ASURE SOFTWARE INC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1 -THE COMPANY AND BASIS OF PRESENTATION

Asure Software, Inc. (“Asure”, the “Company”, “we” and “our”), a Delaware corporation, is a provider of cloud-based Human Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) to businesses of all sizes. We offer human resources (“HR”) tools necessary to build a thriving workforce, provide the resources to stay compliant with dynamic federal, state, and local tax jurisdictions and their respective labor laws, freeing cash flows so these businesses can spend their financial capital on growing their businesses rather than administrative overhead that can impede growth. Our solutions also provide new ways for employers to connect with their employees and strengthen relationships with their talent. At the core of our offering is the Asure HCM platform—a SaaS-based system that includes Payroll & Tax filing, Recruiting, Time & Attendance software, HR management tools, and Benefits Administration. This platform serves as the foundation for delivering both our core software and a range of complementary, technology-enabled services. These include AsureMarketplace™, which automates data exchange between our HCM system and third-party providers to increase efficiency, accuracy, and breadth of services. Our HR Compliance services combine expert guidance with scalable digital delivery. AsurePay™, our payroll card, provides employees with fast, secure access to earned wages. Additionally, through our licensed brokerage, we offer Insurance Services that help employers manage benefits and reduce administrative costs. We deliver our solutions directly and through a national network of Reseller Partners.

We strive to be the most trusted HCM resource. Our solutions solve three primary challenges that prevent businesses from growing: HR complexity, allocation of human and financial capital, and the ability to build great teams. We sell our solutions through both direct and partner channels. We supplement our direct sales efforts with partner programs that afford us access to opportunities in various geographic and industry niches. Asure has two types of partners: Reseller Partners that white label our products while providing value-added services to their clients (our indirect clients) and Referral Partners that provide us with client leads but do not resell our solutions. We have and will continue to invest in research and development to expand our solutions. Our solutions reduce the administrative burden on employers and increase employee productivity while managing the employment lifecycle. The Asure HCM suite includes eight product lines: Asure Payroll & Tax, Asure Tax Management Solutions, AsureRecruiting™, Asure Time & Attendance, Asure HR Compliance, Asure Insurance and Benefits Administration, AsureMarketplace™, and AsurePay™.

We develop, market, sell and support our offerings nationwide through our principal office in Austin, Texas and from our other office locations in Alabama, California, Florida, New Jersey, New York, North Carolina, Ohio, South Dakota, Tennessee, and Vermont.

We have prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly, they do not include all information and footnotes required under U.S. generally accepted accounting principles (“U.S. GAAP”) 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, 2025, comprehensive loss and changes in stockholders’ equity for the three and six months ended June 30, 2025, and 2024, and cash flows for the six months ended June 30, 2025, and 2024.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto filed with the SEC in our annual report on Form 10-K for the fiscal year ended December 31, 2024 (our “2024 Annual Report on Form 10-K”). Our results for any interim period are not necessarily indicative of results for a full fiscal year.

NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES

REPORTABLE SEGMENTS

Our chief operating decision maker is our Chairman and Chief Executive Officer, Patrick Goepel, who reviews financial information presented on a company-wide basis. Thus, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, we determined that we have a single reportable segment that primarily derives our revenue in the United States by providing payroll services to customers.

USE OF ESTIMATES

Preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, the determination of the fair value of our long-lived assets, and the fair value of assets acquired, and liabilities assumed during acquisitions. We base our estimates on historical experience and on various other assumptions management believes reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

We consider all highly liquid investments with maturity of 90 days or less to be cash equivalents. Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes and bonds, and/or repurchase agreements, backed by such obligations. Carrying value approximates fair value.

Restricted cash consists of cash balances which are restricted as to their withdrawal or usage. As of June 30, 2025, we have $40,000 of restricted cash. Pursuant to the terms of our Credit, Security and Guaranty Agreement (as amended to date, the “Loan Agreement”) with MidCap Financial Trust (“MidCap”) we may only use these funds for Permitted Acquisitions (as defined in the Loan Agreement). See Note 6 —Notes Payablefor information about the Loan Agreement.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires companies to disaggregate information about their effective tax rate reconciliation as well as information on income taxes paid. The standard applies to all entities subject to income taxes. The standard becomes effective for public entities for annual periods beginning after December 15, 2024. We are currently evaluating this standard and the potential effects of these changes to our consolidated financial statements.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

As of June 30, 2025, and December 31, 2024, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities.

NOTE 3 -BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

Asset Acquisitions

During the six months ended June 30, 2025, we completed four customer relationship asset acquisitions. The total purchase price of these acquisitions was $8,086, which consisted of $6,362 of cash paid during the six months ended June 30, 2025,$574 of cash to be paid over the next 12 months, and the delivery of promissory notes in the amount of $1,150, net of discounts. The acquired customer relationships are recorded as intangible assets and are being amortized on a straight-line basis over eight years.

Business Combinations

Effective July 11, 2024, we purchased substantially all the assets of an applicant tracking technology company based out of South Dakota for an innovative hiring solution designed to streamline the recruitment process for small and mid-sized businesses. This strategic acquisition reinforces Asure’s commitment to delivering comprehensive, user-friendly tools that simplify people management. The aggregate purchase price paid for the business was $15,162, consisting of $7,900 paid in cash on hand, $3,000 in the form of a promissory note ($1,716 net of discount), and 525 shares of Asure common stock, which had a fair value of $4,262 on the day of acquisition.

The purchase consideration was allocated among the acquired assets, which consist of a customer relationships intangible asset with fair value of $2,700, and a developed technology intangible asset with a fair value of $3,200. Additionally, we assumed $237 of deferred revenue and $498 of other accrued liabilities as part of the transaction. The intangible assets are being amortized on a straight-line basis over eight andfive years, respectively.

The remaining $8,713 of excess purchase consideration was allocated to goodwill, which is generally expected to be deductible for tax purposes. This represents the knowledge and experience of the employees retained as part of the transaction as well as the synergies and economies of scale expected from expanding the Midwest operating region to a national scale.

Asset Acquisitions

During the year ended December 31, 2024, we completed eleven customer relationship asset acquisitions. The total purchase price of these acquisitions was $15,202, which consisted of $5,842 of cash paid during the year ended December 31, 2024, $1,280 of cash paid during the six months ended June 30, 2025, $1,596 of cash to be paid over the next 12 months, $235 of cash to be paid thereafter, the delivery of promissory notes in the amount of $1,386, net of discounts, and the delivery of 500 shares of Asure common stock, which had an aggregate fair value of $4,863 at the acquisition dates. The purchase price for certain acquisitions is subject to adjustments for contingent events to be resolved primarily over the nextone tothree years, including revenue generated from the acquired assets. The acquired customer relationships are recorded as intangible assets and are being amortized on a straight-line basis over eight years.

See Note 6 —Notes Payablefor information related to outstanding debt in connection with our business combinations and asset acquisitions.

NOTE 4 -INVESTMENTS AND FAIR VALUE MEASUREMENTS

Accounting Standards Codification (ASC) 820 “Fair Value Measurement” (“ASC 820”) defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about 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. ASC 820 describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable:

The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis for the periods presented below (in thousands):

Cash equivalents and investments classified as available-for-sale within funds held for clients consisted of the following for the periods presented below (in thousands):

(1)Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. As of June 30, 2025, and December 31, 2024, there were 88 and 45 securities, respectively, in an unrealized gain position and there were 52 and 89 securities in an unrealized loss position, respectively. As of June 30, 2025, these unrealized losses were less than $24 individually and $299 in the aggregate. As of December 31, 2024, these unrealized losses were less than $38 individually and $738 in the aggregate. We invest in high quality securities with roughly 69% of our portfolio made up of A ratings and above with unrealized losses primarily attributable to macroeconomic factors rather than credit related. We have no material individual securities that have been in a continuous unrealized loss position greater than twelve months. We do not intend to sell these investments and we do not expect to sell these investments before recovery of their amortized cost basis, which may be at maturity. We review our investments to identify and evaluate investments that indicate possible credit losses. Factors considered in determining whether a loss is a credit loss include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2)At June 30, 2025 and December 31, 2024, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets.

Funds held for clients represent assets that we have classified for use solely for the purposes of satisfying the obligations to remit funds relating to our payroll and payroll tax filing services, which are classified as client funds obligations on our Condensed Consolidated Balance Sheets.

Funds held for clients have been invested in the following categories for the periods presented below (in thousands):

Expected maturities of available-for-sale securities are as of June 30, 2025, are as follows (in thousands):

NOTE 5 -GOODWILL AND OTHER INTANGIBLE ASSETS

We believe significant synergies are expected to arise from our strategic acquisitions and their assembled work forces. 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 for each acquisition. A portion of acquired goodwill will be amortizable for tax purposes. As of June 30, 2025, there has beenno impairment of goodwill based on the qualitative assessments we have performed.

The gross carrying amount and accumulated amortization of our intangible assets are as follows for the periods presented below (in thousands, except weighted average periods):

We record amortization expenses using thestraight-line method over the estimated useful lives of the intangible assets, as noted above. Amortization expenses recorded in operating expenses were $8,481 and $7,495 for the six months ended June 30, 2025 and 2024, respectively. Amortization expenses recorded in cost of sales were $420 and $100 for the six months ended June 30, 2025 and 2024, respectively. There wasno impairment of intangibles during the six months ended June 30, 2025, based on the qualitative assessment we performed. However, if market, political and other conditions over which we have no control continue to affect the capital markets and our stock price declines, we may experience an impairment of our intangibles in future quarters.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of June 30, 2025 (in thousands):

NOTE 6 -NOTES PAYABLE

The following table summarizes our outstanding debt as of the dates indicated (in thousands):

(1)See Note 3 — Business Combinations and Asset Acquisitions and Notes Payable - Acquisitions section below for further discussion regarding the notes payable related to acquisitions.

The following table summarizes the debt issuance costs as of the dates indicated (in thousands):

The following table summarizes the future principal payments related to our outstanding debtas of June 30, 2025 (in thousands):

Notes Payable - Acquisitions

As of June 30, 2025, we have seven promissory notes related to acquisitions that occurred during the six months ended June 30, 2025, and prior years with a combined outstanding of principal balance of $11,345 and maturity dates ranging from October 1, 2025, to July 1, 2029. All of our promissory notes related to acquisitions are subordinated to our Loan Agreement with MidCap (defined below). See Note 2 —Business Combinations and Asset Acquisitions for further discussion regarding the issuance of notes payable related to acquisitions.

Notes Payable - Other

In November 2024, we delivered a promissory note to an unrelated third party in exchange for cash. As of December 31, 2024, the promissory note had an outstanding principal balance of $5,000 and would mature on November 1, 2025. On April 10, 2025, we opted to repay the outstanding balance on our unrelated third-party promissory note prior to its maturity using the proceeds of the Loan Agreement (described below). In connection with the extinguishment, we paid the lender an aggregate amount of $5,197 (the “Payoff Amount”) in full payment of our outstanding obligations under the Note. The Payoff Amount represented $5,097 of outstanding principal and interest on the unpaid principal balance and a $100 prepayment fee.

Notes Payable - MidCap

On April 10, 2025, we entered into a Loan Agreement with MidCap and the lenders from time to time party thereto (such lenders collectively with MidCap, the “Lenders”).

Under the Loan Agreement, we may borrow up to $60,000 from the Lenders, all of which has been funded as of June 30, 2025. The first $20,000 was advanced on April 10, 2025, the closing date of the Loan Agreement. The remaining $40,000 was advanced on June 30, 2025, which funds may only be used for Permitted Acquisitions (as defined in the Loan Agreement). The maturity date of the loan as provided under the Loan Agreement is April 1, 2030 (the “Maturity Date”). See Note 12 —Subsequent Eventsfor information regarding our use of these restricted funds in connections with an acquisition.

Interest on the outstanding loan balance is payable monthly in arrears at an annual rate of Term SOFR plus 5.00%, subject to a Secured Overnight Financing Rate (“SOFR”) floor of 2.00%. This rate was 9.33% as of June 30, 2025. Prior to April 1, 2029 (the “Amortization Start Date”), we must make interest-only payments on the outstanding loan balance. Commencing on the Amortization Start Date and continuing on the first day of each calendar month thereafter, we will pay an amount equal to the total principal of the outstanding loan balance divided by twelve (12), for a twelve (12) month straight-line amortization of equal monthly principal payments. Also on a monthly basis, we must pay an administrative agency fee to MidCap equal to 0.25% of the average end-of-day principal balance outstanding during the immediately preceding month. At the time of final payment under the loan, we will provide a final payment fee of 1.00% of the amount advanced thereunder except in the case of a refinance of the loan with MidCap and the Lenders

We are subject to customary events of default as described in the Loan Agreement. In such event, and for so long as it continues, the outstanding loan balance will bear interest at 2.0% per annum in excess of the rate otherwise payable. Under the Loan Agreement, we covenant to maintain a (1) Total Leverage Ratio (as defined in the Loan Agreement), as tested quarterly, no greater than 5.50 to 1.00, and (2) minimum liquidity threshold of 10.00% of the outstanding principal amount of the Loans. As of June 30, 2025, we are in compliance with all covenants under the Loan Agreement.

In connection with the Loan Agreement and subsequent draw, we incurred $2,025 of origination, legal, and other fees that represent debt financing costs to be deferred and amortized over the duration of the Loan Agreement, of which $7 was unpaid as of June 30, 2025. As a result, net proceeds of all borrowings under the Loan Agreement were $57,975.

See Note 12 —Subsequent Events for information related to amendments to our Loan Agreement.

NOTE 7– CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables

Receivables from contracts with customers, net of allowance for credit losses of $7,279, were $13,623 at June 30, 2025. Receivables from contracts with customers, net of allowance for credit losses of $6,328, were $18,154 at December 31, 2024. We had a provision for expected losses of $20, write-offs charged against the allowance for credit losses of $69, and recoveries on previously written off receivables of $1,000 during the six months ended June 30, 2025. We had a provision for expected losses of $107, write-offs charges against the allowance for credit losses of $5, and recoveries on previously written off receivables of $580 during the six months ended June 30, 2024. No customer represented more than 10% of our net accounts receivable balance as of June 30, 2025, and December 31, 2024.

Contract Assets

Costs to Fulfill Contracts

Contract assets from contracts with customers were $2,885 and $1,712 at June 30, 2025 and December 31, 2024, respectively.

Costs to Obtain Contracts

Deferred commission costs from contracts with customers were $13,317 and $12,351 at June 30, 2025 and December 31, 2024, respectively. The amount of amortization recognized for thethree and six months ended June 30, 2025 was$878 and$1,615, respectively, and for thethree and six months ended June 30, 2024 was$565 and$1,191, respectively.

Deferred Revenue

During the three and six months ended June 30, 2025, revenue of $2,567 and $8,557, respectively, and during the three and six months ended June 30, 2024, revenue of $888 and $6,007, respectively, was recognized from the deferred revenue balance at the beginning of each period.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2025, approximately $82,390 of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 27%of these remaining performance obligations over the next twelve months, with the balance recognized thereafter. These amounts exclude remaining performance obligations related to contracts for professional services for tax and payroll offerings whose remaining contractual term is less than one year as of June 30, 2025.

Revenue Concentration

During the six months ended June 30, 2025 and 2024, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 -COMMITMENTS AND CONTINGENCIES

Lease Commitments

We have entered into office space lease agreements, which qualify as operating leases under ASU No. 2016-02, “Leases (Topic 842)”. Under such leases, the lessors receive annual minimum (base) rent. The leases have original terms (excluding extension options) ranging fromone toten years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We record base rent expense under the straight-line method over the term of the lease. In the accompanying Condensed Consolidated Statements of Comprehensive Loss, rent expense is included in operating expenses under general and administrative expenses. The components of the rent expense are as follows for the periods presented below (in thousands):

For purposes of calculating the operating lease assets and lease liabilities, extension options are not included in the lease term unless it is reasonably certain we will exercise the option, or the lessor has the sole ability to exercise the option. The weighted average discount rate of our operating leases is 10% as of June 30, 2025, and December 31, 2024. The weighted average remaining lease termis four years as of June 30, 2025 and December 31, 2024.

Supplemental cash flow information related to operating leases are as follows for the periods presented below (in thousands):

Future minimum commitments over the life of all operating leases, which exclude variable rent payments, are as follows for the period presented below (in thousands):

Contingencies

Although we have been, are, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of June 30, 2025, we were not currently a party to any material legal proceedings.

NOTE 9 -SHARE-BASED COMPENSATION

We have one active equity plan, the 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan, approved by our stockholders, replaced our 2009 Equity Incentive Plan, as amended (the “2009 Plan”); however, the terms and conditions of the 2009 Plan will continue to govern any outstanding awards granted thereunder.

The number of shares reserved for issuance under the 2018 Plan is 6,998 shares. We have an aggregate of 2,428 options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted and outstanding pursuant to the 2018 Plan as of June 30, 2025. As of June 30, 2025, the number of shares available for future grant under the 2018 Plan is 2,602.

Share-based compensation for our stock option plans for the three and six months ended June 30, 2025, was$1,891 and$3,754, respectively, and for thethree and six months ended June 30, 2024, was$1,488 and$3,390, respectively. Issuance of common stock related to the exercise of stock options and the vesting of restricted stock units (including restricted stock units that converted from performance stock units) are as follows for the period presented below (in thousands):

Effective January 1, 2025, the Compensation Committee approved the grant of PSUs pursuant to a PSU Award Grant Notice and PSU Award Agreement (the “2025 PSU Award Agreement”) under the 2018 Plan to our executive officers payable in the form of RSUs. The number of RSUs into which the PSUs convert for each executive officer is a sliding scale between 0% to 200% of the target amount based on our achievement of certain performance metrics tied to our recurring revenue and gross profit for 2025.

NOTE 10 -NET LOSS PER SHARE

We compute net income or loss per share based on the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options or vesting of RSUs and in some cases PSUs. In periods of net income, we compute the adjustment to the denominator of our dilutive net earnings per share calculation to include these stock options, RSUs, and PSUs, as applicable, using the treasury stock method. Regardless of the period resulting in net income or net loss, we exclude the adjustment to the denominator of our dilutive net loss per share calculation to the extent that they are anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per common share for the periods presented below (in thousands, except per share amounts):

NOTE 11 -SEGMENT INFORMATION

We manage our business activities on a consolidated basis and operate asone reportable segment. Our chief operating decision maker (“CODM”) is the Chairman and Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated net loss, as reported on our Consolidated Statements of Comprehensive Loss, to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between cost of sales, sales and marketing, general and administrative, and research and development expenses. The CODM does not review assets in evaluating the results of the segment, and therefore, such information is not presented.

The operating financial results of our single reportable segment for three and six months ended June 30, 2025 and 2024, are as follows (in thousands):

NOTE 12 -SUBSEQUENT EVENTS

On July 1, 2025, we acquired 100% of the membership interests of Lathem Time 2025 LLC (f/k/a Lathem Time Corporation, “Lathem”), whose technology will be usedto expand the capabilities of our broader suite of HR solutions, specifically in timekeeping systems. The aggregate purchase price that we paid for the membership interests was $39,500, consisting of $37,500 paid in restricted cash on hand drawn from the MidCap Loan Agreement and the remaining $2,000 in the form of a promissory note ($1,803 net of discount) with the principal balance due on July 1, 2029. In connection with the acquisition, we recognized $733 of legal costs as General and Administrative expense.

Due to the close proximity of the acquisition date and our filing of this Quarterly Report on Form 10-Q for the six months ended June 30, 2025, the initial accounting for the business combination is incomplete. Accordingly, we are unable to disclose the allocation of purchase consideration among the assets acquired and liabilities assumed as well as pro forma revenue and earnings information of the consolidated entity at this time. We will include relevant disclosures as required in the third quarter of 2025.

During July 2025, we entered a Limited Consent, Amendment No. 1, and Joinder to the Loan Agreement and Amendment No. 2 of the Loan Agreement (the “Amendments”). The Amendments, collectively, resulted in an increase in our minimum liquidity threshold from $6,000 (10.00% of the outstanding balance under the Loan Agreement) to $10,000. In addition, we agreed with the Lenders to increase the final payment fee paid to the Lenders at the time of final payment under the loan from 1.00% to 2.00% of the amount advanced thereunder except in the case of a refinance of the loan with MidCap and the Lenders, in which case, the unaccrued portion of that fee would be waived. Furthermore, Lathem joined the Loan Agreement as Guarantor and the Lenders consented to the Lathem transaction.