(Amounts in thousands, except per share data or otherwise noted)
NOTE 1 - THE COMPANY
Asure Software, Inc. ("Asure" or the "Company"), a Delaware corporation d/b/a Asure Software and incorporated in 1985, is a provider of web-based workforce management solutions that enable organizations to manage their office environment as well as their human resource and payroll processes effectively and efficiently.
In September 2007, the Company announced its name change to “Asure Software” to reflect the Company’s focus on its software business for its future growth. In October 2007, Asure purchased iSarla Inc., a Delaware corporation and application service provider that offers on-demand software solutions that help simplify the human resource process and improve employee productivity by managing and communicating human resources, employee benefits and payroll information. Under the trade name “iEmployee,” these web-based solutions include Time & Attendance, Timesheets, Human Resource Benefits, Expenses and others. Asure’s software business also includes software products and services from its NetSimplicity product line, which provides simple and affordable solutions to common office administration problems. NetSimplicity’s flagship product, Meeting Room Manager, automates the entire facility scheduling process: reserving rooms, requesting equipment, ordering food, sending invitations, reporting on the meeting environment and more.
Effective September 19, 2008, the Company transferred the listing of its common stock from the Nasdaq Global Market Exchange to the Nasdaq Capital Market Exchange. The Company’s trading symbol continued to be “ASUR” and the trading of the Company’s stock was unaffected by this change. As a result of this transfer, Asure was provided an additional 180 calendar days, or until February 2, 2009, to regain compliance with the minimum $1.00 share bid price requirement pursuant to Nasdaq Marketplace Rule 4450(a)(5).
Due to the continued unprecedented market conditions, Nasdaq, on several occasions, further suspended the enforcement of its rules requiring a minimum $1.00 share bid price for all Nasdaq-listed companies. Consequently, Asure’s current compliance deadline had been extended until November 17, 2009. As a method of gaining the required $1.00 share bid price, effective on December 28, 2009, Asure implemented a reverse stock split approved by Asure’s stockholders at the December 17, 2009 Annual Meeting. Pursuant to the reverse stock split, every ten shares of issued and outstanding common stock of Asure, $.01 par value per share were automatically converted to one issued and outstanding share of common stock without any change in the par value of such shares. Historical share data presented in these consolidated financial statements and notes thereto have been restated to reflect this reverse stock split as of the date earliest presented herin.
On January 29, 2009, Asure’s Board announced its plan to take the Company private. Due to concerns including the loss of liquidity and reduced requirements for regular financial reporting and disclosure, a group of shareholders led by Red Oak Fund, LP (“Red Oak”) opposed the go-private effort. As shareholder vote counts indicated a majority of shareholders also opposed the Go-Private effort, the Board canceled the special meeting and withdrew its proposal to go private. Subsequently, Red Oak nominated a slate of board directors, who were elected to replace Asure’s prior Board during the Company’s annual shareholders’ meeting on August 28, 2009. In addition to a new board of directors, the Company is currently managed by a new Chief Executive Officer, who the new board of directors believes will be able to implement its strategy for growing the software business and achieving profitability and positive cash flows. However, uncertainties and challenges remain and there can be no assurances that Asure's current strategy will be successful.
On November 24, 2009, the Board of Directors of the Company approved a change in the Company's fiscal year end from July 31 to December 31 of each year. This change to the calendar year reporting cycle began January 1, 2010.
Effective December 17, 2009 the shareholders voted to approve an amendment to the Company’s Restated Certificate of Incorporation to change the Company’s name from Forgent Networks, Inc. to Asure Software, Inc
On October 1, 2011, the Company, through ADI Software, LLC, a wholly owned subsidiary of the Company (“Purchaser”), purchased substantially all of the assets and assumed certain liabilities of ADI Time, LLC (“Seller”) relating to its time and attendance software and management services business, pursuant to an Asset Purchase Agreement (“APA”) by and among the Company, Purchaser and Seller. The APA contains certain customary representations, warranties, indemnities and covenants of the Company, Purchaser and Seller.
The purchase price for the assets consisted of $6,000 in cash and a promissory note of the Purchaser (“Purchaser Note”) in the aggregate principal amount of $1,095. The Purchaser Note bears interest at an annual rate of 0.16%, will mature on October 1, 2014, and is guaranteed by the Company. The Purchaser may offset any indemnification payments owed by the Seller under the APA against up to $1 million under the Purchaser Note. The cash portion of the purchase price was funded with the Company’s cash on hand and proceeds from the Credit Agreement and the Subordinated Notes. (further discussed in Note 4)
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
On December 14, 2011, the Company, through Asure Legiant, LLC, a wholly owned subsidiary of the Company (“Purchaser”), purchased substantially all of the assets and assumed certain liabilities of WG Ross Corp., d/b/a Legiant (“Seller”), relating to its cloud computing time and attendance software and management services pursuant to an Asset Purchase Agreement (“APA”) by and among the Company, Purchaser, Seller and, with respect to Section 6.6 only, ADI Software, LLC, a wholly owned subsidiary of the Company. The APA contains certain customary representations, warranties, indemnities and covenants of the Company, Purchaser and Seller.
The purchase price for the assets was $4,000, consisting of $1,511 in cash and three subordinated promissory notes of the Purchaser in the aggregate principal amount of $2,489, as adjusted pursuant to the terms of the APA. One of the promissory notes is for an aggregate principal amount of $250 bears interest at an annual rate of 0.20%, and will mature on February 1, 2012. The second promissory note is for an aggregate principal amount of $478 bears interest at an annual rate of 5.00%, and will mature on October 1, 2014. The third promissory note is for an aggregate principal amount of $1,761 bears interest at an annual rate of 0.20%, and will mature on October 1, 2014. The Purchaser may offset any indemnification payments owed by the Seller under the APA against up to $1 million under the third promissory note. All three promissory notes are guaranteed by the Company and are subordinated to the Company’s bank financing. The cash portion of the purchase price was funded with the Company’s cash on hand and proceeds from the Company’s bank financing.
According to the Nasdaq Capital Markets Rule 5550 (b) on Continue Listing Standards for Primary Equity Securities, the Company failed to meet the minimum stockholders’ equity requirement of $2,500 as of December 31, 2011. The Company's stockholders’ equity as of December 31, 2011 was $2,064. The Company did not meet this requirement primarily due to the mark-to-market impact of the derivative liability associated with the subordinated convertible notes outstanding. Subsequent to December 31, 2011, the terms of the subordinated convertible notes were amended to eliminate the embedded derivative features resulting in a settlement or extinguishment of the derivative liability. The Company estimates that the impact of this transaction will result in the Company exceeding the minimum stockholders’ equity requirement as of March 31, 2012.
The Company has informed Nasdaq's MarketWatch department regarding this matter.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Asure’s consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior year’s financial statement to conform to the current year presentation.
SEGMENTS
The chief operating decision maker is the Company’s Chief Executive Officer who reviews financial information presented on a company-wide basis. Accordingly, in accordance with ASC 280, the Company determined that is has a single reporting segment and operating unit structure.
USE OF ESTIMATES
Preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year end and the reported amounts of revenues and expenses during the fiscal year. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, lease impairment, useful lives of fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during the iEmployee, ADI Time and Legiant acquisitions. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the preparation of the financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation.
LIQUIDITY
As of December 31, 2011, Asure’s principal source of liquidity consisted of $1,067 of current cash and cash equivalents as well as future cash generated from operations. Cash and equivalents were $1,070 at December 31, 2010. While the cash balance is relatively unchanged from prior year, the Company used approximately $3.1 million in operating cash flow in the acquisitions of ADI Time and Legiant in the fourth quarter of 2011. The Company believes that it has and/or will generate sufficient cash for its short and long term needs. The Company may continue to reduce expenses and thus may utilize its cash balances in the short-term to reduce long-term costs. The Company expects that it will be able to generate positive cash flows from operating activities in the next calendar year as well.
Management is focused on growing its existing software operations and looking to make strategic acquisitions in the near future. In the short-term, any acquisitions will be funded with cash on the balance sheet, cash from operations, and cash or debt raised from outside sources as well as with equity.
There is no assurance that the Company will be able to grow its cash balances or limit its cash consumption and thus maintain sufficient cash balances, and it is possible that the Company’s future business demands may lead to cash utilization at levels greater than recently experienced. Management believes that the Company has sufficient capital and liquidity to fund and cultivate the growth of its current and future operations for the next 12 months and thereafter. However, due to uncertainties related to the timing and costs of these efforts, Asure may need to raise additional capital in the future. There is no assurance that the Company will be able to raise additional capital if and when it is needed.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis, and non-financial assets and liabilities such as goodwill, intangible assets and property and equipment that are measured at fair value on a non-recurring basis.
CREDIT POLICY
The Company reviews potential customers' credit ratings to evaluate customers' ability to pay an obligation within the payment term, which is usually net thirty days. When payment is reasonably assured and no known barriers exist to legally enforce the payment, the Company extends credit to customers. An account is placed on "Credit Hold" if a placed order exceeds the credit limit and may be placed on "Credit Hold" sooner if circumstances warrant. The Company follows its credit policy consistently and constantly monitors all of its delinquent accounts for indications of uncollectability.
DERIVATIVE
The Company’s convertible notes payable contain embedded derivative instruments related to the conversion feature that are accounted for separately. The fair values of these instruments are re-measured each reporting period and a gain or loss is recorded for the change in fair value.
CONCENTRATION OF CREDIT RISK
The Company grants credit to customers in the ordinary course of business. Concentrations of credit risk related to the Company’s trade accounts receivable are limited due to the large number of customers, including third-party resellers, and their dispersion across several industries and geographic areas. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. The Company requires advanced payments or secured transactions when deemed necessary.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains an allowance for doubtful accounts at an amount estimated to be sufficient to provide adequate protection against losses resulting from extending credit to the Company’s customers. This allowance is based in the aggregate, on historical collection experience, age of receivables, and general economic conditions. The allowance for doubtful accounts also considers the need for specific customer reserves based on the customer’s payment experience, credit-worthiness and age of receivable balances. Asure’s bad debts have not been material and have been within management expectations. The allowances for doubtful accounts as of December 31, 2011 does not include $61 in Provision for Doubtful accounts from the Company’s acquisitions in the fourth quarter of 2011. The allowances for doubtful accounts as of December 31, 2011and 2010 are as follows:
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BALANCE AT BEGINNING OF YEAR
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PROVISION FOR DOUBTFUL ACCOUNTS RECEIVABLE
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WRITE-OFF OF UNCOLLECTIBLE ACCOUNTS RECEIVABLE
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BALANCE AT END OF YEAR
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Year ended December 31, 2011
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Year ended December 31, 2010
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ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
INVENTORY
Inventory consists of finished goods and is stated at the lower of cost or market. Inventory includes purchased LCD panels and a full range of biometric and card recognition clocks that are sold as part of the Company’s workforce management solutions as well as its human resource and payroll processes to complement its NetSimplicity, Time and Labor Management (ADI Time, Legiant and iEmployee) software products respectively. The Company routinely assesses its on-hand inventory for timely identification and measurement of obsolete, slow-moving or otherwise impaired inventory.
PROPERTY AND EQUIPMENT
Property and equipment, including software, furniture and equipment, are recorded at cost less accumulated depreciation. Internal support equipment is video teleconferencing equipment used internally for purposes such as sales and marketing demonstrations, Company meetings, testing, troubleshooting customer problems and engineering, and is recorded at manufactured cost, if the Company constructed the asset or is recorded at cost, if purchased. Depreciation is recorded using the straight-line method over the estimated economic useful lives of the assets, which range from two to five years. Property and equipment also includes leasehold improvements and capital leases, which are recorded at cost less accumulated amortization. Amortization of leasehold improvements and capital leases is recorded using the straight-line method over the shorter of the lease term or over the life of the respective assets, as applicable. Gains or losses related to retirements or disposition of fixed assets are recognized in the period incurred. Repair and maintenance costs are expensed as incurred. The Company periodically reviews the estimated economic useful lives of its property and equipment and makes adjustments, if necessary, according to the latest information available.
BUSINESS COMBINATIONS
We accounted for the acquisitions using the acquisition method of accounting based on ASC 805—
Business
Combinations
, which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their full fair value as of the date control is obtained. The fair value of assets acquired and liabilities assumed has been determined based upon our estimates of the fair values of assets acquired and liabilities assumed in the acquisitions. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. While we used our best estimates and assumptions to measure the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, not to exceed one year from the date of acquisition, any changes in the estimated fair values of the net assets recorded for the acquisitions will result in an adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is tested 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. See Note 4 for additional information regarding goodwill. Intangible assets that are not considered to have an indefinite useful life are amortized using the straight-line method over their estimated period of benefit, which generally ranges from one to ten years. Each 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. No impairments of finite-lived intangible assets have been identified during any of the periods presented. See Note 5 for additional information regarding intangible assets.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with FASB ASC 350, Asure reviews and evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, including those noted above, the Company compares the assets’ carrying amounts against the estimated undiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts are greater than the undiscounted cash flows, the fair values of those assets are estimated by discounting the projected cash flows. Any excess of the carrying amounts over the fair values are recorded as impairments in that fiscal period. No impairment of long-lived assets has been identified during any of the periods presented.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
ORIGINAL ISSUE DISCOUNTS
Original issue discounts, when incurred on the issuance of debt, are recognized as a reduction of the current loan obligations and amortized to interest expense over the life of the related indebtedness using the effective interest rate method. The Company’s original issue discounts were $518 at October 1, 2011 and an additional $382 on December 14, 2011 for the ADI Time and Legiant acquisitions, respectively. At the time of any repurchases or retirements of related debt, the remaining amount of net original issue discounts will be written off and included in the calculation of gain/(loss) on retirement in the consolidated statement of operations. We recognized amortization of original issue discounts totaling $44 during the year ended December 31, 2011 which has been recorded in interest expense – amortization of OID and derivative mark-to-market in the consolidated statement of operations.
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. The Company recognizes software revenue in accordance with FASB ASC 985-605, Revenue Recognition (FASB ASC 985-605). The Company’s revenues consists of software license, software subscription and service fees. Revenue from the software element is earned through the licensing or right to use the Company’s software and from the sale of specific software products. Service fee income is earned through the sale of maintenance and technical support, training and installation. Revenue from the sale of hardware devices is recognized upon shipment of the hardware. Asure also sells multiple elements within a single sale.
Since the Company currently offers software both as a perpetual license and as software as a service, revenue recognition varies based on which of these forms of software the customer purchases.
When the Company sells software licenses in a multiple element arrangement and vendor-specific objective evidence (“VSOE”) of fair value is available for the undelivered element, sales revenue is generally recognized on the date the product is shipped, using the residual method, with a portion of revenue recorded as deferred (unearned) due to the applicable undelivered elements. VSOE of fair value for the maintenance, training and installation services are based on the prices charged for the maintenance and services when sold separately. Undelivered elements for our multiple element arrangements with a customer are generally restricted to post contract support, training and install. The amount of revenue allocated to these undelivered elements is based on the VSOE of fair value for those undelivered elements. Deferred revenue due to undelivered elements is recognized ratably on a straight-line basis over the service period (typically one year) or when the service is completed. When VSOE of fair value is not available for the undelivered element of a multiple element arrangement, sales revenue is recognized ratably, on a straight-line basis over the service period of the undelivered element. The Company’s training and installation services are not essential to the functionality of the Company’s products as such services can be provided by a third party or the customers themselves.
The Company also sells software subscriptions and may at times sell related setup, implementation and professional services in the same arrangement. Setup and implementation services typically occur at start of the software subscription period, while certain professional services may not occur several months later depending on the nature of the services and the customer requirements. Prior to January 1, 2010, the Company recognized the total contract value of software subscriptions and related services ratably as a single unit of accounting over the contract term, beginning when the customer was able to utilize the software. Subsequent to the adoption of the updated FASB ASC 605, the Company accounts each of these elements as separate accounting units for new contracts entered into beginning January 1, 2010. We allocate the value of the arrangement to each unit of accounting based on vendor specific objective evidence of selling price, when it exists, third-party evidence of selling prices for like services or estimated selling price. Software subscription service revenues are recognized pro-rata over the life of the software subscription contract, while the related setup, implementation or professional services revenues are recognized upon completion. The result of the adoption is an immaterial acceleration of setup, implementation and professional service revenues related to software subscription transactions.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
The Company does not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or acceptance clauses until such rights of return, refund or cancellation have expired or acceptance has occurred. The Company's arrangements with resellers do not allow for any rights of return.
Deferred revenue includes amounts received from customers in excess of revenue recognized, and is comprised of deferred maintenance, service and other revenue. Deferred revenues are recognized in the Consolidated Statements of Operations when the service is completed and over the terms of the arrangements, primarily ranging from one to three years.
ADVERTISING COSTS
The Company expenses advertising costs as they are incurred. Advertising expenses were $3 and $25 for the years ended December 31, 2011 and December 31, 2010, respectively. These expenses are recorded as part of sales and marketing expenses on the Consolidated Statements of Operations.
LEASE OBLIGATIONS
Asure recognizes its lease obligations with scheduled rent increases over the term of the lease on a straight-line basis. Accordingly, the total amount of base rentals over the term of the Company’s leases is charged to expense on a straight-line method, with the amount of rental expense in excess of lease payments recorded as a deferred rent liability. As of December 31, 2011 and 2010, the Company had deferred rent liabilities of $5 and $0, respectively, all of which are classified as long-term liabilities. The Company also recognizes capital lease obligations and records the underlying assets and liabilities on its Consolidated Balance Sheets. As of December 31, 2011 and 2010, Asure had $66 and $73 in capital lease obligations, respectively.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries are measured using the local currency as the functional currency. Accordingly, the assets and liabilities of these foreign subsidiaries are translated at current exchange rates at each balance sheet date. Translation adjustments arising from the translation of net assets located outside of the United States into United States dollars are recorded in accumulated other comprehensive income (loss) as a separate component of stockholders' equity. Income and expenses from the foreign subsidiaries are translated using monthly average exchange rates. Net gains and losses resulting from foreign exchange transactions are included in other income and expenses and were not significant in calendar years 2011 and 2010.
INCOME TAXES
The Company accounts for income taxes using the liability method under FASB ASC 740,
"Accounting for Income Taxes,"
which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some component or all of the deferred tax assets will not be realized.
In June 2006, the FASB issued an accounting standard regarding uncertain tax positions now codified with FASB ASC 740This standard clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.
This interpretation defines the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Additionally, this standard provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and transition. Asure adopted this standard effective August 1, 2007. The adoption did not have a material effect on the Company’s consolidated financial statements.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
SHARE BASED COMPENSATION
In December 2004, the FASB issued an accounting standard now codified as ASC 718, Stock Compensation. This revised standard addresses the accounting for stock-based payment transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments. Under this standard, companies may not account for stock-based compensation transactions using the intrinsic-value method .Instead, companies are required to account for such transactions using a fair-value method and recognize the related expense in the Consolidated Statement of Operations.
The Company adopted Statement ASC 718 effective August 1, 2005, using the modified prospective application transition method. The modified prospective application method requires that companies recognize compensation expense on stock-based payment awards that are modified, repurchased or cancelled after the effective date. The fair value of each award granted from Asure's stock option plans are estimated at the date of grant using the Black-Scholes option pricing model. 313 and 15 stock options were granted during the years ended December 31, 2011 and 2010.
As of December 31, 2011, $182 of unrecognized compensation costs related to non-vested option grants is expected to be recognized over the course of the following 3 years.
The Company issued 2 thousand shares of common stock related to exercises of stock options granted from its Stock Option Plans for the year ended December 31, 2011 and no shares in the year ended December 31, 2010.
COMPREHENSIVE LOSS
In accordance with the disclosure requirements of ASC 220,
Comprehensive Income,
the Company’s comprehensive loss is comprised of net loss and foreign currency translation adjustments. The following table presents the Company’s comprehensive loss and its components for the years ended December 31, 2011, and 2010.
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Twelve Months Ended
December 31,
2011
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Twelve Months Ended
December 31,
2010
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Foreign Currency gain (loss)
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RECENT ACCOUNTING PRONOUNCEMENTS
In October 2009, the FASB updated FASB ASC 605,
Revenue Recognition
(FASB ASC 605) to address how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting. This guidance eliminates the residual method and replaces it with the “relative selling price” method when allocating revenue in a multiple deliverable arrangement. The selling price for each deliverable shall be determined using vendor specific objective evidence of selling price, if it exists, otherwise third-party evidence of selling price shall be used. If neither exists for a deliverable, the vendor shall use its best estimate of the selling price for that deliverable. After adoption, this guidance will also require expanded qualitative and quantitative disclosures. The updated FASB ASC 605 is effective for the Company’s revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company adopted the updated FASB ASC 605 on January 1, 2010 on a prospective basis for any new contracts entered into after the date of adoption. The adoptions of this ASC update did not have a material impact to its condensed consolidated statement of operations for the twelve months ended December 31, 2010. However, the Company cannot predict whether the impact of this update will have a material impact in future quarters due to potential changes in products and product mix. Prior to the adoption of the updated FASB ASC 605, the Company accounted for its software subscriptions and related setup, implementation and professional services as a single accounting unit. Thus all revenues associated with such an arrangement were recognized pro-rata over the life of the software subscription service contract. Subsequent to the adoption of the updated FASB ASC 605, the Company accounts for each of these elements as separate accounting units. Thus the software subscription service revenue is recognized pro-rata over the life of the software subscription contract, while the related setup and implementation revenues are recognized upon completion. The result of the adoption is an immaterial acceleration of setup and implementation revenues related to software subscriptions.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
On May 12, 2011, the FASB issued ASU 2011-04 (Topic 220): Fair Value Measurement. The new guidance creates a uniform framework for applying fair value measurement principles. It eliminates differences between GAAP and International Financial Reporting Standards issued by the International Accounting Standards Board. New disclosures required by the guidance include: quantitative information about the significant unobservable inputs used for Level 3 measurements; a qualitative discussion about the sensitivity of recurring Level 3 measurements to changes in the unobservable inputs disclosed, including the interrelationship between inputs; and a description of the company's valuation processes. This guidance is effective for interim and annual periods beginning after December 15, 2011, and all amendments will be applied prospectively with any changes in measurements recognized in income in the period of adoption. The Company is currently evaluating the impact of this standard on the financial statements and related disclosures, but is not expected to be material to the Company’s consolidated financial statements
On June 17, 2011, the FASB issued ASU 2011-05 (Topic 820): Comprehensive Income. The new guidance amends disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (“OCI”) as part of the statement of changes in shareholders' equity. All changes in OCI will be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The guidance does not change the items that must be reported in OCI. This guidance is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2011 with early adoption permitted. The adoption of this guidance will not impact the Company's consolidated financial position, results of operations or cash flows and will only impact the presentation of OCI in the consolidated financial statements
NOTE 3 - FAIR VALUE MEASUREMENTS
Effective August 1, 2008, Asure adopted ASC 820,
Fair Value Measurements and Disclosures.
ASC 820 defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements. The adoption of FASB ASC 820 did not have a material impact to the Company’s consolidated financial statements.
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:
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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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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 the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2011 and 2010, respectively:
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Fair Value Measure at December 31, 2011
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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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2011
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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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$
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1,067
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$
|
1,067
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Derivative Liability
|
|
|
(835
|
)
|
|
|
-
|
|
|
|
(835
|
)
|
|
|
-
|
|
|
Total
|
|
$
|
232
|
|
|
$
|
1,067
|
|
|
$
|
(835
|
)
|
|
$
|
-
|
|
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
|
|
|
|
|
|
Fair Value Measure at December 31, 2010
|
|
|
|
|
Total
|
|
|
Quoted
|
|
|
Significant
|
|
|
|
|
|
|
|
Carrying
|
|
|
Prices
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
Value at
|
|
|
in Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
December 31,
|
|
|
Market
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Description
|
|
2010
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Cash and Cash Equivalents
|
|
$
|
1,070
|
|
|
$
|
1,070
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total
|
|
$
|
1,070
|
|
|
$
|
1,070
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Other Financial Assets and Liabilities
Financial assets and liabilities with carrying amounts approximating fair value include cash, trade accounts receivable, accounts payable, accrued expenses and other current liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities.
The Company’s line of credit and notes payable, subordinated convertible notes payable and subordinated notes payable including current portion, as of December 31, 2011, had a carrying value of $6,419. This carrying value approximates fair value. The fair value is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities.
See Note #4 for further discussion of the valuation of the Company’s derivative liability
NOTE 4 - ACQUISITIONS, DEBT COMMITMENTS AND DERIVATIVE LIABILTY
During fiscal 2011, the Company made two acquisitions for approximately $10.4 million in aggregate purchase consideration. The 2011 acquisitions were funded from available cash on hand, long-term debt, and promissory notes issued to the sellers
On October 1, 2011, the Company, through ADI Software, LLC, a wholly owned subsidiary of the Company purchased substantially all of the assets and assumed certain liabilities of ADI Time, LLC relating to its time and attendance software and management services business, pursuant to an Asset Purchase Agreement (“APA”) by and among the Company, ADI Software, LLC and ADI Time, LLC. The APA contains certain customary representations, warranties, indemnities and covenants of the Company, ADI Software, LLC and ADI Time, LLC. The Company expects to benefit through the additions of ADI Time, LLC’s proprietary Time and Labor Management software and its complementary proprietary time clock hardware solutions in addition to its network of resellers. The purchase price for the assets consisted of $6,000 in cash and a promissory note of ADI Software, LLC (“Purchaser Note”) in the aggregate principal amount of $1,095. The Purchaser Note bears interest at an annual rate of 0.16%, will mature on October 1, 2014, and is guaranteed by the Company. ADI Software, LLC may offset any indemnification payments owed by ADI Time, LLC under the APA against up to $1 million under the Purchaser Note. The cash portion of the purchase price was funded with the Company’s cash on hand and proceeds from the Company’s bank financing.
On December 14, 2011, the Company, through Asure Legiant, LLC, a wholly owned subsidiary of the Company, purchased substantially all of the assets and assumed certain liabilities of WG Ross Corp., d/b/a Legiant, relating to its cloud computing time and attendance software and management services pursuant to an Asset Purchase Agreement (“APA”) by and among the Company, Asure Legiant, LLC, Legiant and, with respect to Section 6.6 only, ADI Software, LLC, a wholly owned subsidiary of the Company. The APA contains certain customary representations, warranties, indemnities and covenants of the Company, Asure Legiant, LLC and Legiant. The Company expects to benefit by acquiring a large set of customers on its existing proprietary Time and Labor Management software solution with minimal acquired general & administrative expenses. The purchase price for the assets was $4,000, consisting of approximately $1,511 in cash and three subordinated promissory notes of the Asure Legiant, LLC in the aggregate principal amount of approximately $2,489, as adjusted pursuant to the terms of the APA. One of the promissory notes is for an aggregate principal amount of $250, bears interest at an annual rate of 0.20%, and will mature on February 1, 2012. The second promissory note is for an aggregate principal amount of approximately $479, bears interest at an annual rate of 5.00%, and will mature on October 1, 2014. The third promissory note is for an aggregate principal amount of approximately $1,761, bears interest at an annual rate of 0.20%, and will mature on October 1, 2014. Asure Legiant, LLC may offset any indemnification payments owed by Legiant under the APA against up to $1 million under the third promissory note. All three promissory notes are guaranteed by the Company and are subordinated to the Company’s bank financing. The cash portion of the purchase price was funded with the Company’s cash on hand and proceeds from the Company’s bank financing. Details regarding the financing of the acquisition is described in the below Notes Payable table.
Transaction costs for these acquisitions were $130.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
Following are the aggregate purchase price allocations for the two acquisitions.
As of December, 2011, the measurement period for the acquisitions is finalized except for our estimated income tax assets acquired and income tax liabilities assumed as we continue to assess the tax impact of the acquisitions in the various jurisdiction to which we report. We expect that goodwill arising from these acquisitions will be deductible for tax purposes over 15 years.
The allocations were based on fair values at the dates of acquisition (amounts in thousands):
|
|
|
ADI
|
|
|
Legiant
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration paid net of Cash received
|
|
|
6,697
|
|
|
|
3,704
|
|
|
|
10,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Original issue discount
|
|
|
(244
|
)
|
|
|
(382
|
)
|
|
|
(626
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,453
|
|
|
|
3,322
|
|
|
|
9,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
437
|
|
|
|
5
|
|
|
|
442
|
|
|
Inventories
|
|
|
31
|
|
|
|
56
|
|
|
|
87
|
|
|
Prepaid expenses and other current assets
|
|
|
5
|
|
|
|
11
|
|
|
|
16
|
|
|
Property and equipment, net
|
|
|
157
|
|
|
|
30
|
|
|
|
187
|
|
|
Total Assets
|
|
|
630
|
|
|
|
102
|
|
|
|
732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities Assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(134
|
)
|
|
|
(17
|
)
|
|
|
(151
|
)
|
|
Other accrued liabilities
|
|
|
(6
|
)
|
|
|
(23
|
)
|
|
|
(29
|
)
|
|
Deferred revenue
|
|
|
(695
|
)
|
|
|
(692
|
)
|
|
|
(1,387
|
)
|
|
Total Liabilities
|
|
|
(835
|
)
|
|
|
(732
|
)
|
|
|
(1,567
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles Acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed Technology
|
|
|
671
|
|
|
|
-
|
|
|
|
671
|
|
|
Reseller Relationships`
|
|
|
853
|
|
|
|
-
|
|
|
|
853
|
|
|
Trade names
|
|
|
37
|
|
|
|
-
|
|
|
|
37
|
|
|
Customer relationships
|
|
|
967
|
|
|
|
1,785
|
|
|
|
2,752
|
|
|
Non-compete agreements
|
|
|
32
|
|
|
|
-
|
|
|
|
32
|
|
|
Goodwill
|
|
|
4,098
|
|
|
|
2,167
|
|
|
|
6,265
|
|
|
Total Intangibles
|
|
|
6,658
|
|
|
|
3,952
|
|
|
|
10,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,453
|
|
|
|
3,322
|
|
|
|
9,775
|
|
The following unaudited summaries of pro forma combined results of operation for the years ended December 31, 2011 and 2010, give effect to the acquisition as if it had been completed on January 1, 2010. These pro forma summaries do not reflect any operating efficiencies, cost savings or revenue enhancements that may be achieved by the combined companies. In addition, certain non-recurring expenses, such as legal expenses and other transactions expenses for the first 12 months after the acquisition, are not reflected in the pro forma summaries. These pro forma summaries are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been had the acquisition taken place as of that date, nor are they indicative of future consolidated results of operations.
|
|
|
FOR THE YEARS ENDED
|
|
|
|
|
DECEMBER 31
|
|
|
DECEMBER 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Revenues
|
|
|
17,012
|
|
|
|
17,497
|
|
|
Net (loss)
|
|
|
(1,238
|
)
|
|
|
(1,844
|
)
|
|
Net (loss) per common share:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
(0.40
|
)
|
|
|
(0.60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
3,085
|
|
|
|
3,087
|
|
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
In connection with the assumptions, the Company issued or assumed the following debt instruments:
|
Notes Payable and Line of Credit
|
|
|
|
|
|
|
Balance as of December 31,
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
Stated Interest Rate
|
|
|
2010
|
|
|
2011
|
|
|
Short Term
|
|
|
Long Term
|
|
ADI Time - Sellers Note (net of unamortized discount of $226)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legiant - Sellers Note 3 (net of unamortized discount of $377)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Convertible Notes Payable (net of unamortized discount of $253)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Notes Payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADI Time - Sellers Note
In conjunction with the acquisition of ADI Software, LLC; the Company entered into a Promissory Note in the amount of $1,095 with the Seller. The Promissory Note bears interest at an annual rate of 0.16%, will mature on October 1, 2014, and is guaranteed by the Company. The Purchaser may offset any indemnification payments owed by the Seller under the APA against up to $1,000 under the Purchaser Note. The Company recorded the note at fair value using a discount rate of 9%, which resulted in an unamortized discount of $226, 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.
In conjunction with the acquisition of Legiant Software, LLC the Company entered into three separate Promissory Notes all payable to the Sellers. The details of each of the Promissory Notes is as follows:
Legiant - Sellers Note #1
Legiant Acquisition-Sellers Note #1 is for an aggregate principal amount of $250 bears interest at an annual rate of 0.20%, matured on February 1, 2012, and was paid in full.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
Legiant Acquisition-Sellers Note #2
Legiant Acquisition-Sellers Note #2 is for the principal amount of $478, bears interest at an annual rate of 5.00% and requires monthly payments of $10 until the maturity date of October 1, 2014.
Legiant Acquisition-Sellers Note #3
Legiant Acquisition-Sellers Note #3 is for an aggregate principal amount of $1,761, bears interest at an annual rate of 0.20%, and will mature on October 1, 2014 when all interest and principal are due. The Company may offset any indemnification payments owed by the Seller under the acquisition agreement against up to $1 million under Sellers Note #3. The Company recorded the note at fair value using a discount rate of 9%, which resulted in an unamortized discount of $377, 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 and will be payable, in cash, on October 1, 2014.
All three promissory notes are guaranteed by the Company and are subordinated to the Company’s bank financing discussed below.
Subordinated Convertible Notes Payable
On September 30, 2011, the Company entered into a Securities Purchase Agreement (the “9% Note Purchase Agreement”) relating to the sale of $1,500 aggregate principal amount of the Company’s 9% subordinated convertible notes (“9% Notes”) in a private placement to accredited investors to finance the ADI acquisition. The 9% Notes will 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. The 9% Note will mature on September 30, 2014. The 9% Note is secured by all of the assets of the Company and is subordinated to the Company’s obligations to the Bank and the 15% Notes.
Beginning 12 months from the date of issuance, the holder may convert the 9% Notes into shares of the Company’s common stock at a conversion price of $5.00 per share. The conversion price will be adjusted for certain events, such as stock dividends and stock splits. Additionally, if the Company subsequently issues common stock at a price below the then current conversion price, the conversion price will be reset to the greater of $3.27 per share (the closing price of the Company’s Common Stock on September 30, 2011) or such lower price. In the event that a holder of a 9% Note elects to convert the 9% Note into equity, and the Company determines that such conversion would jeopardize the Company’s tax benefits under Section 382 of the Internal Revenue Code, the Company may elect to prepay any or all of such 9% Notes prior to conversion, subject to certain limitations at a purchase price equal to the product of the number of shares into which the 9% Note is convertible and the volume weighted average closing price during the 20 day trading period beginning on the 10th day before the conversion notice is received by the Company multiplied by the Premium Rate. The Premium Rate is 1.1 if a holder notifies the Company of an intention to convert their 9% Note into equity prior to the date that is 90 days before the maturity date and 1.5 if such notification is made within 90 days of the maturity date. The 9% Notes also contain customary terms of default.
The 9% Note Purchase Agreement provides that, if the Company issues common stock below $3.25 per share, each holder of the 9% Notes outstanding at that time will have the right to purchase its pro rata portion of such stock issuance.
These convertible notes contain embedded derivative instruments related to the conversion feature that are accounted for separately. The derivative instruments entered into to finance the ADI acquisition. The fair values of these instruments are re-measured each reporting period and a gain or loss is recorded for the change in fair value. At inception, the conversion feature was valued at $274 and resulted in an original issue discount on the convertible debt, 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. The Company used a Monte Carlo simulation in a risk-neutral framework to simulate market capitalization outcomes of the Company, including considerations of the Company’s projected share price volatility, to estimate the fair value of the embedded derivative. The fair value of the conversion feature was $835 at December 31, 2011, with $561 being recorded in the income statement for the mark-to-market impact. This amount of $561 was recorded in interest expense – amortization of OID and derivative mark-to-market in the consolidated statements of operations. Subsequent to December 31, 2011, the terms of the convertible notes were amended to eliminate the embedded derivative features resulting in a settlement or extinguishment of the derivative liability. See Note 13 for further information.
Mr. Goepel, the Company’s Chief Executive Officer, purchased $200 of the 9% Notes. Red Oak Fund, LP purchased $600 of the 9% Notes. Mr. Sandberg, the Company’s Chairman, is the controlling member of Red Oak Partners, LLC, which manages the Red Oak Fund.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
Subordinated Notes Payable
On September 30, 2011, the Company entered into a Securities Purchase Agreement (the “15% Note Purchase Agreement”) relating to the sale of $1,700 aggregate principal amount of the Company’s 15% subordinated notes (“15% Notes”) in a private placement to accredited investors. The 15% Note will pay interest on each of March 31, June 30, September 30 and December 31, beginning on December 31, 2011, at a rate of 15% per year. The 15% Notes will mature on September 30, 2014. The 15% Notes are secured by all of the assets of the Company and are subordinated to the Company’s obligations to the Bank. The 15% Notes also contain customary terms of default.
Patrick Goepel, the Company’s Chief Executive Officer purchased $500 of the 15% Notes. Pinnacle Fund, LLLP purchased $300 of the 15% Notes. David Sandberg, the Company’s Chairman, is the controlling member of Red Oak Partners, LLC, which owns 50% of Pinnacle Partners, LLC, which is the general partner of the Pinnacle Fund, LLLP. Red Oak Partners, LLC is also the manager of the Pinnacle Fund, LLLP.
Credit Agreement
On September 29, 2011, the Company entered into a Credit Agreement with JPMorgan Chase Bank N.A. (“Bank”), providing for a $500 line of credit (the “Credit Agreement”), which was fully utilized as of December 31, 2011. The line of credit bears interest at a rate of 1.5% above the CB Floating Rate and matures on September 28, 2012. The CB Floating rate is defined as the Bank’s prime rate, as announced from time to time, provided that the CB Floating Rate may not be less than the adjusted one month LIBOR rate. The aggregate principal amount of advances outstanding at any one time under the line of credit may not exceed 80% of eligible trade accounts and accounts receivable or the maximum principal amount then available, whichever is less.
The Company’s obligations to the Bank are guaranteed by ADI Software, LLC, a wholly owned subsidiary of the Company, and secured by all of the assets of the Company and its subsidiaries. The Credit Agreement contains customary affirmative and negative covenants, including but not limited to limitations with respect to debt, liens, sale of equity interests, mergers and acquisitions, sale of assets, and loans or advances to and investments in others. The Company is also required to maintain total cash and marketable securities of not less than $300, beginning on December 31, 2011; a debt service coverage ratio of not less than 1.2 to 1.0 for each period of four consecutive fiscal quarters beginning the twelve months ending December 31, 2011; and EBITDA of not less than $100 for each fiscal quarter beginning the quarter ending December 31, 2011. The Company was in compliance with these covenants at December 31, 2011.
Events of default under the Credit Agreement include, among others, (i) the failure to pay when due the obligations owing to the Bank, (ii) the failure to perform covenants set forth in the Credit Agreement (as described above), (iii) any materially incorrect or misleading representation, warranty or certificate to the Bank, (iv) any materially incorrect or misleading representation in any financial statement or other information delivered to the Bank, (v) certain cross defaults and cross accelerations, (vi) the failure to perform under the guaranty, (vii) the occurrence of certain bankruptcy or insolvency events, (viii) judgments against the Company or its subsidiaries, and (ix) certain material adverse changes. In some cases, the events of default are subject to customary notice and grace period provisions.
The following is a schedule of the payments of principal on the debt obligations, by year, through maturity, in thousands.
ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
NOTE 5 - INTANGIBLE ASSETS
Asure accounted for its historical acquisitions in accordance with ASC 805,
Business Combinations.
The Company recorded the amount exceeding the fair value of net assets acquired at the date of acquisition as goodwill. The Company 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 current year acquisitions of ADI Time and Legiant.Asure’s intangible assets relate to ADI Time, Legiant and its acquisition of iSarla Inc. and the iEmployee operations.
In accordance with ASC 350,
Intangibles-Goodwill and
O
ther,
Asure reviews and evaluates its long-lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. Based on Asure’s impairment test, no impairment was identified for the Company’s intangible assets for the years ended December 31, 2011 and 2010.
On May 3, 2010, the Company and Ceridian Corporation (“Ceridian”), a reseller of the Company’s iEmployee products, entered into an agreement by which joint customers of the Company and Ceridian were given until July 31, 2010 to choose either to (i) contract directly with the Company to continue using our goods and services, or (ii) continue using Ceridian’s offerings that may not include the Company’s products and services. Depending on the number of customers that contracted with Asure and the related pricing, the cash flows associated with the Ceridian customers may vary from historical levels. Thus the Company tested the Customer Relationships intangible asset for impairment in accordance with ASC 350. The Company compared the asset’s carrying amount against the estimated undiscounted cash flows to be generated from the customers that contracted with Asure over the estimated useful life of the intangible asset. The undiscounted cash flows from the intangible asset exceeded the carrying value of the intangible asset and thus no impairment was required.
As of December 31, 2011 and 2010, the gross carrying amount and accumulated amortization of the Company’s intangible assets are are as follows:
|
|
|
|
|
|
December 31, 2011
|
|
|
Intangible Asset
|
|
Amortization
Period (in Years)
|
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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ASURE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data or otherwise noted)
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December 31, 2010
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Intangible Asset
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Amortization
Period (in Years)
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Gross
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Accumulated
Amortization
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Net
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