Asure Software Inc.
ASURE SOFTWARE INC (Form: 8-K/A, Received: 08/09/2017 06:07:13)

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

 
AMENDMENT No. 1 to FORM 8-K/A
 

 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report: May 25, 2017
(Date of earliest event reported)
 
Asure Software, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction
of incorporation)
 
0-20008
(Commission File Number)
 
74-2415696
(IRS Employer
Identification Number)
 
 
 
 
 
110 Wild Basin Rd., Suite 100, Austin, TX
(Address of principal executive offices)
 
 
 
78746
(Zip Code)
 
512-437-2700
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former Name or Former Address, if changed since last report)
 
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:
 
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1934 (§240.12b-2 of this chapter)
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. 
 


On May 26, 2017 we filed a Current Report on Form 8-K (“Original Form 8-K”) to report the completion of the acquisition of iSystems Holdings, LLC, pursuant to an Equity Purchase Agreement, and the acquisition of Compass HRM, Inc., pursuant to a Stock Purchase Agreement.
 
We are amending the Original Form 8-K to provide the historical financial statements of Compass HRM, Inc. and update the pro forma financial information related to the acquisitions to include Compass HRM, Inc.
 
Item 9.01.  Financial Statements and Exhibits.
 
(a)   Financial Statements of Business Acquired .
 
The audited financial statements of Compass HRM, Inc.  as of December 31, 2016 and for the year then ended and the unaudited financial statements of Compass HRM, Inc. as of March 31, 2017 and for each of the three months ended March 31, 2017 and 2016 are filed as Exhibits 99.1 and 99.2, respectively, hereto and incorporated herein by reference.
 
(b)   Pro Forma Financial Information .
 
Our unaudited pro forma condensed combined financial information of Asure Software, Inc., after giving effect to the iSystems and Compass acquisitions and the borrowings under the Restated Credit Agreement, is filed as Exhibit 99.3 hereto and is incorporated herein by reference.
 
(d)   Exhibits
 
Exhibit No.
 
Description
 
 
 
23.1 
 
 
 
 
99.1
 
 
 
 
99.2
 
 
 
 
99.3
 
 
 
 
 
Cautionary Statement Regarding Forward-Looking Statements
 
This Report contains forward-looking statements that involve risks and uncertainties. These statements relate to future periods, future events or our future operating or financial performance. All statements other than statements of historical fact, including statements identified by words such as “may,” “will,” “could,” “expect,” “anticipate,” “continue,” “plan,” “intend,” “estimate,” “project,” “believe” and similar expressions or variations, are forward-looking statements. Forward-looking statements include but are not limited to statements regarding our strategy, future operations, financial condition, results of operations, projected costs, and plans and objectives of management. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described in our reports and filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events.
 


SIGNATURE
 
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.
 
 
Dated: August 8, 2017
By:
/s/ Pat Goepel
 
 
Pat Goepel
 
 
Chief Executive Officer and Acting Chief Financial Officer
 


 
EXHIBIT INDEX
 
Exhibit No.
 
Description
 
 
 
23.1 
 
 
 
 
99.1
 
 
 
 
99.2
 
 
 
 
99.3
 
 
 
 


Exhibit 23.1


INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in the Registration Statements of Asure Software, Inc. on Form S-3 (File Nos. 333-182828, 333-212317 and 333-216075) and Form S-8 (File Nos. 333-175186 and 333-215097) of our report dated August 8, 2017, with respect to our audits of the financial statements of Compass HRM, Inc. as of December 31, 2016 and for the year then ended, which report is included in this Current Report on Form 8-K/A of Asure Software, Inc. as of August 8, 2017.


/s/ Marcum LLP

Irvine, California
August 8, 2017
 
Exhibit 99.1
 
COMPASS HRM, INC.

FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016
 
 
 
 
 
 

 
COMPASS HRM, INC.

CONTENTS
 
Independent Auditors’ Report
1-2
   
Financial Statements
 
   
Balance Sheet
3
Statement of Operations
4
Statement of Stockholders’ Equity
5
Statement of Cash Flows
6
   
Notes to Financial Statements
7-12



 
INDEPENDENT AUDITORS’ REPORT


To the Board of Directors and Stockholders of
Compass HRM, Inc.

Report on the Financial Statements

We have audited the accompanying financial statements of Compass HRM, Inc. (the “Company”), which comprise the balance sheet as of December 31, 2016 , and the related   statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.  In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Compass HRM, Inc. as of December 31, 2016 , and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.



Irvine, CA
August 8, 2017
2

COMPASS HRM, INC.
     
BALANCE SHEET
     
DECEMBER 31, 2016
 
 
Assets
           
             
Current Assets
           
  Cash
 
$
393,287
       
  Accounts receivable and unbilled revenue
   
271,010
       
  Prepaid expenses and other current assets
   
107,574
       
               
Total Current Assets
         
$
771,871
 
                 
Property, Equipment and Improvements, Net
           
115,269
 
                 
Capitalized Software, Net
           
327,403
 
                 
Total Assets
         
$
1,214,543
 
                 
Liabilities and Stockholders' Equity
               
                 
Current Liabilities
               
Accounts payable and accrued expenses
 
$
214,232
         
Other current liabilities
   
157,304
         
Current portion of term loan
   
191,664
         
                 
Total Current Liabilities
         
$
563,200
 
                 
Term Loan, Net of Current Portion
           
606,129
 
                 
Total Liabilities
           
1,169,329
 
                 
Commitments and Contingencies (See Note 6)
               
                 
Stockholders' Equity
               
Common stock, no par value; 100 shares authorized,
               
 issued and outstanding
   
--
         
Additional paid-in capital
   
89,800
         
Accumulated deficit
   
(44,586
)
       
                 
Total Stockholders' Equity
           
45,214
 
                 
Total Liabilities and Stockholders' Equity
         
$
1,214,543
 
 
The accompanying notes are an integral part of these financial statements.
3

COMPASS HRM, INC.
     
STATEMENT OF OPERATIONS
     
FOR THE YEAR ENDED DECEMBER 31, 2016
 
Revenues
       
$
3,538,269
 
               
Cost of Revenues
         
699,204
 
               
Gross Profit
         
2,839,065
 
               
Operating Expenses
             
Employee compensation and benefits
 
$
1,895,618
         
General and administrative
   
1,156,033
         
Sales and marketing
   
44,769
         
                 
Total Operating Expenses
           
3,096,420
 
                 
Operating Loss
           
(257,355
)
                 
Other Expenses
               
Interest expense
   
43,751
         
Other expense
   
822
         
                 
Total Other Expenses
           
44,573
 
                 
Net Loss
         
$
(301,928
)
 
The accompanying notes are an integral part of these financial statements.
4

COMPASS HRM, INC.
                   
STATEMENT OF STOCKHOLDERS' EQUITY
                   
FOR THE YEAR ENDED DECEMBER 31, 2016
 
                           
Total
 
   
Common Stock
   
Additional
   
Retained
   
Stockholders'
 
   
Shares
   
Amount
    Paid-in Capital     Earnings    
Equity
 
                               
Balance - January 1, 2016
   
100
   
$
--
   
$
52,116
   
$
270,842
   
$
322,958
 
                                         
Distributions
   
--
     
--
     
--
     
(13,500
)
   
(13,500
)
                                         
Contributions
   
--
     
--
     
37,684
     
--
     
37,684
 
                                         
Net loss
   
--
     
--
     
--
     
(301,928
)
   
(301,928
)
                                         
Balance - December 31, 2016
   
100
   
$
--
   
$
89,800
   
$
(44,586
)
 
$
45,214
 
 
 
The accompanying notes are an integral part of these financial statements.
5

COMPASS HRM, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
 
Cash Flows From Operating Activities
           
Net loss
       
$
(301,928
)
Adjustments to reconcile net loss to net cash used in
             
operating activities:
             
Depreciation and amortization
 
$
187,287
         
Changes in operating assets and liabilities:
               
Accounts receivable and unbilled revenue
   
(4,349
)
       
Prepaid expenses and other current assets
   
(84,379
)
       
Accounts payable and accrued expenses
   
75,496
         
Other current liabilities
   
80,651
         
                 
Total Adjustments
           
254,706
 
                 
Net Cash Used in Operating Activities
           
(47,222
)
                 
Cash Flows From Investing Activities
               
Purchase of property, equipment, and improvements
   
(35,541
)
       
Capitalized software development cost
   
(111,383
)
       
                 
Net Cash Used in Investing Activities
           
(146,924
)
                 
Cash Flows From Financing Activities
               
Proceeds from borrowings under term loan
   
287,080
         
Repayment of principal amount of term loan
   
(186,210
)
       
Contributions from stockholders
   
37,684
         
Distributions paid to the stockholders
   
(13,500
)
       
                 
Net Cash Provided by Financing Activities
           
125,054
 
                 
Net Decrease in Cash
           
(69,092
)
                 
Cash - Beginning
           
462,379
 
                 
Cash - Ending
         
$
393,287
 
                 
Supplemental Disclosure of Cash Flow Information
               
                 
Cash paid during the year for:
               
Interest
         
$
43,751
 
 
The accompanying notes are an integral part of these financial statements.
6


COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016
 
Note 1 - Description of Business

Compass HRM, Inc. (the “Company”) is an S Corporation founded on April 21, 2011 and headquartered in Tampa, Florida. The Company is a workforce management company providing a full range of HR solutions and specializing in payroll services tailored to fit each client’s needs.  The Company’s services are comprised of traditional payroll processing, self-serve module for payroll processing under the software as a service (“SaaS”) model, employee time and attendance solutions, limited human resource services, and employee screening and background checks.

In May 2017, the Company entered into a stock purchase agreement with Asure Software, Inc. (“Asure”), pursuant to which Asure purchased all outstanding shares of common stock of the Company for an aggregate consideration of $6,000,000.


Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements.  Such financial statements and accompanying notes are the representation of the Company’s management, who is responsible for their integrity and objectivity.

Use of Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported period. The most significant of estimates relate to unbilled revenue and useful lives of long-lived assets. Actual results could differ from the estimates included in the accompanying financial statements.
 
7

COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016
 
Note 2 - Summary of Significant Accounting Policies (continued)

Revenue Recognition

The Company recognizes revenue for services provided under two type of contracts: monthly subscription fees and per payroll processing services.

Monthly subscription - The Company enters into fixed fee arrangements for SaaS customers.  Fees associated for each services are recognized ratably in the period services are rendered and earned under service agreements with clients where fees are fixed or determinable and collectability is reasonably assured.

Per payroll processing service - The Company negotiates per employee per month fees for the payroll processing customers.  Revenue is recognized as services are rendered.

CASH CONCENTRATION

The Company maintains its cash balances in bank accounts with major financial institutions that from time to time, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes cash balances are not exposed to significant credit risk.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The carrying values of financial instruments, which include cash, accounts receivable, and accounts payable, approximate fair value due to their short-term maturities.  The carrying value of debt approximates fair value due to the relative stable interest rate environment and the Company’s credit-worthiness.

Accounts Receivable and Unbilled Revenue

Accounts receivable consist primarily of amounts due from customers under normal trade terms as of December 31, 2016.  Allowances for uncollected accounts are provided for based upon a variety of factors, including historical amounts written off, an evaluation of current economic conditions and quarterly assessment of customer collectability.  As of December 31, 2016, no allowance for doubtful accounts was recorded by the Company as all amounts were considered collectible.
8

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016
 
Note 2 - Summary of Significant Accounting Policies (continued)

Accounts Receivable and Unbilled Revenue (continued)

The amounts due from customers under normal trade terms that were not yet billed as of December 31, 2016 amounting to $64,401 are reflected as unbilled revenue and included within accounts receivable balances.

Property, Equipment and Improvements

Property, equipment and improvements are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to seven years.  Leasehold improvements are amortized over the shorter of the lease term or economic life of the asset. Expenditures that materially increase the asset’s life are capitalized, while ordinary maintenance and repairs are charged to operations as incurred. Upon disposition of property and equipment, the related cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the statement of operations.

Capitalized Software

The Company capitalized software development costs associated with payroll and time tracking modules.  Capitalized cost include fees paid to consultants, based on their participation in the project during the capitalization period.  The capitalization period includes costs incurred subsequent to management’s determination of project feasibility until the date the project is available for release to customers. Development costs that do not meet the above criteria are charged to expense as incurred.  Capitalized software development costs are amortized over the estimated life of four years.

Income Taxes

The Company and its stockholders have elected since inception to be taxed as an S Corporation.  Under this election, the stockholders of the corporation are personally liable for federal and state income taxes arising from income, if any.

The Company evaluates any uncertain tax provisions in accordance with GAAP. The Company has elected to classify interest and penalties related to uncertain tax positions as a component of income tax expense. To date, the Company has not identified any uncertain tax positions and there have been no interest or penalties assessed or paid.
9

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016
 
Note 3 - Property, Equipment and Improvements, Net

Property, equipment and improvements consist of the following:

Computer and related equipment
 
$
109,368
 
Furniture and fixtures
   
46,666
 
Leasehold improvements
   
59,988
 
     
216,022
 
Less: accumulated depreciation
   
(100,753
)
         
Property, Equipment and Improvements, Net
 
$
115,269
 

Depreciation expense amounted to $37,708 for the year ended December 31, 2016.


Note 4 - Capitalized Software

Capitalized software consist of the following:
 
       
Software Development
 
$
586,416
 
Less: Accumulated amortization
   
(259,013
)
         
Total Capital Software, Net
 
$
327,403
 

For the year ended December 31, 2016, amortization expense for capital software amounted to $149,579.

The following table summarizes the future estimated amortization expense relating to capitalized software as of December 31, 2016:

For the Years Ending
December 31,
 
Amortization
Expense
 
2017
 
$
144,193
 
2018
   
111,560
 
2019
   
71,650
 
         
Total
 
$
327,403
 

 
 
10

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016
 
Note 5 - Term Loan

The Company had a term loan outstanding with Citizens First Bank whereby the Company was able to borrow up to $1,000,000.  The term loan bears interest at a rate of 4.5% per annum computed on a 365/360 basis. The loan termination date is November 11, 2020.  The Company has approximately $200,000 available on the loan at December 31, 2016.  The term loan is collateralized by a first lien on all assets of the Company and an assignment of the personal life insurance policies of two stockholders.

The following table summarizes the future principal payments related to the outstanding term loan:
 
For the Years Ending
December 31,
 
Gross
Amount
 
2017
 
$
191,664
 
2018
   
200,594
 
2019
   
209,940
 
2020
   
195,595
 
         
Total
 
$
797,793
 

In May 2017, the term loan was fully paid off in connection with the stock purchase agreement with Asure.

Note 6 - Leases

The Company leases office space as well as office equipment, under various operating lease agreements. The lease terms expire on various dates through 2019.

At December 31, 2016, future minimum lease agreements under these leases are as follows:

For the Years Ending
December 31,
 
Office Space
   
Equipment
Leases
   
Total
 
2017
 
$
114,243
   
$
17,928
   
$
132,171
 
2018
   
51,000
     
17,928
     
68,928
 
2019
   
--
     
15,750
     
15,750
 
                         
Total
 
$
165,243
   
$
51,606
   
$
216,849
 

Rent expense, including the Company’s share of operating expenses, amounted to $174,422 during the year ended December 31, 2016.
11

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016
 
Note 7 - Related Party Transactions

The Company has a programing and administrative services agreement with Compass Insurance Partners, LLC, a related party by virtue of being under common control.  During 2016, the Company incurred costs from Compass Insurance Partners, LLC of $383,098 for programing and other administrative services performed by Compass Insurance Partners LLC, which are included in general and administrative expenses, in the accompanying statement of operations.

Note 8 - Subsequent Events

The Company evaluated subsequent events through August 8, 2017, the date these financial statements were available to be issued.  Except for the matter disclosed in Notes 1 and 5, there were no material subsequent events that required recognition or additional disclosure in the accompanying financial statements.
 
 
 
 

 
12

Exhibit 99.2
 
 
COMPASS HRM, INC.

FINANCIAL STATEMENTS
(Unaudited)

FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
 
 
 
 
 
 

 
COMPASS HRM, INC.

CONTENTS
 
Financial Statements
 
   
Balance Sheets
1
Statements of Operations
2
Statements of Cash Flows
3-4
   
Notes to Financial Statements
5-10



 
COMPASS HRM, INC.
     
BALANCE SHEETS
 
   
March 31,
   
December 31,
 
   
2017
   
2016
 
   
(Unaudited)
       
             
Assets
           
             
Current Assets
           
Cash
 
$
245,399
   
$
393,287
 
Accounts receivable and unbilled revenue
   
275,470
     
271,010
 
Prepaid expenses and other current assets
   
91,901
     
107,574
 
                 
Total Current Assets
   
612,770
     
771,871
 
                 
Property, Equipment and Improvements, Net
   
124,597
     
115,269
 
                 
Capitalized Software, Net
   
291,355
     
327,403
 
                 
Total Assets
 
$
1,028,722
   
$
1,214,543
 
                 
                 
Liabilities and Stockholders' Equity
               
                 
Current Liabilities
               
Accounts payable and accrued expenses
 
$
256,909
   
$
214,232
 
Other current liabilities
   
--
     
157,304
 
Current portion of term loan
   
193,829
     
191,664
 
                 
Total Current Liabilities
   
450,738
     
563,200
 
                 
Term Loan, Net of Current Portion
   
541,712
     
606,129
 
                 
Total Liabilities
   
992,450
     
1,169,329
 
                 
Stockholders' Equity
               
Common stock, no par value; 100 shares authorized,
               
issued and outstanding
   
--
     
--
 
Additional paid-in capital
   
89,800
     
89,800
 
Accumulated deficit
   
(53,528
)
   
(44,586
)
                 
Total Stockholders' Equity
   
36,272
     
45,214
 
                 
Total Liabilities and Stockholders' Equity
 
$
1,028,722
   
$
1,214,543
 
 
The accompanying notes are an integral part of these financial statements.
1

COMPASS HRM, INC.
     
STATEMENTS OF OPERATIONS
(Unaudited)
     
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
 
   
2017
   
2016
 
             
Revenues
 
$
974,116
   
$
967,555
 
                 
Cost of Revenues
   
271,904
     
115,841
 
                 
Gross Profit
   
702,212
     
851,714
 
                 
Operating Expenses
               
Employee compensation and benefits
   
435,878
     
502,043
 
General and administrative
   
254,600
     
350,027
 
Sales and marketing
   
10,042
     
10,621
 
                 
Total Operating Expenses
   
700,520
     
862,691
 
                 
Operating Income (Loss)
   
1,692
     
(10,977
)
                 
Other Expenses
               
Interest expense
   
10,559
     
10,432
 
Other expense
   
75
     
40
 
                 
Total Other Expenses
   
10,634
     
10,472
 
                 
Net Loss
   
(8,942
)
   
(21,449
)
                 
Retained Earnings (Accumulated Deficit) - Beginning
   
(44,586
)
   
270,842
 
                 
Distributions
   
--
     
(14,743
)
                 
Retained Earnings (Accumulated Deficit) - Ending
 
$
(53,528
)
 
$
234,650
 
 
The accompanying notes are an integral part of these financial statements.
2

 
COMPASS HRM, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
 
   
2017
   
2016
 
             
Cash Flows From Operating Activities
           
Net loss
 
$
(8,942
)
 
$
(21,449
)
Adjustments to reconcile net loss to net cash (used in)
               
provided by operating activities:
               
Depreciation and amortization
   
46,468
     
44,738
 
Changes in operating assets and liabilities:
               
Accounts receivable and unbilled revenue
   
(4,460
)
   
(329
)
Prepaid expenses and other current assets
   
15,673
     
(21,389
)
Accounts payable and accrued expenses
   
42,677
     
83,145
 
Other current liabilities
   
(157,304
)
   
107,055
 
                 
Total Adjustments
   
(56,946
)
   
213,220
 
                 
Net Cash (Used in) Provided by Operating Activities
   
(65,888
)
   
191,771
 
                 
Cash Flows From Investing Activities
               
Purchase of property, equipment, and improvements
   
(19,748
)
   
(13,853
)
Capitalized software development cost
   
--
     
(86,438
)
                 
Net Cash Used in Investing Activities
   
(19,748
)
   
(100,291
)
                 
Cash Flows From Financing Activities
               
Proceeds from borrowings under term loan
   
--
     
137,080
 
Repayment of principal amount of term loan
   
(62,252
)
   
(230,961
)
Distributions paid to the stockholders
   
--
     
(14,743
)
                 
Net Cash Used in Financing Activities
   
(62,252
)
   
(108,624
)
                 
Net (Decrease) in Cash
   
(147,888
)
   
(17,144
)
                 
Cash - Beginning
   
393,287
     
462,379
 
                 
Cash - Ending
 
$
245,399
   
$
445,235
 
 
The accompanying notes are an integral part of these financial statements.
3

 
COMPASS HRM, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
 
   
2017
   
2016
 
Supplemental Disclosure of Cash Flow Information
           
             
  Cash paid during the year for:
           
    Interest
 
$
10,559
   
$
10,432
 
 
 
 
The accompanying notes are an integral part of these financial statements.
4


COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

FOR THE PERIOD ENDED MARCH 31, 2017 AND DECEMBER 31, 2016

 
Note 1 - Description of Business

Compass HRM, Inc. (the “Company”) is an S Corporation founded on April 21, 2011 and headquartered in Tampa, Florida. The Company is a workforce management company providing a full range of HR solutions and specializing in payroll services tailored to fit each client’s needs.  The Company’s services are comprised of traditional payroll processing, self-serve module for payroll processing under the software as a service (“SaaS”) model, employee time and attendance solutions, limited human resource services, and employee screening and background checks.

In May 2017, the Company entered into a stock purchase agreement with Asure Software, Inc. (“Asure”), pursuant to which Asure purchased all outstanding shares of common stock of the Company for an aggregate consideration of $6,000,000.


Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements.  Such financial statements and accompanying notes are the representation of the Company’s management, who is responsible for their integrity and objectivity.

Use of Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. The most significant of estimates relate to unbilled revenue and useful lives of long-lived assets. Actual results could differ from the estimates included in the accompanying financial statements.
5

COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

FOR THE PERIOD ENDED MARCH 31, 2017 AND DECEMBER 31, 2016

 
Note 2 - Summary of Significant Accounting Policies (continued)

Revenue Recognition

The Company recognizes revenue for services provided under two type of contracts: monthly subscription fees and per payroll processing services.

Monthly subscription - The Company enters into fixed fee arrangements for SaaS customers.  Fees associated for each services are recognized ratably in the period services are rendered and earned under service agreements with clients where fees are fixed or determinable and collectability is reasonably assured.

Per payroll processing service - The Company negotiates per employee per month fees for the payroll processing customers.  Revenue is recognized as services are rendered.

CASH CONCENTRATION

The Company maintains its cash balances in bank accounts with major financial institutions that from time to time, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes cash balances are not exposed to significant credit risk.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The carrying values of financial instruments, which include cash, accounts receivable, and accounts payable, approximate fair value due to their short-term maturities.  The carrying value of debt approximates fair value due to the relative stable interest rate environment and the Company’s credit-worthiness.

Accounts Receivable and Unbilled Revenue

Accounts receivable consist primarily of amounts due from customers under normal trade terms as of March 31, 2017 and December 31, 2016.  Allowances for uncollected accounts are provided for based upon a variety of factors, including historical amounts written off, an evaluation of current economic conditions and quarterly assessment of customer collectability.  As of March 31, 2017 and December 31, 2016, no allowance for doubtful accounts was recorded by the Company as all amounts were considered collectible.
6

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

FOR THE PERIOD ENDED MARCH 31, 2017 AND DECEMBER 31, 2016

 
Note 2 - Summary of Significant Accounting Policies (continued)

Accounts Receivable and Unbilled Revenue (continued)

The amounts due from customers under normal trade terms that were not yet billed as of March 31, 2017 and December 31, 2016 amounting to $71,109 and $64,401, respectively, are reflected as unbilled revenue and included within accounts receivable balances.

Property, Equipment and Improvements

Property, equipment and improvements are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to seven years.  Leasehold improvements are amortized over the shorter of the lease term or economic life of the asset. Expenditures that materially increase the asset’s life are capitalized, while ordinary maintenance and repairs are charged to operations as incurred. Upon disposition of property and equipment, the related cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the statement of operations.

Capitalized Software

The Company capitalized software development costs associated with payroll and time tracking modules.  Capitalized costs include fees paid to consultants, based on their participation in the project during the capitalization period.  The capitalization period includes costs incurred subsequent to management’s determination of project feasibility until the date the project is available for release to customers. Development costs that do not meet the above criteria are charged to expense as incurred.  Capitalized software development costs are amortized over the estimated life of four years.

Income Taxes

The Company and its stockholders have elected since inception to be taxed as an S Corporation.  Under this election, the stockholders of the corporation are personally liable for federal and state income taxes arising from income, if any.

The Company evaluates any uncertain tax provisions in accordance with GAAP. The Company has elected to classify interest and penalties related to uncertain tax positions as a component of income tax expense. To date, the Company has not identified any uncertain tax positions and there have been no interest or penalties assessed or paid.
 
7

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

FOR THE PERIOD ENDED MARCH 31, 2017 AND DECEMBER 31, 2016

 
Note 3 - Property, Equipment and Improvements, Net

Property, equipment and improvements consist of the following as of March 31, 2017 and December 31, 2016:

   
March 31,
2017
   
December 31,
2016
 
Computer and related equipment
 
$
129,116
   
$
109,368
 
Furniture and fixtures
   
46,666
     
46,666
 
Leasehold improvements
   
59,988
     
59,988
 
     
235,770
     
216,022
 
Less: accumulated depreciation
   
(111,173
)
   
(100,753
)
                 
Property, Equipment and Improvements, Net
 
$
124,597
   
$
115,269
 

Depreciation expense amounted to $10,420 and $9,093 for the three months ended March 31, 2017 and 2016 respectively.


Note 4 - Capitalized Software

Capitalized software consist of the following as of March 31, 2017 and December 31, 2016.

   
March 31,
2017
   
December 31,
2016
 
Software Development
 
$
586,416
   
$
586,416
 
Less: Accumulated amortization
   
(295,061
)
   
(259,013
)
                 
Total Capital Software, Net
 
$
291,355
   
$
327,403
 

For the three months ended March 31, 2017 and December 31, 2016, amortization expense for capital software amounted to $36,048 and $35,645 respectively.

The following table summarizes the future estimated amortization expense relating to capitalized software as of March 31, 2017:

Calendar Years
 
Amortization
Expense
 
2017 (April to December)
 
$
108,145
 
2018
   
111,560
 
2019
   
71,650
 
         
Total
 
$
291,355
 
 
8

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

FOR THE PERIOD ENDED MARCH 31, 2017 AND DECEMBER 31, 2016

 
Note 5 - Term Loan

The Company had a term loan outstanding with Citizens First Bank whereby the Company was able to borrow up to $1,000,000.  The term loan bears interest at a rate of 4.5% per annum computed on a 365/360 basis. The loan termination date is November 11, 2020.  The Company had approximately $260,000 and $200,000 available on the loan as of March 31, 2017 and December 31, 2016 respectively.  The term loan was collateralized by a first lien on all assets of the Company and an assignment of the personal life insurance policies of two stockholders.

The following table summarizes the future principal payments related to the outstanding term loan as of March 31, 2017:

Calendar Years
 
Gross
Amount
 
2017 (April to December)
 
$
129,691
 
2018
   
200,594
 
2019
   
209,940
 
2020
   
195,316
 
         
Total
 
$
735,541
 

In May 2017, the term loan was fully paid off in connection with the stock purchase agreement with Asure.


Note 6 - Leases

The Company leases office space as well as office equipment, under various operating lease agreements. The lease terms expire on various dates through 2019.

At March 31, 2017, future minimum lease agreements under these leases are as follows:

Calendar Years
 
Office Space
   
Equipment
Leases
   
Total
 
2017 (April to December)
 
$
79,561
   
$
13,446
   
$
93,007
 
2018
   
51,000
     
17,928
     
68,928
 
2019
   
--
     
15,750
     
15,750
 
                         
Total
 
$
130,561
   
$
47,124
   
$
177,685
 
 
 
 
 
9

 
COMPASS HRM, INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

FOR THE PERIOD ENDED MARCH 31, 2017 AND DECEMBER 31, 2016

 
Note 6 - Leases (continued)

Rent expense including in Company’s share of operating expenses amounted to $43,686 and $43,074 during three months ended March 31, 2017 and 2016 respectively.


Note 7 - Related Party Transactions

The Company has a programing and administrative services agreement with Compass Insurance Partners, LLC, a related party by virtue of being under common control.  During the three months ended March 31, 2017 and 2016, the Company incurred costs from $58,459 and $162,617 respectively, for programing and other administrative services performed by Compass Insurance Partners LLC, which is included in general and administrative expenses, in the accompanying statement of operations.


Note 8 - Subsequent Events

The Company evaluated subsequent events through August 8, 2017, the date these financial statements were available to be issued.  Except for the matter disclosed in Notes 1 and 5, there were no material subsequent events that required recognition or additional disclosure in the accompanying financial statements.

 
 

 
 
10
 
Exhibit 99.3


ASURE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On May 25 2017, we closed the acquisition of iSystems Holdings, LLC, a Delaware limited liability company (“Seller”), and iSystems Intermediate Holdco, Inc., a Delaware corporation (“iSystems”), pursuant to which we acquired 100% of the outstanding equity interests of iSystems for an aggregate purchase price of $55,000,000, subject to adjustment as provided in the Equity Purchase Agreement. The aggregate purchase price consists of (i) $32,000,000 in cash, subject to adjustment, (ii) a secured subordinated promissory note (“iSystems Note”) in the principal amount of $5,000,000, subject to adjustment, and 1,526,332 shares of unregistered common stock valued at $18,000,000 based on a volume-weighted average of the closing prices of our common stock during a 90-day period. The iSystems Note bears interest at an annual rate of 3.5% and matures on May 25, 2019. The unpaid principal and all accrued interest under the promissory note is payable in two installments of $2.5 million on May 25, 2018 and May 25, 2019, subject to adjustment. The Equity Purchase Agreement contains certain customary representations, warranties, indemnities and covenants. To finance the iSystems acquisition, we amended and restated our existing credit agreement to add an additional term loan in the amount of approximately $40,000,000, of which we borrowed $32,000,000 to complete the acquisition.

On May 25, 2017 we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Compass HRM, Inc. (“Compass”) and the sellers and seller representative named therein, pursuant to which the sellers sold 100% of the outstanding shares of capital stock of Compass to us for an aggregate purchase price of $6,000,000, subject to adjustment as provided in the Stock Purchase Agreement. The aggregate purchase price consists of $4,500,000 in cash and a subordinated promissory note (“Compass Note”) in the principal amount of $1,500,000, subject to adjustment. The Compass Note bears interest at an annual rate of 3.5% and matures on May 25, 2022. The Compass Note is payable in five annual installments of $300,000 on the anniversary of the closing date, subject to adjustment. Compass is headquartered in Tampa, Florida, and provides cloud-based human resource management software, including payroll, benefits, time and attendance, and performance management. To finance the Compass acquisition, we incurred approximately $4,500,000 of additional indebtedness pursuant to an additional term loan under our Restated Credit Agreement.
 
Following is the purchase price allocation for the iSystems and Compass acquisitions. We based the preliminary fair value estimate for the assets acquired and liabilities assumed for this acquisition upon preliminary calculations and valuations. Our estimates and assumptions for these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). The primary areas of those preliminary estimates that we have not yet finalized relate to certain tangible assets and liabilities acquired, certain legal matters and income and non-income based taxes.

We recorded the transaction using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date of acquisition. The $18,540,000 of intangible assets subject to amortization consist of $480,000 allocated to noncompete agreements, $15,860,000 in customer relationships, $1,190,000 for trade names, and $1,010,000 for developed technology.


We believe meaningful synergies are expected to arise from this acquisition. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill. A portion of acquired goodwill will be deductible for tax purposes.

We based the allocations on fair values at the date of acquisition (amounts in thousands):
 
 
                 
Assets Acquired
 
iSystems
   
Compass
   
Total
 
 Cash & cash equivalents
 
$
211
     
207
     
418
 
Accounts receivable
   
951
     
241
     
1,192
 
Restricted cash
   
200
      -      
200
 
Fixed assets
   
681
     
38
     
719
 
Other assets
   
699
     
33
     
732
 
Goodwill
   
42,096
     
1,929
     
44,025
 
Intangibles
   
15,070
     
3,470
     
18,540
 
Total assets acquired
 
$
59,908
     
5,918
     
65,826
 
 
                       
Liabilities assumed
                       
Accounts payable
   
392
     
65
     
457
 
Accrued other liabilities
   
791
     
45
     
836
 
Deferred revenue
   
1,073
     
-
     
1,073
 
Total liabilities assumed
   
2,256
     
110
     
2,366
 
 
                       
Net assets acquired
 
$
57,652
     
5,808
     
63,460
 

The following unaudited pro forma condensed combined financial statements (and notes thereto) of Asure Software, Inc. assumes that the acquisitions of iSystems and Compass (and, in the case of the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016, the acquisition of Personnel Management Systems, Inc. (“PMSI”), Corporate Payroll, Inc. (Payroll Division) (“CPI”) and Payroll Specialties NW, Inc. (“PSNW”) 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, Inc. for the year ended December 31, 2016 filed on Form 10-K, the unaudited condensed consolidated financial statements of Asure Software, Inc. for the three months ended March 31, 2017 filed on Form 10-Q, the audited financial statements of PMSI as of and for the two years ended December 31, 2016 and 2015, the audited financial statements of CPI as of and for the two years ended December 31, 2016 and 2015, the audited financial statements of PSNW as of and for the two years ended December 31, 2016 and 2015 filed on Form 8-K/A, the audited and unaudited consolidated statements of iSystems Holdings, LLC as of and for the years ended December 31, 2016 and 2015 and three months ended March 31, 2017 and 2016 filed on Form 8-K, and the audited and unaudited financial statements of Compass HRM, Inc. as of and for the year ended December 31, 2016 and three months ended March 31, 2017 and 2016, respectively. The unaudited pro forma condensed combined financial information includes unaudited pro forma adjustments that are factually supportable and directly attributable to the iSystems and Compass acquisitions. 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 results of Asure. 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 iSystems and Compass historical financial statements have been reclassified to conform to classifications used by Asure Software, Inc.
 
The unaudited pro forma condensed combined statement of operations does not include non-recurring transaction costs associated with the iSystems and Compass acquisition that are no longer capitalized as part of that 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 applicable acquisition taken place on the dates indicated or (ii) the future operations of the combined companies. 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 iSystems and Compass might have looked like had the acquisitions taken place at an earlier date.

 
Asure Software, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2017 (Amounts in thousands)
 
 
Asure
Software
 
 
iSystems
 
 
Compass
 
 
Pro Forma
Adjustments
 
 
Pro Forma
Combined
 
Cash & cash equivalents
 
 
2,288
 
 
 
2,190
 
 
 
245
 
 
 
(3,414
)
 (a)
 
1,309
 
Accounts  receivable-net
 
 
8,953
 
 
 
1,195
 
 
 
275
 
 
 
 
 
 
10,423
 
Inventory
 
 
530
 
 
 
 
 
 
 
 
 
 
 
 
530
 
Funds held for clients
 
 
30,544
 
 
 
 
 
 
 
 
 
 
 
 
30,544
 
Prepaid expense and other
 
 
2,012
 
 
 
253
 
 
 
93
 
 
 
 
 
 
2,358
 
Total Current Assets
 
 
44,327
 
 
 
3,638
 
 
 
613
 
 
 
(3,414
)
 
 
45,164
 
Restricted cash
 
 
 
 
 
200
 
 
 
 
 
 
 
 
 
200
 
Property and equipment-net
 
 
1,809
 
 
 
4,688
 
 
 
125
 
 
 
 
 
 
6,622
 
Goodwill
 
 
31,455
 
 
 
16,593
 
 
 
 
 
 
27,432
 
 (b)
 
75,480
 
Intangible assets-net
 
 
17,184
 
 
 
9,639
 
 
 
291
 
 
 
8,610
 
 (c)
 
35,724
 
Other assets
 
 
322
 
 
 
64
 
 
 
 
 
 
 
 
 
386
 
Total Assets
 
 
95,097
 
 
 
34,822
 
 
 
1,029
 
 
 
32,628
 
 
 
163,576
 
Notes payable-current portion
 
 
2,971
 
 
 
61
 
 
 
194
 
 
 
3,245
 
 (d)
 
6,471
 
Accounts payable
 
 
2,276
 
 
 
268
 
 
 
257
 
 
 
 
 
 
2,801
 
Accrued compensation and benefits
 
 
1,523
 
 
 
601
 
 
 
 
 
 
 
 
 
2,124
 
Other accrued liabilities
 
 
1,433
 
 
 
967
 
 
 
 
 
 
 
 
 
2,400
 
Client fund obligations
 
 
30,544
 
 
 
 
 
 
 
 
 
 
 
 
30,544
 
Deferred revenue- current portion
 
 
9,265
 
 
 
254
 
 
 
 
 
 
 
 
 
9,519
 
Total Current Liabilities
 
 
48,012
 
 
 
2,151
 
 
 
451
 
 
 
3,245
 
 
 
53,859
 
Deferred revenue
 
 
611
 
 
 
793
 
 
 
 
 
 
 
 
 
1,404
 
Deferred tax liability
 
 
 
 
 
1,029
 
 
 
 
 
 
 
 
 
 
1,029
 
Notes payable
 
 
28,165
 
 
 
19,280
 
 
 
542
 
 
 
22,886
 
 (d)
 
70,873
 
Other liabilities
 
 
157
 
 
 
102
 
 
 
 
 
 
 
 
 
259
 
Total Liabilities
 
 
76,945
 
 
 
23,355
 
 
 
993
 
 
 
26,131
 
 
 
127,424
 
Common stock
 
 
90
 
 
 
 
 
 
 
 
 
15
 
 (e)
 
105
 
Treasury stock
 
 
(5,017
)
 
 
 
 
 
 
 
 
 
 
 
(5,017
)
Additional paid-in capital
 
 
296,042
 
 
 
 
 
 
90
 
 
 
17,895
 
 (e)
 
314,027
 
Retained earnings (deficit)
 
 
(272,934
)
 
 
11,467
 
 
 
(54
)
 
 
(11,413
)
 
 
(272,934
)
Other comprehensive loss
 
 
(29
)
 
 
 
 
 
 
 
 
 
 
 
(29
)
Total Stockholders’ Equity
 
 
18,152
 
 
 
11,467
 
 
 
36
 
 
 
6,497
 
 
 
36,152
 
Total Liabilities and Stockholders’ Equity
 
 
95,097
 
 
 
34,822
 
 
 
1,029
 
 
 
32,628
 
 
 
163,576
 

 

Asure Software, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
 
For the Three Months Ended March 31, 2017 (Amounts in thousands, except per share data) Pro Forma
 
   
 
Asure Software
   
iSystems
   
Compass
   
Pro Forma Adjustments
   
Pro Forma Combined
 
Total Revenues
 
$
10,727
   
$
3,502
   
$
974
   
$
(213
)
 (a) 
$
14,990
 
 
                                       
Total Cost of Sales
   
2,438
     
1,437
     
272
     
(916
)
 (a)  
3,231
 
Gross Margin
   
8,289
     
2,065
     
702
     
703
     
11,759
 
 
                                       
Total Operating Expenses
   
8,659
     
2,137
     
700
     
(44
)
 (b)  
11,452
 
 
                                       
Income (Loss) from Operations
   
(370
)
   
(72
)
   
2
     
747
     
307
 
 
                                       
Total Other Income (Loss)
   
(547
   
(389
   
(11
   
(447
 (c)    
(1,394
Pre-Tax Income (Loss)
   
(917
)
   
(461
)
   
(9
)
   
300
     
(1,087
)
    Income Tax Provision
   
(142
)
   
(91
)
   
-
     
-
     
(233
)
Net Income (Loss)
 
$
(1,059
)
 
$
(552
)
 
$
(9
)
 
$
300
   
$
(1,320
)
 
                                       
Basic and Diluted Net Loss per Share:
                                       
          Basic
 
$
(0.12
)
                         
$
(0.13
)
          Diluted
 
$
(0.12
)
                         
$
(0.13
)
 
                                       
Weighted Average Basic and Diluted Shares:
                                       
          Basic
   
8,627
                             
10,265
 
          Diluted
   
8,627
                             
10,265
 
 

 
Asure Software, Inc.
Unaudited Pro Forma Condensed Statement of Operations
 
For the Twelve Months Ended December 31, 2016
(Amounts in thousands, except per share data)
 
 
 
Asure Software
   
PMSI
   
PSNW
   
CPI
   
iSystems
   
Compass
   
Pro Forma Adjustments
     
Pro Forma Combined
 
Total Revenues
 
$
35,542
   
$
4,585
     
1,682
   
$
1,623
   
$
12,801
   
$
3,538
   
$
(1,995
)
 (a)  
$
57,776
 
 
                                                                 
Total Cost of Sales
   
8,117
     
1,035
     
416
     
496
     
5,654
     
699
     
(2,615
)
 (a)    
13,802
 
Gross Margin
   
27,425
     
3,550
     
1,266
     
1,127
     
7,147
     
2,839
     
620
       
43,974
 
 
                                                                 
Total Operating Expenses
   
26,198
     
3,106
     
1,248
     
1,487
     
9,563
     
3,096
     
(1,666
)
 (b)    
43,032
 
 
                                                                 
Income (Loss) from Operations
   
1,227
     
444
     
18
     
(360
)
   
(2,416
)
   
(257
)
   
2,286
 
     
942
 
 
                                                                 
Total Other Income (Loss)
   
(2,010
)
   
(58
)
   
26
 
   
-
     
(1,493
)
   
(45
)
   
(2,516
)  (c)    
6,096
 
Pre-Tax Income (Loss)
   
(783
)
   
386
     
44
     
(360
)
   
(3,909
)
   
(302
)
   
(230
)
     
(5,154
)
    Income Tax Provision
   
(189
)
   
-
     
-
     
-
     
(367
)
   
-
     
-
       
(556
)
Net Income (Loss)
 
$
(972
)
 
$
386
     
44
   
$
(360
)
 
$
(4,276
)
   
(302
)
 
$
(230
)
   
$
(5,710
)
 
                                                                 
Basic and Diluted Net Loss per Share:
                                                                 
          Basic
 
$
(0.15
)
                                                   
$
(0.59
)
          Diluted
 
$
(0.15
)
                                                   
$
(0.59
)
 
                                                                 
Weighted Average Basic and Diluted Shares:
                                                                 
          Basic
   
6,533
                                                       
9,697
 
          Diluted
   
6,533
                                                       
9,697
 
 
 
(The accompanying notes are an integral part of the unaudited pro forma condensed combined financial information of Asure Software, Inc.)

Notes to Unaudited Pro Forma Condensed Combined Balance Sheet:

Gives effect to or reflects the following:

(a)
The elimination of assets in iSystems Holdings LLC not acquired by Asure Software, Inc.

(b)
The estimated value of goodwill recorded in conjunction with the iSystems and Compass acquisitions.

(c)
The estimated value of intangibles recorded in conjunction with the iSystems and Compass acquisitions.

(d)
The estimated fair value of the subordinated promissory note issued to the Seller in the iSystems and Compass acquisitions and the additional term loan under the Restated Credit Agreement.

(e)
The estimated fair value of Asure Software common stock issued to the Seller in the acquisition of iSystems.

Notes to Unaudited Pro Forma Condensed Combined Income Statement:

Gives effect to or reflects the following:

(a)
The elimination of intercompany revenue and cost of sales between Asure Software, Inc., CPI and PSNW.

(b)
The adjustments to the historical intangible amortization expense resulting from the effects of the preliminary purchase price associated with the acquisitions of PMSI, CPI, PSNW, iSystems, and Compass. 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.

(c)
The adjustments for interest expense on acquisition related debt and transaction costs incurred pursuant the acquisitions of PMSI, CPI, PSNW, iSystems, and Compass.