cash equivalents in funds held for clients.
Working Capital. We had working capital of $18,734$24,040 at September 30, 2017, an increaseMarch 31, 2024, a decrease of $14,527$1,840 from working capital of $4,207$25,880 at December 31, 2016.2023. Working capital at September 30, 2017as of March 31, 2024 and December 31, 20162023 includes $12,065$3,547 and $9,252$6,853 of short-term deferred revenue, respectively. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to future revenue as we perform our services, but this does not represent future payments. Deferred revenue can vary based on seasonality, expiration of initial multi-year contracts and deals that are billed after implementation rather than in advance of service delivery. We attribute the increase in our working capital to the issuance of stock in an underwritten public offering and proceeds from notes payable, offset by the acquisitions of PMSI, CPI and PSNW in the first quarter of 2017 and the acquisitions of iSystems and Compass in the second quarter of 2017.
Operating Activities. Net cash used in operating activities was $2,083of $3,947 for the ninethree months ended September 30, 2017. The $2,083 of cash used in operating activities during the first nine months of 2017March 31, 2024 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 prepaidsapproximately $6,579, primarily due to depreciation and other assets of $471,amortization and a decrease in accounts payable of $569.share-based compensation. 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 usedchanges in operating assets and liabilities, which resulted in a use of $10,218 in cash. Net cash provided by operating activities duringof $4,588 for the first ninethree months of 2016ended March 31, 2023 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 lossincome of $2,996, an increaseapproximately $7,787, primarily due to depreciation and amortization and share-based compensation. For the three months ended March 31, 2023, changes in accrued expensesoperating assets and other long-term obligationsliabilities resulted in a use of $951, a decrease$3,538 in inventory of $169, and a decrease in prepaid expenses and other assets of $124.cash.
Investing Activities. Net cash used in investing activities was $38,351 and $7,750of $4,495 for the ninethree months ended September 30, 2017 and September 30, 2016, respectively. Cash used in investing for the nine months ended September 30, 2017March 31, 2024 is primarily due to the acquisitionspurchases of PMSI, CPIavailable-for-sale securities and PSNW in January 2017, and the acquisitionsmaturities of iSystems and Compass in May 2017, partially$3,516, offset by an increase in funds held for clients. Theproceeds from sales and maturities of available-for-sale securities of $2,406. Net cash used in investing activities of $6,647 for the ninethree months ended September 30, 2016March 31, 2023 is primarily due primarily to the acquisitionpurchases of Mangrove, offset by the increase in funds held for clients.available-for-sale securities and maturities of $10,189.
Financing Activities. Net cash provided by financing activities was $55,123$21,062 for the ninethree months ended September 30, 2017. We recognizedMarch 31, 2024, which primarily consisted of a net proceeds from the issuanceincrease in client fund obligations 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.$21,122. Net cash provided by financing activities was $7,460$21,128 for the ninethree months ended September 30, 2016. We incurred $16,823March 31, 2023, which primarily consisted 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 decreasea net increase in client fund obligations of $4,155$19,372.
We have an outstanding promissory note in connection with a payroll business acquired in September 2021 in the amount of $4,200 as of March 31, 2024. The outstanding promissory note matures on September 30, 2026.
We also have an outstanding promissory note in connection with a payroll business acquired in October 2023 in the amount of $1,500 as of March 31, 2024. The outstanding promissory note matures on October 1, 2025.
We also have an outstanding promissory note in connection with a payroll processing and debt financing feesbenefits brokerage servicer acquired in February 2024 in the amount of $438.$1,000 as of March 31, 2024. The outstanding promissory note matures on February 22, 2026.
Sources of Liquidity. As of September 30, 2017, Asure’sMarch 31, 2024, the Company’s principal sources of liquidity consisted of approximately $27,464$23,166 of cash futureand cash equivalents, together with cash generated from operations and $5,000 underof 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.
We cannot assureensure 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,Currently, we do not have a credit facility or access to a line of credit. Further, we cannot assureensure that we will be able to raise additional capital on acceptable terms, or at all. Subject toall, or at the foregoing, management believes thattime we need it.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have sufficient capitalprepared our Condensed Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles and liquidity to fund and cultivateincluded the growthaccounts of our currentwholly owned subsidiaries. We have eliminated all significant intercompany transactions and future operations forbalances 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 least the next twelve months fromdate of the issuance of these financial statements and to maintain compliance with the termsreported 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 debt agreementslong-lived assets. We base our estimates on historical experience and related covenants or to obtain compliance through debt repayments made with our available cash on hand or anticipated for receiptvarious 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 ordinary coursepreparation 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.financial statements for continued reasonableness. We prospectively apply appropriate adjustments, if any, to our estimates based upon our periodic evaluation. 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 toa description of our critical accounting policies, and estimates since December 31, 2016. For additional information on critical accounting policies, refer to “Management’ssee Management’s Discussion and Analysis”Analysis in our 2016 Annual Report on Form 10-K.10-K for the year ended December 31, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not requiredThere have been no material changes to provide the information required under this item.our exposure from market risks from those disclosed in our 2023 Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Control and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for us. Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that ourThe Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of as of September 30, 2017that are designed to provide reasonable assuranceensure that information required to be disclosed in the reports filed or submitted by us in reports that we file or submit underAsure to the Exchange ActSEC is (i) recorded, processed, summarized, and reported, within the time periods specified inby the Securities and Exchange CommissionSEC’s rules and forms, and (ii)is accumulated and communicated to our management including our principal executive officerthe 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 March 31, 2024, disclosure controls and procedures were effective.
Change in Internal Controls over Financial Reporting
During the period ended September 30, 2017,March 31, 2024, 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
NoneWe have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business. As of March 31, 2024, we were not party to any material legal proceedings.
WeThere have been no material changes from the risk factors previously disclosed in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on February 26, 2024, and investors are a smaller reporting company as defined by Rule 12b-2 ofencouraged to review these risk factors prior to making an investment in the Exchange Act and are not required to provide the information required under this item.Company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
NoneOn February 22, 2024, we issued 450 shares of our common stock to a payroll processing and benefits brokerage servicer based in New Jersey from whom we acquired certain of their assets. The shares were part of the purchase price consideration in connection with such purchase. The shares were valued at $10.01 per share, or an aggregate of $4,500. The issuance and sale of the shares of our common stock in connection with this acquisition are exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof and Rule 506(b) of Regulation D thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NoneNone.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
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:
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EXHIBIT NUMBER | | DESCRIPTION |
31.1* | | |
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* | | |
| 101* | |
101 | | The following materials from Asure Software, Inc.’s Condensed Quarterly Report on Form 10-Q for the quarterthree months ended September 30, 2017,March 31, 2024, 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). |
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104 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted as Inline XBRL and contained in Exhibit 101 (filed herewith). |
* Filed herewithherewith.
** Furnished herewith.
+ Indicates management contract or compensatory plan, contract or arrangement in which directors or executive officers participate.
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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.
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| ASURE SOFTWARE, INC. | |
| | | |
Date: May 2, 2024 | By: | | |
November 13, 2017 | By: | /s/ PATRICK GOEPEL | |
| | Patrick Goepel | |
| | Chief Executive Officer | |
| | (Principal Executive Officer) | | | |
| November 13, 2017 | | |
Date: May 2, 2024 | By: | /s/ KELYN BRANNON JOHN PENCE | |
| | John Pence | | Kelyn Brannon | |
| | Chief Financial Officer | |
| | (Principal Financial and Accounting Officer) | | | |