ASUR

Business Context and Reporting Period

Company: Asure Software, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2010
Reporting Status: Smaller Reporting Company; Non-accelerated filer.
Business Overview: Asure provides software and services, primarily through two product lines: NetSimplicity (facility scheduling, e.g., Meeting Room Manager) and iEmployee (HR and workforce management solutions). The company transitioned its fiscal year-end from July 31 to December 31 effective January 1, 2010.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 7.3% for the three months and 6.0% for the nine months ended September 30, 2010, compared to the same periods in 2009. Growth was driven by increases in SaaS revenues and hardware sales for the Meeting Room Manager product.
• Profitability Improvement: The company reported a net loss of $1.203 million for the nine months ended September 30, 2010, a significant improvement from the $8.691 million loss in the prior year period. The three-month period ended September 30, 2010, resulted in a net income of effectively zero, compared to a $4.804 million loss in the prior year.
• Expense Reduction: Selling, General, and Administrative (SG&A) expenses decreased by 61.8% for the three months and 54.3% for the nine months compared to 2009. This reduction was primarily due to the absence of one-time litigation settlement costs ($2.2 million in 2009) and significant headcount/salary reductions.
• One-Time Charges: The nine-month 2010 results included a $1.203 million "Loss on Lease Amendment" related to a building lease reduction. This charge was absent in the prior year period, which instead included a $2.2 million litigation settlement and $0.63 million asset impairment.

Guidance, Outlook, and Risks

• Liquidity and Capital Resources: As of September 30, 2010, cash and equivalents were $0.837 million. Management believes it has sufficient capital to fund operations for the next 12 months. However, the company notes that future business demands may require raising additional capital, with no assurance that such capital will be available.
• Lease Amendment Impact: A lease amendment in Q2 2010 reduced leased square footage from 137,000 to 9,000 sq. ft. and monthly rent from $299k to $20k. While this incurred a one-time $1.5 million fee (resulting in the $1.203 million net loss), it is expected to generate $0.36 million in quarterly cash savings going forward.
• Strategic Focus: Management is focused on growing existing software operations (NetSimplicity and iEmployee) and exploring strategic acquisitions. The company expects to generate positive cash flows from operating activities for the remainder of 2010.
• Risks: Key risks include the uncertainty of raising additional capital if needed, the impact of the macroeconomic environment on revenue growth, and the potential for cash utilization to exceed recent levels. The company also faces risks related to the transition of customers from its former reseller, Ceridian, though it successfully captured 93% of pre-dispute recurring revenue.

Investor Verification Checklist

• Cash Burn Rate: Verify the sustainability of the $0.837 million cash balance against the projected operating cash flow for the remainder of 2010.
• Deferred Revenue Quality: Confirm the composition of the $1.866 million in current deferred revenue to ensure it represents valid future service obligations rather than potential refunds.
• Lease Savings Realization: Monitor future quarters to confirm the anticipated $0.36 million quarterly cash savings from the lease amendment are being realized.
• Customer Retention: Track the long-term retention of customers transitioned from the Ceridian reseller relationship to ensure recurring revenue stability.
• Acquisition Funding: Assess the company's ability to fund strategic acquisitions without diluting shareholders or incurring significant debt, given current liquidity constraints.