asur-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __ to __


Commission File Number: 1-34522

ASURE SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

Delaware

74-2415696

(State or other jurisdiction of incorporation)

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

405 Colorado Street, Suite 1800, Austin, Texas

78701

(Address of principal executive offices)

(Zip Code)


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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

ASUR

The Nasdaq Capital Market

Series A Junior Participating Preferred Share Purchase Rights

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒

Yes

☐

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

☒

Yes

☐

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

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

☒

As of November 10, 2023, 24,851,198 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and September 30, 2022	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and September 30, 2022	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	27
Item 3.	Defaults upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	28
Item 6.	Exhibits	29

	Signatures	29

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash, cash equivalents, and restricted cash	$	32,787	$	17,010
Accounts receivable, net of allowance for doubtful accounts of $1,186 and $3,248 at September 30, 2023 and December 31, 2022, respectively	15,133		12,123
Inventory	93		251
Prepaid expenses and other current assets	3,907		10,304
Total current assets before funds held for clients	51,920		39,688
Funds held for clients	172,503		203,588
Total current assets	224,423		243,276
Property and equipment, net	13,436		11,439
Goodwill	86,011		86,011
Intangible assets, net	57,326		66,594
Operating lease assets, net	5,265		7,065
Other assets, net	8,036		5,523
Total assets	$	394,497	$	419,908
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable	$	195	$	4,106
Accounts payable	1,696		2,194
Accrued compensation and benefits	5,770		5,791
Operating lease liabilities, current	1,510		1,860
Other accrued liabilities	5,170		3,728
Contingent purchase consideration	—		2,955
Deferred revenue	3,392		8,461
Total current liabilities before client fund obligations	17,733		29,095
Client fund obligations	175,056		206,088
Total current liabilities	192,789		235,183
Long-term liabilities:
Deferred revenue	666		788
Deferred tax liability	1,614		1,503
Notes payable, net of current portion	2,633		30,795
Operating lease liabilities, noncurrent	4,956		6,459
Other liabilities	177		114
Total long-term liabilities	10,046		39,659
Total liabilities	202,835		274,842
Stockholders’ equity:
Preferred stock, $0.01 par value; 1,500 shares authorized; none issued or outstanding	—		—
Common stock, $0.01 par value; 44,000 shares authorized; 25,235 and 20,628 shares issued, 24,851 and 20,244 shares outstanding at September 30, 2023 and December 31, 2022, respectively	252		206
Treasury stock at cost, 384 shares at September 30, 2023 and December 31, 2022	(5,017)		(5,017)
Additional paid-in capital	485,981		433,586
Accumulated deficit	(286,858)		(281,226)
Accumulated other comprehensive loss	(2,696)		(2,483)
Total stockholders’ equity	191,662		145,066
Total liabilities and stockholders’ equity	$	394,497	$	419,908

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

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue:
Recurring	$	23,833	$	19,959	$	74,749	$	61,977
Professional services, hardware and other	5,501		1,944		18,069		4,559
Total revenue	29,334		21,903		92,818		66,536
Cost of Sales	8,054		8,256		25,120		25,164
Gross profit	21,280		13,647		67,698		41,372
Operating expenses:
Sales and marketing	6,597		4,752		22,312		14,238
General and administrative	9,294		8,023		29,586		24,204
Research and development	1,803		1,230		5,107		4,523
Amortization of intangible assets	3,333		3,350		9,929		10,134
Total operating expenses	21,027		17,355		66,934		53,099
Income (loss) from operations	253		(3,708)		764		(11,727)
Interest expense, net	(782)		(1,122)		(4,321)		(3,006)
(Loss) gain on extinguishment of debt	(1,517)		—		(1,517)		180
Other (expense) income, net	(283)		399		(291)		1,349
Loss from operations before income taxes	(2,329)		(4,431)		(5,365)		(13,204)
Income tax (benefit) expense	(123)		102		267		206
Net loss	(2,206)		(4,533)		(5,632)		(13,410)
Other comprehensive loss:
Unrealized loss on marketable securities	(201)		(1,243)		(213)		(2,802)
Comprehensive loss	$	(2,407)	$	(5,776)	$	(5,845)	$	(16,212)

Basic and diluted loss per share
Basic	$	(0.10)	$	(0.22)	$	(0.27)	$	(0.67)
Diluted	$	(0.10)	$	(0.22)	$	(0.27)	$	(0.67)

Weighted average basic and diluted shares
Basic	22,591		20,219		21,204		20,092
Diluted	22,591		20,219		21,204		20,092

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

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


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

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

Stock issued upon option exercise and vesting of restricted stock units	99	1		—		479		—		—		480
Shares issued, net of issuance costs	4,047	40		—		45,484		—		—		45,524
Share based compensation	—	—		—		1,251		—		—		1,251
Net loss	—	—		—		—		(2,206)		—		(2,206)
Other comprehensive loss	—	—		—		—		—		(201)		(201)
Balance at September 30, 2023	24,851	$	252	$	(5,017)	$	485,981	$	(286,858)	$	(2,696)	$	191,662

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

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


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

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

Stock issued upon option exercise and vesting of restricted stock units	18	—		—		—		—		—		—
Share based compensation	—	—		—		798		—		—		798
Net loss	—	—		—		—		(4,533)		—		(4,533)
Other comprehensive loss	—	—		—		—		—		(1,243)		(1,243)
Balance at September 30, 2022	20,160	$	205	$	(5,017)	$	432,445	$	(280,170)	$	(2,901)	$	144,562

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

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(5,632)	$	(13,410)
Adjustments to reconcile loss to net cash provided by operations:
Depreciation and amortization	14,243		14,018
Amortization of operating lease assets	1,129		1,268
Amortization of debt financing costs and discount	548		531
Non-cash interest expense	1,471		—
Net accretion of discounts and amortization of premiums on available-for-sale securities	(63)		279
Provision for doubtful accounts	2,004		304
Provision for deferred income taxes	111		163
Loss (gain) on extinguishment of debt	1,208		(180)
Net realized gains on sales of available-for-sale securities	(1,645)		(808)
Share-based compensation	4,170		2,341
Loss on disposals of long-term assets	132		1
Change in fair value of contingent purchase consideration	175		(1,350)
Adjustment to Intangibles	—		23
Changes in operating assets and liabilities:
Accounts receivable	(5,014)		(1,816)
Inventory	159		(85)
Prepaid expenses and other assets	4,031		2,855
Operating lease right-of-use assets	473		(3,489)
Accounts payable	(498)		738
Accrued expenses and other long-term obligations	918		2,637
Operating lease liabilities	(895)		2,298
Deferred revenue	(5,190)		639
Net cash provided by operating activities	11,835		6,957
Cash flows from investing activities:
Acquisition of intangible asset	(697)		(2,289)
Purchases of property and equipment	(1,365)		(2,188)
Software capitalization costs	(5,029)		(3,219)
Purchases of available-for-sale securities	(21,513)		(33,454)
Proceeds from sales and maturities of available-for-sale securities	10,428		7,159
Net cash used in investing activities	(18,176)		(33,991)
Cash flows from financing activities:
Payments of notes payable	(35,627)		(1,688)
Debt extinguishment costs	(468)		—
Payments of contingent purchase consideration	—		(9)
Net proceeds from issuance of common stock	45,986		192
Capital raise fees	(258)		—
Net change in client fund obligations	(31,033)		(32,527)
Net cash used in financing activities	(21,400)		(34,032)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	(27,741)		(61,066)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	164,042		198,641
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	136,301	$	137,575

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

Table of Contents

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	32,787	$	10,885
Restricted cash and restricted cash equivalents included in funds held for clients	103,514		126,690
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	136,301	$	137,575

Supplemental information:
Cash paid for interest	$	3,140	$	2,247
Cash paid for income taxes	$	532	$	246

Non-cash investing and financing activities:
Acquisition of intangible assets	$	332	$	—
Notes payable

SEC Form 10-Q filed by Asure Software Inc