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~~(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.

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 ~~November~~May 6, ~~2020, 15,907,302~~2021, 19,033,872 shares of the registrant’s Common Stock were outstanding.

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

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

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

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

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies disclosure requirements related to fair value measurement. We adopted the standard on January 1, 2020. The adoption of this standard did not have an impact on our financial statements and disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40). The new guidance reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). We adopted the standard on January 1, 2020 prospectively to all implementation costs incurred after the date of adoption. The effects of this standard on our financial position, results of operations and cash flows were not material.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. As we are a smaller reporting company, ASU 2016-13 is effective for us beginning January 1, 2023. We are currently evaluating the impact, if any, the adoption will have on our financial position and results of operations.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,. ASU 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and which simplifies ~~other aspects of~~ the accounting for income ~~taxes. ASU 2019-12 is~~taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The standard became effective for ~~fiscal years~~interim and annual periods beginning after December 15, 2020, ~~and interim periods within those fiscal years.~~with early adoption permitted. We ~~are currently evaluating~~adopted ASU 2019-12 during the quarter beginning January 1, 2021, using the prospective approach except for hybrid tax regimes, which we adopted using the modified retrospective approach. The adoption of ASU 2019-12 resulted in no material impact ~~if any,~~to the ~~adoption will have on our~~Company's financial ~~position and results of operations.~~

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of ~~September 30, 2020,~~March 31, 2021, we were not a party to any pending legal proceedings that are material to our business.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of ~~September 30, 2020:~~

~~(Amounts in thousands, except share~~(2)Net Notes Payable, includes $1,989 of Gross Notes Payables and ~~per share data unless otherwise noted)~~

The following table summarizes the future principal payments related to our outstanding debt as of ~~September 30, 2020:~~

March 31, 2021:

Year Ending

Amount

2020 ¹
$ 1,001
2021 ¹
11,450
2022 ¹
2,489
2023
500
2024
8,625
Total
$ 24,065


Year Ending	Amount
2021 (remainder)	$	10,407
2022	3,400
2023	500
2024	8,625
2025	0
Total	$	22,932

~~(1)~~

Includes $8,856 of principal payments related to our PPP loan with Pinnacle Bank, all or a portion of which we expect will be forgiven and for which we are not obligated to make any payments until the Small Business Administration has made a decision regarding our application for loan forgiveness. We expect to make our forgiveness application in the fourth quarter of 2020. Given this, we expect that payments we may owe, if any, would not start until second quarter of 2021.

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ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share data unless otherwise noted)

Senior Credit Facility with Wells Fargo N.A.

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

Following the amendment, ~~and restatement on December 31, 2019,~~ the Credit Agreement provided for ~~$20,000~~$10,000 in term loans and a ~~$10,000~~$5,000 revolver and provided for new applicable margin rates for determining the interest payable on loans and amended certain of our financial covenants ~~including adding a covenant based~~as described in our Form 10-K filed with the SEC on ~~achieving EBITDA of at least $3,750 for the three months ended~~ March 31, 2020, $4,850 for the six months ended June 30, 2020 and $5,950 for the nine months ended September 30, 2020, which covenant was in lieu of a leverage covenant calculated at March 31, 2020, June 30, 2020 and September 30, 2020.

On July 7, 2020, our senior lender identified certain events of default under our Credit Agreement and reserved their rights to pursue their remedies as a result of the events of default. Then, on July 10, 2020, our senior lender issued a reservation of rights letter related to these events of default. The primary event of default that triggered the reservation of rights letter was our failure to achieve Minimum EBITDA of $3,750 for the first quarter ending March 31, 2020, as required under Section 7 of the Credit Agreement, which failure was a result of impacts to our business driven primarily by COVID-19. This covenant was set in December 31, 2019, before the Covid-19 pandemic and its possible effects on our business were known to our senior lender or us. The other events of default our lender identified were technical defaults resulting from the fact that we were either unaware that our senior lender was considering the failure to achieve Minimum EBITDA an event of default as of May 11, 2020 or because we were unaware that the senior lender was still requiring that we provide certain requested documents in connection with our banking relationship. Under the reservation of rights letter, the senior lender began accruing default interest from May 11, 2020.

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

On August 10, 2020, we entered into a waiver and amendment to our Credit Agreement and our Amended and Restated Guaranty and Security Agreement (the “Amendment”). The Credit Agreement now provides for $10,000 in term loans and a $5,000 revolver and required that we make a principal payment of $9,750 on our outstanding term loans and reduce future availability on our revolver by $5,000. The outstanding principal balance and all accrued and unpaid interest on the term loans is due on December 31, 2024. The Amendment provides for an accordion feature to our term loan that would allow us to borrow up to an additional $15,000 in term loans subject to certain conditions following the Covenant Conversion Date. The Amendment also reset our financial covenants. The Amendment does not require that we meet our fixed charge ratio or leverage ratio covenant until the Covenant Conversion Date. The Coverage Conversion Date is the earlier of August 10, 2022 or the date in which we have satisfied the fixed charge coverage ratio and leverage ratio for two consecutive reporting periods. Until such time, we are only obligated to comply with our minimum EBITDA and minimum recurring revenue covenants.9, 2021. We expect to be in compliance with these amended financial covenants over the next twelve months.

As of ~~September 30, 2020,~~March 31, 2021 and December 31, ~~2019,~~2020, 0 amount was outstanding and $4,500, ~~and $10,000,~~ respectively, was available for borrowing under the revolver.

PPP Loan

~~In April 2020, Asure entered into~~Due to the effects of COVID-19 on our business and the related need to support our operations, we applied for and received a ~~Promissory Note (the “PPP Note”)~~loan from Pinnacle Bank under the PPP during the second quarter of 2020. Under the terms of our note with Pinnacle Bank, asprincipal payments would have begun in November 2020. However, the ~~lender (the “Lender”), pursuant to~~SBA, which the Lender agreed to give us a loan under the Paycheck Protection Program (the "PPP Loan") offered by the U.S. Small Business Administration (the “SBA”) in a principal amount of $8,856 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

~~The interest rate on the PPP Note is a fixed rate of 1% per annum. To the extent that the amounts owed~~administers loans issued under the PPP, ~~Loan, or a portion of them, are not forgiven,~~has issued guidance, deferring all payments that would be owed on this loan until the ~~Company will be required to make principal and interest payments in monthly installments beginning after the Small Business Administration~~SBA makes a decision on our forgiveness application. Based on current guidance from the Small Business Administration and assuming we file our forgiveness application in the fourth quarter of 2020, we would not expect to have a decision on our loan forgiveness ~~application from~~application. While we expect that the ~~Small Business Administration until second quarter~~entire loan will be forgiven, we cannot be certain that the SBA will forgive our entire loan. If we do not receive forgiveness of ~~2021. To~~our entire loan, we will be obligated to begin repaying the ~~extent any~~portion of the principal and interest that is not forgiven such that it is fully paid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank. Further, if the portion of the PPP Loan that is not forgiven ~~the PPP Note matures on April 15, 2022.~~

~~The PPP Note includes events~~(the “Unforgiven Debt”) exceeds $3,250 or requires monthly payments of ~~default. Upon the occurrence~~principal and interest in excess of ~~an event~~$185, it is likely we will be in default under our Credit Agreement unless we obtain a waiver from our senior lender or are otherwise able to negotiate acceptable terms with our senior lender and Pinnacle Bank. We filed our initial application for forgiveness of ~~default, the Lender will have the right to exercise remedies against the Company, including the right to require immediate payment of all amounts due under the PPP Note.~~

~~NOTE 6 – STOCKHOLDERS’ EQUITY~~

~~Authorized Shares~~

~~On May 28,~~this loan in December 2020, ~~the Company amended its Restated Certificate of Incorporation to increase the total number of authorized shares of capital stock from 23,500,000 to 45,500,000~~ and ~~the number of authorized shares of common stock from 22,000,000 to 44,000,000.~~

~~Share Repurchase Program~~

~~On March 10, 2020,~~completed our ~~Board of Directors authorized a new stock repurchase program, under which~~application in early February 2021. Given this timing, we expect that payments we may ~~repurchase up~~owe, if any, would not start until second or third quarter of 2021. Under U.S. GAAP, we are required to ~~$5,000~~report this entire loan as outstanding debt in our financial statements and further identify the current portion of this debt (e.g. amounts which would be payable in the next 12 months) with reference to the actual terms of our ~~outstanding common stock. This new stock repurchase program~~note with Pinnacle Bank. Notwithstanding how this loan is reported in ~~addition~~our financial statements, we do not expect to make any payments on this note until at least second quarter of 2021, and then only to the ~~approximately 66,000 shares available under our existing stock repurchase plan.~~

~~Under~~extent that any portion of this ~~new stock repurchase program, we may repurchase shares~~note is not forgiven in accordance with ~~all applicable securities laws and regulations, including Rule 10b-18~~the terms of the Securities Exchange Act of 1934, as amended. The extent to which we repurchase our shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by our management. The repurchase program may be extended, suspended or discontinued at any time. We expect to finance the program from existing cash resources.

PPP.

~~While the program remains in place, there have been no repurchases in 2020 and 2019.~~

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

~~Employee Stock Purchase Plan~~

Our Employee Stock Purchase Plan (“Purchase Plan”) was approved by the shareholders in June 2017. The Purchase Plan allows all eligible employees to purchase a limited number of shares of our common stock during pre-specified offering periods at a discount established by the Board of Directors, not to exceed 15% of the fair market value of the common stock, at the beginning or end of the offering period (whichever is lower). Under the ESPP, 225,000 shares were originally reserved for issuance. On May 27, 2020, our shareholders increased the number of shares reserved for issuance under the Purchase Plan by an additional 250,000 shares.

~~Accumulated Other Comprehensive Income (Loss)~~

~~As of September 30, 2020, and December 31, 2019, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities.~~

NOTE 7 6 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables

Receivables from contracts with customers, net of allowance for doubtful accounts of ~~$885~~$1,909 were ~~$5,220~~$3,873 at ~~September 30, 2020.~~March 31, 2021. Receivables from contracts with customers, net of allowance for doubtful accounts of ~~$904~~$2,194 were ~~$4,808~~$3,354 at December 31, ~~2019.~~2020. As of ~~September 30, 2020,~~March 31, 2021, one customer represented 3%5% of our net accounts receivable balance. NaN customers represented more than 10% of our net accounts receivable balance as of December 31, ~~2019.~~

2020.

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ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share data unless otherwise noted)

Deferred Commissions

Deferred commission costs from contracts with customers were ~~$3,530~~$4,128 and ~~$2,697~~$3,792 at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The amount of amortization recognized for the three ~~and nine~~ months ended ~~September 30, 2020 was $220 and $660, respectively~~March 31, 2021 and for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was ~~$428~~$232 and ~~$1,018,~~$249, respectively.

Deferred Revenue

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, revenue of ~~$259~~$3,406 and ~~$3,652, respectively, and the three and nine months ended September 30, 2019, revenue of $429 and $2,643, respectively,~~$2,704 was recognized from the deferred revenue balance at the beginning of each period.

Transaction Price Allocated to the Remaining Performance Obligations

As of ~~September 30, 2020,~~March 31, 2021, approximately ~~$24,537~~$24,563 of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 65% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Revenue Concentration

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ there were no customers that individually represented 10% or more of consolidated revenue.

~~NOTE 8 – LEASES~~

NOTE 7 – LEASES

We have entered into office space lease agreements, which qualify as operating leases under ~~Topic 842.~~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 to ten years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

We record base rent expense under the straight-line method over the term of the lease. In the accompanying condensed consolidated statements of comprehensive loss, rent expense is included in operating expenses under selling, general and administrative expenses. The components of the rent expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Operating lease cost
$ 540 $ 552 $ 1,613 $ 1,694
Sublease income
(11 ) (37 ) (107 ) (112 )
Net rent expense
$ 529 $ 515 $ 1,506 $ 1,582


	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	570	$	552
Sublease income	(11)		(48)
Net rent expense	$	559	$	504

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%~~8% and 9% as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The weighted average remaining lease term is five and six years as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Supplemental cash flow information related to operating leases for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 follow:

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and ~~2019 follow:~~

per share data unless otherwise noted)

Nine Months Ended September 30,

2020

2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases
$ 1,699 $ 1,743
Non-cash operating activities:

Operating lease assets obtained in exchange for new operating lease liabilities
$ 1,052 $ 8,093


	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	609	$	573
Non-cash operating activities:
Operating lease assets obtained in exchange for new operating lease liabilities	$	325	$	0

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


Year Ending December 31	Operating Leases
2021 (remainder)	$	1,854
2022	1,949
2023	1,256
2024	1,037
2025	828
Thereafter	1,803
Total minimum lease payments	8,727
Less imputed interest	(1,666)
Total lease liabilities	$	7,061

Year Ending December 31

Operating Leases

2020 (remainder)
$ 578
2021
2,354
2022
1,837
2023
1,142
2024
1,022
Thereafter
2,630
Total minimum lease payments
9,563
Less imputed interest
(1,940 )
Total lease liabilities
$ 7,623

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

NOTE 9 8 – SHARE-BASED COMPENSATION

We have 1 active equity plan, the 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan, approved by our shareholders, replaced our 2009 Equity Incentive Plan, as amended (the “2009 Plan”), however, the terms and conditions of the 2009 Plan ~~continues~~continue to govern any outstanding awards previously granted under the 2009 Plan.

The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) 2,350,000 shares, and (ii) any shares subject to issued and outstanding awards under the 2009 Plan as of the effective date of the 2018 Plan that expire, are canceled or otherwise terminate following the effective date of the 2018 Plan. We have outstanding options to purchase ~~1,388,077~~1,465,985 shares at a weighted average exercise price of ~~$7.78.~~$7.89. During the three ~~and nine~~ months ending ~~September 30, 2020~~March 31, 2021 we issued ~~123,500 and 668,000~~307,500 of employee stock ~~options, respectively.~~options. The weighted average exercise price of these awards was ~~$6.86 and $6.46~~$7.53 for the three ~~and nine~~ months ended ~~September 30, 2020, respectively, these~~March 31, 2021. These awards will vest over a three-year period. We also had ~~497,913~~388,273 outstanding restricted stock units as of ~~September 30, 2020.~~

March 31, 2021.

In December 2019, we offered to exchange certain outstanding options to purchase shares of our common stock previously granted under the 2009 Plan and the 2018 Plan that have an exercise price per share higher than the greater of $8.50 or the closing trading price of our common stock on the offer expiration date (“eligible options”) for new RSUs to be granted under the 2018 Plan. The offer exchange program was approved by our board of directors and by our shareholders earlier in 2019. Under the offer exchange program, every 2.5 shares underlying an eligible option would be exchanged for one new RSU. Upon expiration of the exchange offer in January 2020, we granted 187,000 RSUs in exchange for the cancellation of options to purchase 467,500 shares that were tendered by employees who participated in the offer exchange program.

As of ~~September 30, 2020,~~March 31, 2021, we had ~~1,104,614~~1,008,506 shares available for grant pursuant to the 2018 Plan.

Share based compensation for our stock option plans for the three months ended ~~September 30,~~March 31, 2021 and March 31, 2020 were $626 and ~~September 30, 2019 was $707 and $577, respectively and for the nine months ended September 30, 2020 and September 30, 2019 was $1,733 and $1,580,~~$438, respectively. We issued ~~14,173~~19,709 and ~~5,000~~19,317 shares of common stock related to exercises of stock options for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. We issued ~~43,901~~34,920 and ~~30,000~~9,944 shares of common stock related to the issuance of vested restricted stock units for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

~~NOTE 10 – DISCONTINUED OPERATIONS~~

In December 2019, we sold our Workspace Management business to FM:Systems for approximately $121,500 in cash. We used the proceeds to pay down debt. In July 2020, in connection with finalizing the working capital adjustment, we received the escrow funds. This transaction enabled us to focus on and continue to deliver our HCM solutions to small and mid-size businesses.

~~The table below reflects the operating results of the Workspace Management business reported as discontinued operations during the three and nine months ended September 30, 2019.~~

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

Revenue
$ 6,705 $ 20,622

Income from discontinued operations
$ 2,126 $ 4,030
Income tax benefit
(142 ) (112 )
Income from discontinued operations, net of taxes
$ 2,268 $ 4,142

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

The table below reflects the depreciation, amortization, capital expenditures, and significant operating and investing non-cash items of the Workspace Management business reported as discontinued operations during the three and nine months ended September 30, 2019:

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

Depreciation and amortization
$ 511 $ 1,744
Provision for doubtful accounts
31 (103 )
Share based compensation
3 112
Capital expenditures
(62 ) (401 )
Software capitalization
(300 ) (716 )

NOTE 11 9 – NET LOSS PER SHARE

We compute net loss per share based on the weighted average number of common shares outstanding for the period. Diluted net loss per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options. We compute the number of common share equivalents, which includes stock options, using the treasury stock method. We have excluded stock options and restricted stock units of approximately ~~1,859,000~~1,854,000

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ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and ~~2,063,000~~per share data unless otherwise noted)

and 1,264,000 shares for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per common share for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~September 30, 2019:~~

March 31, 2020:


	Three Months Ended March 31,
	2021		2020
Net loss	$	(1,598)	$	(1,767)
Weighted-average shares of common stock outstanding, basic and diluted	19,007,000		15,727,000
Basic and diluted loss per share	$	(0.08)	$	(0.11)

Three Months Ended

Three Months Ended

Nine Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Numerator:

Loss from continuing operations
$ (4,759 ) $ (5,624 ) $ (10,475 ) $ (15,359 )
Income from discontinued operations
0 2,268 0 4,142
Net income (loss)
$ (4,759 ) $ (3,356 ) $ (10,475 ) $ (11,217 )

Denominator:

Weighted-average shares of common stock outstanding, basic and diluted
15,873,000 15,565,000 15,793,000 15,472,000

Basic and diluted income (loss) per share

Loss per share from continuing operations
$ (0.30 ) $ (0.36 ) $ (0.66 ) $ (0.99 )
Income per share from discontinued operations
0 0.14 0 0.27
Income (loss) per share
$ (0.30 ) $ (0.22 ) $ (0.66 ) $ (0.72 )

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

NOTE 12 10 – SUBSEQUENT EVENTS

We evaluated subsequent events through the date of the filing of this Quarterly Report on Form 10-Q with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the condensed consolidated financial statements as of ~~September 30, 2020,~~March 31, 2021, and events which occurred subsequent to ~~September 30, 2020~~March 31, 2021 but were not recognized in the condensed consolidated financial statements. Based on this evaluation, we have determined there were no subsequent events to report.

2018

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

Further information on ~~Form 10-K for a further description of~~ these and other ~~factors.~~ factors that could affect the company's financial results is included in the reports on Forms 10-K, 10-Q and 8-K, and in other filings we make with the Securities and Exchange Commission from time to time. These documents are available on the SEC Filings section of the Investor Information section of the company's website at investor.asuresoftware.com

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

except as required by law.

OVERVIEW

~~OVERVIEW~~

The following ~~review~~description of Asure’s financial position as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, and results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ should be read in conjunction with our ~~2019~~2020 Annual Report on Form 10-K filed with the ~~Securities and Exchange Commission.~~SEC on March 11, 2021. Asure’s internet website address is http://www.asuresoftware.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") 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 in our website or connected to our website is not incorporated into this Quarterly Report on Form 10-Q.

~~Asure is~~We are a leading provider of cloud-based Human Capital Management ~~(“HCM”) software and services and, until its divestiture in December 2019, Workspace Management software solutions. Asure helps~~(HCM) solutions, delivered as software-as-a-service (SaaS) for small and mid-sized ~~companies grow by helping them build better teams with skills that get them~~businesses (SMBs). From recruitment to retirement, our solutions help more than 80,000

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SMBs across the next level, stay compliant with ever changing federal, state, and local tax jurisdictions and labor laws, and better allocation of cash so they can spend their financial capital on growing their business rather than back-office overhead that suffocates growth. Asure’s Human Capital Management suite, named AsureHCM, includes cloud-based Payroll & Tax, HR, and Time & Attendance software as well as HR Services ranging from HR projects to completely outsourcing payroll and HR staff. We also offer these products and services through our network of reseller partners.

~~Asure’s platform vision is to help clients~~United States grow their ~~business~~businesses. About 10,000 of our clients are direct and ~~become~~the approximately 70,000 remaining are indirect as they have contracts with Reseller Partners that white label our solutions.

We strive to be the most trusted HCM resource to entrepreneurs ~~everywhere. The Asure product~~and are focused on less densely populated U.S. metropolitan cities where fewer of our competitors have a presence. Our solution strategy ~~is driven by~~solves three primary challenges that prevent businesses from growing: HR complexity, allocation of ~~both~~ human and financial capital, and the ability to build great teams. ~~The AsureHCM suite includes four product lines: AsurePayroll&Tax, AsureHR, AsureTime&Attendance,~~We have invested in, and ~~AsureHRServices.~~

we intend to continue to invest in, research and development to expand our solutions. Asure HCM, our user-friendly solution, reduces the administrative burden on employers and increases employee productivity while managing the complete employment lifecycle.

~~Table~~Impact of ~~Contents~~

the COVID-19 Pandemic to be updated

~~For~~On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. In response, federal, state and local governments imposed various restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the disease, and many such restrictions remain in place. Beginning in February 2020, we took various actions in order to minimize the risk of COVID-19 to our employees, our clients, and the communities in which we operate, and in March 2020, we prohibited all business-related travel until further notice and began transitioning our employees to work-from-home arrangements. As of ~~Asure’s product lines, support and professional services are key elements~~March 31, 2021, more than 70% of our ~~value proposition~~employees were working remotely. We will continue to actively monitor the situation and ~~overall solution.~~ may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and clients.

In addition, the COVID-19 pandemic has disrupted the operations of our clients and client prospects and may continue to ~~state-of-the-art hosting platforms~~do so for an indefinite period of time. Across many industries, temporary and ~~regular software upgrades~~permanent business closures as well as business occupancy limitations have resulted in significant layoffs and ~~releases, Asure gives~~employee furloughs since late March 2020. Because we charge our clients ~~easy access~~on a per-employee basis for certain services we provide, decreases in the headcounts of our clients as of the onset of the pandemic negatively impacted our recurring revenue during 2020, and we expect that our recurring revenue in future periods will continue to ~~our skilled support team. Our services~~be negatively impacted by such headcount reductions until employment levels among such client base return to pre-pandemic levels. Further, at the onset of the COVID-19 pandemic, a limited number of new clients temporarily delayed service implementation. As the COVID-19 pandemic continues to create uncertainty and ~~support representatives are knowledgeable about Asure’s solutions and HR best practices as many staff have professional certifications~~the potential for ongoing business disruptions, we may experience similar client-driven delays in ~~payroll (CPP) and human resources (PHR and SPHR).~~

service implementation in the future.

~~Our~~In 2020, we continued to aggressively invest in sales and marketing ~~strategy includes both direct~~ and ~~indirect channels~~in research and development to ~~target small~~drive future growth and ~~mid-sized businesses (SMBs) throughout~~expand our market share. Lower headcount at our clients and the ~~United States. Our direct sales and marketing efforts include marketing directly to SMBs and their trusted advisors~~other pandemic-related factors described above, which include CPAs, banks, and benefits brokers who frequently refer their clients to HCM vendors. Our indirect model licenses our HCM software to resellers that provide value-add HCM services to their clients. These resellers include pure-play payroll providers focused on a geographic or industry niche as well as CPAs, banks, and benefits brokers that want to expand relationships with their clients directly without referring those clients outside their business.

~~Recent Developments~~

The COVID-19 outbreak has disrupted businesses on a global scale. The rapid spread has resulted in authorities around the world implementing numerous measures to contain the virus, such as business shutdowns, quarantines, shelter-in-place orders and travel bans and restrictions. The pandemic and these containment measures have had and ~~are expected to~~may continue to have, a ~~substantial~~ negative impact on ~~businesses, especially SMBs.~~recurring revenue, combined with increased sales and marketing and research and development expenses, resulted in a decrease in net income for the year ended December 31, 2020 as compared to the year ended December 31, 2019. We expect net income to be negatively affected by the impact of the pandemic on our recurring revenue and our deliberate, increased level of investment in sales and marketing and research and development to drive the growth of our business.

Prior to the COVID-19 pandemic, our sales force historically traveled frequently to market our solution set. The current remote work environment presents a ~~COVID-19 related decrease~~unique opportunity for our sales force because each sales employee is able to meet virtually with a greater number of client prospects in ~~customer demand across all~~a given day than he or she would if conducting in-person meetings. Although we have not experienced such challenges to date, if clients and client prospects are not as willing or available to engage by video conference and teleconference, the shift from in-person to virtual sales meetings could negatively affect our ~~markets to~~sales efforts, impede client acquisition and lengthen our sales cycles, which would negatively ~~and materially~~ impact our ~~revenues for the remainder of 2020, with the most significant impact currently expected in the second~~business and third quarters. We implemented cost-saving initiatives in the first quarter of 2020. In April 2020, we entered into a loan under the Paycheck Protection Program (“PPP”) offered by the U.S. Small Business Administration in a principal amount of $8,856. In July 2020, we acquired certain assets of a payroll tax business. We did not record any asset impairments or bad debt reserves related to COVID-19 during the first three quarters of 2020, but future events may require such charges. We will continue to evaluate the nature and extent of the COVID-19 outbreak’s impact on our financial condition, results of operations and ~~cash flows.~~

could impact our financial condition in the future.

We are unable to estimate the full impact that the COVID-19 pandemic could have on our business and results of operations in the future due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact it may have on the business of our clients and other factors identified in Part I, Item 1A “Risk Factors” in our Form 10-K. As a result, the effect of the ongoing COVID-19 pandemic may not be fully reflected in our results of operations and overall financial performance until future periods.

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RESULTS OF OPERATIONS

($ in thousands)

Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 Compared to Three ~~and Nine~~ Months Ended ~~September 30, 2019~~

March 31, 2020

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

Total revenue represents our consolidated revenues, including sales of our payroll and tax services, time and attendance and human resource software, as well as complementary hardware devices to enhance our software products. Recurring revenue consists of cloud revenue, recurring HR consulting revenue, hardware as a service, maintenance and support revenue and interest earned on client funds. Professional services, hardware and other revenue consists of hardware revenue, on-premise software license revenue as well as installation services and other professional services revenue. While revenue mix varies by product, recurring ~~represents~~represented over 95% of total ~~revenue.~~

Revenue for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$16,015, a decrease~~$19,802, an increase of ~~$1,839,~~$855, or ~~10.3%~~4.5%, from ~~$17,854~~$18,947 for the three months ended ~~September 30, 2019, which excludes revenue from discontinued operations.~~March 31, 2020. Recurring revenue ~~decreased~~increased primarily due to ~~the~~an increase in clients due to our acquisitions in 2020 and higher account balances in funds held for clients partially offset by impact of ~~COVID and lower interest rates.~~

COVID. Revenue for the ~~nine~~three months ended ~~September 30, 2020 was $49,076, a decrease of $6,462,~~March 31, 2021, increased sequentially $3,371 or ~~11.6%~~20.5%, from ~~$55,538~~$16,430 for the ~~nine~~three months ended ~~September 30, 2019, which excludes revenue from discontinued operations. Recurring revenue decreased~~December 31, 2020 primarily due to ~~the impact of COVID and lower interest rates.~~

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

In addition to continuing to develop our workforce solutions and release of new software updates and enhancements, we continue to actively explore other opportunities to acquire additional products or technologies to complement our current software and services.

Consolidated gross profit for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$9,073, a decrease~~$12,492, an increase of ~~$1,695~~$1,385 or ~~15.7%~~12.5%, from ~~$10,768~~$11,107 for the three months ended ~~September 30, 2019.~~March 31, 2020. Gross margin as a percentage of revenue was ~~56.7%~~63.1% for the three months ended ~~September 30, 2020~~March 31, 2021 as compared to ~~60.3%~~58.6% for the three months ended ~~September 30, 2019.~~March 31, 2020. Our ~~decline~~increase in gross margin is primarily attributable to ~~lower~~the increase in revenue and more efficient operations.

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

Selling and marketing expenses for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$3,573,~~$3,611, an increase of ~~$328~~$36 from ~~$3,245~~$3,575 for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase in sales and marketing is primarily due to increased personnel costs offset by lower discretionary marketing spend as we focus on hiring direct sales personnel. Sales and marketing expenses as a percentage of revenue ~~increased~~decreased to ~~22.3%~~18.2% for the three months ended ~~September 30, 2020~~March 31, 2021 from ~~18.2%~~18.9% for the same period in ~~2019.~~

Selling and marketing expenses for the nine months ended September 30, 2020 were $9,916, an increase of $908 from $9,008 for the nine months ended September 30, 2019, primarily due to increased personnel costs as we focus on hiring direct sales personnel. Selling and marketing expenses as a percentage of revenue increased to 20.2% for the nine months ended September 30, 2020 from 16.2% for the same period in 2019.

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

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

General and administrative expenses for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$5,947, a decrease~~$6,498, an increase of ~~$1,025~~$976 from ~~$6,972~~$5,522 for the three months ended ~~September 30, 2019,~~March 31, 2020, primarily attributable to ~~reduced~~the income from the transition services agreement with FM:Systems in relation to the sale of the Workspace business in 2019 as well as increased personnel ~~costs and reduced rent expenses associated with closures of certain facilities we had acquired due to acquisition.~~costs. General and administrative expenses as a percentage of revenue ~~decreased~~increased to ~~37.1%~~32.8% for the three months ended ~~September 30, 2020~~March 31, 2021 from ~~39.1%~~29.1% for the same period in ~~2019.~~

General and administrative expenses for the nine months ended September 30, 2020 were $17,580, a decrease of $4,199 from $21,779 for the nine months ended September 30, 2019 primarily attributable to a reduction in professional fees that were incurred in the nine months ended September 30, 2019, as well as reduced rent expenses associated with closures of certain facilities we had acquired due to acquisition. General and administrative expenses as a percentage of revenue decreased to 35.8% for the nine months ended September 30, 2020 from 39.2% for the same period in 2019.

We continue to drive efficiencies within our payroll operations and ~~execute~~continually reevaluate our vendor ~~rationalization with the sale of the Workspace Management business in the fourth quarter of 2019.~~

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, 2020~~March 31, 2021 were ~~$1,805, an increase~~$1,124, a decrease of ~~$534,~~$50, or ~~42.0%~~4.3%, from ~~$1,271~~$1,174 for the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~increase~~decrease in R&D expense is primarily attributable to ~~increased personnel~~an increase in investment costs ~~as well as COVID-19 related initiatives~~offset by an increase in ~~order to comply with the CARES Act legislation.~~capitalization costs. R&D expenses as a percentage of revenues ~~increased~~decreased to ~~11.3%~~5.7% for the three months ended ~~September 30, 2020~~March 31, 2021 from ~~7.1%~~6.2% for the same period in ~~2019.~~

R&D expenses for the nine months ended September 30, 2020 were $4,356, an increase of $795, or 22.3%, from $3,561 for the nine months ended September 30, 2019. The increase in R&D expense is primarily attributable to increased personnel costs as well as COVID-19 related initiatives in order to comply with the CARES Act. R&D expenses as a percentage of revenues increased to 8.9% for the nine months ended September 30, 2020 from 6.4% for the same period in 2019.

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

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

In the second quarter of 2020, we launched the new Simple Payroll Entry cloud solution for providing clients self-service payroll entry capabilities, with a modern user experience appropriate for small companies. For Asure HR, we developed a new product tier for Advanced HR called Essential HR. Asure Time & Attendance launched our next major release 12.4. Mid-Market HCM released the Asure Mobile app in the Google and Apple stores. The app provides employees quick access to key payroll and benefit information.

Amortization expense for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$2,424~~$2,528 an increase of ~~$102~~$179 from ~~$2,322~~$2,349 for the three months ended ~~September 30, 2019.~~March 31, 2020. Amortization expense as a percentage of revenue was ~~15.1%~~12.8% and ~~13.0%~~12.4% for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

Amortization expense for the nine months ended September 30, 2020 of $7,123 was consistent with amortization expense of $7,143 for the nine months ended September 30, 2019. Amortization expense as a percentage of revenue was 14.5% and 12.9% for the nine months ended September 30, 2020 and 2019, respectively.

Interest expense and other, net for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~a loss of $408~~$224 compared to ~~a loss of $2,712~~$235 for the three months ended ~~September 30, 2019.~~March 31, 2020. Interest expense and other as a percentage of revenue was at ~~(2.5%)~~1.1% and ~~(15.2%)~~1.2% for the three months ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and September 30, 2019,~~ respectively. Interest expense and other for the three months ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~is composed of interest expense on notes payable. Interest expense and other for the three months ended September 30, 2019~~ is composed primarily of interest expense on notes payable.

Interest expense and other, net for the nine months ended September 30, 2020 was a gain of $302 compared to a loss of $8,495 for the nine months ended September 30, 2019. Interest expense and other as a percentage of revenue was at 0.6% and (15.3%) for the nine months ended September 30, 2020 and September 30, 2019, respectively. Interest expense and other for the nine months ended September 30, 2020 is composed of income from the transition services agreement with FM:Systems in relation to the sale of the Workspace business in 2019, offset by interest expense on notes payable. Interest expense and other for the nine months ended September 30, 2019 is composed primarily of interest expense on notes payable.

For the three months ended ~~September 30,~~March 31, 2021 and 2020, and 2019, we recorded an income tax benefit attributable to continuing operations of $(325) and $(130), respectively, an increase of $195, or 149.6%. For the nine months ended September 30, 2020 and 2019, we recorded an income tax expense attributable to continuing operations of ~~$71~~$105 and ~~$512,~~$19, respectively, ~~a decrease~~an increase of ~~$441,~~$86, or ~~86.2%~~450.6%.

We incurred a loss from ~~continuing~~ operations of ~~$4,759,~~$1,598, or ~~$0.30~~$0.08 per share, during the three months ended ~~September 30, 2020,~~March 31, 2021, compared to a loss from ~~continuing~~ operations of ~~$5,624,~~$1,767, or ~~$0.36~~$0.11 per share, during the three months ended ~~September 30, 2019.~~March 31, 2020. Loss from ~~continuing~~

We incurred a loss from continuing operations of $10,475, or $0.66 per share, during the nine months ended September 30, 2020, compared to a loss from continuing operations of $15,359, or $0.99 per share, during the nine months ended September 30, 2019. Loss from continuing operations as a percentage of total revenues was 21.3% and 27.7% for the nine months ended September 30, 2020 and 2019, respectively.

We intend to continue to implement our corporate strategy for growing our software and services business by investing in areas that directly generate revenue and positive cash flows for the Company. However, uncertainties and challenges remain, including the effects of COVID-19, and there can be no assurance that we can successfully grow our revenues or achieve profitability during the remainder of fiscal year ~~2020.~~

Working Capital. We had working capital of ~~$477~~$7,340 at ~~September 30, 2020,~~March 31, 2021, a decrease of ~~$17,377~~$866 from working capital of ~~$17,854~~$8,206 at December 31, ~~2019.~~2020. Working capital as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 includes ~~$3,585~~$1,605 and ~~$5,500~~$4,343 of short-term deferred revenue, respectively. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to future revenue as we perform our services, but this does not represent future payments. Deferred revenue can vary based on seasonality, expiration of initial multi-year contracts and deals that are billed after implementation rather than in advance of service delivery.

Operating Activities. Net cash used in operating activities of ~~$1,717~~$1,235 for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was primarily driven by a net loss of ~~$10,475.~~$1,598. Non-cash adjustments to our net loss increased by approximately ~~$87~~$5,038 due to ~~a reduction in the amortization of our deferred financing costs.~~primarily due to depreciation and amortization. Changes in operating assets and liabilities resulted in ~~an increased~~a use of cash of ~~$6,295.~~

Investing Activities. Net cash ~~used in~~provided by investing activities of ~~$64,687~~$65,158 for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 is primarily due to the net change in funds held for clients. Net cash provided by investing activities of $24,806 for the three months ended March 31, 2020 is primarily due to the net change in funds held for clients and our acquisition of a payroll tax business during the quarter. Net cash provided by investing activities of $36,552 for the nine months ended September 30, 2019 is primarily due to the net change in funds held for clients offset by the acquisition from first quarter of 2019.

Financing Activities. Net cash provided by financing activities was $50,517 for the nine months ended September 30, 2020, which primarily consisted of a net increase in client fund obligations of $53,465 and payments of notes payable of $12,171 offset by proceeds of notes payable of $8,856. Net cash used in financing activities was ~~$43,310~~$68,210 for the ~~nine~~three months ended ~~September 30, 2019. We incurred $8,000~~March 31, 2021, which primarily consisted of ~~indebtedness, resulting~~a net decrease in ~~a source~~client fund obligations of ~~cash. This~~$66,337 and payments of notes payable of $1,981. Net cash used in financing activities was ~~offset by debt financing fees of $1,102 and~~$29,449 for the three months ended March 31, 2020 primarily due to a net change in client fund obligations of ~~$49,964.~~

Sources of Liquidity. As of ~~September 30, 2020, Asure’s~~March 31, 2021, Asure's principal sources of liquidity consisted of approximately ~~$12,939~~$24,290 of cash and cash equivalents, cash generated from operations of our business over the next twelve months, and $4,500 available for borrowing under our Wells Fargo revolver.

~~Due~~In March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo, as administrative agent, and the lenders that are party thereto. The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults, bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the ~~effects of Covid-19 on our business, we were not~~defaults are subject to customary notice and grace period provisions. In March 2014 and in compliance with our minimum EBITDA financial covenant as of March 31, 2020. This covenant was set in December 31, 2019, before the Covid-19 pandemic and its possible effects on our business were known to our senior lender or us. On July 10, 2020, our senior lender issued a reservation of rights letter related to our failure to complyconnection with the ~~minimum EBITDA financial covenant, along with other technical defaults. See Part II, Item 3 for more information about this default~~Credit Agreement, we and our ~~senior lender’s reservation of rights letter. Following this default, we negotiated and~~wholly owned active subsidiaries entered into a ~~waiver and amendment to our Credit Agreement and our Amended and Restated~~ Guaranty and Security Agreement ~~(the “Amendment”) on~~with Wells Fargo Bank. Under the Guaranty and Security Agreement, we and each of our wholly owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets. The Credit Agreement has been amended and restated multiple times, with the most recent amendment and restatement effective December 31, 2019. As described below, the Credit Agreement was amended during 2020, with the most recent amendment effective August 10, 2020.

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

Due to the effects of ~~Covid-19~~COVID-19 on our business and the related need to support our operations, we applied for and received a loan from Pinnacle Bank under the ~~Paycheck Protection Program~~PPP during the second quarter of 2020. Under the terms of our note with Pinnacle Bank, principal payments would have begun in November 2020. However, the ~~Small Business Administration,~~SBA, who administers loans issued under the ~~Paycheck Protection Program,~~PPP, has issued guidance, deferring all payments that would be owed on this loan until the ~~Small Business Administration~~SBA makes a decision on our loan forgiveness application. While we expect that the entire loan will be forgiven, we cannot be certain that the ~~Small Business Administration~~SBA will ~~grant forgiveness of~~forgive our entire loan. If we do not receive forgiveness of our entire loan, we will be obligated to begin repaying the portion of the principal and interest that is not forgiven such that it is fully paid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank. We ~~intend to apply~~applied our initial application for forgiveness of this loan in ~~the fourth quarter of 2020. Given~~December 2020 and completed this application in early February 2021. As a result, we expect that payments we may owe, if any, would not start until second or third quarter of 2021. Under GAAP, we are required to report this entire loan as outstanding debt in our financial statements and further identify the current portion of this debt (e.g. amounts which would be payable in the next 12 months) with reference to the actual terms of our note with Pinnacle Bank. Notwithstanding how this loan is reported in our financial statements, we do not expect to make any payments on this note until at least second quarter of 2021, and then only to the extent that any portion of this note is not forgiven in accordance with the terms of the ~~Paycheck Protection Program.~~PPP. Thus, we do not anticipate our obligations to Pinnacle Bank to have a material effect on our liquidity needs in the next twelve months.

As of ~~September 30, 2020,~~March 31, 2021, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the ~~Securities and Exchange Commission.~~

Information regarding recent accounting pronouncements is provided in Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements. Such information is incorporated by reference herein.

There have been no material changes to our exposure from market risks from those disclosed in our ~~2019~~2020 Annual Report on Form 10-K.

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 not effective as of September 30, 2020~~that are designed to ~~provide reasonable assurance~~ensure that information required to be disclosed in the reports filed or submitted by ~~us in reports that we file or submit under~~Asure to the ~~Exchange Act~~SEC is ~~(i)~~ recorded, processed, summarized, and reported, within the time periods specified inby the ~~Securities and Exchange Commission~~SEC's rules and forms, and ~~(ii)~~is accumulated and communicated to ~~our~~ management including ~~our principal executive officer~~the Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. ~~During~~The Company’s management, including the ~~fourth quarter of 2019, management reported a material weakness~~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 ~~Company’s internal control over financial reporting.~~

~~Except for the remediation efforts on the material weakness from the fourth quarter of 2019 noted above, during~~During the period ended ~~September 30, 2020,~~March 31, 2021, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of ~~September 30, 2020,~~March 31, 2021, we were not party to any pending legal proceedings that are material to our business.

~~Except as set forth below, there~~There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Securities Exchange Commission on March ~~16, 2020~~11, 2021 (the “Form 10-K”), and investors are encouraged to review such risk factors prior to making an investment in the Company.

The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

In December 2019, a novel coronavirus disease (“COVID-19”) was reported and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic. A significant outbreak of epidemic, pandemic, or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the broader economies, financial markets and overall demand environment for our products.

As a result of the COVID-19 pandemic, we temporarily closed our offices and several other impacted locations and implemented certain travel restrictions, both of which have begun to disrupt how we operate our business. We have shifted certain of our customer events to virtual-only experiences and we may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future. Moreover, the conditions caused by the COVID-19 pandemic can affect the rate of IT spending and could adversely affect our customers’ ability or willingness to attend our events or to purchase our offerings, delay prospective customers’ purchasing decisions, adversely impact our ability to provide on-site consulting services to our customers, delay the provisioning of our offerings, lengthen payment terms, reduce the value or duration of their subscription contracts, or affect attrition rates, all of which could adversely affect our future sales, operating results and overall financial performance.

Our operations have also begun to be negatively affected by a range of external factors related to the COVID-19 pandemic that are not within our control. For example, many cities, counties, states, and even countries have imposed or may impose a wide range of restrictions on our employees, partners and customers physical movement to limit the spread of COVID-19. If the COVID-19 pandemic has a substantial impact on our employees, partners or customers attendance or productivity, our results of operations and overall financial performance may be harmed. Finally, as a result of changes in the tax code such as the recent deferral of certain payroll tax obligations and the implementation of certain tax credits, we have had to devote more resources internally both to monitor the impact of these changes on our clients and ensure that our clients remain compliant with the federal, state and local tax jurisdictions. In addition, there can be no assurance that additional tax changes will not require us to incur more expense.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and vendors. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed and the effects of the COVID-19 pandemic could cause or contribute to the risks and uncertainties set forth in the Form 10-K.

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

~~None.~~

~~Table of Contents~~

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

On July 7, 2020, our senior lender identified certain events of default under our Third Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association as Administrative Agent, the lenders that are party thereto and us, dated December 31, 2019 (the “Credit Agreement”) and reserved their rights to pursue their remedies under the Credit Agreement as a result of the events of default. Then, on July 10, 2020, our senior lender issued a reservation of rights letter related to these events of default. The primary event of default that triggered the reservation of rights letter was our failure to achieve Minimum EBITDA of $3,750 for the first quarter ending March 31, 2020, as required under Section 7 of the Credit Agreement, which failure was a result of impacts to our business driven primarily by COVID-19. The other events of default were technical defaults resulting from the fact that we were either unaware that our senior lender was considering the failure to achieve Minimum EBITDA an event of default as of May 11, 2020 or because we were unaware that the senior lender was still requiring that we provide certain requested documents in connection with our banking relationship. Under the reservation of rights letter, the senior lender accrued default interest from May 11, 2020, which we would have been required to pay on August 10, 2020. On August 10, 2020 we executed a waiver and amendment to the Credit Agreement, which is described in more detail under “Sources of Liquidity.” The amendment reset our financial covenants and waived the default in exchange for the payment of $9,750 in principal owed on our term loan and the payment of an amendment fee of $225 to our senior lender. Our senior lender also waived payment of a prepayment penalty in connection with the amendment.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

On November 6, 2020, James (Jay) A. Powers resigned his position as chief financial officer and secretary for family health reasons and not any disagreement with us on any matter related to our operations, policies or practices. We have not yet confirmed Mr. Powers’ last day with us, which will be dependent upon the need for Mr. Powers to provide us transition support. Solely for purposes of signing and providing the certifications required under this Form 10-Q, our chief executive officer, Patrick Goepel, was appointed principal financial officer and principal accounting officer. Effective November 9, 2020, John F. Pence was appointed as our chief financial officer and secretary. Following the filing of this Form 10-Q, Mr. Pence will serve as our principal financial officer and our principal accounting officer.

Mr. Pence, age 50, has 28 years of increasing levels of financial and accounting leadership experience. He is a certified public accountant licensed in the state of Texas. Mr. Pence was most recently the chief financial officer of Beneplace LLC. He has also served as chief financial officer and chief operating officer for Mobi Corp. from February 2010 to December 2017. Mr. Pence serves on the board of directors of Green Builders, Inc., a regional land development company. During the last two years, there have been no transactions or proposed transactions by the Company in which Mr. Pence has had or is to have a direct or indirect material interest, and there are no family relationships between Mr. Pence and any of the Company’s other executive officers or directors.

We have agreed to pay Mr. Pence an initial annual base salary of $250,000 for his services, which will be increased to $300,000 when the Company determines to reinstate its executive officers’ full salaries, which were reduced as a cost savings measure in connection with the Covid-19 pandemic. In addition, in 2021, Mr. Pence will be eligible for a cash bonus based on the Company’s profitability and other determining factors. The target amount of his cash bonus is $150,000. Effective November 10, 2020, we granted Mr. Pence 10,000 restricted stock units (RSUs) and options to purchase 75,000 shares of our common stock at an exercise price equal to the closing price of our common stock on November 10, 2020. Such RSUs will vest as follows: 1/3 on the first anniversary date of the grant date and the remaining 2/3rds will vest over the following 2 year period in substantially equal quarterly installments. Such options will vest as follows: 1/3 on the first anniversary of the grant date and the remaining 2/3rds will vest over the following 2 year period in substantially equal monthly installments. The RSUs and options will be granted under, and be subject to the terms of, our 2018 Incentive Award Plan. In addition, we have agreed that if we terminate Mr. Pence for any reason other than gross misconduct, he will receive severance pay equal to three (3) months of his then current base salary, plus the employer’s portion of the health care premium for continuation coverage under COBRA, also for a period of three months, provided that he has executed a general release of claims.

Mr. Pence is expected to enter into our standard form of indemnification agreement and to be a participant in our Executive Change in Control Severance Plan. The form of indemnification agreement and our Executive Change in Control Severance Plan have been filed as Exhibits 10.1 and 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on December 21, 2017.

Charles Lathrop, Jr. informed our board of directors that he intends to resign as a director effective December 31, 2020. His decision to resign from our board was due to health reasons and not any disagreement on any matter related to our operations, policies or practices.

~~Table of Contents~~

None.

ITEM 6. EXHIBITS

~~EXHIBIT NUMBER~~	~~DESCRIPTION~~
EXHIBIT NUMBER		DESCRIPTION
2.1 *		Asset Purchase Agreement among Asure Payroll Tax Management LLC, Payroll Tax Management, Inc., Financial Business Group Holdings, and Alden J. Blowers, incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on July 13, 2020.
31.1
10.1* **	~~General Release and Separation Agreement between Asure Software, Inc. and Kelyn J. Brannon dated August 11, 2020 (filed herewith).~~

~~10.2~~	Waiver and Amendment No. 4 to Third Amended and Restated Credit Agreement and Amendment No. 2 to the Amended and Restated Guaranty and Security Agreement, dated August 10, 2020, by and among Asure Software, Inc., the Guarantors party thereto, Wells Fargo Bank, National Association as administrative agent for each member of the Lender Group and the Bank Product Providers identified on the signature pages thereto, Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the six months ended June 30,2020.

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

~~32.1~~ 31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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

~~101~~ 32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101		The following materials from Asure Software, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2020,~~March 31, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (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 (5) Notes to Condensed Consolidated Financial Statements (filed herewith).

104		The cover page from the ~~Company’s~~Company's Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2020,~~March 31, 2021, formatted as Inline XBRL and contained in Exhibit 101 (filed herewith).

* Schedules and similar attachments to the agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of all omitted schedules and similar attachments to the SEC upon its request.

** Compensatory plan or arrangement

3126

Table of Contents

SIGNATURES

~~SIGNATURES~~

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

~~Delaware~~		~~74-2415696~~
~~(State or other jurisdiction of~~		~~(I.R.S. Employer~~
~~incorporation or organization)~~		~~Identification No.)~~

~~3700 N. Capital of Texas Hwy #350~~
~~Austin, Texas~~		~~78746~~
~~(Address of Principal Executive Offices)~~		~~(Zip Code)~~


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	ASUR	Nasdaq Capital Market
Series A Junior Participating Preferred Share Purchase Rights	N/A	N/A

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

Item 1.		Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	3 1
		Condensed Consolidated Statements of Comprehensive Loss for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~	4
		Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~	5
		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~	6
		Notes to Condensed Consolidated Financial Statements	7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	21 19
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	28 25
Item 4.		Controls and Procedures	28 25

PART II - OTHER INFORMATION

Item 1.		Legal Proceedings	29 26
Item 1A.		Risk Factors	29 26
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	29 26
Item 3.		Defaults upon Senior Securities	30 26
Item 5.		Other Information	30 26
Item 6.		Exhibits	31 26

Signatures			32 27


	March 31, 2021		December 31, 2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	24,290	$	28,577
Accounts receivable, net of allowance for doubtful accounts of $1,909 and $2,194 at March 31, 2021 and December 31, 2020, respectively	3,873		3,354
Inventory	349		449
Prepaid expenses and other current assets	3,372		3,284
Total current assets before funds held for clients	31,884		35,664
Funds held for clients	254,492		321,069
Total current assets	286,376		356,733
Property and equipment, net	8,662		8,281
Goodwill	73,958		73,958
Intangible assets, net	61,646		64,552
Operating lease assets, net	6,354		6,450
Other assets, net	4,107		3,953
Total assets	$	441,103	$	513,927
Liabilities and stockholders’ equity
Current liabilities:
Current portion of notes payable	$	11,901	$	12,310
Accounts payable	750		1,288
Accrued compensation and benefits	3,610		2,916
Operating lease liabilities, current	1,985		1,833
Other accrued liabilities	1,064		1,380
Contingent purchase obligation	3,880		3,880
Deferred revenue	1,605		4,343
Total current liabilities before client fund obligations	24,795		27,950
Client fund obligations	254,241		320,577
Total current liabilities	279,036		348,527
Long-term liabilities:
Deferred revenue	86		111
Deferred tax liability	985		888
Notes payable, net of current portion	10,683		12,225
Operating lease liabilities, noncurrent	5,076		5,366
Other liabilities	586		1,157
Total long-term liabilities	17,416		19,747
Total liabilities	296,452		368,274
Commitments
Stockholders’ equity:
Preferred stock, $0.01 par value; 1,500 shares authorized; NaN issued or outstanding	0		0
Common stock, $0.01 par value; 44,000 and 22,000 shares authorized; 19,405 and 19,354 shares issued, 19,021 and 18,970 shares outstanding at March 31, 2021 and December 31, 2020, respectively	194		193
Treasury stock at cost, 384 shares at March 31, 2021 and December 31, 2020	(5,017)		(5,017)
Additional paid-in capital	420,561		419,827
Accumulated deficit	(271,552)		(269,954)
Accumulated other comprehensive income	465		604
Total stockholders’ equity	144,651		145,653
Total liabilities and stockholders’ equity	$	441,103	$	513,927

	September 30, 2020 (unaudited)			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	12,939		$	28,826
Accounts receivable, net of allowance for doubtful accounts of $885 and $904 at September 30, 2020 and December 31, 2019, respectively		5,220			4,808
Inventory		408			656
Prepaid expenses and other current assets		2,558			12,218
Total current assets before funds held for clients		21,125			46,508
Funds held for clients		199,306			137,935
Total current assets		220,431			184,443
Property and equipment, net		8,275			7,867
Goodwill		71,289			68,697
Intangible assets, net		62,055			63,850
Operating lease assets, net		6,837			6,963
Other assets, net		3,839			3,224
Total assets	$	372,726		$	335,044
Liabilities and stockholders’ equity
Current liabilities:
Current portion of notes payable	$	10,794		$	2,571
Accounts payable		1,009			1,736
Accrued compensation and benefits		3,305			3,424
Operating lease liabilities, current		1,779			1,575
Other accrued liabilities		791			6,556
Deferred revenue		3,585			5,500
Total current liabilities before client fund obligations		21,263			21,362
Client fund obligations		198,691			145,227
Total current liabilities		219,954			166,589
Long-term liabilities:
Deferred revenue		161			322
Deferred tax liability		362			336
Notes payable, net of current portion		12,908			24,142
Contingent purchase consideration		2,745			0
Operating lease liabilities, noncurrent		5,844			5,937
Other liabilities		656			139
Total long-term liabilities		22,676			30,876
Total liabilities		242,630			197,465
Commitments
Stockholders’ equity:
Preferred stock, $.01 par value; 1,500 shares authorized; NaN issued or outstanding		0			0
Common stock, $.01 par value; 44,000 and 22,000 shares authorized; 16,225 and 16,098 shares issued, 15,900 and 15,714 shares outstanding at September 30, 2020 and December 31, 2019, respectively		163			161
Treasury stock at cost, 384 shares at September 30, 2020 and December 31, 2019		(5,017	)		(5,017	)
Additional paid-in capital		398,449			396,102
Accumulated deficit		(264,112	)		(253,642	)
Accumulated other comprehensive income (loss)		613			(25	)
Total stockholders’ equity		130,096			137,579
Total liabilities and stockholders’ equity	$	372,726		$	335,044

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended March 31,
	2021		2020
Revenue:
Recurring	$	19,242	$	18,436
Professional services, hardware and other	560		511
Total revenue	19,802		18,947
Cost of Sales	7,310		7,840
Gross profit	12,492		11,107
Operating expenses:
Sales and marketing	3,611		3,575
General and administrative	6,498		5,522
Research and development	1,124		1,174
Amortization of intangible assets	2,528		2,349
Total operating expenses	13,761		12,620
Loss from operations	(1,269)		(1,513)
Interest expense and other, net	(224)		(235)
Loss from operations before income taxes	(1,493)		(1,748)
Income tax expense	105		19
Net loss	(1,598)		(1,767)
Other comprehensive income:
Unrealized (loss) gain on marketable securities	(139)		65
Comprehensive loss	$	(1,737)	$	(1,702)

Basic and diluted net loss per share
Basic	$	(0.08)	$	(0.11)
Diluted	$	(0.08)	$	(0.11)
Weighted average basic and diluted shares
Basic	19,007,000		15,727,000
Diluted	19,007,000		15,727,000

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue:
Recurring	$	15,273		$	17,014		$	47,442		$	53,429
Professional services, hardware and other		742			840			1,634			2,109
Total revenue		16,015			17,854			49,076			55,538
Cost of Sales		6,942			7,086			20,807			20,399
Gross profit		9,073			10,768			28,269			35,139
Operating expenses:
Sales and marketing		3,573			3,245			9,916			9,008
General and administrative		5,947			6,972			17,580			21,779
Research and development		1,805			1,271			4,356			3,561
Amortization of intangible assets		2,424			2,322			7,123			7,143
Total operating expenses		13,749			13,810			38,975			41,491
Loss from operations		(4,676	)		(3,042	)		(10,706	)		(6,352	)
Interest (expense) income and other, net		(408	)		(2,712	)		302			(8,495	)
Loss from continuing operations before income taxes		(5,084	)		(5,754	)		(10,404	)		(14,847	)
Income tax (benefit) expense		(325	)		(130	)		71			512
Loss from continuing operations		(4,759	)		(5,624	)		(10,475	)		(15,359	)
Discontinued operations
Income from operations of discontinued operations		0			2,126			0			4,030
Income tax benefit		0			(142	)		0			(112	)
Gain on discontinued operations, net of taxes		0			2,268			0			4,142
Net loss		(4,759	)		(3,356	)		(10,475	)		(11,217	)
Other comprehensive income:
Unrealized gain on marketable securities		16			(4	)		643			22
Foreign currency translation loss		0			(514	)		0			(560	)
Comprehensive loss	$	(4,743	)	$	(3,874	)	$	(9,832	)	$	(11,755	)

Basic and diluted loss per share from continuing operations
Basic	$	(0.30	)	$	(0.36	)	$	(0.66	)	$	(0.99	)
Diluted	$	(0.30	)	$	(0.36	)	$	(0.66	)	$	(0.99	)
Basic and diluted loss per share
Basic	$	(0.30	)	$	(0.22	)	$	(0.66	)	$	(0.72	)
Diluted	$	(0.30	)	$	(0.22	)	$	(0.66	)	$	(0.72	)
Weighted average basic and diluted shares
Basic		15,873,000			15,565,000			15,793,000			15,472,000
Diluted		15,873,000			15,565,000			15,793,000			15,472,000


	Common Stock Outstanding	Common Stock Amount		Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance at December 31, 2020	18,970	$	193	$	(5,017)	$	419,827	$	(269,954)	$	604	$	145,653
Stock issued upon option exercise and vesting of restricted stock units	51	1		—		131		—		—		132
Share based compensation	—	—		—		626		—		—		626
Share issuance costs	—	—		—		(23)		—		—		(23)
Net loss	—	—		—		—		(1,598)		—		(1,598)
Other comprehensive loss	—	—		—		—		—		(139)		(139)
Balance at March 31, 2021	19,021	$	194	$	(5,017)	$	420,561	$	(271,552)	$	465	$	144,651

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(10,475	)	$	(11,217	)
Adjustments to reconcile loss to net cash (used in) provided by operations:
Depreciation and amortization		12,046			11,594
Amortization of debt financing costs and discount		348			1,178
Provision for (recovery of) doubtful accounts		317			(414	)
Provision for deferred income taxes		26			468
Gain on modification of debt		(123	)		0
Share-based compensation		1,733			1,580
Loss on disposals of fixed assets		55			83
Changes in operating assets and liabilities:
Accounts receivable		1,451			2,930
Inventory		137			(2,062	)
Prepaid expenses and other assets		(766	)		16
Accounts payable		(726	)		(598	)
Accrued expenses and other long-term obligations		(2,482	)		217
Operating lease liabilities		(1,182	)		0
Deferred revenue		(2,076	)		148
Net cash (used in) provided by operating activities		(1,717	)		3,923
Cash flows from investing activities:
Acquisitions, net of cash acquired		(6,994	)		(7,443	)
Acquisition of intangible asset		(1,823	)		0
Purchases of property and equipment		(859	)		(1,159	)
Software capitalization costs		(1,904	)		(3,207	)
Net change in funds held for clients		(53,107	)		48,361
Net cash (used in) provided by investing activities		(64,687	)		36,552
Cash flows from financing activities:
Proceeds from notes payable		8,856			8,000
Payments of notes payable		(12,171	)		(4,638	)
Proceeds from revolving line of credit		0			8,000
Payments of revolving line of credit		0			(4,000	)
Debt financing fees		(249	)		(1,102	)
Payments of finance leases		0			(102	)
Net proceeds from issuance of common stock		616			496
Net change in client fund obligations		53,465			(49,964	)
Net cash provided by (used in) financing activities		50,517			(43,310	)
Effect of foreign exchange rates		0			(33	)
Net increase (decrease) in cash and cash equivalents		(15,887	)		(2,868	)
Cash and cash equivalents at beginning of period		28,826			15,444
Cash and cash equivalents at end of period	$	12,939		$	12,576
Supplemental information:
Cash paid for:
Interest	$	967		$	6,581
Income taxes		3,469			31
Non-cash Investing and Financing Activities:
Subordinated notes payable –acquisitions	$	0		$	2,000
Equity issued in connection with acquisitions		0			555

	September 30, 2020
	Amortized Cost		Gross Unrealized Gains ⁽¹⁾		Gross Unrealized Losses ⁽¹⁾			Aggregate Estimated Fair Value
Funds Held for Clients ⁽²⁾
Certificates of deposit	$	8,844	$	233	$	0		$	9,077
Corporate debt securities		9,438		288		0			9,726
Municipal bonds		7,561		101		(7	)		7,655
US Government agency securities		0		0		0			0
Asset-backed securities		498		2		0			500
Total	$	26,341	$	624	$	(7	)	$	26,958


	March 31, 2021
	Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)		Aggregate Estimated Fair Value
Funds Held for Clients (2)
Certificates of deposit	$	7,119	$	165	$	0	$	7,284
Corporate debt securities	8,894		213		(4)		9,103
Municipal bonds	7,254		99		0		7,353
US Government agency securities	500		0		(7)		493
Asset-backed securities	0		0		0		0
Total	$	23,767	$	477	$	(11)	$	24,233

Expected Maturities	Amount

One year or less	$	5,695
After one year through five years		21,263
After five years through 10 years		0
After 10 years		0
	$	26,958


	March 31, 2021
	Total Carrying Value		Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	3,301	$	3,301	$	0	$	0
Funds held for clients
Money market funds	1,082		1,082		0		0
Available-for-sale securities	24,233		0		24,233		0
Total	$	28,616	$	4,383	$	24,233	$	0

Liabilities:
Contingent purchase consideration	$	3,880	$	0	$	0	$	3,880
Total	$	3,880	$	0	$	0	$	3,880

	September 30, 2020
Intangible Assets	Weighted Average Amortization Period (in Years)		Gross		Accumulated Amortization			Net
Customer relationships		8.9	$	83,111	$	(26,575	)	$	56,536
Developed technology		6.6		12,001		(7,230	)		4,771
Reseller relationships		7.0		853		(853	)		0
Trade names		3.0		780		(254	)		526
Noncompete agreements		5.2		1,032		(810	)		222
		8.5	$	97,777	$	(35,722	)	$	62,055


	March 31, 2021
Intangible Assets	Weighted Average Amortization Period (in Years)	Gross		Accumulated Amortization		Net
Customer relationships	8.9	$	88,310	$	(31,350)	$	56,960
Developed technology	6.6	12,001		(7,987)		4,014
Reseller relationships	7.0	853		(853)		0
Trade names	3.0	880		(379)		501
Noncompete agreements	5.2	1,032		(861)		171
	8.6	$	103,076	$	(41,430)	$	61,646

	December 31, 2019
Intangible Assets	Weighted Average Amortization Period (in Years)		Gross		Accumulated Amortization			Net
Customer relationships		8.9	$	78,558	$	(19,757	)	$	58,801
Developed technology		6.0		10,001		(6,004	)		3,997
Reseller relationships		7.0		853		(853	)		0
Trade names		3.0		780		(78	)		702
Noncompete agreements		5.2		1,032		(682	)		350
		8.5	$	91,224	$	(27,374	)	$	63,850


	December 31, 2020
Intangible Assets	Weighted Average Amortization Period (in Years)	Gross		Accumulated Amortization		Net
Customer relationships	8.9	$	88,310	$	(28,898)	$	59,412
Developed technology	6.6	12,001		(7,608)		4,393
Reseller relationships	7.0	853		(853)		0
Trade names	3.0	880		(312)		568
Noncompete agreements	5.2	1,032		(853)		179
	8.5	$	103,076	$	(38,524)	$	64,552

Balance at December 31, 2019	$	68,697
Acquisition		2,592
Balance at September 30, 2020	$	71,289


Calendar Years	Amount
2021 (April to December)	$	8,695
2022	11,068
2023	9,942
2024	9,682
2025	8,896
Thereafter	13,363
	$	61,646

Calendar Years	Amount
2020 (September to December)	$	2,803
2021		11,048
2022		10,514
2023		9,389
2024		9,162
Thereafter		19,139
	$	62,055


	Maturity	Stated Interest Rate		March 31, 2021		December 31, 2020
Subordinated Notes Payable – acquisitions	7/1/2021 – 7/1/2022	2.00% - 3.00%		$	4,263	$	6,182
PPP Loan – Pinnacle Bank1	4/15/2022	1.00	%	8,856		8,856
Term Loan – Wells Fargo Syndicate Partner	12/31/2024	5.25	%	9,813		9,875
Total Notes Payable				$	22,932	$	24,913
Short-term Notes Payable				12,024		12,388
Long-term Notes Payable				$	10,908	$	12,525

	September 30, 2020
	Gross Notes Payable		Debt Issuance Costs and Debt Discount			Net Notes Payable
Notes payable, current portion¹	$	10,901	$	(107	)	$	10,794
Notes payable, net of current portion²		13,164		(256	)		12,908
Total	$	24,065	$	(363	)	$	23,702

~~(1)~~	Net Notes Payable includes $5,379 of Gross Notes Payables and $0 Debt Issuance Cost and Debt Discount related to our PPP loan with Pinnacle Bank, all or a portion of which we expect will be forgiven and for which we are not obligated to make any payments until the Small Business Administration has made a decision regarding our application for loan forgiveness.
~~(2)~~	Net Notes Payable, includes $3,477 of Gross Notes Payables and $0 Debt Issuance Cost and Debt Discount related to our PPP loan with Pinnacle Bank, all or a portion of which we expect will be forgiven and for which we are not obligated to make payments until the Small Business Administration has made a decision regarding our application for loan forgiveness.

Year Ending	Amount
2020 ¹	$	1,001
2021 ¹		11,450
2022 ¹		2,489
2023		500
2024		8,625
Total	$	24,065

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Operating lease cost	$	540		$	552		$	1,613		$	1,694
Sublease income		(11	)		(37	)		(107	)		(112	)
Net rent expense	$	529		$	515		$	1,506		$	1,582

Year Ending December 31	Operating Leases
2020 (remainder)	$	578
2021		2,354
2022		1,837
2023		1,142
2024		1,022
Thereafter		2,630
Total minimum lease payments		9,563
Less imputed interest		(1,940	)
Total lease liabilities	$	7,623

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
Revenue	$	6,705		$	20,622

Income from discontinued operations	$	2,126		$	4,030
Income tax benefit		(142	)		(112	)
Income from discontinued operations, net of taxes	$	2,268		$	4,142


	Three Months Ended March 31,		Increase
	2021	2020		%
Recurring	19,242	18,436	806	4.4	%
Professional services, hardware and other	560	511	49	9.6	%
Total	19,802	18,947	855	4.5	%

	Three Months Ended September 30,				Increase (Decrease)
	2020		2019		Increase (Decrease)			%
Recurring	$	15,273	$	17,014	$	(1,741	)		(10.2	)
Professional services, hardware and other		742		840		(98	)		(11.7	)
Total	$	16,015	$	17,854	$	(1,839	)		(10.3	)


	March 31, 2021		December 31, 2020
Working capital	$	7,340	$	8,206
Cash and cash equivalents	$	24,290	$	28,577


	ASURE SOFTWARE, INC.

Date: May 10, 2021	By:		/s/ PATRICK GOEPEL
~~Date: November 9, 2020~~	~~By:~~	~~/s/~~ Patrick Goepel
		~~Patrick Goepel~~	Chief Executive Officer

Date: May 10, 2021	By:	/s/ JOHN PENCE
		John Pence
		Chief ~~Executive~~Financial Officer, Principal Financial Officer and Principal Accounting Officer