NOTE 4 – ACQUISITIONS

2018 Acquisitions

In January 2018, we closed three strategic acquisitions: TelePayroll Inc. (“TelePayroll”), a Southern California-based provider of HR, payroll and employee benefits services; Pay Systems of America, Inc. (“Pay Systems”), a provider of HR, payroll and employee benefits services; and Savers Administrative Services, Inc. (“Savers Admin”), a certified third-party administrator of payroll and HR services. All three companies are current resellers of our leading Human Resource Information System platform, Evolution. The total consideration for the three acquisitions was $30,574, of which $25,432 was paid with cash on hand and the remaining portion was paid with a combination of promissory notes and Asure common stock.

Stock Purchase Agreement

In January 2018, we closed on the acquisition of all of the outstanding shares of common stock (the “TelePayroll Shares”) of TelePayroll, Inc., a California corporation (“TelePayroll”), pursuant to a Stock Purchase Agreement (the “TelePayroll Stock Purchase Agreement”), among us, TelePayroll, the sellers identified therein, and the stockholders’ representative named therein. The aggregate consideration for the TelePayroll Shares consisted of (i) $9,000 in cash; (ii) 91,848 shares of common stock, having a value of $1,200 and (iii) a subordinated promissory note (the “TelePayroll Note”) in the principal amount of $1,800 subject to adjustment as provided in the TelePayroll Stock Purchase Agreement. We funded the cash payment with cash on hand. The TelePayroll Note bears interest at an annual rate of 2.0% and matures on January 1, 2020. The entire unpaid principal and all accrued interest under the TelePayroll Note is payable at maturity.

Stock Purchase Agreement

In January 2018, we closed on the acquisition of all of the outstanding shares of common stock (the “Savers Admin Shares”) of Savers Administrative Services, Inc., a North Carolina corporation (“Savers Admin”), pursuant to a Stock Purchase Agreement (the “Savers Admin Stock Purchase Agreement”), among us, Savers Admin, the sellers identified therein, and the stockholders’ representative named therein. The aggregate consideration for the Savers Admin Shares consisted of (i) $2,280 in cash and (ii) a subordinated promissory note (the “Savers Admin Note”) in the principal amount of $570 subject to adjustment as provided in the Savers Admin Stock Purchase Agreement. We funded the cash payment with cash on hand. The Savers Admin Note bears interest at an annual rate of 2.0% and matures on January 1, 2020. The entire unpaid principal and all accrued interest under the Savers Admin Note is payable at maturity.

Stock Purchase Agreement

In January 2018, we closed on the acquisition of all of the outstanding shares of common stock (the “Pay Systems Shares”) of Pay Systems of America, Inc., a Tennessee corporation (“Pay Systems”), pursuant to a Stock Purchase Agreement (the “Pay Systems Stock Purchase Agreement”), among us, Pay Systems and the sellers identified therein. The aggregate consideration for the Pay Systems Shares consisted of (i) $14,152 in cash and (ii) a subordinated promissory note (the “Pay Systems Note”) in the principal amount of $1,572 subject to adjustment as provided in the Pay Systems Stock Purchase Agreement. We funded the cash payment with cash on hand. The Pay Systems Note bears interest at an annual rate of 2.0% and is payable in two installments – one-half, plus accrued interest, on July 1, 2018 and the remaining principal balance and accrued interest on January 1, 2019.

Purchase Price Allocation

Following is the purchase price allocation for the 2018 acquisitions. We based the preliminary fair value estimate for the assets acquired and liabilities assumed for these acquisitions upon preliminary calculations and valuations. Our estimates and assumptions for these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). The primary areas of those preliminary estimates that we have not yet finalized relate to certain tangible assets and liabilities acquired, and income and non-income based taxes.

We recorded the transactions using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the dates of acquisitions. The $16,980 of intangible assets subject to amortization consist of $15,800 allocated to Customer Relationships, $850 for Trade Names, and $330 for Noncompete Agreements. To value the Trade Names, we employed the relief from royalty method under the market approach. For the Noncompete Agreements, we employed a form of the income approach which analyzes the Company’s profitability with these assets in place, in contrast to the Company’s profitability without them. For the Customer Relationships, we employed a form of the excess earnings method, which is a form of the income approach. The discount rate used in valuing these assets ranged from 14.5% to 31.0%, which reflects the risk associated with the intangible assets related to the other assets and the overall business operations to us. We estimated the fair values of the Trade Names using the relief from royalty method based upon a 1.0% royalty rate.

We believe significant synergies are expected to arise from these strategic acquisitions. 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 deductible for tax purposes.

Assets Acquired	TelePayroll		Pay Systems		Savers Admin		Total
Cash & cash equivalents	$	197		767		160	$	1,124
Accounts receivable		9		54		67		130
Fixed assets		10		121		-		131
Other assets		91		49		12		152
Funds held for clients		8,520		10,976		5,525		25,021
Goodwill		4,428		8,273		865		13,566
Intangibles		7,870		7,240		1,870		16,980
Total assets acquired	$	21,125		27,480		8,499	$	57,104

Liabilities assumed
Accounts payable		55		107		45		207
Accrued other liabilities		347		951		94		1,392
Deferred revenue		356		-		-		356
Client fund obligations		8,520		10,976		5,525		25,021
Total liabilities assumed		9,278		12,034		5,664		26,976

Net assets acquired	$	11,847		15,446		2,835	$	30,128

The following is a reconciliation of the purchase price to the fair value of net assets acquired at the date of acquisition:

	TelePayroll			Pay Systems			Savers Admin			Total
Purchase price	$	12,000			15,724			2,850		$	30,574
Working capital adjustment		36			(217	)		38			(143	)
Adjustment to fair value of Asure’s stock issued		(7	)		-			-			(7	)
Debt discount		(182	)		(61	)		(53	)		(296	)
Fair value of net assets acquired	$	11,847			15,446			2,835		$	30,128

Transaction costs for the 2018 acquisitions were $993 and were expensed as incurred and included in selling, general and administrative expenses.

2017 Acquisitions

In January 2017, we closed three strategic acquisitions: Personnel Management Systems, Inc., a provider of outsourced HR solutions; Corporate Payroll, Inc. (Payroll Division), a provider of payroll services; and Payroll Specialties NW, Inc., a provider of payroll services.

In May 2017, we closed two strategic acquisitions: iSystems Intermediate HoldCo, Inc. (“iSystems”), and Compass HRM. iSystems, through its flagship product, Evolution HCM, offers payroll, tax management and HR software combined with comprehensive back-end service bureau tools to service providers across the United States. Tampa-based Compass HRM is a current reseller of our HCM offering (formerly Mangrove), which provides human resources solutions that enhance organizations, people, and profits through payroll and HR solutions. The acquisition of Compass HRM expands our reach in the Southeast, particularly Florida.

In October 2017, we acquired Associated Data Services (“ADS”). ADS, based in Birmingham, Alabama, is a leading regional human resources and payroll services bureau in the Southeast and a current reseller of our HCM solution, Evolution.

Stock Purchase Agreement

In January 2017, we closed on the acquisition of all of the outstanding shares of common stock (the “PMSI Shares”) of Personnel Management Systems, Inc., a Washington corporation (“PMSI”), pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), among us, PMSI, the sellers identified therein, and the stockholders’ representative named therein. The aggregate consideration for the PMSI Shares consisted of (i) $3,875 in cash and (ii) a subordinated promissory note (the “PMSI Note”) in the principal amount of $1,125 subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from our recent underwritten public offering in June 2017. The PMSI Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PMSI Note is payable at maturity.

Asset Purchase Agreement

In January 2017, we closed on the acquisition of substantially all the assets of Corporate Payroll, Inc., an Ohio corporation (“CPI”), relating to its payroll service bureau business, pursuant to an Asset Purchase Agreement (the “CPI Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $1,500 in cash, (ii) a subordinated promissory note (the “CPI Note”) in the principal amount of $500 and (iii) 112,166 shares of our common stock valued at $1,000, subject to adjustment as provided in the CPI Asset Purchase Agreement. We funded the cash payment with proceeds from our recent underwritten public offering in June 2017. The CPI Note bears no interest and matures on April 30, 2018. The entire unpaid principal under the CPI Note is payable at maturity. The recipient of the shares of our common stock entered into a six month lock-up agreement with us.

Asset Purchase Agreement

In January 2017, we closed on the acquisition of substantially all the assets of Payroll Specialties NW, Inc., an Oregon corporation (“PSNW”), pursuant to an Asset Purchase Agreement (the “PSNW Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $3,010 in cash and (ii) a subordinated promissory note (the “PSNW Note”) in the principal amount of $600, subject to adjustment as provided in the PSNW Asset Purchase Agreement. We funded the cash payment with proceeds from our recent underwritten public offering in June 2017. The PSNW Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PSNW Note is payable at maturity.

Equity Purchase Agreement

In May 2017, we entered into an equity purchase agreement (the “Equity Purchase Agreement”) with iSystems Holdings, LLC, a Delaware limited liability company (“Seller”), and iSystems Intermediate Holdco, Inc., a Delaware corporation (“iSystems”), pursuant to which we acquired 100% of the outstanding equity interests of iSystems for an aggregate purchase price of $55,000, subject to adjustment as provided in the Equity Purchase Agreement. The aggregate purchase price consists of (i) $32,000 in cash, subject to adjustment, (ii) a secured subordinated promissory note (“iSystems Note”) in the principal amount of $5,000, subject to adjustment, and (iii) 1,526,332 shares of unregistered common stock valued at $18,000 based on a volume-weighted average of the closing prices of our common stock during a 90-day period. The iSystems Note bears interest at an annual rate of 3.5% and matures on May 25, 2019. The unpaid principal and all accrued interest under the promissory note is payable in two installments of $2,500 on May 25, 2018 and May 25, 2019, subject to adjustment.

To finance the iSystems acquisition, we amended and restated our existing credit agreement with Wells Fargo Bank, National Association, as administrative agent (the “Restated Credit Agreement”) to add an additional term loan in the amount of approximately $40,000, of which we borrowed approximately $32,000 to complete the iSystems acquisition. See Note 6- Notes Payable for further detail.

Stock Purchase Agreement

In May 2017, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Compass HRM, Inc. (“Compass”) and the sellers and seller representative named therein, pursuant to which the sellers sold 100% of the outstanding shares of capital stock of Compass to us for an aggregate purchase price of $6,000, subject to adjustment as provided in the Stock Purchase Agreement. Compass is headquartered in Tampa, Florida, and provides cloud-based human resource management software, including payroll, benefits, time and attendance, and performance management. The aggregate purchase price consists of $4,500 in cash and a subordinated promissory note (“Compass Note”) in the principal amount of $1,500, subject to adjustment. The Compass Note bears interest at an annual rate of 2.0% and matures on May 25, 2022. The Compass Note is payable in five annual installments of $300 on the anniversary of the closing date, subject to adjustment. The Compass Note was adjusted in March 2018, effective as of May 2017, to a principal amount of $1,474, to give effect to a working capital adjustment pursuant to the Stock Purchase Agreement. The revised Compass Note is now payable in five annual installments of $295 on the anniversary of the closing date, subject to adjustment.

To finance the Compass acquisition, we incurred approximately $4,500 of additional indebtedness pursuant to an additional term loan under our Restated Credit Agreement. See Note 6 –Notes Payable for further details.

Stock Purchase Agreement

In October 2017, we entered into a stock purchase agreement (the “ADS Stock Purchase Agreement”) with Associated Data Services (“ADS”) and the sellers and seller representative named therein, pursuant to which the sellers sold 100% of the outstanding shares of capital stock of ADS to us for an aggregate purchase price of $3,400, subject to adjustment as provided in the ADS Stock Purchase Agreement. The aggregate purchase price consists of $1,778 in cash; 44,624 shares of common stock in Asure Software, Inc. estimated to have a fair value of $528,200; and a subordinated promissory note (“ADS Note”) in the principal amount of $1,122, subject to adjustment. The ADS Note bears interest at an annual rate of 2.0%. The ADS Note is payable in two annual installments of $370 and $752 plus accrued interest, on October 1, 2018 and October 1, 2019, respectively , subject to adjustment.

Purchase Price Allocation

Following is the purchase price allocation for the 2017 acquisitions. We based the preliminary fair value estimate for the assets acquired and liabilities assumed for these acquisitions upon preliminary calculations and valuations. Our estimates and assumptions for these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). The primary areas of those preliminary estimates that we have not yet finalized relate to certain tangible assets and liabilities acquired, and income and non-income based taxes.

We recorded the transactions using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the dates of acquisitions. The $26,408 of intangible assets subject to amortization consist of $23,085 allocated to Customer Relationships, $1,621 for Trade Names, $1,010 for Developed Technology, and $692 for Noncompete Agreements. To value the Trade Names, we employed the relief from royalty method under the market approach. For the Noncompete Agreements, we employed a form of the income approach which analyzes the Company’s profitability with these assets in place, in contrast to the Company’s profitability without them. For the Customer Relationships and Developed Technology, we employed a form of the excess earnings method, which is a form of the income approach. The discount rate used in valuing these assets ranged from 14.0% to 17.0%, which reflects the risk associated with the intangible assets related to the other assets and the overall business operations to us. We estimated the fair values of the Trade Names using the relief from royalty method based upon a 1.0% to 1.7% royalty rate.

We based the allocations on fair values at the date of acquisition:

Assets Acquired	CPI		PMSI		PSNW		iSystems		Compass		ADS		Total
Cash & cash equivalents	$	126		131		53		211		207		124	$	852
Accounts receivable		22		347		111		951		241		-		1,672
Restricted cash		-		-		-		200		-		-		200
Fixed assets		-		130		7		681		38		4		860
Other assets		-		17		17		699		33		1		767
Funds held for clients		2,809		-		6,294		-		-		5,091		14,194
Goodwill		1,190		2,295		1,579		42,330		2,023		1,474		50,891
Intangibles		1,563		2,646		1,879		15,070		3,470		1,780		26,408
Total assets acquired	$	5,710		5,566		9,940		60,142		6,012		8,474	$	95,844

Liabilities assumed
Accounts payable		51		19		28		392		65		18		573
Accrued other liabilities		-		197		40		868		45		30		1,180
Deferred revenue		-		370		-		1,073		-		-		1,443
Client fund obligations		2,754		-		6,294		-		-		5,091		14,139
Total liabilities assumed		2,805		586		6,362		2,333		110		5,139		17,335

Net assets acquired	$	2,905		4,980		3,578		57,809		5,902		3,335	$	78,509

The following is a reconciliation of the purchase price to the fair value of net assets acquired at the date of acquisition:

	CPI			PMSI			PSNW			iSystems			Compass			ADS			Total
Purchase price	$	3,000			5,000			3,610			55,000			6,000			3,400		$	76,010
Working capital adjustment		-			42			-			202			55			-			299
Adjustment to fair value of Asure’s stock issued		(54	)		-			-			2,880			-			28			2,854
Debt discount		(41	)		(62	)		(32	)		(273	)		(153	)		(93	)		(654	)
Fair value of net assets acquired	$	2,905			4,980			3,578			57,809			5,902			3,335		$	78,509

Transaction costs for the 2017 acquisitions were $3,112 and were expensed as incurred and included in selling, general and administrative expenses.

Unaudited Pro Forma Financial Information

The following unaudited summary of pro forma combined results of operations for the three months ended March 31, 2018 and March 31, 2017 gives effect to the acquisitions of iSystems, Compass, ADS, TelePayroll, Pay Systems, and Savers Admin as if we had completed them on January 1, 2017. This pro forma summary does not reflect any operating efficiencies, cost savings or revenue enhancements that we may achieve by combining operations. In addition, we have not reflected certain non-recurring expenses, such as legal expenses and other transactions expenses for the first 12 months after the acquisition, in the pro forma summary. We present this pro forma summary for informational purposes only and it is not necessarily indicative of what our actual results of operations would have been had the acquisitions taken place as of January 1, 2017, nor is it indicative of future consolidated results of operations.

	FOR THE THREE MONTHS ENDED MARCH 31, 2018			FOR THE THREE MONTHS ENDED MARCH 31, 2017


Revenues	$	19,304		$	18,766
Net income (loss)	$	(1,251	)	$	(2,381	)
Net income (loss) per common share:
Basic and diluted	$	(0.10	)	$	(0.23	)

Weighted average shares outstanding:
Basic		12,583			10,403
Diluted		12,583			10,403