Asure Software Inc.
ASURE SOFTWARE INC (Form: 8-K/A, Received: 02/29/2012 17:29:35)


UNITED STATES
SECURITIES AND EXCHANGE   COMMISSION
Washington, D.C. 20549
 


FORM 8-K/A
 


CURRENT REPORT
 
Pursuant to Section 13 or
15(d) of the
Securities Exchange Act of 1934
 
Date of Report: December 14, 2011
(Date of earliest event reported)
 
Asure Software, Inc.
 (Exact name of registrant as specified in its charter)

Delaware
 
0-20008
 
74-2415696
(State or other jurisdiction
of incorporation)
 
(Commission File
Number)
 
(IRS Employer
Identification Number)
 
110 Wild Basin Rd
Austin, TX
 
78746
(Address of principal executive offices)
 
(Zip Code)
 
512-437-2700
(Registrant’s telephone number, including area code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
This Form 8-K/A is filed as an amendment to the Current Report on Form 8-K filed by Asure Software, Inc. on December 14, 2011.  This Amendment is being filed to include the financial statements of W.G. Ross Corp., d/b/a Legiant and pro forma information listed below.

 
Item 9.01   Financial Statements and Exhibits                                          
           
 
(a)
 
Financial statements of businesses acquired.
           
   
(1)
 
Exhibit 99.1 - Audited Financial Statements for W.G. Ross Corp. as of and for the years ended December 31, 2009 and 2010 and the accompanying Report of Independent Auditors; and
           
   
(2)
 
Exhibit 99.2 - Unaudited Financial Statements for W.G. Ross Corp. as of and for the nine months ended September 30, 2011 and 2010.
           
 
(b)
 
Pro forma financial information—Included herein as Exhibit 99.3 are the unaudited pro forma condensed combined Balance Sheet as of September 30, 2011 and the pro forma condensed combined Statements of Operations for the twelve months ended December 31, 2010 and nine months ended September, 2011.
           
 
(c)
 
Exhibits.
 

Exhibit
 
Description
23.1
 
     
99.1
 
     
99.2
 
     
99.3
 
 
 
 
 

 
 
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 hereunto duly authorized.

 
ASURE SOFTWARE, INC.
   
Date: February 29, 2012
By:
/s/David Scoglio
 
   
David Scoglio
   
Chief Financial Officer
 
 
 
 
 

 
 

 
 
EXHIBIT INDEX

Exhibit
 
Description
23.1
 
     
99.1
 
     
99.2
 
     
99.3
 

 
EXHIBIT 23.1
 

CONSENT OF INDEPENDENT AUDITOR
 
We consent to the incorporation by reference in the Registration Statements (No. 333-77733, 333-44533, 333-48885, 333-28499, 333-51822, 333-64212, 333-65472, 333-65464, 333-95754, 333-65478) on Form S-8 of Asure Software, Inc. of our report dated January 17, 2012, relating to our audits of the financial statements of W.G. Ross Corporation as of and for the years ended December 31, 2010 and 2009, included in this Current Report on Form 8-K/A.
 
 
 
/s/Padgett Stratemann & Co., L.L.P.
San Antonio, TX
 
February 28, 2012
 
 
EXHIBIT 99.1
 
 
 
 
W. G. Ross Corporation, dba Legiant

Financial Statements

December 31, 2010 and 2009







 
 

 

W. G. Ross Corporation, dba Legiant

Table of Contents

 
Page
   
Independent Auditors' Report
1
   
Balance Sheets
2
   
Statements of Income
3
   
Statements of Changes in Stockholder’s Deficit
4
   
Statements of Cash Flows
5
   
Notes to Financial Statements
7




 
 

 
 
Padgett Stratemann  & Co., L.L.P.
Independent Auditors' Report
 
To the Stockholder
W. G. Ross Corporation, dba Legiant
Austin, Texas
 
We have audited the accompanying balance sheets of W. G. Ross Corporation, dba Legiant (the "Company") as of December 31, 2010 and 2009, and the related statements of income, changes in stockholder's deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of W. G. Ross Corporation, dba Legiant as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.


Padgett, Stratemann & Co., L.L.P.

Certified Public Accountants
January 17, 2012
 
 
 
 
SAN ANTONIO   
AUSTIN  
100 N.E. LOOP 410, SUITE 1100   811 BARTON SPRINGS ROAD, SUITE 550 TOLL FREE: 800 879 4966
SAN ANTONIO, TEXAS 78216    AUSTIN, TEXAS 78704    WEB: PADGETT-CPA.COM
210 828 6281  512 476 0717  
                                                                                                                                                                                                                                                                            
 
1

 

W. G. Ross Corporation, dba Legiant
Balance Sheets
December 31, 2010 and 2009

Assets
Current Assets
 
2010
   
2009
 
Cash and cash equivalents
  $ 50,827     $ 323,330  
Accounts receivable
    184,400       83,297  
Employee receivable
    7,281       -  
Total current assets
    242,508       406,627  
Property and Equipment — net
    64,123       77,388  
    $ 306,631     $ 484,015  
                 
Liabilities and Stockholder's Deficit
Current Liabilities
               
Lines of credit
  $ 330,000     $ 350,000  
Current portion of note payable
    93,031       88,149  
Accounts payable
    48,024       64,012  
Accrued expenses
    59,979       113,740  
Deferred revenue
    719,616       713,077  
Customer advances
    14,202       14,199  
Total current liabilities
    1,264,852       1,343,177  
Note Payable — less current portion
    463,101       563,399  
Total liabilities
    1,727,953       1,906,576  
Stockholder's Deficit
               
Common stock— no par value; 1,000,000 shares
    500       500  
authorized; 500,000 shares issued and outstanding
Accumulated deficit
    (1,421,822 )     (1,423,061 )
Total stockholder's deficit
    (1,421,322 )     (1,422,561 )
    $ 306,631     $ 484,015  
 
Notes to financial statements form an integral part of these statements.
 
 
2

 
 
W. G. Ross Corporation, dba Legiant
Statements of Income
December 31, 2010 and 2009

   
2010
   
2009
 
Revenue:
           
Sales
  $ 1,868,025     $ 2,063,850  
Service
    1,271,807       1,731,458  
Total revenue
    3,139,832       3,795,308  
Cost of revenue
    965,162       927,318  
Gross profit
    2,174,670       2,867,990  
General and administrative expenses
    1,929,195       2,613,091  
Operating income
    245,475       254,899  
Other income and expense:
               
Mergers and acquisition costs
            (125,211 )
Interest expense
    (45,374 )     (17,366 )
Other income
    42,419       37,215  
Total other income and expense
    (2,955 )     (105,362 )
Net income
  $ 242,520     $ 149,537  
 
Notes to financial statements form an integral part of these statements.
 
 
3

 
 
W. G. Ross Corporation, dba Legiant
Statements of Changes in Stockholder's Deficit
December 31, 2010 and 2009
 
 
 
Common Stock
             
   
Shares
   
Amount
   
Accumulated
   
Total
 
 
Deficit
 
Balance at December 31, 2008
    1,000,000     $ 1,000     $ (419,090 )   $ (418,090 )
Net income
    -       -       149,537       149,537  
Acquisition and retirement of
    (500,000 )     (500 )     (999,500 )     (1,000,000 )
treasury stock
Distributions
    -       -       (154,008       (154,008 )
Balance at December 31, 2009
    500,000       500       (1,423,061 )     (1,422,561 )
Net income
    -       -       242,520       242,520  
Distributions
    -       -       (241,281 )     (241,281 )
Balance at December 31, 2010
    500,000     $ 500     $ (1,421,822 )   $ (1,421,322 )

Notes to financial statements form an integral part of these statements.
 
 
4

 
 
W. G. Ross Corporation, dba Legiant
Statements of Cash Flows
Years Ended December 31, 2010 and 2009
 
   
2010
   
2009
 
Cash Flows From Operating Activities
           
Net income
  $ 242,520     $ 149,537  
Adjustments to reconcile net income to
               
net cash provided by operating activities:
Depreciation and amortization
    17,355       46,651  
Changes in operating assets and liabilities:
               
Accounts receivable
    (101,103 )     170,874  
Employee receivable
    (7,281 )     -  
Accounts payable
    (15,988 )     50,752  
Accrued expenses
    (53,761 )     71,530  
Deferred revenue
    6,539       (131,535 )
Customer advances
    3       14,199  
Net cash provided by operating activities
    88,284       372,008  
Cash Flows From Investing Activities — purchase
    (4,090 )     (26,698 )
of property and equipment
Net cash used in investing activities
    (4,090 )     (26,698 )

Notes to financial statements form an integral part of these statements.
 
 
5

 
 
W. G. Ross Corporation, dba Legiant
Statements of Cash Flows
Years Ended December 31, 2010 and 2009
(Continued)
 
   
2010
   
2009
 
Cash Flows From Financing Activities
           
Proceeds from (payments on) lines of credit— net
  $ (20,000 )   $ 138,827  
Purchase of common stock
            (300,000
Payments on note payable
    (95,416 )    
(48,452
)
Stockholder's distributions
    (241,281 )     (154,008 )
Net cash used in financing activities
    (356,697 )     (363,633 )
Net decrease in cash and cash equivalents
    (272,503 )     (18,323 )
Cash and cash equivalents at beginning of year
    323,330       341,653  
Cash and cash equivalents at end of year
  $ 50,827     $ 323,330  
Supplemental Disclosures of Cash Flow Information
               
Cash paid for interest
  $ 45,374     $ 17,366  
Supplemental Disclosures of Noncash Financing Activity
               
Purchase of common stock with a note payable
  $ -     $ 700,000  

Notes to financial statements form an integral part of these statements.
 
 
6

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
1.           Summary of Significant Accounting Policies
 
Reporting Entity and Nature of Operations
 
W. G. Ross Corporation, dba Legiant (the "Company") integrates software, hardware, and professional services to create a comprehensive time accounting solution. The Company is headquartered in Austin, Texas.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Recent Accounting Pronouncements
 
Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities
 
On January 1, 2010, the Company adopted Accounting Standards Codification ("ASC"), Consolidations — Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities. The new guidance identifies the primary beneficiary of a variable interest entity ("VIE") as the enterprise that has both the power to direct the activities of a VIE that most significantly impacts the entity's economic performance, and the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. The new guidance also provides information on additional disclosures and ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE.
 
The new provisions shall be effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company adopted this guidance for its year ended December 31, 2010. The adoption of this guidance did not have a material effect on the Company's financial position, results of operations, or cash flows.
 
Cash Equivalents
 
Cash equivalents for purposes of the statements of cash flows are all highly liquid debt instruments purchased with a maturity of three months or less.
 
 
7

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
1.           Summary of Significant Accounting Policies (continued)
 
Accounts Receivable
 
The allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. Losses are charged against the allowance when management believes the uncollectibility of a receivable is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for doubtful accounts is evaluated on a regular basis by management and is based on historical experience and specifically identified questionable receivables. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. There was no allowance for doubtful accounts at December 31, 2010 and 2009.
 
Depreciation and Amortization
 
Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method based on the following estimated useful lives: vehicles — 7 years; furniture and fixtures —7 years; computers —5 years; and computer software —3 years.
 
Impairment of Long-Lived Assets
 
The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, and the effects of obsolescence, demand, competition, and other economic factors. The Company did not recognize an impairment loss during the years ended December 31, 2010 and 2009.
 
Revenue Recognition
 
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable.
 
 
8

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
1.           Summary of Significant Accounting Policies (continued)
 
Revenue Recognition (continued)
 
The Company earns revenue from two primary sources: the sale and installation of time accounting software and hardware and related maintenance and service contracts. In some instances, these are sold together in a multiple-element arrangement. When a multiple-element arrangement exists, the Company will allocate the value of the arrangement to each unit of accounting based on vendor-specific objective evidence of selling price, typically the estimated selling price of the undelivered element on a stand-alone basis. In this case, the software license and hardware revenue will be recognized upon installation, setup, and customer acceptance, and the associated maintenance and support revenue will be deferred and recognized ratably over the contractual period (typically one year).
 
If hardware devices are sold on a stand-alone basis, revenue is recognized upon shipment of the hardware.
 
The Company also offers its products as software-as-a-service ("SaaS") which is offered on a subscription basis. Recently, this type of software subscription has also become known as "cloud-based" software subscriptions. The Company recognizes SaaS revenue pro-rata over the life of the software subscription contract.
 
Deferred revenue includes collected retainer amounts for product installations which have yet to be finalized and software and hardware maintenance amounts collected for which the service period has not yet elapsed.
 
Cost of Revenue
 
Cost of revenue consists primarily of hardware and software products purchased from third-party vendors which are then rebranded and sold under the Legiant name.
 
Income Taxes
 
The Company, with the consent of its stockholder, has elected under the Internal Revenue Code to be taxed as an S Corporation. The stockholders of an S Corporation are taxed on their proportionate share of the entity's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. Certain specific deductions and credits flow through the Company to its stockholder.
 
The Company is subject to the Texas gross margin tax. In 2010, the Company recorded $19,544 ($5,936 in 2009) of Texas gross margin tax, which is included in general and administrative expenses in the statements of income.
 
 
9

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
1.           Summary of Significant Accounting Policies (continued)
 
Contingencies
 
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company's management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In   assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.
 
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
 
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
 
Advertising and Promotion
 
Advertising and promotion costs totaled approximately $104,000 and $193,000 for the years ended December 31, 2010 and 2009, respectively, and are expensed as incurred.
 
 
10

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements

2.     Property and Equipment
 
Property and equipment consists of the following:
 
   
December 31,
 
   
2010
   
2009
 
Vehicles
  $ 86,743     $ 86,742  
Furniture and fixtures
    80,213       80,213  
Computers
    75,794       73,816  
Computer software
    18,040       15,929  
      260,790       256,700  
Less accumulated depreciation and amortization
    196,667       179,312  
Net property and equipment
  $ 64,123     $ 77,388  

3.    Lines of Credit
 
The Company has two revolving lines of credit with a total capacity of $350,000 from a commercial bank, bearing interest at the bank's prime lending rate. At December 31, 2010 and 2009, there were outstanding balances of $330,000 and $350,000, respectively. The stockholder of the Company has unconditionally guaranteed the debt. In addition, all accounts receivable, equipment, and general intangibles of the Company are collateralized under the loan agreements. The lines of credit, including any accrued interest, are due on demand.
 
4.            Note Payable
 
In 2009, the Company issued a $700,000 note payable to a former stockholder, for the purchase of 500,000 shares of common stock. The note requires monthly principal and interest payments of $9,894, at an interest rate of 5.0%, and matures on June 11, 2016. The note is secured by 250,000 shares of common stock of the Company.
 
 
11

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements

4.           Note Payable (continued)
 
Future payments required under the stock repurchase note as of December 31, 2010 are as follows:
 
Year ending December 31,
     
2011
    93,031  
2012
    97,052  
2013
    102,017  
2014
    107,237  
2015
    112,723  
Thereafter
    44,072  
    $ 556,132  
 
5.            Retirement Plan
 
The Company sponsors a 401(k) employee retirement savings plan with discretionary employer matching. The Company contributed $17,038 and $29,696 of matching contributions during 2010 and 2009, respectively.
 
6.     Lease Commitments
 
The Company leases facilities in Austin, Texas under a lease agreement, which expires March 31, 2013.
 
Future annual minimum lease payments required under the agreement as of December 31, 2010 are as follows:
 
Year ending December 31,
     
2011
  $ 44,766  
2012
    52,923  
2013
    13,231  
    $ 110,920  

 
12

 

W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
7.    Mergers and Acquisition Costs
 
During 2009, the Company incurred a one-time expense totaling $125,211 as a result of a potential purchase of the Company. These costs were related to travel, legal counsel, and accounting services.
 
8.     Treasury Stock
 
In 2009, the Board of Directors authorized the purchase of 500,000 shares of the Company's common stock. The Company repurchased 500,000 shares of common stock for $300,000 in cash and a $700,000 note payable. The Company retired all 500,000 shares in 2009.
 
9.    Customers and Credit Risk
 
In 2010 and 2009, 83% and 95%, respectively, of the Company's cost of revenue purchases were value-­added-reseller software from two providers. Disruption of the supply of this software platform would severely impact the Company's source of modifiable software and ability to earn revenue.
 
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation up to a minimum of $250,000. The Company has not experienced any losses in such accounts.
 
10.         Subsequent Events
 
Effective December 14, 2011, the Company sold substantially all its assets to a third party.
 
The Company has evaluated subsequent events through December 14, 2011.
 
 
13

 
EXHIBIT 99.2
 
W. G. Ross Corporation, dba Legiant
 
Table of Contents
 
 
Page
   
Balance Sheets
2
   
Statements of Income
3
   
Statements of Cash Flows
4
   
Notes to Financial Statements
6
 
 
 
 

 
 
W. G. Ross Corporation, dba Legiant
Balance Sheets
September 30, 2011 and December 31, 2010
 
Assets
 
Current Assets
 
2011
   
2010
 
Cash and cash equivalents
  $ 190,438     $ 50,827  
Accounts receivable
    70,328       184,400  
Employee receivable
    -       7,281  
Total current assets
    260,766       242,508  
Property and Equipment net
    58,631       64,123  
    $ 319,397     $ 306,631  
 
Liabilities and Stockholder's Deficit
 
Current Liabilities
           
Lines of credit
  $ 25,495     $ 330,000  
Current portion of note payable
    492,946       93,031  
Accounts payable
    28,123       48,024  
Accrued expenses
    56,460       59,979  
Deferred revenue
    910,063       719,616  
Customer advances
    -       14,202  
Total current liabilities
    1,513,087       1,264,852  
Note Payable — less current portion
    -       463,101  
Total liabilities
    1,513,087       1,727,953  
Stockholder's Deficit
               
Common stock— no par value; 1,000,000 shares
          authorized; 500,000 shares issued and outstanding
    500       500  
Accumulated deficit
    (1,194,190 )     (1,421,822 )
Total stockholder's deficit
    (1,193,690 )     (1,421,322 )
    $ 319,397     $ 306,631  
 
Notes to financial statements form an integral part of these statements.
 
 
2

 
 
W. G. Ross Corporation, dba Legiant
Statements of Income
For the Nine months ended September 30, 2011 and 2010
 
   
2011
   
2010
 
Revenue:
           
Sales
  $ 1,189,027     $ 1,543,539  
Service
    849,284       985,735  
Total revenue
    2,038,311       2,529,274  
Cost of revenue
    410,585       746,063  
Gross profit
    1,627,726       1,783,211  
General and administrative expenses
    1,261,079       1,672,578  
Operating income
    366,647       110,633  
Other income and expense:
               
Mergers and acquisition costs
            -  
Interest expense
    (24,609 )     (34,565 )
Other income
    (1,459 )     (107 )
Total other income and expense
    (26,068 )     (34,672 )
Net income
  $ 340,579     $ 75,961  

Notes to financial statements form an integral part of these statements.
 
 
3

 
 
W. G. Ross Corporation, dba Legiant
Statements of Cash Flows
For the Nine months ended September 30, 2011 and 2010
 
   
2011
   
2010
 
Cash Flows From Operating Activities
           
Net income
  $ 340,579     $ 75,961  
Adjustments to reconcile net income to
net cash provided by operating activities:
               
Depreciation and amortization
    17,644       15,668  
Changes in operating assets and liabilities:
               
Accounts receivable
    114,072       (89,279 )
Employee receivable
    7,281       (9,654 )
Accounts payable
    12,929       71,100  
Accrued expenses
    (10,855 )     (29,043 )
Deferred revenue
    -       -  
Customer advances
    176,245       (64,064 )
Net cash provided by operating activities
    657,895       (29,311 )
Cash Flows From Investing Activities — purchase
of property and equipment
    (12,152 )     (4,222 )
Net cash used in investing activities
    (12,152 )     (4,222 )
 
Notes to financial statements form an integral part of these statements.
 
 
4

 
 
W. G. Ross Corporation, dba Legiant
Statements of Cash Flows
For the Nine months ended September 30, 2011 and 2010
(Continued)
 
   
2011
   
2010
 
Cash Flows From Financing Activities
           
Proceeds from (payments on) lines of credit— net
  $ -       -  
Purchase of common stock
            -  
Wachovia Line of Credit
    (330,000 )     (40,000 )
Payments on note payable
    (63,185 )     (72,875 )
Stockholder's distributions
    (112,947 )     (1,000 )
Net cash used in financing activities
    (506,132 )     (113,875 )
Net increase/(decrease) in cash and cash equivalents
    139,611      
(147,408
)
Cash and cash equivalents at beginning of year
    50,827       323,330  
Cash and cash equivalents at end of year
  $ 190,438     $ 175,922  
Supplemental Disclosures of Cash Flow Information
               
Cash paid for interest
  $ 24,609     $ 34,565  
Supplemental Disclosures of Noncash Financing Activity
               
Purchase of common stock with a note payable
  $ -       -  
 
Notes to financial statements form an integral part of these statements.
 
 
5

 
 
Notes to Unaudited Financial Statements
 
1.           Summary of Significant Accounting Policies
 
Reporting Entity and Nature of Operations
 
W. G. Ross Corporation, dba Legiant (the "Company") integrates software, hardware, and professional services to create a comprehensive time accounting solution. The Company is headquartered in Austin, Texas.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Recent Accounting Pronouncements
 
Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities
 
On January 1, 2010, the Company adopted Accounting Standards Codification ("ASC"), Consolidations — Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities. The new guidance identifies the primary beneficiary of a variable interest entity ("VIE") as the enterprise that has both the power to direct the activities of a VIE that most significantly impacts the entity's economic performance, and the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. The new guidance also provides information on additional disclosures and ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE.
 
The new provisions shall be effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company adopted this guidance for its year ended December 31, 2010. The adoption of this guidance did not have a material effect on the Company's financial position, results of operations, or cash flows.
 
Cash Equivalents
 
Cash equivalents for purposes of the statements of cash flows are all highly liquid debt instruments purchased with a maturity of three months or less.
 
 
6

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
1.           Summary of Significant Accounting Policies (continued)
 
Accounts Receivable
 
The allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. Losses are charged against the allowance when management believes the uncollectibility of a receivable is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for doubtful accounts is evaluated on a regular basis by management and is based on historical experience and specifically identified questionable receivables. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. There was no allowance for doubtful accounts at December 31, 2010 and September 30, 2011.
 
Depreciation and Amortization
 
Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method based on the following estimated useful lives: vehicles — 7 years; furniture and fixtures —7 years; computers —5 years; and computer software —3 years.
 
Impairment of Long-Lived Assets
 
The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, and the effects of obsolescence, demand, competition, and other economic factors. The Company did not recognize an impairment loss during the years ended December 31, 2010 and  September 30, 2011.
 
Revenue Recognition
 
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable.

 
7

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
1.           Summary of Significant Accounting Policies (continued)
 
Revenue Recognition (continued)
 
The Company earns revenue from two primary sources: the sale and installation of time accounting software and hardware and related maintenance and service contracts. In some instances, these are sold together in a multiple-element arrangement. When a multiple-element arrangement exists, the Company will allocate the value of the arrangement to each unit of accounting based on vendor-specific objective evidence of selling price, typically the estimated selling price of the undelivered element on a stand-alone basis. In this case, the software license and hardware revenue will be recognized upon installation, setup, and customer acceptance, and the associated maintenance and support revenue will be deferred and recognized ratably over the contractual period (typically one year).
 
If hardware devices are sold on a stand-alone basis, revenue is recognized upon shipment of the hardware.
 
The Company also offers its products as software-as-a-service ("SaaS") which is offered on a subscription basis. Recently, this type of software subscription has also become known as "cloud-based" software subscriptions. The Company recognizes SaaS revenue pro-rata over the life of the software subscription contract.
 
Deferred revenue includes collected retainer amounts for product installations which have yet to be finalized and software and hardware maintenance amounts collected for which the service period has not yet elapsed.
 
Cost of   Revenue
 
Cost of revenue consists primarily of hardware and software products purchased from third-party vendors which are then rebranded and sold under the Legiant name.
 
Income Taxes
 
The Company, with the consent of its stockholder, has elected under the Internal Revenue Code to be taxed as an S Corporation. The stockholders of an S Corporation are taxed on their proportionate share of the entity's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. Certain specific deductions and credits flow through the Company to its stockholder.
 
The Company is subject to the Texas gross margin tax. In 2010, the Company recorded $19,544 of Texas gross margin tax, which is included in general and administrative expenses in the statements of income.

 
8

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
1.           Summary of Significant Accounting Policies (continued)
 
Contingencies
 
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company's management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In   assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.
 
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
 
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
 
Advertising and Promotion
 
Advertising and promotion costs totaled approximately $90,000 and $99,000 for the nine months ended September 30, 2010 and 2011, respectively.

 
9

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
2.     Property and Equipment
 
Property and equipment consists of the following:
 
   
December 31
2010
   
September 30 
2011
 
Vehicles
  $ 86,743     $ 86,743  
Furniture and fixtures
    80,213       83,243  
Computers
    75,794       84,916  
Computer software
    18,040       18,040  
      260,790       272,942  
Less accumulated depreciation and amortization
    196,667       214,311  
Net property and equipment
  $ 64,123     $ 58,631  

3.    Lines of Credit
 
The Company has two revolving lines of credit with a total capacity of $350,000 from a commercial bank, bearing interest at the bank's prime lending rate. At December 31, 2010 and September 30, 2011, there were outstanding balances of $330,000 and $0, respectively. The stockholder of the Company has unconditionally guaranteed the debt. In addition, all accounts receivable, equipment, and general intangibles of the Company are collateralized under the loan agreements. The lines of credit, including any accrued interest, are due on demand.
 
4.           Note Payable
 
In 2009, the Company issued a $700,000 note payable to a former stockholder, for the purchase of 500,000 shares of common stock. The note requires monthly principal and interest payments of $9,894, at an interest rate of 5.0%, and matures on June 11, 2016. The note is secured by 250,000 shares of common stock of the Company.

 
10

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
4.           Note Payable (continued)
 
Future payments required under the stock repurchase note as of December 31, 2010 are as follows:
 
 
Year ending December 31,      
  2011   $ 93,031  
  2012     97,052  
  2013     102,017  
  2014     107,237  
  2015     112,723  
  Thereafter   $ 44,072  
      556,13 2  
 
5.     Retirement Plan
 
The Company sponsors a 401(k) employee retirement savings plan with discretionary employer matching. The Company contributed $17,038 and $29,696 of matching contributions during 2010 and 2009, respectively.
 
6.    Lease Commitments
 
The Company leases facilities in Austin, Texas under a lease agreement, which expires March 31, 2013.
 
Future annual minimum lease payments required under the agreement as of December 31, 2010 are as follows:
 
  Year ending December 31,      
 2011       44,766  
 2012     52,923  
 2013     13,231  
    $ 110,920  
 
 
11

 
 
W. G. Ross Corporation, dba Legiant
Notes to Financial Statements
 
7.    Mergers and Acquisition Costs
 
During 2009, the Company incurred a one-time expense totaling $125,211 as a result of a potential purchase of the Company. These costs were related to travel, legal counsel, and accounting services.
 
8.    Treasury Stock
 
In 2009, the Board of Directors authorized the purchase of 500,000 shares of the Company's common stock. The Company repurchased 500,000 shares of common stock for $300,000 in cash and a $700,000 note payable. The Company retired all 500,000 shares in 2009.
 
9.    Customers and Credit Risk
 
In 2010 and 2009, 83% and 95%, respectively, of the Company's cost of revenue purchases were value-­added-reseller software from two providers. Disruption of the supply of this software platform would severely impact the Company's source of modifiable software and ability to earn revenue.
 
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation up to a minimum of $250,000. The Company has not experienced any losses in such accounts.
 
10.         Subsequent Events
 
Effective December 14, 2011, the Company sold substantially all its assets to a third party.
 
The Company has evaluated subsequent events through December 14, 2011.
 
 
12

 
EXHIBIT 99.3
 
 
ASURE SOFTWARE, INC.
 
INDEX TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
 
Page
   
Introduction to Unaudited Pro Forma Condensed Combined Financial Information
2
   
Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2011
4
   
Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2010
5
   
Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 2011
6
   
Notes to Unaudited Pro Forma Condensed Combined Financial Information
7
 

 
 

 
 
INTRODUCTION TO ASURE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
(Amounts in thousands, except per share data)
 
On December 14, 2011, the Company, through Asure Legiant, LLC, a wholly owned subsidiary of the Company (“Purchaser”), purchased substantially all of the assets and assumed certain liabilities of WG Ross Corp., d/b/a Legiant (“Seller”), relating to its cloud computing time and attendance software and management services pursuant to an Asset Purchase Agreement (“APA”) by and among the Company, Purchaser, Seller and, with respect to Section 6.6 only, ADI Software, LLC, a wholly owned subsidiary of the Company. The APA contains certain customary representations, warranties, indemnities and covenants of the Company, Purchaser and Seller.

 The purchase price for the assets was $4,000,000, consisting of $1,511,231.98 in cash and three subordinated promissory notes of the Purchaser in the aggregate principal amount of $2,488,768.02, as adjusted pursuant to the terms of the APA. One of the promissory notes is for an aggregate principal amount of $250,000, bears interest at an annual rate of 0.20%, and will mature on February 1, 2012. The second promissory note is for an aggregate principal amount of $477,536.05, bears interest at an annual rate of 5.00%, and will mature on October 1, 2014. The third promissory note is for an aggregate principal amount of $1,761,231.97, bears interest at an annual rate of 0.20%, and will mature on October 1, 2014. The Purchaser may offset any indemnification payments owed by the Seller under the APA against up to $1 million under the third promissory note. All three promissory notes are guaranteed by the Company and are subordinated to the Company’s bank financing. The cash portion of the purchase price was funded with the Company’s cash on hand and proceeds from the Company’s bank financing.

The business combination was accounted for under ASC 805, “Business Combinations.”  The application of purchase accounting under ASC 805 requires the total purchase price to be allocated to the fair value of assets acquired and liabilities assumed based on their fair values at the acquisition date, with amounts exceeding fair value being recorded as goodwill.  The Company is currently in the process of assessing and finalizing the fair value of the assets acquired and the liabilities assumed.  The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed (in thousands):
 
Assets Acquired
     
Cash
  $ -  
Short-term investments
    -  
Accounts receivable
    5  
Inventory
    26  
Fixed assets
    30  
Other assets
    -  
Goodwill
    2,167  
Customer relationships (7 year useful life)
    801  
Reseller Relationship (7 years useful life)
    709  
Trade names (1 year useful life)
    30  
Non-compete agreements (3 year useful life)
    26  
Total assets acquired
   
3,794
 
         
Liabilities assumed
       
Accounts payable
    (10
Accrued compensation and benefits
    -  
Accrued other liabilities
    (88
Deferred revenue
    -  
Total liabilities assumed
    (98
         
Net assets acquired
  $ 3,696  
 
 
2

 

The following unaudited pro forma condensed combined balance sheet assumes the acquisition occurred on September 30, 2011 and the unaudited pro forma condensed combined statements of operations and notes thereto, assume that the Acquisition occurred at the beginning of the periods presented.  The unaudited pro forma condensed combined financial information is derived from, and should be read in conjunction with, the consolidated financial statements of Asure Software for the year ended December 31, 2010 filed on Form 10-K and Legiant for the year ended December 31, 2010 included herein and the unaudited interim consolidated financial statements of Asure Software for the nine months ended September 30, 2011 filed on Form 10-Q and Legiant for the nine months ended September 30, 2011 included herein. The unaudited pro forma condensed combined financial information includes unaudited pro forma adjustments that are factually supportable and directly attributable to the Acquisition. In addition, with respect to the unaudited pro forma condensed combined financial information, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information was prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805 – Business Combinations. Certain amounts in the Legiant historical financial statements have been reclassified to conform to classifications used by Asure Software, Inc.

The unaudited pro forma condensed combined statements of operations do not include non-recurring transaction costs associated with the Acquisition that are no longer capitalized as part of the acquisition.
 
The following pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of (i) the results of operations and financial position that would have been achieved had the Acquisition taken place on the dates indicated or (ii) the future operations of the combined company. The following information should be relied on only for the limited purpose of presenting what the results of operations and financial position of the combined businesses of Asure Software and Legiant might have looked like had the Acquisition taken place at an earlier date.
 
 
3

 
 
Unaudited Pro Forma Condensed Balance Sheet
 
(Amounts in thousands, except per share data)
 
   
Asure 09/30/11
   
Legiant 09/30/11
   
Pro Forma Combined Adjustments
     
Pro Forma Combined
9/30/11
 
                           
ASSETS
                         
 Current Assets:
                         
   Cash and cash equivalents
   
6,082
     
190
   
(1,511
)
a
   
4,761
 
   Accounts receivable trade
   
996
     
70
             
1,066
 
   Allowance
   
(17
)
   
-
             
(17
)
   Notes receivable
   
120
     
-
             
120
 
   Inventory
   
6
     
-
             
6
 
   Prepaid expenses and other current assets
   
227
     
-
             
227
 
Total Current Assets
   
7,414
     
260
   
(1,511
)
     
6,163
 
   Property and equipment, net
   
221
     
59
   
(17
)
b
   
263
 
   Intangible assets, net
   
2,258
     
-
   
1,566
 
c
   
3,824
 
   Goodwill
   
-
     
-
   
2,166
 
d
   
2,166
 
     Total Assets
   
9,893
     
319
   
2,204
       
12,416
 
                                 
LIABILITIES AND STOCKHOLDERS’EQUITY
                               
   Current Liabilities:
                               
Accounts payable
   
686
     
54
   
(11
)
e
   
729
 
Line of Credit
   
500
                     
500
 
Accrued compensation and benefits
   
72
     
-
             
72
 
Other accrued Liabilities
   
399
     
56
             
455
 
Deferred Revenue
   
2,522
     
910
   
 
 
 
   
3,432
 
Total Current Liabilities
   
4,179
     
1,020
   
(11
)
     
5,188
 
Long-term deferred revenue
   
150
     
-
             
150
 
Subordinated notes (related parties $800)
   
1,450
     
493
   
1,985
 
f
   
3,928
 
 Subordinated convertible notes (related parties $800)
   
1,400
     
-
             
1,400
 
Other long-term obligations
   
4
     
-
             
4
 
   Total Liabilities
   
7,183
     
1,513
   
1,974
       
10,670
 
 Owner’s Equity
   
2,710
     
(1,194
)
 
230
 
g
   
1,746
 
Total Liabilities and Stockholders’ Equity
   
9,893
     
319
   
2,204
       
12,416
 
 
(The accompanying notes are an integral part of the Pro Forma consolidated financial information)
 
 
4

 
 
Unaudited Pro Forma Condensed Statement of Operations
 
(Amounts in thousands, except per share data)
 
   
Asure
Twelve Months
Ended Dec-10
   
Legiant
Twelve Months
Ended Dec-10
   
Pro Forma
Combined
Adjustments
     
Pro Forma Combined
Twelve Months
Ended Dec-10
 
                           
Revenues
                         
Revenues
   
10,033
     
3,139
   
-
       
13,172
 
Total Revenues
   
10,033
     
3,139
             
13,172
 
                                 
Cost of Sales
                               
Cost of sales
   
2,259
     
965
   
114
 
a
   
3,338
 
Total Cost of Sales
   
2,259
     
965
   
114
       
3,338
 
                                 
Gross Margin
   
7,774
     
2,174
   
(114
)
     
9,834
 
                                 
Operating Expense
                               
Selling, general and administrative expenses
   
5,693
     
1,929
   
(61
b
   
7,561
 
Research and development
   
1,445
                     
1,445
 
Loss on lease agreement
   
1,203
     
-
             
1,203
 
Amortization of intangibles
   
598
     
-
   
140
 
a
   
738
 
Total Operating Expenses
   
8,939
     
1,929
   
79
       
10,947
 
                                 
Income (Loss) from Operations
   
(1,165
)
   
245
   
(193
)
     
(1,113
)
                                 
Other Income and (Expenses)
                               
Interest income
   
5
     
42
             
47
 
Gain on Investments
   
130
     
-
             
130
 
Foreign currency translation (loss) gain
   
(54
)
   
-
             
(54
)
Other income (expenses)
   
(61
)
   
(45
)
 
(34
)
c
   
(140
)
Total Other Income and (Expense)
   
20
     
(3
)
 
(34
)
     
(17
)
                                 
Income (Loss) From Operations, Before Income Taxes
   
(1,145
)
   
242
   
(227
)
     
(1,130
)
Benefit (provision) for income taxes
   
8
     
-
             
8
 
Net Income (Loss)
 
$
(1,137
)
   
242
   
(227
)
     
(1,122
)
                                 
Net income per common share:
                               
Basic
 
$
(0.37
)
                        (0.36
Diluted
 
$
(0.37
)
                        (0.36
                                 
Weighted-average common shares outstanding:
                               
Basic
   
3,087
                      3,087  
Diluted
   
3,087
                      3,087  
 
(The accompanying notes are an integral part of the Pro Forma consolidated financial information)
 
 
5

 
Unaudited Pro Forma Condensed Statement of Operations
 
(Amounts in thousands, except per share data)
 
   
Asure
Nine Months
Ended 09/30/11
   
Legiant
Nine Months
Ended 09/30/11
   
Pro Forma
Combined
Adjustments
     
Pro Forma Combined
Nine Months
Ended 9/30/11
 
Revenues
                         
Revenues
   
7,293
     
2,038
             
9,331
 
Total Revenues
   
7,293
     
2,038
             
9,331
 
                                 
Cost of Sales
                               
Cost of sales
   
1,363
     
410
     
86
 
a
   
1,859
 
Total Cost of Sales
   
1,363
     
410
     
86
       
1,859
 
                                   
Gross Margin
   
5,930
     
1,628
     
(86
)
     
7,472
 
                                   
Operating Expense
                                 
Selling, general and administrative expenses
   
4,340
     
1,261
     
-
       
5,601
 
Research and development
   
1,150
                       
1,150 
 
Amortization of Intangibles
   
449
             
105 
 
a
   
554
 
Total Operating Expenses
   
5,939
     
1,261
     
105
       
7,305
 
                                   
(Loss) Income from Operations
   
(9
)
   
367
     
(191
)
     
167
 
                                   
Other Income and (Expenses)
                                 
Interest income
   
8
     
(1
)
             
7
 
Foreign currency translation gain (loss)
   
47
     
-
               
47
 
Other income (expenses)
   
(20
)
   
(25
)
   
(45
)
c
   
(90
)
Total Other Income and (Expense)
   
35
     
(26
)
   
(45
)
     
(36
)
                                   
(Loss) Income From Operations, Before Income Taxes
   
26
     
341
     
(236
)
     
131
 
Benefits (provision) for income taxes
   
(30
)
   
-
               
(30
)
Net (Loss) Income
 
$
(4
)
   
341
     
(236
)
   
$
101
 
                                   
Net (Loss) income per common share:
                                 
Basic
 
$
(0.00
)
                     
  0.03
 
Diluted
 
$
(0.00
)
                     
  0.03
 
                                   
Weighted-average common shares outstanding:
                                 
Basic
   
3,085
                       
  3,085
 
Diluted
   
3,085
                       
  3,085
 
 
(The accompanying notes are an integral part of the Pro Forma consolidated financial information)
 
 
6

 
 
ASURE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME FOR TWELVE MONTHS ENDED 12/31/10
AND NINE MONTHS ENDED 09/30/11
(Amounts in thousands, except per share data)
 
Notes to Pro Forma Balance Sheet:
(a)     Cash used in acquisition of $1,511
(b)     Adjustment to FA for NBV of Vehicle & Shed not purchased
(c)     Estimated value of intangible assets acquired in acquisition
(d)     Estimated value of goodwill acquired in acquisition
(e)     Adjustment in estimated value of accounts payable
(f)     Note payable to seller
(g)     Reduction in Legiant equity account at acquisition
 
Notes to Pro Forma Income Statement:
 
(a)  
Reflects adjustments to the historical intangible amortization expense resulting from the effects of the preliminary purchase price associated with the acquisition of Legiant.  The final allocation of the actual purchase price is subject to the final valuation of the acquired assets, but that allocation is not expected to differ materially from the preliminary allocation presented in this pro forma condensed combined financial information.
 
(b)   
Expenses excluded on transaction costs associated with the Acquisition that are no longer capitalized as part of the acquisition $61k for twelve months ended December 31, 2010.
 
(c)   
Reflects Interest expense on acquisition related debt
 
 
 
7