asuresoftware063014.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2014
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number: 0-20008
ASURE SOFTWARE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
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74-2415696
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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110 Wild Basin Road, Suite 100
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Austin, Texas
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78746
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(Address of Principal Executive Offices)
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(Zip Code)
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(512) 437-2700
(Registrant’s Telephone Number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 12, 2014, the registrant had outstanding 5,979,426 shares of its Common Stock, $0.01 par value.
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Page
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Number
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PART I - FINANCIAL INFORMATION
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Item 1.
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3 |
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3
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4
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5
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6
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Item 2.
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16
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Item 3.
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21
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Item 4.
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21
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PART II - OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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22
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23
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
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June 30,
2014
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December 31,
2013
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Assets
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Current assets:
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Cash and cash equivalents
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Accounts receivable, net of allowance for doubtful accounts of $152 and $168 at June 30, 2014 and December 31, 2013, respectively
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Prepaid expenses and other current assets
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Property and equipment, net
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Liabilities and stockholders’ equity
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Current portion of notes payable
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Accrued compensation and benefits
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Other accrued liabilities
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Total current liabilities
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Total long-term liabilities
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Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding
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Common stock, $.01 par value; 11,000 shares authorized; 6,363 and 6,353 shares issued,
5,979 and 5,969 shares outstanding at June 30, 2014 and December 31, 2013, respectively
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Treasury stock at cost, 384 shares at June 30, 2014 and December 31, 2013
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Additional paid-in capital
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Accumulated other comprehensive loss
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Total stockholders’ equity
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The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands, except share and per share data)
(Unaudited)
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FOR THE
THREE MONTHS ENDED
June 30,
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FOR THE
SIX MONTHS ENDED
June 30,
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2014
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2013
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2014
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2013
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Selling, general and administrative
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Amortization of intangible assets
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Income (loss) from operations
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Gain on settlement of note payable and litigation
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Foreign currency translation gain (loss)
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Interest expense and other
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Interest expense- amortization of original issue discount (OID)
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Total other income (loss), net
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Income (loss) from operations before income taxes
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Other comprehensive income (loss):
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Foreign currency gain (loss)
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Other comprehensive income (loss)
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Basic and diluted net income (loss) per share
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Weighted average basic and diluted shares
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The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
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FOR THE
SIX MONTHS ENDED
JUNE 30,
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2014
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2013
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Adjustments to reconcile net loss to net cash provided by operations:
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Depreciation and amortization
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Provision for doubtful accounts
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Amortization of original issue discount (OID)
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Gain on settlement of note payable and litigation
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Changes in operating assets and liabilities:
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Prepaid expenses and other assets
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Accrued expenses and other long-term obligations
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Net cash provided by operating activities
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Net purchases of property and equipment
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Collection of note receivable
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Net cash used in investing activities
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Payments on notes payable
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Proceeds from notes payable
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Payments on amendment of senior notes payable
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Net proceeds from issuance of common stock
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- |
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Insurance proceeds for settlement of notes payable dispute, net of expenses
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Payments on capital leases
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Net proceeds from exercise of options
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Net cash used in financing activities
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Effect of translation exchange rates
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Net increase (decrease) in cash and cash equivalents
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Cash and equivalents at beginning of period
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Cash and equivalents at end of period
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SUPPLEMENTAL INFORMATION:
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The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION
Asure Software, Inc., a Delaware corporation, is a provider of cloud-based software-as-a-service (“SaaS”) time & labor management and workspace management solutions that enable organizations to manage their office environments as well as their human resource and payroll processes effectively and efficiently. Asure develops, markets, sells and supports its offerings worldwide through its principal office in Austin, Texas and through additional offices in Warwick, Rhode Island; Framingham, Massachusetts; Traverse City, Michigan and Staines, United Kingdom.
We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission and accordingly, they do not include all information and footnotes required under U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of June 30, 2014 and December 31, 2013, the results of operations for the three and six months ended June 30, 2014 and 2013, and the cash flows for the six months ended June 30, 2014 and 2013.
You should read these condensed consolidated financial statements in conjunction with our audited consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in our annual report on Form 10-K for the fiscal year ended December 31, 2013. The results for the interim periods are not necessarily indicative of results for a full fiscal year.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash deposits and highly liquid investments with an original maturity of three months or less when purchased.
RESTRICTED CASH
Restricted cash represents a certificate of deposit held in a cash collateral account as required by JPMorgan Chase Bank N.A. (“Bank”), to secure our obligations under our credit card line with the Bank.
LIQUIDITY
As of June 30, 2014, Asure’s principal source of liquidity consisted of $2,005 of current cash and cash equivalents, future cash generated from operations and amounts available for borrowing under our Wells Fargo revolver discussed in Note 6 – Notes Payable. We believe that we have and/or will generate sufficient cash for our short- and long-term needs, including meeting the requirements of our Term Loan, and the related debt covenant requirements. Based on current internal projections, we believe that we currently have and/or will generate sufficient cash for our operational needs, including any required debt payments, for at least the next twelve months.
Management is focused on growing our existing product offering as well as our customer base to increase our recurring revenues. We have made and will continue to explore additional strategic acquisitions. In July 2014 we acquired all of the outstanding common stock of FotoPunch, Inc. and in August 2014 we acquired substantially all the assets of Roomtag, LLC, as discussed in Note 10 – Subsequent Events. We expect to fund any future acquisitions with equity, available cash, future cash from operations, or debt from outside sources.
We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that we have sufficient capital and liquidity to fund and cultivate the growth of our current and future operations for at least the next twelve months and to maintain compliance with the terms of our debt agreements and related covenants or to obtain compliance through debt repayments made with the available cash on hand or anticipated for receipt in the ordinary course of operations.
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-11 (ASU 2013-11), which updated the guidance in Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. The amendments in ASU 2013-11 generally provide guidance for the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The guidance requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. This guidance became effective for us as of January 1, 2014 and is consistent with our present practice.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, which changes the criteria for reporting discontinued operations and requires additional disclosures about discontinued operations. ASU 2014-08 requires that an entity report as a discontinued operation only a disposal that represents a strategic shift in operations that has a major effect on its operations and financial results. ASU 2014-08 is effective for us beginning on or after December 15, 2014. Early adoption is permitted, but only for a disposal (or classification as held for sale) that has not been reported in financial statements previously issued or made available for issuance. The ASU must be applied prospectively. We believe that its adoption will not have a material impact on our consolidated results of operations or financial condition.
In May 2014, the FASB issued a new accounting standard related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. We will adopt this standard effective January 1, 2017, as required. The standard can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are evaluating the impact of adopting this new standard on its financial statements.
CONTINGENCIES
In February 2014, we reached an agreement to settle all claims and dismiss all pending litigation with PeopleCube Holding B.V. and Meeting Maker Holding B.V., the sellers of the capital stock of Meeting Maker – United States, Inc. (dba PeopleCube) that we purchased in July 2012.
Under the settlement agreement, the parties agreed to dismiss the litigation and we settled the remaining balance due by us of $2,460 on the Subordinated Notes Payable: PeopleCube Acquisition Note for $1,700. Separately, our insurance carrier agreed to pay us $500 in conjunction with the settlement. With the insurance proceeds and after offsetting any related litigation and other settlement costs incurred in 2014 of $226, we recorded a net gain of $1,034 on the settlement in the first quarter of 2014. We paid this note in full in the first quarter of 2014. Finally, as part of the original purchase price in the Meeting Maker acquisition, we issued 255,000 shares of our common stock subject to a lockup expiring as to 125,000 shares in June 2013 and 130,000 shares in June 2014. This settlement also removed the lockup for the remaining 130,000 shares.
Although Asure has been the defendant or plaintiff in various actions that arose in the normal course of business, as of June 30, 2014, we are not party to any pending legal proceedings.
NOTE 3 – FAIR VALUE MEASUREMENTS
Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements.
ASC 820 establishes a three-tier fair value hierarchy, which is based on the reliability of the inputs used in measuring fair values. These tiers include:
Level 1:
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Quoted prices in active markets for identical assets or liabilities;
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Level 2:
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Quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active for identical or similar assets or liabilities; and model-driven valuations whose significant inputs are observable; and
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ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
Level 3:
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Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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The following table presents the fair value hierarchy for our financial assets measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, respectively:
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Fair Value Measure at June 30, 2014
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Total
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Quoted
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Significant
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Carrying
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Prices
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Other
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Significant
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Value at
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in Active
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Observable
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Unobservable
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June 30,
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Market
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Inputs
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Inputs
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Description
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2014
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(Level 1)
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(Level 2)
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(Level 3)
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Cash and Cash Equivalents
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Restricted cash - certificate of deposit
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Fair Value Measure at December 31, 2013
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Total
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Quoted
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Significant
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Carrying
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Prices
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Other
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Significant
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Value at
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in Active
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Observable
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Unobservable
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December 31,
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Market
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Inputs
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Inputs
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Description
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2013
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(Level 1)
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(Level 2)
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(Level 3)
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Cash and Cash Equivalents
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Restricted cash - certificate of deposit
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For our level 2 asset, the fair value is based on information obtained from our third party service provider and approximates carrying value.
NOTE 4 – ACQUISITIONS
2012 Acquisition
In July 2012, Asure acquired the capital stock of Meeting Maker – United States, Inc., (dba PeopleCube), for a combination of cash and Asure common stock. The 2012 acquisition of PeopleCube gave Asure a product line that includes software to assist customers in driving integrated facility management of offices, conference rooms, video conferencing, events and training, alternative workspaces and lobby use.
The purchase price was composed of $9,800 in cash, subject to a post-closing working capital adjustment, (ii) 255,000 shares of our common stock, par value $0.01 per share, representing just under five percent of Asure’s outstanding shares and valued at $2.94 per share and (iii) an additional $3,000 note from us due on October 31, 2014, subject to offset of any amounts owed by the seller under the indemnification provisions of the stock purchase agreement. The note was adjusted to a fair value of $2,404 at the date of purchase based on our incremental borrowing rate. We recorded the note at fair value using a discount rate of 10%, which resulted in an original issue discount of $622, which will accrete up the note to its aggregate principal amount over the course of the life of the loan using the effective interest method. Details regarding the financing of the acquisition are described in Note 6 – Notes Payable. Transaction costs for this acquisition were $905 and we expensed them as incurred.
In December 2012, we demanded a purchase price adjustment from PeopleCube Holding B.V. and Meeting Maker Holding B.V., the sellers of the capital stock of Meeting Maker – United States, Inc. (dba PeopleCube) that we purchased in July 2012, based on matters we discovered after closing. In the third quarter of 2013, we reached an agreement to settle our post-closing working capital adjustment dispute. The parties agreed to a post-closing working capital adjustment due to us of $496, with accrued interest of $44, totaling $540. The parties agreed to reduce the original $3,000 deferred purchase payment by the post-closing adjustment amount of $540. This also had the effect of reducing our long-term debt by a like amount and $496 was deducted from our goodwill balance. The remaining deferred purchase price balance under the Subordinated Notes Payable: PeopleCube Acquisition Note then became $2,460.
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
In February 2014, we reached an agreement to settle all claims and dismiss all pending litigation with the sellers of PeopleCube. Under the settlement agreement, the parties agreed to dismiss the litigation and settle the remaining balance due of $2,460 on the Subordinated Notes Payable: PeopleCube Acquisition Note for $1,700. Separately, our insurance carrier agreed to pay us $500 in conjunction with the settlement. With the insurance proceeds and after offsetting any related litigation costs incurred in 2014, we recorded a net gain of $1,034 on the settlement in the first quarter of 2014. We paid this note in full in 2014. Finally, as part of the original purchase price in the Meeting Maker acquisition, we issued 255,000 shares of our common stock subject to a lockup expiring as to 125,000 shares in June 2013 and 130,000 shares in June 2014. This settlement also removed the lockup for the remaining 130,000 shares.
NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS
Asure accounted for its historical acquisitions in accordance with ASC 805, Business Combinations. We recorded the amount exceeding the fair value of net assets acquired at the date of acquisition as goodwill. We recorded intangible assets apart from goodwill if the assets had contractual or other legal rights or if the assets could be separated and sold, transferred, licensed, rented or exchanged. Asure’s goodwill relates to the acquisitions of ADI and Legiant in 2011 and the acquisition of PeopleCube in 2012.
In accordance with ASC 350, Intangibles-Goodwill and Other, we review and evaluate our long-lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that we may not recover their net book value. We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests, if indicators of potential impairment exist, using a fair-value-based approach. There has been no impairment of goodwill for the periods presented. We amortize intangible assets not considered to have an indefinite useful life using the straight-line method over their estimated period of benefit, which generally ranges from one to ten years. Each reporting period, we evaluate the estimated remaining useful life of intangible assets and assess whether events or changes in circumstances warrant a revision to the remaining period of amortization or indicate that impairment exists. We have not identified any impairments of finite-lived intangible assets during any of the periods presented.
The following table summarizes the changes in our goodwill:
Balance at December 31, 2013
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The gross carrying amount and accumulated amortization of our intangible assets as of June 30, 2014 and December 31, 2013 are as follows:
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June 30, 2014
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Intangible Asset
|
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Weighted Average
Amortization
Period (in Years)
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Gross
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Accumulated
Amortization
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Net
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|
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
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|
|
December 31, 2013
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Intangible Asset
|
|
Weighted Average
Amortization
Period (in Years)
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Gross
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Accumulated
Amortization
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Net
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We record amortization expense using the straight-line method over the estimated economic useful lives of the intangible assets, as noted above. Amortization expenses for the three months ended June 30, 2014 and 2013 were $497 and $582, respectively, included in Operating Expenses. Amortization expenses recorded in Cost of Sales were $76 and $70 for the three months ended June 30, 2014 and 2013, respectively. Amortization expenses for the six months ended June 30, 2014 and 2013 were $994 and $1,164 included in Operating Expenses, and $152 and $140, respectively, included in Cost of Sales.
The following table summarizes the future estimated amortization expense relating to our intangible assets:
Twelve Months Ended
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December 31, 2014 (remaining)
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NOTE 6 – NOTES PAYABLE
The following table summarizes our outstanding debt as of the dates indicated:
Notes Payable
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Maturity
|
|
Interest Rate
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|
Balance as of
June 30, 2014
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|
Balance as of
December 31,2013
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Subordinated Convertible Notes Payable – 9% Notes
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Subordinated Notes Payable: PeopleCube Acquisition Note
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ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
The following table summarizes the future principal payments related to our outstanding debt:
Year Ended
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Gross Amount
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Unamortized Original Issue Discount
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Subordinated Convertible Notes Payable - 9% Notes
In September 2011, we sold $1,500 of our 9% subordinated convertible notes (“9% Notes”) in a private placement to accredited investors to finance the ADI acquisition. The 9% Notes pay interest on each of March 31, June 30, September 30 and December 31, beginning on December 31, 2011, at a rate of 9% per year and will mature on September 30, 2014. The 9% Notes are secured by all of our assets, but are subordinated to our obligations under the Term Loan discussed below.
In March 2012, we amended the terms of the 9% Notes to eliminate the embedded derivative features resulting in a settlement or extinguishment of the derivative liability. Under the terms of the amendment, each holder of 9% Notes was permitted to convert the outstanding principal balance due there under into shares of our common stock at the conversion price originally set forth in the 9% Notes ($5.00 per share of common stock) on or before March 15, 2012. Holders of approximately $1,150 of the total $1,500 of principal amount of 9% Notes converted their 9% Notes to common stock. At June 30, 2014 and December 31, 2013, we had $246 and $238 outstanding, respectively, under the 9% Notes with a September 30, 2014 maturity.
Subordinated Notes Payable: PeopleCube Acquisition Note
In July 2012, we issued a $3,000 Note to the seller in the PeopleCube stock acquisition. The note was due October 31, 2014, subject to offset of any amounts owed by the seller to us under the indemnification provisions of the stock purchase agreement. We recorded the note at fair value using a discount rate of 10%, which resulted in an original issue discount of $622, which will accrete up the note to its aggregate principal amount over the course of the life of the loan using the effective interest method.
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
In the third quarter of 2013, we reached an agreement to settle our post-closing working capital adjustment dispute with PeopleCube Holding B.V. and Meeting Maker Holding B.V., the sellers of the capital stock of Meeting Maker – United States, Inc. (dba PeopleCube). The parties agreed to a post-closing adjustment due to us of $496, with accrued interest of $44, totaling $540. The parties agreed to reduce the original $3,000 deferred purchase payment by the post-closing adjustment amount of $540. This also had the effect of reducing our note by a like amount. The remaining deferred purchase price balance under the Subordinated Notes Payable: PeopleCube Acquisition Note became $2,460.
In February, 2014, we reached an agreement to settle all claims and dismiss all pending litigation with PeopleCube Holding B.V. and Meeting Maker Holding B.V., the sellers of the capital stock of Meeting Maker – United States, Inc. (dba PeopleCube). Under the settlement agreement, the parties agreed to dismiss the litigation and we settled the remaining balance due by us of $2,460 on the Subordinated Notes Payable: PeopleCube Acquisition Note for $1,700. Separately, our insurance carrier agreed to pay us $500 in conjunction with the settlement. With the insurance proceeds and after offsetting any related litigation costs incurred in 2014, we recorded a net gain of $1,034 on the settlement in the first quarter of 2014. We paid this note in full in the first quarter of 2014. Finally, as part of the original purchase price in the Meeting Maker acquisition, we issued 255,000 shares of our common stock subject to a lockup expiring as to 125,000 shares in June 2013 and 130,000 shares in June 2014. This settlement also removed the lockup for the remaining 130,000 shares.
Senior Note Payable
In July 2012, we and our wholly-owned subsidiaries entered into a loan agreement with Deerpath Funding, LP, a Delaware limited partnership, as lender, administrative agent and collateral agent (“Deerpath”). Under the loan agreement, we borrowed $14,500 to (i) finance the cash purchase consideration for the acquisition of PeopleCube, (ii) pay outstanding indebtedness under the 15% Notes (including partial interest and subordination consent payments of $134 to Mr. Goepel, our Chief Executive Officer, and $81 to Pinnacle Fund, which is controlled by David Sandberg, our Chairman) and our bank line of credit, and (iii) pay transaction costs and expenses of the term loan and the acquisition of PeopleCube.
We made quarterly principal payments of $362 each on the senior note payable beginning October 1, 2012. We paid the required $2,000 principal payment in May 2013. The balance of this note of $14,085 was refinanced under a new facility with Wells Fargo Bank, N.A. in March 2014, as discussed below. We were in compliance with all covenant requirements as of December 31, 2013 and through the payoff date. We recorded a loss on debt refinancing of $1,402 in the first quarter of 2014, of which $704 is a pre-payment premium and $698 is non-cash deferred financing costs.
Term Loan - Well Fargo
In March, 2014, we entered into a Credit Agreement with Wells Fargo Bank, N.A., as administrative agent, and the lenders that are party thereto. We used the proceeds of the term loan to finance the repayment of all amounts outstanding under our loan agreement with Deerpath and the payment of certain fees, cost and expenses related to the Credit Agreement.
The Credit Agreement provides for a term loan in the amount of $15,000. The term loan will mature in March 2019. The outstanding principal amount of the term loan is payable follows:
·
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$188 on June 30, 2014 and the last day of each fiscal quarter thereafter up to March 31, 2016;
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·
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$281 on June 30, 2016 and the last day of each fiscal quarter thereafter up to March 31, 2017; and
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·
|
$375 on June 30, 2017 and the last day of each fiscal quarter thereafter, with a final payment of the remaining balance due on March 31, 2019
|
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
The first scheduled principal payment of $188 was made in June 2014.
The Credit Agreement also provides for a revolving loan commitment in the aggregate amount of up to $3,000. The outstanding principal amount of the revolving loan is due and payable in March 2019. Additionally, the Credit Agreement provides for a $10,000 uncommitted incremental term loan facility to support permitted acquisitions. Under the revolver, no amounts were outstanding and $2,580 was available for borrowing at June 30, 2014. In July 2014, we borrowed $1,500 under the revolver, which was used to fund a portion of the acquisition cost of all of the issued and outstanding shares of common stock of FotoPunch, Inc. In August 2014, we borrowed $1,000 under the revolver which was used to fund a portion of the acquisition cost of substantially all the assets of Roomtag, LLC. See Note 10- Subsequent Events for further details.
The term loan and revolving loan will bear interest, at our option, at (i) the greater of 1% or LIBOR, plus an applicable margin or (ii) a base rate (as defined in the Credit Agreement) plus an applicable margin. We have elected to use the Libor rate plus the applicable margin, which is 5% for the first six months. The interest rate is 5% for the 6 month period ended September 30, 2014. Interest is payable quarterly and the margin varies based upon our leverage ratio. See table below of applicable margin rates.
Total Leverage Ratio
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Base Rate Margin
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LIBOR Rate Margin
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> 2.75:1.0
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3.00 |
% |
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4.00 |
% |
< 2.75:1.0 but > 2.25:1
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2.50 |
% |
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3.50 |
% |
< 2.25:1
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2.00 |
% |
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|
3.00 |
% |
We may voluntarily prepay the principal amount outstanding under the revolving loan at any time without penalty or premium. We must pay a premium if we make a voluntary prepayment of outstanding principal under the term loan during the first two years following the closing date or if we are required to prepay outstanding principal under the Credit Agreement with proceeds resulting from certain asset sales or debt incurrence. The premium is 1% or 0.5% of the principal amount being prepaid depending on whether the prepayment occurs on or before the first anniversary of the closing date or subsequent to the first anniversary date through the second anniversary of the closing date. In addition, we are required to repay outstanding principal on an annual basis with 50% of excess cash flow, certain over advances, asset sale proceeds, debt proceeds, and proceeds from judgments and settlements.
Under the Credit Agreement, we are required to maintain a fixed charge coverage ratio of not less than 1.5 to 1.0 beginning with the quarter ending June 30, 2014 and each calendar quarter thereafter, and a leverage ratio of not greater than 3.5 to 1.0 beginning with the quarter ending June 30, 2014 with the levels stepping down thereafter.
The Credit Agreement contains customary affirmative and negative covenants, including, among others, limitations with respect to debt, liens, fundamental changes, sale of assets, prepayment of debt, investments, dividends, and transactions with affiliates.
We were in compliance with the covenant requirements as of June 30, 2014 and expect to be in compliance or be able to obtain compliance through debt repayments with the available cash on hand or as expected to be generated from operations over the subsequent twelve month period.
The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults, bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the defaults are subject to customary notice and grace period provisions.
In connection with the Credit Agreement, we and our wholly-owned active subsidiaries entered into a Guaranty and Security Agreement, in March 2014, with Wells Fargo Bank. Under the Guaranty and Security Agreement, we and each of our wholly-owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets.
ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
NOTE 7 – SHARE BASED COMPENSATION
Share based compensation for our stock option plans for the three months ended June 30, 2014 and 2013 were $42 and $45, respectively, and $81 and $69 for the six months ended June 30, 2014 and 2013, respectively. No shares of common stock and 4,425 shares of common stock were issued related to exercises of stock options granted from our Stock Option Plan for the three months ended June 30, 2014 and 2013, respectively.
Asure has one active equity plan, the 2009 Equity Plan (the “2009 Plan”). The 2009 Plan provides for the issuance of non-qualified and incentive stock options to our employees and consultants. We generally grant stock options with exercise prices greater than or equal to the fair market value at the time of grant. The options generally vest over three to four years and are exercisable for a period of five to ten years beginning with date of grant. Our shareholders approved an amendment to the 2009 Plan in June 2014 to increase the number of shares reserved under the plan from 1,200,000 to 1,400,000. We have a total of 620,000 options granted and outstanding pursuant to the 2009 Plan as of June 30, 2014.
NOTE 8 – OTHER COMPREHENSIVE LOSS
Comprehensive loss represents a measure of all changes in equity that result from recognized transactions and other economic events other than those resulting from investments by and distributions to shareholders. Our other comprehensive loss includes foreign currency translation adjustments.
The following table presents the changes in each component of accumulated other comprehensive loss, net of tax:
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Foreign Currency Items
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|
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Accumulated Other
Comprehensive Loss Items
|
|
Beginning balance, December 31, 2013
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Other comprehensive loss before reclassifications
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Amounts reclassified from accumulated other comprehensive income (loss)
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Net current-period other comprehensive loss
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Ending balance, June 30, 2014
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The following table presents the tax benefit (expense) allocated to each component of other comprehensive income (loss):
|
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Three Months Ended June 30, 2014
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Before Tax
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Tax Benefit
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Net of Tax
|
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Foreign currency translation adjustments
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Six Months Ended June 30, 2014
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Before Tax
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Tax Benefit
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Net of Tax
|
|
Foreign currency translation adjustments
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ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data unless otherwise noted)
NOTE 9 – NET INCOME (LOSS) PER SHARE
We compute net income (loss) per share based on the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options. We compute the number of common share equivalents, which includes stock options, using the treasury stock method. We have excluded stock options to acquire 100,000 and 620,000 shares for the three and six months ended June 30, 2014, respectively, and 673,000 shares for the three and six months ended June 30, 2013, respectively, from the computation of the dilutive stock options because the effect of including the stock options would have been anti-dilutive.
The following table sets forth the computation of basic and diluted net loss per common share for the three and six months ended June 30, 2014 and 2013:
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For the Three Months
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For the Six Months
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Ended June 30,
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Ended June 30,
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2014
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2013
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2014
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2013
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Weighted-average shares of common stock outstanding
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Dilutive effect of employee stock options
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Weighted average shares for diluted net income (loss) per share
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Basic net income (loss) per share
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Diluted net income (loss) per share
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NOTE 10 – SUBSEQUENT EVENTS
In July 2014, we acquired all of the issued and outstanding shares of common stock (the “Shares”) of FotoPunch, Inc., a Delaware corporation (“FotoPunch”), a cloud-based time and labor solution provider whose photo-based time clock technology transforms any mobile device into a biometric, geo-located time clock. We have been working with FotoPunch since 2012 as a technology partner for our GeoPunch™ solution, which was launched to help customers support a workforce that is increasingly mobile, global and dispersed.
The aggregate consideration for the Shares consisted of (i) $1,500 in cash, a portion of which was used to pay certain obligations of FotoPunch and (ii) up to an additional $3,000 in post-closing earnout payments. We funded the $1,500 cash payment with proceeds from our credit agreement with Wells Fargo.
The $3,000 earnout is payable over three earnout periods (with the first, second and third periods ending June 30, 2015, June 30, 2016 and June 30, 2018, respectively ) based on the FotoPunch operations achieving specified target revenues in an earnout period. At least 75% of the target revenues must be achieved in the first and second earnout periods and at least 50% of the target revenues must be achieved in the third and fourth earnout periods.
In August 2014, we acquired substantially all the assets of Roomtag, LLC (“Roomtag”). The aggregate consideration for the assets consisted of (i) $933 in cash, and (ii) an unsecured subordinated promissory note (“Note”) for $754. We funded the $933 cash payment with proceeds from our credit agreement with Wells Fargo. The Note bears interest at an annual rate of 0.36% and is payable on October 31, 2016.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following review of Asure’s financial position as of and for the three months and six months ended June 30, 2014 and 2013 should be read in conjunction with our 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Asure’s internet website address is http://www.asuresoftware.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our internet website free of charge as soon as reasonably practicable after they are electronically filed, or furnished to, the Securities and Exchange Commission. Asure’s internet website and the information contained therein or connected thereto is not incorporated into this Quarterly Report on Form 10-Q.
Asure is a leading global provider of cloud-based software-as-a-service (“SaaS”) time & labor management and workspace management solutions that enable companies of all sizes and complexities to operate more efficiently and proactively manage costs associated with their most expensive assets: real estate, labor and technology.
We currently offer two main product lines, AsureSpace™ and AsureForce®. Our AsureSpace™ workplace management solutions enable organizations to manage their office environments and optimize real estate utilization. Our AsureForce® time and labor management solutions help organizations optimize labor and labor administration costs and activities. For both product lines, support and professional services are other key elements of our software and services business. As an extension of our perpetual software product offerings, Asure offers our customers maintenance and support contracts that provide ready access to qualified support staff, software patches and upgrades to our software products. We also provide installation of and training on our products, add-on software customization and other professional services.
We target our sales and marketing efforts to a wide range of audiences, from small and medium-sized businesses to Fortune 500 companies and divisions of enterprise organizations throughout the United States, Europe and Asia/Pacific. We generate sales of our solutions through our direct sales teams and indirectly through our channel partners. We are expanding our investment in our direct sales teams to continue to address our market opportunity.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report represent forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results of operations, levels of activity, economic performance, financial condition or achievements to be materially different from future results of operations, levels of activity, economic performance, financial condition or achievements as expressed or implied by such forward-looking statements. Asure has attempted to identify these forward-looking statements with the words “believes,” “estimates,” “plans,” “expects,” “anticipates,” “may,” “could” and other similar expressions. Although these forward-looking statements reflect management’s current plans and expectations, which we believe are reasonable as of the filing date of this report, they inherently are subject to certain risks and uncertainties. These risks and uncertainties include — but are not limited to — adverse changes in the economy, financial markets, and credit markets; delays or reductions in information technology spending; the development of the market for cloud based workplace applications; product development; market acceptance of new products and product improvements; our ability to retain or increase our customer base; security breaches; errors, disruptions or delays in our services; privacy concerns; changes in the our sales cycle; competition, including pricing pressures, entry of new competitors, and new technologies; intellectual property enforcement and litigation; our ability to hire, retain and motivate employees; our ability to manage our growth; our ability to realize benefits from acquisitions; changes in sales may not be immediately reflected in our operating results due to our subscription model; changes in laws and regulations; and changes in accounting standards. Asure is under no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results.
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues represented by certain items in Asure’s Consolidated Statements of Comprehensive Loss for the fiscal periods indicated:
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FOR THE THREE
MONTHS ENDED
JUNE 30,
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FOR THE SIX
MONTHS ENDED
JUNE 30,
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2014
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2013
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2014
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2013
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Selling, general and administrative
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Amortization of intangible assets
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THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (Amounts in thousands)
Revenue
Our revenue was derived from the following sources:
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FOR THE THREE
MONTHS ENDED
June 30,
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Revenue
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2014
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2013
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Increase (Decrease)
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%
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Maintenance and support revenue
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On premise software license revenue
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Professional services revenue
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FOR THE SIX
MONTHS ENDED
June 30,
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Revenue
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2014
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2013
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Increase (Decrease)
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%
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Maintenance and support revenue
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On premise software license revenue
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Professional services revenue
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Revenue represents our consolidated revenues, including sales of our scheduling software, time and attendance and human resource software, complementary hardware devices to enhance our software products, software maintenance and support services, installation and training services and other professional services.
Our product offerings are categorized into AsureSpace™ and AsureForce®. AsureSpace™ offers workplace management solutions that enable organizations to manage their office environments and optimize real estate utilization, and AsureForce® offers time and labor management solutions which help organizations optimize labor and labor administration costs and activities. Both product groupings include cloud revenue, hardware revenue, maintenance and support revenue, on premise software license revenue and professional services revenue. AsureSpace™ revenues include PeopleCube and Meeting Room Manager revenues. AsureForce® revenues include ADI, Legiant and iEmployee revenues.
Revenue for the three months ended June 30, 2014 was $6,548, an increase of $252 or 4.0%, from the $6,296 reported for the three months ended June 30, 2013. Cloud revenue and professional services revenue all increased from the first quarter of 2013 due to our continued emphasis on selling integrated cloud based solutions. AsureSpace™ revenue for the three months ended June 30, 2014 was $3,752, an increase of $395 or 11.8%, from the $3,357 recorded for the three months ended June 30, 2013. This increase was primarily due to an increase in PeopleCube cloud revenue and professional services revenue. AsureForce® revenue for the three months ended June 30, 2014 was $2,796, a decrease of $143 or 4.9%, from the $2,939 recorded for the three months ended June 30, 2013. This decrease was primarily due to a decrease in all Legiant revenues (primarily hardware revenue, maintenance and support revenue and cloud revenue), as well as a decrease in ADI on premise software license revenue. These decreases were offset by increases in ADI cloud and professional services revenue.
Revenues for the six months ended June 30, 2014 were $13,075, an increase of $804 or 6.6%, from the $12,271 reported for the six months ended June 30, 2013. This increase was primarily due to an increase in cloud revenue and professional services revenue, offset by smaller decreases in maintenance and support revenue and on premise software license revenue. AsureSpace™ revenue for the six months ended June 30, 2014 was $7,633, an increase of $1,057 or 16.1%, from the $6,576 recorded for the six months ended June 30, 2013. This increase was primarily due to an increase in PeopleCube cloud revenue, hardware revenue and professional services revenue. AsureForce® revenue for the six months ended June 30, 2014 was $5,442, a decrease of $253 or 4.4%, from the $5,695 recorded for the six months ended June 30, 2013. This decrease was primarily due to decreases in all Legiant revenues and iEmployee cloud revenue, offset by increases in ADI cloud revenue and professional services revenue.
Although our sales are concentrated in certain industry sectors, including corporate, education, healthcare, government, legal and non-profit, our total customer base is widely spread across industries. Geographically, we sell our products worldwide, but sales are largely concentrated in the United States, Canada and Europe. Additionally, we have a distribution partner in Australia. We continue to target small and medium size businesses and divisions of enterprises in these same industries as prospective customers. As the overall workforce management solutions market continues to experience significant growth related to SaaS products, we will continue to focus on sales of Meeting Room Manager On Demand, PeopleCube and ADI SaaS products.
In addition to continuing to develop our workforce and workspace management solutions and release new software updates and enhancements, we continue to actively explore other opportunities to acquire additional products or technologies to complement our current software and services. Through acquisitions in 2011 of ADI and Legiant, we expanded our cloud computing time and attendance software and management services business. The 2012 acquisition of PeopleCube gave us a product line that includes software to assist customers in driving integrated facility management of offices, conference rooms, video conferencing, events and training, alternative workspaces and lobby use.
Gross Margin
Consolidated gross margin for the three months ended June 30, 2014 was $5,175, an increase of $360, or 7.5%, from the $4,815 reported for the three months ended June 30, 2013. Gross margin as a percentage of revenues was 79.0% and 76.5% for the three months ended June 30, 2014 and 2013, respectively. Consolidated gross margin for the six months ended June 30, 2014 was $10,144, an increase of $1,131, or 12.5%, from the $9,013 reported for the six months ended June 30, 2013. Gross margins as a percentage of revenues were 77.6% and 73.4% for the six months ended June 30, 2014 and 2013, respectively. We attribute the increase in gross margins to gained efficiencies from the consolidation of hosting and support costs after the PeopleCube acquisition which occurred in the third quarter of 2012 as well as a shift in revenue mix toward higher margin items such as cloud revenue.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2014 were $3,495, an increase of $47 or 1.4%, from the $3,448 reported for the three months ended June 30, 2013. SG&A expenses as a percentage of revenues were 53.4% and 54.8% for the three months ended June 30, 2014 and 2013, respectively.
Selling, general and administrative (“SG&A”) expenses for the six months ended June 30, 2014 were $6,857, an increase of $133 or 2.0%, from the $6,724 reported for the six months ended June 30, 2013. SG&A expenses as a percentage of revenues were 52.4% and 54.8% for the six months ended June 30, 2014 and 2013, respectively.
We continue to evaluate any unnecessary SG&A expenses and plans to further reduce expenses as appropriate.
Research and Development Expenses
Research and development (“R&D”) expenses for the three months ended June 30, 2014 were $855, an increase of $191, or 28.8%, from the $664 reported for the three months ended June 30, 2013. R&D expenses as a percentage of revenues were 13.1% and 10.5% for the three months ended June 30, 2014 and 2013, respectively.
Research and development (“R&D”) expenses for the six months ended June 30, 2014 were $1,576, an increase of $212, or 15.5%, from the $1,364 reported for the six months ended June 30, 2013. R&D expenses as a percentage of revenues were 12.1% and 11.1% for the six months ended June 30, 2014 and 2013, respectively.
The increase in both quarter and year to date R&D expenses is due to an increase in headcount and the related placement fees, as well as severance expense for another employee recorded in the second quarter of 2014. These increases reflect our commitment to expand and enhance our industry leading tools and technology.
We continue to improve our products and technologies through organic improvements as well as through acquired intellectual property. Our expanded investment in SaaS hosting, mobile and hardware technologies lay the ground work for broader market opportunities, and represents a key aspect of our competitive differentiation. Native mobile applications, QR Code integration, expanded web service integration and other technologies are all part of our initiatives.
Our development efforts for future releases and enhancements are driven by feedback received from our existing and potential customers and by gauging market trends. We believe we have the appropriate development team to design and further improve our workforce management solutions.
Amortization of Intangible Assets
Amortization expenses for the three months ended June 30, 2014 were $497, a decrease of $85, or 14.6%, from the $582 reported for the three months ended June 30, 2013. Amortization expenses as a percentage of revenues were 7.6% and 9.2% for the three months ended June 30, 2014 and 2013, respectively. Amortization expenses for the six months ended June 30, 2014 were $994, a decrease of $170 or 14.6% compared to $1,164, reported for the six months ended June 30, 2013. Amortization expenses as a percentage of revenues were 7.6% and 9.5% for the six months ended June 30, 2014 and 2013, respectively. This decrease is the result of some of PeopleCube’s intangible assets being sold in the third quarter of 2013 and others becoming fully amortized.
Other Income and Loss
Other loss for the three months ended June 30, 2014 was $278, a decrease of $370, or 57.1%, from the $648 reported for the three months ended June 30, 2013. Other loss as a percentage of revenues was 4.2% and 10.3% for the three months ended June 30, 2014 and 2013, respectively. Other loss for the three months ended June 30, 2014 is composed primarily of interest expense on notes payable of $264. Other loss for the three months ended June 30, 2013 is composed primarily of interest expense on notes payable of $520 and amortization of OID of $125.
Other loss for the six months ended June 30, 2014 was $1,155, a decrease of $194, or 14.4%, from the $1,349 reported for the six months ended June 30, 2013. Other expense as a percentage of revenues was 8.8% and 11.0% for the six months ended June 30, 2014 and 2013, respectively. Other loss for the six months ended June 30, 2014 is composed primarily of a loss on debt refinancing of $1,402, offset by a gain on the settlement of the PeopleCube litigation of $1,034. Interest expense on notes payable was $721 and amortization of OID on notes payable was $54 for the six months ended June 30, 2014 as compared to interest expense on notes payable of $1,050 and amortization of OID of $275 for the six months ended June 30, 2013.
Income Taxes
Income tax expense for the three months ended June 30, 2014 was $35, a decrease of $7, or 16.7%, from the $42 reported for the three months ended June 30, 2013.
Income tax expense for the six months ended June 30, 2014 was $77, a decrease of $4, or 4.9%, from the $81 reported for the six months ended June 30, 2013, respectively.
Net Loss
We generated net income of $15, or $0.00 per share, during the three months ended June 30, 2014, compared to a net loss of $569 or $(0.10) per share reported for the three months ended June 30, 2013. Net income as a percentage of total revenues was 0.2% for the three months ended June 30, 2014 compared to net loss of 9.0% of total revenues for the three months ended June 30, 2013.
We generated a net loss of $515, or $(0.09) per share, during the six months ended June 30, 2014, compared to a net loss of $1,669 or $(0.31) per share reported for the six months ended June 30, 2013. Net loss as a percentage of total revenues was 3.9% for the six months ended June 30, 2014 compared to net loss of 13.6% of total revenues for the six months ended June 30, 2013.
We intend to continue to implement our corporate strategy for growing the software and services business by modestly investing in areas that directly generate revenue and positive cash flows for the Company. However, uncertainties and challenges remain and there can be no assurance that we can successfully grow our revenues or achieve profitability during the remainder of fiscal year 2014.
LIQUIDITY AND CAPITAL RESOURCES (Amounts in thousands)
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June 30,
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December 31,
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2014
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2013
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Cash, cash equivalents and short-term investments
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For the Six Months Ended
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June 30,
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2014
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2013
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Cash provided by operating activities
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Cash used in investing activities
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Cash provided by (used in) financing activities
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Working Capital. We had a working capital deficit of $5,983 at June 30, 2014, a decrease of $1,854 from the $7,837 deficit at December 31, 2013. The working capital deficit at June 30, 2014 and December 31, 2013 includes $9,365 and $10,059 of deferred revenue, respectively. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to future revenue as we perform our services, but this does not represent future payments. We attribute the decrease in our working capital deficit to a decrease in current notes payable of $3,312, together with a decrease in deferred revenue of $694.. Deferred revenue can vary based on seasonality, expiration of initial multi-year contracts and deals that are billed after implementation rather than in advance of service delivery. This is offset by a decrease in cash and cash equivalents of $1,933. Cash and current notes payable decreased primarily due to the payoff of the Deerpath note and the payoff of the PeopleCube note (through the settlement of the litigation), offset by the new term note with Wells Fargo in the first quarter of 2014.
Operating Activities. Cash provided by operating activities was $747 for the six months ended June 30, 2014. The $747 of cash provided by operating activities during the first six months of 2014 was primarily driven by the net income (after adjustment for non-cash items) of $1,355, a decrease in accounts receivable of $474 and the release of restricted cash of $250, offset by a decrease in deferred revenue of $860, a decrease in accounts payable of $264, and an increase in inventory of $183. The $786 of cash provided by operating activities during the first six months of 2013 was primarily driven by the net income (after adjustment of non-cash items) of $208 and an increase in accrued expenses and deferred revenue of $1,093, offset by a decrease in accounts payable of $605.
Investing Activities. Cash used in investing activities was $281 and $235 for the six months ended June 30, 2014 and June 30, 2013, respectively, due primarily to net purchases of property and equipment.
Financing Activities. Cash used in financing activities was $2,378 for the six months ended June 30, 2014. We incurred $15,000 of debt, as well as received cash of $373 from insurance proceeds for settlement of notes payable, net of expenses. This is offset by note payments of $16,436 and debt financing fees of $565. Cash provided by financing of $517 for the six months ended June 30, 2013 consisted of the sale of common stock of $3,461 offset by payments on notes payable of $2,726 and payments on the amendment of senior notes payable of $188.
Sources of Liquidity. As of June 30, 2014, Asure’s principal sources of liquidity consisted of approximately $2,000 of current cash and cash equivalents, future cash generated from operations and amounts available for borrowing under our Wells Fargo revolver discussed in Note 6 – Notes Payable. We believe that we have and/or will generate sufficient cash for our short- and long-term needs. Based on current internal projections, we believe that we currently have and/or will generate sufficient cash for our operational needs, including any required debt payments, for at least the next twelve months. We currently project that we can generate positive cash flows from our operating activities for at least the next twelve months.
Our management team is focused on growing our existing software operations and is also seeking additional strategic acquisitions for the near future. At present, we plan to fund any future acquisition with equity, existing cash, cash generated from future operations and/or cash or debt raised from outside sources. As discussed in Note 10 – Subsequent Events of the accompanying financial statements, we acquired all of the outstanding common stock of FotoPunch, Inc. in July 2014 and substantially all the assets of Roomtag, LLC in August 2014.
We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that we have sufficient capital and liquidity to fund and cultivate the growth of our current and future operations for at least the next twelve months and to maintain compliance with the terms of our debt agreements and related covenants or to obtain compliance through debt repayments made with the available cash on hand or anticipated for receipt in the ordinary course of operations.
CRITICAL ACCOUNTING POLICIES
There were no material changes to our critical accounting policies and estimates since December 31, 2013. For additional information on critical accounting policies, refer to “Management’s Discussion and Analysis” in our 2013 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Control and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for us. Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of as of June 30, 2014 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Change in Internal Controls over Financial Reporting
During the period ended June 30, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
None
EXHIBIT NUMBER
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DESCRIPTION
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31.1*
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31.2*
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32.1*
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32.2*
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101*
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The following materials from Asure Software, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (Extensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets, (2) the Condensed Consolidated Statements of Comprehensive Loss, (3) the Condensed Consolidated Statements of Cash Flows, and (4) Notes to Condensed Consolidated Financial Statements.
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* Filed herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ASURE SOFTWARE, INC.
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August 13, 2014
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By:
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/s/ PATRICK GOEPEL
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Patrick Goepel
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Chief Executive Officer
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August 13, 2014
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By:
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/s/ KRISTI RICHBURG
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Kristi Richburg
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Controller & Interim Chief Financial Officer (principal financial officer)
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INDEX TO EXHIBITS
EXHIBIT NUMBER
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DESCRIPTION
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31.1*
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31.2*
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32.1*
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32.2*
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101*
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The following materials from Asure Software, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (Extensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets, (2) the Condensed Consolidated Statements of Comprehensive Loss, (3) the Condensed Consolidated Statements of Cash Flows, and (4) Notes to Condensed Consolidated Financial Statements.
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* Filed herewith
ex31-1.htm
EXHIBIT 31.1
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned, Patrick Goepel, certify, that:
1. I have reviewed this quarterly report on Form 10-Q of the Company (the “Report”);
2. Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in the Report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within these entities, particularly during the period in which the Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and
(d) Disclosed in the Report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the quarter ended June 30, 2014) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the Audit Committee of the Board of Directors:
(a) All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date: August 13, 2014
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By:
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/s/ PATRICK GOEPEL
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Patrick Goepel
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Chief Executive Officer
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ex31-2.htm
EXHIBIT 31.2
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned, Kristi Richburg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the Company (the “Report”);
2. Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in the Report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within these entities, particularly during the period in which the Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and
(d) Disclosed in the Report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the quarter ended June 30, 2014) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the Audit Committee of the Board of Directors:
(a) All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date: August 13, 2014
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By:
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/s/ KRISTI RICHBURG
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Kristi Richburg
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Controller & Interim Chief Financial Officer
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ex32-1.htm
EXHIBIT 32.1
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned, Patrick Goepel, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The quarterly report on Form 10-Q of the Company for the period ended June 30, 2014 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 13, 2014
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By:
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/s/ PATRICK GOEPEL
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Patrick Goepel
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Chief Executive Officer
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A signed original of this written statement required by Section 906 has been provided to Asure Software, Inc. and will be retained by Asure Software, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
ex32-2.htm
EXHIBIT 32.2
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned, Kristi Richburg, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The quarterly report on Form 10-Q of the Company for the period ended June 30, 2014 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 13, 2014
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By:
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/s/ KRISTI RICHBURG
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Kristi Richburg
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Controller & Interim Chief Financial Officer
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A signed original of this written statement required by Section 906 has been provided to Asure Software, Inc. and will be retained by Asure Software, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.