Asure Software Annual Report 2016

Plain-text annual report

ASURE SOFTWARE INC FORM 10-K (Annual Report) Filed 03/20/17 for the Period Ending 12/31/16 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 110 WILD BASIN ROAD SUITE 100 AUSTIN, TX 78746 5124372700 0000884144 ASUR 7373 - Computer Integrated Systems Design Software Technology 12/31 http://www.edgar-online.com © Copyright 2017, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the calendar year ended December 31, 2016OR☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-20008ASURE SOFTWARE, INC.(Exact Name of Registrant as Specified in its Charter) Delaware 74-2415696(State or other jurisdiction of (I.R.S. Employerincorporation or organization) Identification No.) 110 Wild Basin Road, Suite 100 Austin, Texas 78746(Address of Principal Executive Offices) (Zip Code) (512) 437-2700(Registrant’s Telephone Number, including Area Code)SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:NoneSECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:Common Stock, $0.01 par value Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934(“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filings pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will notbe contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, as defined inRule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the 4,809,312 shares of the registrant’s Common Stock held by non-affiliates on June 30, 2016, the last business day of theregistrant’s most recently completed second quarter, was approximately $22,651,860. For purposes of this computation all officers, directors and 5% beneficialowners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are,in fact, affiliates of the registrant. At March 15, 2017, there were 8,630,023 shares of the registrant’s Common Stock, $.01 par value, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive Proxy Statement relating to its 2017 Annual Meeting of Shareholders are incorporated by reference into Part III of thisAnnual Report on Form 10-K where indicated. Such Proxy Statement, or an amendment to this report containing the Items comprising Part III, will be filed withthe U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. TABLE OF CONTENTSPART I Item 1.Business3Item 1A.Risk Factors9Item 1B.Unresolved Staff Comments9Item 2.Properties9Item 3.Legal Proceedings9 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities10Item 6.Selected Financial Data11Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations11Item 7A.Quantitative and Qualitative Disclosures about Market Risk20Item 8.Financial Statements and Supplementary Data20Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures21Item 9A.Controls and Procedures21 PART III Item 10.Directors, Executive Officers and Corporate Governance22Item 11.Executive Compensation22Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters22Item 13.Certain Relationships and Related Transactions, and Director Independence22Item 14.Principal Accountant Fees and Services22 PART IV Item 15.Exhibits and Financial Statement Schedules23 Signatures25 Table of Contents PART IITEM 1. BUSINESSGENERALAsure Software, Inc., a Delaware corporation, is a global provider of cloud-based software-as-a-service (“SaaS”) time and labor management and AgileWorkplace management solutions that enable organizations to manage their office environments as well as their human resource and payroll processes effectivelyand efficiently.Asure serves approximately 7,000 clients in 80 countries, ranging from global Fortune 500 clients to small and mid-sized businesses. Some of our currentclients include Aetna, Apple Inc., Baker & McKenzie, Deutsche Bank, KPMG UK, La Trobe University, Merck and Co., Inc., Mondelez, Pfizer, Inc., Pearson,PSSI, Salesforce.com, Inc., State Street and Thomson Reuters. Our mission guides the work we do each day; it is “To deliver innovative technology with thepassion to empower every client’s workplace and the commitment to make their workdays easier.”We currently offer a full suite of solutions to help clients optimize and manage their mobile workforces and their global workspaces. SaaS-based offeringsinclude: asset management, mobile room scheduling, mobile time tracking, scheduling software, space utilization solutions, tablet-based time clocks, time andlabor management software, traditional time clocks, touch panels for room scheduling, and workplace business intelligence (“BI”) analytics, as well as humanresource management, payroll processing and benefits administration services businesses. All products are implemented using our proven client deployment modeland supported with professional services and client support teams as needed.More than ever, companies are trying to get a handle on how to track, understand and optimize their real estate and time and labor costs in a world that isbecoming increasingly mobile and global. With tele-commuting, hoteling (i.e., sharing of cubical space), and alternative working on the rise, executives have anopportunity to reinvent their workspaces to better meet the needs of their workforces and save millions in real estate costs. Similarly, mobile time tracking withgeospatial and facial recognition technologies allows executives to better understand where and when their employees are working, and provides great insights intooptimizing labor schedules and labor costs. Mobile time and tablet-based time tracking solutions also help combat “buddy punching”- when a dishonest workercovers for an absent co-worker by punching the company time clock for the absent worker- which can cost companies millions of dollars per year.We were incorporated in 1985 and our principal executive offices are located at 110 Wild Basin Road, Suite 100, Austin, Texas 78746. Our telephonenumber is (512) 437-2700 and our website is www.asuresoftware.com. Information on our website is not part of this Annual Report on Form 10-K.Asure makes available free of charge, on or through its website, our annual report on Form 10-K, our quarterly reports on Form 10-Q and our currentreports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicableafter we electronically file these materials or furnish them to the Securities and Exchange Commission. RECENT DEVELOPMENTSPublic Stock Offering In December 2016, we completed an underwritten public offering of 1,949,250 shares of common stock at the public offering price of $8.00 per share,which includes 254,250 shares sold pursuant to the underwriters’ full exercise of their over-allotment option. Our net proceeds, after deducting the underwritingdiscounts and commissions and other estimated offering expenses, were approximately $14.4 million. We intend to use the net proceeds received from the offeringfor general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, assets or technologies. Wesubsequently used a portion of the proceeds to reduce approximately $3.0 million of our secured subordinated indebtedness payable in connection with the 2016acquisition of Mangrove and for the three acquisitions we closed in January 2017, as noted below.2017 AcquisitionsIn January 2017, we closed three strategic acquisitions: Personnel Management Systems, Inc., a leading provider of outsourced HR solutions; CorporatePayroll, Inc. (Payroll Division), a leading provider of payroll services; and Payroll Specialties NW, Inc., a leading provider of payroll services. 3Table of ContentsStock Purchase AgreementIn January 2017, we acquired all of the outstanding shares of common stock of Personnel Management Systems, Inc., a Washington corporation. Theaggregate consideration for the stock consisted of (i) $3.875 million in cash and (ii) a subordinated promissory note in the principal amount of $1.125 million,subject to adjustmentAsset Purchase AgreementIn January 2017, we acquired substantially all the assets of Corporate Payroll, Inc., an Ohio corporation, relating to its payroll service bureaubusiness. The aggregate consideration for the assets consisted of (i) $1.5 million in cash, (ii) a subordinated promissory note in the principal amount of $500,000and (iii) 112,166 shares of our common stock valued at $1.0 million, subject to adjustment.Asset Purchase AgreementIn January 2017, we acquired substantially all the assets of Payroll Specialties NW, Inc., an Oregon corporation. The aggregate consideration for theassets consisted of (i) $3.010 million in cash and (ii) a subordinated promissory note in the principal amount of $600,000, subject to adjustment.See Note 14- Subsequent Events in the accompanying financial statements for more information about the Stock Purchase Agreement and Asset PurchaseAgreements.2016 AcquisitionsThrough the acquisitions described below, we have entered into the human resource management, payroll processing and benefits administration servicesbusinesses, which we have integrated into our existing AsureForce® product line.Mangrove Stock AcquisitionIn March 2016, we acquired all of the outstanding shares of common stock of Mangrove Employer Services, Inc. (“Mangrove”), a human resourcemanagement and payroll processing company based in Tampa, Florida. The aggregate consideration for the stock consisted of (i) $11.3 million in cash, and (ii) asecured subordinated promissory note in the principal amount of $6.0 million, subject to adjustment.COBRAsource Asset AcquisitionIn March 2016, we also acquired substantially all the assets of Mangrove COBRAsource Inc., a benefits administration services business which then wasa wholly owned subsidiary of Mangrove. The aggregate consideration for the assets was $1.0 million.PRODUCTS AND SERVICESAsure’s SaaS-based solutions are uniquely designed to help companies bring people, time, space and assets together to more effectively manage theirglobal, mobile workforces. As companies recruit, hire and work to retain mobile employees, executives use Asure’s solutions to understand how their workspacesare used, track how and when people work, and foster productivity by making it easy for employees to find the workspace they need. We currently offer two mainproduct lines, AsureSpace™ and AsureForce®. AsureSpace™ provides workplace management solutions that enable organizations to manage their officeenvironments and optimize real estate utilization, and AsureForce® time and labor management solutions help organizations optimize labor and laboradministration costs and activities. With AsureSpace™ workspace management solutions, clients realize significant costs savings and Return on Investment (“ROI”) gains by better usingtheir real estate with a full portfolio of industry-leading, global, SaaS-based solutions. Our SmartView® product offers unique insights into how space is beingused, which allows companies to make proactive, strategic decisions about real estate investments. SmartTag® asset management helps companies assign physicalassets to people and spaces so they can track and recover all assets, including cell phones, laptops, desks, chairs, and virtually any item assigned to an employee.AsureSpace™ resource scheduling and meeting room management solutions help employees easily find and reserve space for their specific needs. Our newproduct, NowSpace®, allows users to find and reserve desk spaces, conference rooms, catering, audiovisual, and more directly from their smart phones.AsureSpace™ touch panels and kiosks are placed outside busy areas for on-the-fly desk and space reservation needs; viewers can find, reserve and use availablespace as needed. And lastly, workplace business intelligence (“Workplace BI”) tools offer invaluable reporting for executives to understand space utilization andcontinue to make improvements in their real estate investments.4Table of Contents Mangrove, which was acquired in March 2016, and is now a part of our AsureForce® product line, provides cloud-based SaaS Human CapitalManagement (“HCM”) applications which includes human resources (“HR”), payroll, benefits, and talent management software solutions. Mangrove’s HCM suiteof solutions is easy-to-use, with fully integrated HR/payroll applications uniquely designed to help companies recruit, manage, pay, and analyze their workforcemore effectively. The acquisition enabled us to alter the marketplace of HCM by offering a comprehensive solution that brings workforce and workspace managementtogether. These two workflows combined in one unified management platform increases company bottom-line performance through greater employeeempowerment and engagement. It also gives companies new data metrics to manage their two most costly assets: their people and real estate. Cost savings and additional ROI gains come in the form of a more strategic use of labor dollars and the elimination of time theft with AsureForce®workforce management solutions. GeoPunch® mobile time tracking, the AirClock™ tablet-based time tracking, and Asure’s workforce management platformoffer clients several advantages. First, mobile time tracking with geospatial and facial recognition technologies help executives better understand where and whentheir employees are working and provide great insights into optimizing labor schedules and labor costs. Mobile time and tablet-based time tracking solutions makeit much more efficient for employees to punch in and out from wherever they are working, whether it is a client site, a work site, or a home-based workarrangement. GeoPunch® and AirClock™ also help combat buddy punching, which can cost companies millions of dollars per year. Finally, employees,supervisors and executives have real-time access to data and business intelligence to help eliminate buddy punching, optimize job costing and labor scheduling,and ultimately control and optimize labor costs. For both product lines, support and professional services are other key elements of our software and services business. As an extension of our legacyperpetual software product offerings, Asure offers our customers maintenance and support contracts that provide ready access to qualified support staff, softwarepatches and upgrades to our software products. We also provide installation of and training on our products, add-on software customization and other professionalservices on a global scale. PRODUCT DEVELOPMENTWe strive to quickly bring to market innovative, cloud-based solutions that work when, where and how workforces are operating today. Asure’s strategyis to deliver the right technology to its customer base in order to realize efficiencies in the workplace. First-to-market mobile applications are a testament to oursuccess in innovation. Additionally, Asure is committed to co-innovation, working in partnership with industry leaders, partners and clients around the globe todevelop technology solutions that meet the needs of a rapidly shifting workplace.Our industry is characterized by continuing improvements in technology, resulting in the frequent introduction of new products, short product life cycles,changes in customer needs and continual improvement in product performance characteristics. Asure strives to be cost-effective and timely in enhancing oursoftware applications, developing new innovative software solutions that address the increasingly sophisticated and varied needs of an evolving range ofcustomers, and anticipating technological advances and evolving industry standards and practices. Asure development teams – located in Traverse City, Michigan; Dedham, Massachusetts; Salt Lake City, Utah and Austin, Texas – are staffed withsoftware developers, quality assurance engineers and support specialists who work closely with our customers and sales and marketing teams to build products andservices based on market requirements and customer feedback. We develop our new product and service roadmaps based on inputs from customers, competitivecomparisons and relevant technology innovations. Our research and development strategy is rooted in innovation and flexibility. The development team enhances the functionality of our software andhardware products through new releases and new feature developments, with a particular focus on cloud-based SaaS solutions and products for the mobileworkforce. Asure will also continue to evaluate opportunities for developing new software so that organizations may further streamline and automate the tasksassociated with administering their businesses. We seek to simultaneously allow organizations to improve their productivity while reducing the costs associatedwith those business tasks. We also actively search for potential product, service or business acquisitions that we believe will complement our existing and planned product andservice offerings, such as our 2016 Mangrove human capital management, payroll processing and employee benefits administration acquisitions. We cannot assurethat we will make future acquisitions or that we can successfully integrate acquired assets or businesses profitably into Asure.Despite our efforts, we also cannot assure that we will complete our existing and future development efforts or that our new and enhanced softwareproducts will adequately meet the requirements of the marketplace and achieve market acceptance. Additionally, Asure may experience difficulties that coulddelay or prevent the successful development or introduction of new or enhanced software products. In the case of acquiring new or complementary softwareproducts or technologies, we may not be able to integrate the acquisitions into our current product lines. Furthermore, despite extensive testing, errors may befound in new software products or releases after shipment, resulting in a diversion of development resources, increased service costs, loss of revenue and/or delayin market acceptance.5Table of ContentsSALES AND DISTRIBUTIONAsure sells its software products and services through both a direct and channel (partner) model, which enables us to sell our software solutions in anefficient, cost-effective manner. Prospective customers learn about Asure through a variety of ways, including advertising, web site searches, sales calls, publicrelations, direct marketing and social media. When prospective customers show an interest in Asure, we connect them with a sales representative via our web site,phone or a face-to-face meeting to discuss their needs and the solutions they are interested in and make the sale. We track our marketing and sales activities toprovide immediate preview into activities, leads and pipeline opportunities. Asure account management teams also work with existing customers to promote andsell additional solutions that are relevant for each customer. In addition to this direct sales model, we supplement these efforts with our partner programs describedbelow. By working with our partners, we expand the reach of our direct sales force and gain access to key opportunities in major market segmentsworldwide. Asure has two distinct levels of partners in our Partner Program: Reseller Partners and Referral Partners. Reseller Partners . Reseller Partners are companies that represent us globally, as well as before the Federal government, and often offer complementaryproducts to either the workspace management product line or the workforce product line. Reseller Partners commit to a minimum level of business per year withus and receive a channel discount for that commitment. Our Reseller Partners outside the United States include Novera in Australia which represents theworkspace product line. We also have several Reseller Partners that represent our software in the Federal government space. Resellers of our workforce productline in the United States include Oasis Outsourcing, a large provider of human resource outsourcing solutions. Referral Partners . Referral Partners provide us with the name and particular information about a prospective customer and its needs as a sales lead. Ifwe accept the sales lead, we register it for the Referral Partner. If we make a sale as a direct result of such a lead, we will pay the Referral Partner a sales leadreferral fee. Currently, we have a number of Referral Partners, including PolyVision Corp., Steelcase and e-Innovative Solutions for the workspace managementproduct line and several smaller firms for our workforce product line. COMPETITIONWe believe we have a unique position in the market place, in that Asure is the only technology company in the world that offers SaaS-based workspaceand workforce management solutions from a single partner. Additionally, we believe Asure has been first-to-market with mobile apps in the workspacemanagement industry and we are the only known company to have both geospatial and facial recognition technology working together for mobile time tracking. Specific to the AsureSpace™ line of workspace management software solutions, we have a competitive advantage in the breadth of our comprehensiveplatform of workspace scheduling and utilization analytics as well as our resources available for product development, client services, and customer support. Theprimary competitors to AsureSpace™ include Dean Evans & Associates, Inc., Emergingsoft Corporation, AgilQuest Corporation and Condeco Ltd. (UK). Inaddition to the features and available services, we believe the principal advantages of AsureSpace™ with respect to its competitors include its cloud-based servicesmodel, extensive product integration options and partner channel, scalable deployments, configurable interfaces, mobile access and price.We believe that the AsureForce® line of workforce management software solutions has a competitive advantage in the marketplace in servingorganizations seeking specific point-solutions as well as organizations desiring an integrated suite of solutions, particularly in the area of mobile time collection.We believe GeoPunch® and AirClock™ products are first-to-market technology solutions with significant market demand. By competing tactically with point-solutions and strategically with an integrated suite of solutions, Asure can serve the needs of a broad spectrum of companies. Primary competitors to AsureForce®include Kronos, Replicon, and Time Simplicity. While Asure has the advantage of a flexible, easy to use, cloud-based, SaaS-delivered software model, affordability and proven deployment methodology,we face several categories of competitive challenges: Vendors with face-to-face sales contact. In this highly relationship-based sales process, vendors with large, dispersed field-based sales teamswho meet and consult with prospects have an advantage. Key U.S. vendors who approach the market in this manner include ADP, Kronos,PeopleSoft, Condeco and Steelcase. Asure has recently launched a field-based approach to sales and also focuses on high-touch marketingcampaigns and leveraging relationships with channel partners to build relationships with prospects.National payroll processors with loss-leader products. Large brand and market share payroll processing vendors (such as ADP, Inc.) offerequivalent point solutions at little or no cost to prospects when in a competitive engagement because these loss leader products becomeinconsequential next to their core business offerings.Single application vendors. Vendors that offer similar point-solutions, such as room scheduling, office hoteling management, time andattendance, employee/manager self-service and paystub management, can be perceived as better meeting an immediate and specific need.6Table of ContentsBecause the market for our products and services is subject to rapid technological change and there are relatively low barriers to entry in the workplacemanagement software market, we routinely encounter new entrants or competition from vendors in some or all aspects of our two product lines. Competition fromthese potential market entrants may take many forms. Some of our competitors, both current and future, may have greater financial, technical and marketingresources than us and therefore may be able to respond more quickly to new or emerging technologies and changes in customer requirements. As a result, theymay compete more effectively on price and other terms. Additionally, those competitors may devote greater resources in developing products or in promoting andselling their products to achieve greater market acceptance. Asure is actively taking measures designed to address our competitive challenges. However, wecannot assure that we will be able to achieve or maintain a competitive advantage with respect to any of the competitive factors. MARKETING Asure’s marketing strategy has relied on the development and implementation of a comprehensive integrated plan rooted in our business objectives. Themarketing plan includes four primary objectives: 1) build brand awareness, 2) develop lead generation programs that drive revenue, 3) launch products in ameaningful way and 4) develop an infrastructure that supports and measures marketing activities. We deploy multi-faceted, multi-series direct marketing programsto drive awareness, interest and revenue. Marketing vehicles include our web site, organic and paid search, advertising, public relations, direct marketing, events,social media, content marketing and eMarketing. Our marketing plan addresses growth and retention goals for all target audiences, from small and medium-sizedbusinesses to Fortune 500 companies and divisions of enterprise organizations throughout the United States, Europe and Asia/Pacific. INDUSTRY REGULATION Our business is subject to a wide range of complex U.S. and foreign laws and regulations. In addition, many of our solutions are designed to assist clientswith their compliance with certain U.S. and foreign laws and regulations that apply to them. Failure to comply with, or changes in, laws and regulations applicableto our businesses could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences. As a provider of HR outsourcing solutions, we process personal and sensitive data related to clients, employees of our clients, vendors and our employees.We are, therefore, subject to compliance obligations under federal, state and foreign privacy and data security-related laws. For instance, in the United States, theHealth Insurance Portability and Accountability Act of 1996 applies to our COBRA, flexible spending account, and health savings account benefits administrationservices businesses. We are also subject to federal, state and foreign security breach notification laws with respect to both our own employee data and clientemployee data. Some of our solutions assist our clients in complying with certain U.S. and foreign laws and regulations that apply to them. For example, our HCMsolutions help clients manage their compliance with certain requirements of the Patient Protection and Affordable Care Act in the United States. Our COBRAadministration services and flexible spending account services in the United States are designed to help our clients comply with relevant federal guidelines relatingto, respectively, employers’ benefits continuation obligations and certain requirements of the Internal Revenue Code. Although these laws and regulations apply toour clients and not to us, changes in such laws or regulations may affect our operations, products and services. Additionally, the changing nature of privacy laws in the United States, Canada, the European Union and elsewhere, may impact our processing ofpersonal information of our employees and on behalf of our clients. For example, the European Union adopted a comprehensive general data privacy regulation(the “GDPR”) in May 2016 that will replace the current EU Data Protection Directive and related country-specific legislation. The GDPR becomes fully effectivein May 2018. Complying with the enhanced obligations imposed by the GDPR may result in significant costs to our business and require us to amend certain of ourbusiness practices. Further, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue toincrease. The future enactment of more restrictive laws, rules or regulations and/or future enforcement actions or investigations could have a materially adverseimpact on us through increased costs or restrictions on our businesses and noncompliance could result in regulatory penalties and significant legal liability. Failureto comply with data privacy laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have otheradverse consequences The foregoing description does not include an exhaustive list of the laws and regulations governing and impacting our business. 7Table of ContentsTRADEMARKSWe have registered Asure Software® as a federal trademark with the U.S. Patent and Trademark Office. Our other federal trademarks includeAsureForce®, Face Time Clock®, Legiant Timecard® and ADI Time®, and we have pending applications for federal registration of the marks AsureSpace™,SmartView™ and GeoPunch™. We also use the common law trademarks iEmployee™, Netsimplicty™, AsureSpace™, ADI™, Workplace BI™ and LegiantExpress™.EMPLOYEESAs of December 31, 2016, we had a total of 179 employees in the following departments: NUMBER OF FUNCTION EMPLOYEES Research and development 31 Sales and marketing 39 Customer service and technical support 66 Finance, human resources and administration 43 Total 179 We continually evaluate and adjust the size and composition of our workforce. We also periodically retain contractors to support our sales and marketing,information technology and administrative functions. None of our employees are represented by a collective bargaining agreement. Asure has not experienced anywork stoppages and we consider our relations with our employees to be good. Additionally, we augment our workforce capacity in research and development andcustomer service and technical support by contracting for services through third parties. Our future performance depends largely on our ability to continually and effectively attract, train, retain, motivate and manage highly qualified andexperienced technical, sales, marketing and managerial personnel. Asure’s future development and growth depend on the efforts of key management personneland technical employees. Asure uses incentives, including competitive compensation and stock options, to attract and retain well-qualified employees. However,we cannot assure that we will continue to attract and retain personnel with the requisite capabilities and experience. The loss of one or more of Asure’s keymanagement or technical personnel could have a material and adverse effect on our business and operating results.EXECUTIVE OFFICERS The information regarding directors and corporate governance matters is incorporated herein by reference from the section entitled “Election of Directors”of the Company’s definitive Proxy Statement (the “Proxy Statement”) to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended,for the registrants’ Annual Meeting of Stockholders to be held on June 5, 2017. The Proxy Statement is anticipated to be filed within 120 days after the end of theregistrant’s fiscal year ended December 31, 2016. The following table sets forth information regarding the Company’s current executive officers as of March 30, 2017:Name Age PositionPatrick Goepel 55 Chief Executive OfficerJoe Karbowski 50 Chief Operating Officer/Chief Technical OfficerBrad Wolfe 57 Chief Financial Officer Patrick Goepel was elected to the Company’s Board of Directors at its August 28, 2009 Annual Meeting of Shareholders. He was subsequentlyappointed as Interim Chief Executive Officer on September 15, 2009 and became Chief Executive Officer of the Company as of January 1, 2010. Prior to hisappointment, he served as Chief Operating Officer of Patersons Global Payroll. Previously, he was the President and Chief Executive Officer ofFidelity Investment’s Human Resource Services Division from 2006 to 2008; President and Chief Executive Officer of Advantec from 2005 to 2006; andExecutive Vice President of Business Development and US Operations at Ceridian from 1994 to 2005. A former board member of iEmployee, Mr. Goepelcurrently serves on the board of directors of APPD Investments and SafeGuard World International. Joe Karbowski was promoted to Chief Operating Officer and Chief Technical Officer in September 2016. He joined the Company in 2012 when weacquired PeopleCube, where he also served as Chief Technical Officer, evolving it from a startup he co-founded in 1999 to be a leader in the Agile Workplacemarket. With more than 25 years of experience in building commercial software companies, he is a featured speaker and has published numerous articles onsoftware development techniques and methodologies. Joe earned a Bachelor of Science degree in Computer Science from Michigan Technological University,Houghton.8Table of ContentsBrad Wolfe joined the Company as Chief Financial Officer in October 2014. Prior to joining the Company, Mr. Wolfe spent most of the last 14 yearswith DCI Group and their related entities and investments, a private equity and investment organization, where he served in consulting, office and executivefinance and operational roles for the firm’s subsidiary and portfolio companies to promote their growth and profitability. Before that, he was Chief FinancialOfficer and Executive Vice President at AON Corporation, a Fortune 200 company. His background also includes mergers and acquisitions in both publicaccounting and law firm settings, and his experience spans international markets and a wide range of industries, including technology, software and real estate.Wolfe holds an MBA degree from Northwestern University’s Kellogg School of Business in Finance and Information systems, a J.D. degree from the Kent LawSchool executive program, and a B.B.A. degree in accounting and information systems from Southern Methodist University. ITEM 1A. RISK FACTORS We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under thisItem. ITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIES Our principal offices are located in Austin, Texas where we occupy approximately 12,000 square feet of office space under one operating lease thatexpires in June 2018. Subsequent to December 31, 2016, we entered into a lease agreement for new corporate office facilities to accommodate our growth. Welease approximately 6,000 square feet in Dedham, Massachusetts. We also lease office suites in Michigan, Utah and the United Kingdom and, as a result of ourMarch 2016 acquisitions, facilities in Tampa, Florida, Henderson, Nevada and Vernon Hills, Illinois.Management believes that the leased properties described above are adequate to meet Asure’s current operational requirements and can accommodatefurther physical expansion of office space as needed. ITEM 3. LEGAL PROCEEDINGSAlthough Asure has been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of December31 2016, we were not party to any pending legal proceedings.9Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES MARKET INFORMATIONOur common stock trades on the NASDAQ Capital Market System under the symbol “ASUR.” The following table shows the high and low closing saleprices of our common stock for each full quarter as reported by NASDAQ for the periods indicated: 2016 2015 HIGH LOW HIGH LOW 1st Quarter $5.67 $4.36 $6.11 $5.30 2nd Quarter $5.45 $4.53 $6.34 $5.40 3rd Quarter $6.57 $4.64 $6.22 $5.40 4th Quarter $9.55 $6.52 $5.60 $4.45 DIVIDENDSWe did not pay cash dividends on our common stock during fiscal years 2016 and 2015. We presently intend to continue a policy of retaining earningsfor reinvestment in our business, rather than paying cash dividends.HOLDERSAs of March 15, 2017, we had approximately 330 stockholders of record of our common stock . SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table provides information as of December 31, 2016 with respect to shares of our common stock that we may issue under our existingequity compensation plans (share amounts in thousands). A B C Plan Category Number ofSecuritiesto be Issued UponExercise ofOutstandingOptions Weighted AverageExercise Price ofOutstandingOptions Number ofSecuritiesRemainingAvailable for FutureIssuanceUnder EquityCompensationPlans (ExcludingSecuritiesReflected in ColumnA) Equity Compensation Plan Approved by Stockholders (1) 614 $6.47 200 Equity Compensation Plans Not Approved by Stockholders (2) -0- $-0- -0- Total 614 $6.47 200 (1)Consists of the 2009 Equity Plan.(2)Our stockholders have previously approved our existing equity compensation plan. ISSUER PURCHASES OF EQUITY SECURITIESNone. 10Table of ContentsITEM 6. SELECTED FINANCIAL DATAWe are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under thisItem. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSCertain statements in this Report represent forward-looking statements. Forward-looking statements include but are not limited to statements regardingour strategy, future operations, financial condition, results of operations, projected costs, and plans and objectives of management. Actual results may differmaterially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described in this Report and in our otherSEC filings.Asure has attempted to identify these forward-looking statements with the words “believes,” “estimates,” “plans,” “expects,” “anticipates,” “may,”“could” and other similar expressions. Although these forward-looking statements reflect management’s current plans and expectations, which we believereasonable as of the filing date of this Report, they inherently are subject to certain risks and uncertainties. Additionally, Asure is under no obligation to updateany of the forward-looking statements after the date of this Form 10-K to conform such statements to actual results.RESULTS OF OPERATIONSThe following table sets forth, for the fiscal periods indicated, the percentage of total revenues represented by certain items in Asure’s ConsolidatedStatements of Comprehensive Loss: 2016 2015 Revenues 100.0% 100.0%Gross margin 77.2 72.7 Selling, general and administrative 59.2 55.6 Research and development 8.2 11.3 Amortization of intangible assets 6.3 6.9 Total operating expenses 73.7 73.9 Total other loss, net (6.2) (4.5)Net loss (2.7) (6.5) Overview Asure is a leading global provider of cloud-based software-as-a-service (“SaaS”) time and labor management and Agile Workplace management solutionsthat enable companies of all sizes and complexities to operate more efficiently and proactively manage costs associated with their most expensive assets: realestate, labor and technology.We currently offer two main product lines, AsureSpace™ and AsureForce®. Our AsureSpace™ Agile Workplace management solutions enableorganizations to manage their office environments and optimize real estate utilization. Our AsureForce® time and labor management solutions help organizationsoptimize labor and labor administration costs and activities. With our acquisitions of Mangrove Employer Services, Inc. and the assets of Mangrove COBRAsourceInc. in March 2016, we have entered into the human resource management, payroll processing and benefits administration services businesses, which we areintegrating into our existing AsureForce® product line. For both product lines, support and professional services are other key elements of our software andservices business. As an extension of our perpetual software product offerings, Asure offers our customers maintenance and support contracts that provide readyaccess to qualified support staff, software patches and upgrades to our software products. We also provide installation of and training on our products, add-onsoftware customization and other professional services on a global scale. We target our sales and marketing efforts to a wide range of audiences, from small and medium-sized businesses to Fortune 500 companies and divisionsof enterprise organizations throughout the United States, Europe and Asia/Pacific. We generate sales of our solutions through our direct sales teams and indirectlythrough our channel partners. We are expanding our investment in our direct sales teams to continue to address our market opportunity. 11Table of ContentsIn March 2014, we entered into a Credit Agreement and Guaranty and Security Agreement with Wells Fargo Bank, National Association. We amendedthe Credit Agreement again in March 2016 coincident with the acquisition of Mangrove Employer Services, Inc. of Tampa, Florida (“Mangrove”). Under thisamendment, we expanded our overall credit facility by $12.5 million to $29.2 million. This includes a $26.2 million term facility which is due March 21, 2019 anda $3.0 million revolving credit facility. The latest amendment also changes the applicable margin rates for determining the interest rate payable on the loan. Theamendment also amended our leverage ratio requirements under the Credit Agreement. We have now agreed to a leverage ratio not to exceed 5.00:1 at March 31,2016, stepping down to 2.25:1 at December 31, 2018. See Note 6- Notes Payable in the accompanying financial statements for more information. In March 2016, we acquired all of the outstanding shares of common stock of Mangrove, a human resource management and payroll processingcompany. The aggregate consideration for the stock consisted of (i) $11.3 million in cash, a portion of which was used to pay certain obligations of Mangrove and(ii) a secured subordinated promissory note (the “Mangrove Note”) in the principal amount of $6.0 million, subject to adjustment. We funded the cash paymentwith proceeds from our credit agreement with Wells Fargo. The Mangrove Note bears interest at an annual rate of 3.50% and matures in March, 2018, with the firstinstallment of principal due in March, 2017 and the second installment of principal due in March, 2018.In March 2016, we also acquired substantially all the assets of Mangrove COBRAsource Inc., a benefits administration services business. The aggregateconsideration for the assets was $1.0 million.See Note 4- Acquisitions in the accompanying financial statements for more information about the stock and asset acquisitions in 2016.In December 2016, we completed an underwritten public offering of 1,949,250 shares of common stock at the public offering price of $8.00 per share,which includes 254,250 shares sold pursuant to the underwriters’ full exercise of their over-allotment option. Our net proceeds, after deducting the underwritingdiscounts and commissions and other estimated offering expenses, were approximately $14.4 million. We intend to use the net proceeds received from the offeringfor general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, assets or technologies. We used aportion of the proceeds to reduce approximately $3 million of our secured subordinated indebtedness payable in connection with the 2016 acquisition of Mangroveand for the three acquisitions we closed in January 2017.In January 2017, we acquired all of the outstanding shares of common stock of Personnel Management Systems, Inc., a leading provider of outsourcedHR solution. The aggregate consideration for the stock consisted of (i) $3.875 million in cash and (ii) a subordinated promissory note (the “PMSI Note”) in theprincipal amount of $1.125 million, subject to adjustment. We funded the cash payment with proceeds from our recent public stock offering. The PMSI Note bearsinterest at an annual rate of 2.0% and matures on April 30, 2018.In January 2017, we acquired substantially all the assets of Corporate Payroll, Inc., relating to its payroll service bureau business. The aggregateconsideration for the assets consisted of (i) $1.5 million in cash, (ii) a subordinated promissory note (the “CPI Note”) in the principal amount of $500,000 and (iii)112,166 shares of our common stock valued at $1.0 million, subject to adjustment.t. We funded the cash payment with proceeds from our recent public stockoffering. The CPI Note bears no interest and matures on April 30, 2018.In January 2017, we acquired substantially all the assets of Payroll Specialties NW, Inc., a leading provider of payroll services. The aggregateconsideration for the assets consisted of (i) $3.010 million in cash and (ii) a subordinated promissory note (the “PSNW Note”) in the principal amount of $600,000,subject to adjustment. We funded the cash payment with proceeds from our recent public stock offering. The PSNW Note bears interest at an annual rate of 2.0%and matures on April 30, 2018.See Note 14- Subsequent Events in the accompanying financial statements for more information about the acquisitions completed in January 2017.Under the continued guidance and direction of our directors and Chief Executive Officer, Asure will continue to implement its corporate strategy forgrowing its software and services business. However, uncertainties and challenges remain and there can be no assurances that Asure can successfully integrateacquired business operations, grow its revenues or achieve profitability and positive cash flows during calendar year 2017. 12Table of ContentsRevenueOur revenue was derived from the following sources (in thousands): Revenue 2016 2015 Increase(Decrease) % Cloud revenue $20,606 $13,628 $6,978 51.2 Hardware revenue 3,795 3,300 495 15.0 Maintenance and support revenue 4,566 6,054 (1,488) (24.6)On premise software license revenue 2,218 856 1,362 159.1 Professional services revenue 4,357 3,068 1,289 42.0 Total revenue $35,542 $26,906 $8,636 32.1 Revenue represents our consolidated revenues, including sales of our scheduling software, time and attendance and human resource software,complementary hardware devices to enhance our software products, software maintenance and support services, installation and training services and otherprofessional services.Our product offerings are categorized into AsureSpace™ and AsureForce®. AsureSpace™ offers workplace management solutions that enableorganizations to manage their office environments and optimize real estate utilization, and AsureForce® offers time and labor management solutions which helporganizations optimize labor and labor administration costs and activities. Both product groupings include cloud revenue, hardware revenue, maintenance andsupport revenue, on premise software license revenue and professional services revenue. AsureSpace™ revenues include PeopleCube, Meeting Room Manager andRoomtag revenues. AsureForce® revenues include ADI, Legiant, iEmployee, FotoPunch and Mangrove revenues. Our total revenue in 2016 was $35,542 as compared to $26,906 in 2015. Total revenue represents our consolidated revenue, including sales of ourscheduling software, time and attendance and human resource software, complementary hardware devices to enhance our software products, software maintenanceand support services, installation and training services and other professional services. Total revenue increased by $8,636, or 32.1%, in 2016 as compared to 2015. Cloud revenue comprised the majority of the increase with an increase of$6,978, or 51.2%. This increase was primarily due to the acquisition of Mangrove in March 2016, resulting in $5,806 of cloud revenue in 2016. On premisesoftware license revenue, professional services revenue and hardware revenue all increased, offset by a decrease in maintenance and support revenue.AsureForce® revenue was $18,307, an increase of $7,414, or 68.1%, from the $10,893 recorded for 2015. This increase was primarily due to theacquisition of Mangrove in March 2016, resulting in $5,806 of revenue in 2016. Cloud, on premise software license, hardware and professional services revenuesincreased, with the largest increase in cloud revenue of $6,149, or 98.1%. On premise software license revenue increased $879, or 134.1%, hardware revenueincreased $582, or 44.4%, and professional services revenue increased $410, or 59.9%, over 2015. These increases were offset by a decrease in maintenance andsupport revenue of $606, or 30.7%, as compared to 2015 mainly due to timing and size of contracts and renewals and our continued emphasis on transitioning fromon premise to on demand, cloud based services.AsureSpace™ revenue was $17,235 in 2016, an increase of $1,222 or 7.6%, from the $16,013 recorded in 2015. AsureSpace™ cloud, professionalservices and on premise software license revenues increased, offset by decreases in hardware and maintenance and support revenues. Cloud revenue increased$829, or 11.3%, professional services revenue increased $878, or 36.9%, and on premise software license revenue increased $483, or 240.6 % over 2015. Theseincreases were offset by decreases in hardware and maintenance and support revenues of $87, or 4.4%, and $881, or 21.6%, respectively, primarily caused by themovement of customers from on premise to on demand, cloud based solutions. Total cloud revenue increased $6,978, or 51.2%, over 2015. AsureForce® cloud revenue increased $6,149, or 98.1%, as compared to 2015. InAsureForce®, the acquisition of Mangrove in March 2016 contributed $5,806 to cloud revenue. Asure Force Time revenue increased $452, or 12.0%, offset by adecreases in iEmployee revenues of $109, or 4.4%, as compared to 2015. The decrease was due to turning our focus away from the iEmployee software productand focusing resources on the newer technology in the software subscription solutions. AsureSpace™ cloud revenue increased $829,000, or 11.3%. InAsureSpace™, the majority of the increase is comprised of a $1,091, or 30.1%, increase in Resource Scheduler revenue, offset by decreases in Meeting RoomManager and Meeting Maker revenue, as compared to 2015. Overall, we attribute our cloud revenue increases to the acquisition of Mangrove in 2016 as well as acombination of new sales offset by the accretive nature of recurring cloud revenue. During 2016, hardware revenue increased by $495, or 15.0%, over 2015. AsureForce® hardware revenue increased $582, or 44.4%, over 2015, primarilyas a result of Mangrove hardware revenues of $515 in 2016, as well as an increase in AsureForce Time (AFT) revenue of $81, or 7.0%. This increase was offset bya decrease in AsureSpace™ hardware revenue of $87, or 4.4%, over 2015.13Table of ContentsMaintenance and support revenue decreased $1.5 million, or 24.6%, over 2015. Maintenance and support revenue was $4.6 million in 2016 as comparedto $6.1 million in 2015. AsureForce® maintenance and support revenue decreased $606, or 30.7%, over 2015 primarily due to a decrease in AsureForce Timerevenue of $595, or 30.5%, as compared to 2015. AsureSpace™, maintenance and support revenue decreased $881, or 21.6%, over 2015 primarily due to decreasesin Meeting Room Manager and Resource Scheduler maintenance and support revenue of $300, or 15.2%, and $509, or 38.7%, respectively. These decreases areprimarily caused by movements of clients from on premise to on demand, cloud-based solutions.On premise software license revenues increased $1.4 million, or 159.1%, as compared to 2015. AsureForce® on premise software license revenuesincreased $879, or 134.1% from 2015 due to increases in AsureForce Time of $488, or 74.5%, and GeoPunch (FotoPunch) on premise software license revenue of$300 as compared to zero in 2015. AsureSpace™ on premise software license revenues increased $483, or 240.6% from 2015 primarily due to an increase inResource Scheduler on premise software license revenue of $476, or 596.1%, over 2015.Professional services revenue increased $1.3 million, or 42.0%, over 2015. AsureForce® professional services revenue increased $410, or 59.9%, over2015, primarily due to Mangrove revenues of $516 in 2016. AsureSpace™ professional services revenue increased $878, or 36.9%, over 2015, primarily due to anincrease in Resource Scheduler professional services revenue of $850, or 72.7%. Although our total customer base is widely spread across industries, our sales are concentrated in certain industry sectors, including corporate, education,healthcare, government, legal and non-profit. We continue to target small and medium sized businesses and divisions of larger enterprises in these same industriesas prospective customers. Geographically, we sell our products worldwide, but sales are largely concentrated in the United States, Canada andEurope. Additionally, we have a distribution partner in Australia. As the overall workforce management solutions market continues to experience significantgrowth related to SaaS products, we will continue to focus on sales of Meeting Room Manager, On Demand, PeopleCube and ADI SaaS products.In addition to continuing to develop our workforce and Agile Workplace management solutions and release new software updates and enhancements, wecontinue to actively explore other opportunities to acquire additional products or technologies to complement our current software and services. Throughacquisitions in 2011 of ADI and Legiant, we expanded our cloud computing time and attendance software and management services business. The 2012acquisition of PeopleCube gave us a product line that includes software to assist customers in driving integrated facility management of offices, conference rooms,video conferencing, events and training, alternative workspaces and lobby use. The 2014 acquisitions of FotoPunch and Roomtag support our vision to deliverinnovative cloud-based Agile Workplace technologies. Our March 2016 acquisitions from Mangrove enable us to enter into the human resource management,payroll processing and benefits administration services businesses, which we are integrating into our existing AsureForce® product line. Our acquisitions in 2017increased our human resources consulting expertise and added outsourced human resources department offerings to our clients.Gross MarginConsolidated gross margin was $27.4 million in 2016 and $19.6 million in 2015, an increase of $7.9 million, or 40.2%. Gross margin as a percentage ofrevenues was 77.2% for 2016 and 72.7% for 2015. We attribute the increase in gross margin to a shift in the mix of our revenue between our higher margin andlower margin product lines.Consolidated cost of sales increased $777, or 10.6%, from 2015. Our cost of sales relates primarily to direct product costs, compensation and relatedconsulting expenses, hardware expenses, facilities and related expenses and the amortization of our purchased software development costs. These expensesrepresented approximately 93% of the total cost of sales for 2016 and 95% for 2015. These expenses increased by approximately $603,000, or 8.7%, over2015. This increase is comprised of increases in salary and benefits expense of $800,000, or 25.5%, offset by a decrease in facilities related expenses of $152,000,or 51.9%, over 2015. We include intangible amortization related to developed and acquired technology within cost of sales.Selling, General and Administrative ExpensesSelling, general and administrative (“SG&A”) expenses were $21.0 million in 2016 and $15.0 million in 2015, an increase of $6.0 million, or40.0%. SG&A expenses as a percentage of revenues were 59.2% and 55.6% for 2016 and 2015, respectively. General and administrative expenses increased $5.9 million, or 76.6%, and sales and marketing expenses decreased $836, or 11.5%, over 2015. Generaland administrative expenses increased due to integration expenses related to the acquisition of Mangrove in the first quarter of 2016. Sales and marketing expensesdecreased as a result of higher expenses in 2015. In 2015, we reorganized our sales team to increase our focus on larger deals in the enterprise and global markets,resulting in higher headcount and increased selling expenses.We may incur significant additional legal expenses and/or professional services-related expenses in the future if we pursue further acquisitions ofproducts or businesses, even if we ultimately do not consummate any acquisition.14Table of ContentsResearch and Development ExpensesResearch and development (“R&D”) expenses were $2.9 million in 2016 and $3.1 million in 2015, a decrease of $156,000 or 5.1%. R&D expenses as apercentage of revenues were 8.2% and 11.3% for 2016 and 2015, respectively.The $156,000 decrease is primarily due to a decline in professional and consulting fees as well as facilities, overhead and depreciation expenses ascompared to 2015.We continued to invest heavily in 2016 to develop the solutions and technologies required to support our themes of Mobility, User Experience andIntegration. These core tenets of 2016 ultimately serve our vision of helping customers build companies of the future. By expanding our investment into coretechnologies such as SaaS, mobile and platform integration, we have improved our competency and depth of product features. Additionally, working with strategicthird parties has provided us the opportunity to co-innovate with our global customers, further establishing Asure as the core People Success Platform driving theWorkplace of the future. In line with the themes noted above, our SaaS solutions were updated with a new mobile-first web experience, including contemporary branding andcoloring in line with our corporate initiatives, and utilizing the latest responsive UI software libraries to easily adapt to the variety of devices utilized in today’smobile workforce. This does not take away from our investment in our existing native mobile applications, but rather expands it by providing more accessibilityoptions, allowing mobile-specific solutions to be deployed in those scenarios that require technologies only available on the phone. Our AsureSpace solution saw continued focus on collaboration and web services, including a new option to integrate with the WebEx productivity suite. Combined with our enhanced Cisco TMS integration, this new option helps corporate IT by simplifying the desktop deployment requirements on organizations thathave invested in Microsoft Exchange and Cisco infrastructures, while improving the end user experience by having only “one place to click” for all of theirmeeting needs. This feature, plus numerous other features, enhances the position of our single-source platform in the market. Our AsureHCM suite, acquired as part of the Mangrove purchase in March 2016, has fully met the posted objectives of 2016, including theaforementioned user experience update. Key objectives outside of UX included enhancement of ACA and Cobra/Benefits modules, as well as integration withAsure’s existing Time and Labor Management (TLM). Asure has also invested in the infrastructure of the platform, with performance and scalability initiativesthat will ultimately lead to a migration to Amazon AWS targeted for Q1 of 2017. Our Time and Labor Management solution, AsureForce Time, continued to expand features in both its industry leading facial recognition and core laborand compliance areas, including Payroll Based Journal (PBJ) reporting. Full integration with our AsureHCM platform allows customers utilizing both products toexperience single sign-on (SSO) and a unified user experience, all while enjoying the convenience and elimination of duplicate entry that comes with having asingle payroll and TLM solution. We anticipate continuing to invest in research and development in 2017, stimulated by our 2016 success and market opportunities to cross sell and scalethe business. This investment will expand the integration and analytics across our unified platform. Amortization of Intangible AssetsAmortization expenses in 2016 were $2.3 million, an increase of $387,000, or 20.7%, as compared to $1.9 million in 2015. Amortization expenses as apercentage of revenues were 6.3% and 6.9% for 2016 and 2015, respectively. This decrease is due to some of our intangible assets becoming fully amortized. Other Income and LossOther Loss was $2.0 million for the year ended 2016 as compared to $1.2 million in the year ended 2015. Other Loss in 2016 and 2015 was primarilycomprised of interest expense.Income TaxesAt December 31, 2016, we had federal net operating loss carryforwards of approximately $115.7 million, Federal R&D credit carryforwards ofapproximately $5.1 million and alternative minimum tax credit carryforwards of approximately $161,000. The net operating loss and Federal R&D creditcarryforwards will expire in varying amounts from 2018 through 2036, if not utilized. Minimum tax credit carryforwards carry forward indefinitely.15Table of ContentsIncome tax expense decreased from $219,000 in 2015 to $189,000 in 2016, a $30,000, or 13.7%, decrease. These figures represent an effective tax rate of24.1% and 14.2% in 2016 and 2015, respectively. Income tax expense is primarily due to deferred taxes on the amortization of goodwill for tax purposes and theresults of foreign operations. As a result of our various acquisitions in prior years, utilization of the net operating losses and credit carryforwards may be subject to a substantial annuallimitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operatinglosses before utilization.Due to the uncertainty surrounding the timing of realizing the benefits of our favorable tax attributes in future tax returns, we have placed a valuationallowance against our net deferred tax asset, exclusive of goodwill. During 2016, we decreased the valuation allowance by approximately $1.5 million dueprimarily to operations, including expiration of tax carryforwards. Approximately $8.3 million of the valuation allowance relates to tax benefits for stock optiondeductions included in our net operating loss carryforward which we will allocate, if and when realized, directly to contributed capital to the extent the benefitsexceed amounts attributable to book deferred compensation expense. We consider the undistributed earnings of our foreign subsidiaries permanently reinvested and, accordingly, we have not provided for U.S. federal or stateincome taxes thereon.Net Income (Loss)Net loss was $972,000 in 2016. Net loss was $1.8 million in 2015. The decrease in net loss was $785, or 44.7%. Net loss as a percentage of totalrevenues was 2.7% and 6.5% in 2016 and 2015, respectively. LIQUIDITY AND CAPITAL RESOURCES (Amounts in thousands) At and for the year endedDecember 31, 2016 2015 (in thousands) Working capital (deficit) $4,207 $(8,067)Cash, cash equivalents and short-term investments 12,767 1,158 Cash (used in) provided by operating activities (2,012) 3,355 Cash used in investing activities (18,775) (1,388)Cash provided by (used in) financing activities 32,299 (1,143) Working Capital . We had working capital of $4.2 million at December 31, 2016, an increase of $12.3 million from the $8.1 million deficit at December31, 2015. We attribute the increase in our working capital primarily to an increase in cash and cash equivalents of $11.6 million as a result of our public stockoffering which closed in December 2016. Accounts receivable also increased $3.6 million due to an increase in revenue, offset by an increase in short term notespayable of $4.5 million. Working capital at December 31, 2016 includes $9.3 million of short term deferred revenue, a decrease from short term deferred revenueof $10.8 million at December 31, 2015. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to futurerevenue as we perform our services, but this does not represent future payments. Deferred revenue can vary based on seasonality, expiration of initial multi-yearcontracts and deals that are billed after implementation rather than in advance of service delivery. Operating Activities . Cash used in operating activities was $2.0 million in 2016 as compared to cash provided by operating activities of $3.4 million in2015. The $2.0 million of cash used in operating activities during 2016 was primarily driven by net income (after adjustment for non-cash items) of $3.2 millionand an increase in other liabilities of $466, offset by an increase in accounts receivable of $3.4 million, and decreases in deferred revenue and accounts payable of$1.7 million and $1.1 million, respectively. The $3.4 million of cash provided by operating activities during 2015 was primarily driven by net income (afteradjustment for non-cash items) of $1.8 million as well as the growth in deferred revenue of $635,000, and an increase in accounts payable of $1.1 million, offset byan increase in inventory of $615,000. Investing Activities . Cash used in investing activities during 2016 was $18.8 million. The cash used in investing activities in 2016 was primarilycomprised of the acquisition of Mangrove in the first quarter of 2016 of $12.0 million and the net change in funds held for clients of $6.6 million. Cash used ininvesting activities during 2015 was $1.4 million. The cash used in investing activities in 2015 was primarily comprised of purchases of $1.4 million of propertyand equipment. Financing Activities . Cash provided by financing activities during 2016 was $32.3 million. We borrowed $18.4 million, offset by note payable paymentsof $7.2 million. Our stock issuances through our public stock offering and other stock issuances yielded $15.2 million in proceeds. Cash used in financing activitiesduring 2015 was $1.1 million. We borrowed $5.3 million, offset by note payable payments of $6.8 million, including payoff of the Roomtag acquisition note of$722,000 (see Note 6 – Notes Payable of the accompanying financial statements)16Table of ContentsSources of Liquidity . As of December 31, 2016, Asure’s principal sources of liquidity consisted of approximately $12.8 million of cash and cashequivalents, future cash generated from operations, and $3.0 million available for borrowing under our Wells Fargo revolver. We believe that we have and/or willgenerate sufficient cash for our short- and long-term needs. Based on current internal projections, we believe that we have and/or will generate sufficient cash forour operational needs, including any required debt payments, for at least the next twelve months. We currently project that we can generate positive cash flowsfrom our operating activities for at least the next twelve months.Our management team is focused on growing our existing software operations and is also seeking additional strategic acquisitions for the near future. Atpresent, we plan to fund any future acquisition with equity, existing cash and cash equivalents cash generated from future operations and/or cash or debt raisedfrom outside sources. Shelf RegistrationOn June 29, 2016, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”) to sell from time to time upto $30 million of our common stock, preferred stock, warrants, debt securities, subscription rights and units. On July 8, 2016, the shelf registration statement wasdeclared effective by the SEC. Under this shelf registration statement, in December 2016 we completed an underwritten public offering of 1,949,250 shares ofcommon stock at the public offering price of $8.00 per share, which includes 254,250 shares sold pursuant to the underwriters’ full exercise of their over-allotmentoption. We received of approximately $14.4 million, after deducting the underwriting discounts and commissions and other estimated offering expenses. On February 15, 2017, we filed a shelf registration statement on Form S-3 with the SEC. This shelf registration statement, when declared effective bythe SEC, will give us the ability to offer and sell, from time to time, in one or more offerings, up to $75,000,000 of our common stock, preferred stock, warrants,debt securities, subscription rights, and units. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statementbecomes effective.These registration statements are intended to provide us with flexibility to access the public capital markets in order to pursue our growth strategies.Credit AgreementIn March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and the lenders thatare party thereto. The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults,bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the defaultsare subject to customary notice and grace period provisions. In March 2014 and in connection with the Credit Agreement, we and our wholly-owned activesubsidiaries entered into a Guaranty and Security Agreement with Wells Fargo Bank. Under the Guaranty and Security Agreement, we and each of our wholly-owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’assets.The Credit Agreement provided for a term loan in the amount of $15.0 million maturing in March 2019. We used the proceeds of the term loan to financethe repayment of all amounts outstanding under our loan agreement with Deerpath and the payment of certain fees, cost and expenses related to the CreditAgreement. The Credit Agreement also provided for a revolving loan commitment in the aggregate amount of up to $3.0 million. The outstanding principal amount ofthe revolving loan is due and payable in March 2019. As of December 31, 2016, $0 was outstanding and $3.0 million was available for borrowing under therevolver.Additionally, the Credit Agreement provided for a $10.0 million uncommitted incremental term loan facility to support permitted acquisitions.Under the Credit Agreement, we were required to maintain a fixed charge coverage ratio of not less than 1.5 to 1.0 beginning with the quarter ended June30, 2014 and each calendar quarter thereafter, and a leverage ratio of not greater than 3.5 to 1.0 beginning with the quarter ended June 30, 2014 with the levelsstepping down thereafter. We amended the Credit Agreement in August 2014, March 2015 and November 2015. The August 2014 amendment revised the leverageratio beginning with the quarter ended September 30, 2014 to a leverage ratio of not greater than 3.6 to 1.0 with the levels stepping down thereafter. The March2015 amendment authorized us to optionally prepay, subject to specified conditions, the Subordinated Note Payable to Roomtag and revised the leverage ratiobeginning with the quarter ended March 31, 2015 to a leverage ratio of not greater than 3.5 to 1.0 with the levels stepping down thereafter. The November 2015amendment increased the applicable margin relative to the LIBOR rate upon which we compute the interest payable. We agreed that if our leverage ratio is (a) lessthan or equal to 2.25:1, (b) greater than 2.25:1 but less than or equal to 2.75:1, (c) greater than 2.75:1 but less than or equal to 3.25:1 or (d) greater than 3.25:1, theapplicable margin relative to the LIBOR rate would be 3.00, 3.50, 4.00 or 4.50 percentage points, respectively. We further agreed that until the leverage ratiotesting period ending September 30, 2016, we will pay interest based on the 4.50 percentage point margin level.17Table of ContentsIn March 2016, we amended the Credit Agreement. Under this amendment, we expanded the Credit Agreement by $12.5 million to $29.2 million. Theamendment changes the applicable margin rates for determining the interest rate payable on the loan as follows:Total Leverage Ratio Base Rate Margin LIBOR Rate Margin ≤ 2.75:1 3.50% 4.50%> 2.75:1 but ≤ 3.25:1 4.00% 5.00%≥ 3.25:1 4.50% 5.50% The March 2016 amendment also amended our leverage ratio requirement to a leverage ratio not to exceed 5.00:1 at March 31, 2016, stepping down to2.25:1 at December 31, 2018. In March 2017, we amended the Credit Agreement to, among other things, obtain an additional term loan in the amount of $5,000,000. Upondisbursement of the additional term loan, the aggregate principal amount outstanding under our terms loans will be approximately $29,714,453. The aggregateoutstanding principal amount of the term loans is payable as follows:• $742,861.33 on June 30, 2017 and the last day of each fiscal quarter thereafter.We will use the proceeds of the additional term loan to repay a portion of all amounts outstanding under the secured subsordinated note we issued inconnection with the Mangrove acquisition. In the March 2017 amendment, in accordance with the terms of the Credit Agreement, Wells Fargo has consented tosuch early repayment of the Mangrove note, subject to the condition, among others, that the repayment of the Mangrove note will not exceed $5,879,000.The March 2017 amendment also amends our fixed charge coverage ratio and leverage ratio. We have now agreed to:• a fixed charge coverage ratio of not less than 1.25 to 1.0 beginning with the quarter ending March 31, 2017 and each calendar quarter thereafter up toDecember 31, 2017, and not less than 1.5 to :1.0 beginning with the quarter ending March 31, 2018 and each calendar quarter thereafter up to December 31, 2018,and• a leverage ratio of not greater than 4.25 to 1.0 beginning with the quarter ending March 31, 2017, stepping down to 3.0 to 1.0 at March 31, 2018.The Credit Agreement contains customary affirmative and negative covenants, including, among others, limitations with respect to debt, liens,fundamental changes, sale of assets, prepayment of debt, investments, dividends and transactions with affiliates. As of December 31, 2016, we were in compliance with all covenants and all payments remain current. We expect to be in compliance or be able to obtaincompliance through debt repayments with available cash on hand or as we expect to generate from the ordinary course of operations over the next twelve months. See Note 6 - Notes Payable in the accompanying financial statements for more information about the Credit Agreement and Guaranty and SecurityAgreement. We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operationsor future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital inthe future. However, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believesthat we have sufficient capital and liquidity to fund and cultivate the growth of our current and future operations for at least the next twelve months and to maintaincompliance with the terms of our debt agreements and related covenants or to obtain compliance through debt repayments made with our available cash on hand oranticipated for receipt in the ordinary course of operations. CRITICAL ACCOUNTING POLICIES We have prepared our consolidated financial statements in accordance with U.S. generally accepted accounting principles and included the accounts ofAsure’s wholly owned subsidiaries. We have eliminated all significant intercompany transactions and balances in the consolidation. Preparation of the consolidatedfinancial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect thereported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets andliabilities, the disclosure of contingent assets and liabilities at fiscal year end and the reported amounts of revenues and expenses during the fiscal year. The moresignificant estimates made by management include the valuation allowance for our gross deferred tax asset, lease impairment, useful lives of fixed assets, thedetermination 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 onhistorical experience and on various other assumptions that management believes are reasonable under the given circumstances. These estimates could bematerially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodicallyevaluates estimates used in the preparation of our financial statements for continued reasonableness. We prospectively apply appropriate adjustments, if any, to ourestimates based upon our periodic evaluation. We believe the following are our critical accounting policies: 18Table of ContentsRevenue Recognition Our revenues consist of software-as-a-service (“SaaS”) offerings, time-based software subscriptions, and perpetual software license sale arrangementsthat also, typically, include hardware, maintenance/support and professional services elements. We recognize revenue when persuasive evidence of anarrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Software and software-related elements are recognizedin accordance with Accounting Standards Codification (“ASC”) 985-605 Software Revenue Recognition . Non-software revenue elements are recognized inaccordance with ASC 605-25 Revenue Recognition Multiple-Element Arrangements. Since we currently offer our software solutions under either a perpetuallicense, time-based subscription or SaaS model, revenue recognition timing varies based on which form of software rights the customer purchases. SaaS arrangements and time-based software subscriptions typically have an initial term ranging from one to three years and are renewable on an annualbasis. A typical SaaS arrangement will also include hardware, setup and implementation services. We allocate the value of the SaaS arrangement to each separateunit of accounting based on vendor-specific objective evidence (“VSOE”) of selling price, when it exists, third-party evidence of selling price for like services orbest estimated selling price. Revenue allocated to the SaaS/software subscription element is recognized ratably over the non-cancellable term of theSaaS/subscription service. Revenue allocated to other units of accounting included in the arrangement is recognized as outlined in the paragraphs below. We typically sell perpetual software licenses in multiple-element arrangements that include hardware, maintenance/support and professionalservices. Software license revenues, determined under the residual method, are generally recognized on the date we deliver the product to the customer if VSOE offair value exists for all undelivered elements of the software arrangement. If VSOE of fair value does not exist for an undelivered element, we defer the entiresoftware arrangement and recognize it ratably, over the remaining non-cancellable maintenance term, after we have delivered all other undelivered elements. Webase VSOE of fair value for our maintenance, training and installation services on the prices charged for these services when sold separately. We recognizerevenue allocated to hardware, maintenance and services elements included in the arrangement as outlined below. Hardware devices sold to customers (typically time clock, LCD panel and other peripheral devices) are not essential to the functionality of the softwareand as such are treated as non-software elements for revenue recognition purposes. WE recognize hardware revenue when title passes to the customer, typically thedate we ship the hardware. If we sell hardware under a hardware-as-a-service (“HaaS”) arrangement, title to the hardware remains with Asure and we recognizehardware usage revenue ratably over the non-cancellable term of the hardware service delivery, typically one year. Our professional services offerings which typically include data migration, set up, training, and implementation services are also not essential to thefunctionality of our products, as third parties or customers themselves can perform these services. Set up and implementation services typically occur at the start ofthe software arrangement while certain other professional services, depending on the nature of the services and customer requirements, may occur several monthslater. We can reasonably estimate professional services performed for a fixed fee and recognize them on a proportional performance basis. We recognize revenuefor professional services engagements billed on a time and materials basis as we deliver the services. We recognize revenues on all other professional servicesengagements upon the earlier of the completion of the services deliverable or the expiration of the customer’s right to receive the service. We recognize maintenance/support revenues ratably over the non-cancellable term of the support agreement. Initial maintenance/support terms aretypically one to three years and are renewable on an annual basis. We do not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return,refund or cancellation rights have expired or acceptance has occurred. Our arrangements with resellers do not allow for any rights of return. Deferred revenue includes amounts received from customers in excess of revenue we recognize, and is comprised of deferred maintenance, service andother revenue. We recognize deferred revenues when we complete the service and over the terms of the arrangements, primarily ranging from one to three years. 19Table of Contents Intangible Assets and GoodwillWe record the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excesspurchase price recorded as goodwill. Valuation of intangible assets and in-process research and development entails significant estimates and assumptionsincluding, but not limited to, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for thecontinuation of customer relationships and renewal of customer contracts and approximating the useful lives of the intangible assets acquired. U.S. generallyaccepted accounting principles (“GAAP”) require that we not amortize intangible assets other than goodwill with an indefinite life until we determine their life asfinite. We must amortize all other intangible assets over their useful lives. We currently amortize our acquired intangible assets with definite lives over periodsranging from one to nine years. Impairment of Intangible Assets and Long-Lived Assets In accordance with Financial Accounting Standards Board (“FASB”) ASC 350, we review and evaluate our long-lived assets for impairment wheneverevents or changes in circumstances indicate that we may not recover their net book value. When such factors and circumstances exist, including those noted above,we compare the assets’ carrying amounts against the estimated undiscounted cash flows we expect to generate with those assets over their estimated useful lives. Ifthe carrying amounts are greater than the undiscounted cash flows, we estimate the fair values of those assets by discounting the projected cash flows. We recordany excess of the carrying amounts over the fair values as impairments in that fiscal period. There has been no impairment of intangible assets and long-livedassets for the periods presented. Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired in abusiness combination. We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests if indicators ofpotential impairment exist, using a fair-value-based approach. There has been no impairment of goodwill for the periods presented. See Notes 4 and 5 in theaccompanying financial statements for additional information regarding goodwill. See Note 2 – Significant Account Policies in the accompanying financial statements for more information about Recent Accounting Pronouncements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information required under thisItem. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe financial statements and supplementary data required by this Item 8 are listed in Items 15(a)(1) and (2) of Part III of this Report ( Exhibits, FinancialStatement Schedules ). 20Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURESEvaluation of Disclosure Control and Procedures Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officerhave concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of December 31,2016 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded,processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated andcommunicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regardingrequired disclosure. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under theExchange Act). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in InternalControl – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based on ourassessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2016 to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. Management has excluded our wholly owned subsidiaries, Asure COBRASource, LLC and Mangrove Employer Services (collectively referred to as“Mangrove”), from its assessment of internal control over financial reporting as of December 31, 2016 because Mangrove was acquired by us in a businesscombination on March 18, 2016 which did not allow management enough time to make a proper assessment. The total assets and total revenues of Mangroverepresent approximately 49.2% and 19.5 %, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2016. This annual report does not include an attestation report of our independent registered public accounting firm regarding our internal control over financialreporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities andExchange Commission that permit us to provide only management’s reporting in this annual report.There were no changes in our internal control over financial reporting during the year ended December 31, 2016 that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.21Table of Contents PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTThe information required under this Item is incorporated by reference from our definitive proxy statement to be filed relating to our 2017 annual meetingof shareholders.ITEM 11. EXECUTIVE COMPENSATIONThe information required under this Item is incorporated by reference from our definitive proxy statement to be filed relating to our 2017 annual meetingof shareholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required under this Item is incorporated by reference from our definitive proxy statement to be filed relating to our 2017 annual meetingof shareholders.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required under this Item is incorporated by reference from our definitive proxy statement to be filed relating to our 2017 annual meetingof shareholders. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required under this Item is incorporated by reference from our definitive proxy statement to be filed relating to our 2017 annual meetingof shareholders. 22Table of Contents PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)Financial Statements and Financial Statements Schedules(1) The following financial statements of the Company are filed as a part of this Report:Report of Independent Registered Public Accounting FirmConsolidated Financial Statements Consolidated Balance Sheets as of December 31, 2016 and 2015 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2016 and 2015 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2016 and 2015 Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015 Notes to Consolidated Financial Statements (2) Financial Statement Schedules: All schedules for which provision is made in the applicable account regulation of the Securities and Exchange Commission are either notrequired under the related instructions, are inapplicable or the required information is included elsewhere in the Consolidated Financial Statements andincorporated herein by reference.(b)ExhibitsThe exhibits filed in response to Item 601 of Regulations S-K are listed in the Index to the Exhibits. 23Table of Contents Index To Financial Statements and Financial Statement Schedules (Item 15(a)(1) of Part IV) PAGE Report of Independent Registered Public Accounting FirmF - 1Financial Statements: Consolidated Balance Sheets as of December 31, 2016 and 2015F - 3Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2016 and 2015F - 4Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2016 and 2015 F - 5Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015F - 6Notes to the Consolidated Financial StatementsF - 7 24Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Audit Committee of theBoard of Directors and Shareholdersof Asure Software, Inc.We have audited the accompanying consolidated balance sheet of Asure Software, Inc. (the “Company”) as of December 31, 2016, and the related consolidatedstatements of comprehensive loss, changes in stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not requiredto have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Asure Software, Inc., as ofDecember 31, 2016, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generallyaccepted in the United States of America.Marcum LLPIrvine, California March 20, 2017F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Asure Software, Inc. We have audited the accompanying consolidated balance sheet of Asure Software, Inc. as of December 31, 2015, and the related consolidated statements ofcomprehensive loss, changes in stockholders’ equity, and cash flows for each of the year then ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged toperform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating theoverall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Asure Software, Inc. atDecember 31, 2015, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accountingprinciples. /s/ Ernst & Young LLP Austin, TexasMarch 30, 2016F-2Table of Contents ASURE SOFTWARE, INC.CONSOLIDATED BALANCE SHEETS(Amounts in thousands) December 31,2016 December 31,2015 Assets Current assets: Cash and cash equivalents $12,767 $1,158 Accounts and note receivable, net of allowance for doubtful accounts of $338 and $145 at December 31,2016 and December 31, 2015, respectively 8,108 4,671 Inventory 487 784 Prepaid expenses and other current assets 1,256 1,072 Total current assets before funds held for clients 22,618 7,685 Funds held for clients 22,981 - Total current assets 45,599 7,685 Property and equipment, net 1,878 2,212 Goodwill 26,259 17,436 Intangible assets, net 12,048 6,026 Other assets 39 458 Total assets $85,823 $33,817 Liabilities and stockholders’ equity Current liabilities: Current portion of notes payable $5,455 $1,031 Accounts payable 1,576 2,670 Accrued compensation and benefits 1,192 715 Other accrued liabilities 936 713 Deferred revenue 9,252 10,803 Total current liabilities before client fund obligations 18,411 15,932 Client fund obligations 22,981 - Total current liabilities 41,392 15,932 Long-term liabilities: Deferred revenue 769 947 Notes payable, net of current portion and debt issuance cost 24,581 12,262 Other liabilities 835 958 Total long-term liabilities 26,185 14,167 Total liabilities 67,577 30,099 Commitments (Note 13) Stockholders’ equity: Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding - - Common stock, $.01 par value; 11,000 shares authorized; 8,901 and 6,674 shares issued, 8,517 and 6,290shares outstanding at December 31, 2016 and December 31, 2015, respectively 89 67 Treasury stock at cost, 384 shares at December 31, 2016 and December 31, 2015 (5,017) (5,017)Additional paid-in capital 295,044 279,649 Accumulated deficit (271,875) (270,903)Accumulated other comprehensive income (loss) 5 (78)Total stockholders’ equity 18,246 3,718 Total liabilities and stockholders’ equity $85,823 $33,817 The accompanying notes are an integral part of these consolidated financial statements. F-3Table of Contents ASURE SOFTWARE, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(Amounts in thousands, except share and per share data) FOR THETWELVE MONTHS ENDEDDECEMBER 31, 2016 2015 Revenues: Cloud revenue $20,606 $13,628 Hardware revenue 3,795 3,300 Maintenance and support revenue 4,566 6,054 On premise software license revenue 2,218 856 Professional services revenue 4,357 3,068 Total revenues 35,542 26,906 Cost of Sales 8,117 7,340 Gross margin 27,425 19,566 Operating expenses Selling, general and administrative 21,048 14,964 Research and development 2,897 3,053 Amortization of intangible assets 2,253 1,866 Total operating expenses 26,198 19,883 Income (loss) from operations 1,227 (317) Other income (loss) Interest income 10 22 Loss on lease termination - (110)Loss on debt refinancing - (4)Foreign currency gain (loss) (8) 1 Interest expense and other (2,012) (1,109)Interest expense - amortization of original issue discount (OID) - (21) Total other loss, net (2,010) (1,221) Loss from operations before income taxes (783) (1,538)Income tax provision (189) (219)Net loss $(972) $(1,757)Other comprehensive income (loss): Foreign currency translation gain 83 8 Other comprehensive loss $(889) $(1,749) Basic and diluted net loss per share Basic $(0.15) $(0.28)Diluted $(0.15) $(0.28)Weighted average basic and diluted shares Basic 6,533,000 6,176,000 Diluted 6,533,000 6,176,000 The accompanying notes are an integral part of these consolidated financial statements. F-4Table of Contents ASURE SOFTWARE, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(Amounts in thousands) Common Common Additional Other Total Stock Stock Treasury Paid-in Accumulated Comprehensive Stockholders’ Outstanding Amount Stock Capital Deficit Income (Loss) Equity BALANCE ATDECEMBER 31, 2014 6,050 $64 $(5,017) $278,656 $(269,146) $(86) $4,471 Share basedcompensation 409 409 Stock issued uponoption exercise 240 3 584 587 Net loss (1,757) (1,757)Other comprehensiveincome 8 8 BALANCE ATDECEMBER 31, 2015 6,290 $67 $(5,017) $279,649 $(270,903) $(78) $3,718 Share basedcompensation 226 226 Stock issued uponoption exercise 278 3 741 744 Stock issued, net ofissuance cost 1,949 19 14,428 14,447 Net loss (972) (972)Other comprehensiveincome 83 83 BALANCE ATDECEMBER 31, 2016 8,517 $89 $(5,017) $295,044 $(271,875) $5 $18,246 The accompanying notes are an integral part of these consolidated financial statements. F-5Table of Contents ASURE SOFTWARE, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands) FOR THETWELVE MONTHS ENDEDDECEMBER 31, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(972) $(1,757)Adjustments to reconcile net loss to net cash provided by operations: Depreciation and amortization 3,613 3,012 Provision for doubtful accounts 265 100 Share-based compensation 226 409 Loss on debt refinancing - 4 Other 94 28 Changes in operating assets and liabilities: Accounts and note receivable (3,401) 524 Inventory 297 (615)Prepaid expenses and other assets 233 (527)Accounts payable (1,104) 1,120 Accrued expenses and other long-term obligations 466 422 Deferred revenue (1,729) 635 Net cash provided by operating activities (2,012) 3,355 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions net of cash acquired (12,000) - Purchases of property and equipment (436) (1,406)Disposals of property and equipment - 18 Collection of note receivable 223 - Net change in funds held for clients (6,562) - Net cash used in investing activities (18,775) (1,388) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 18,413 5,300 Payments on notes payable (7,233) (6,765)Payments on amendment of senior notes payable - (75)Debt financing fees (438) - Payments on capital leases (197) (190)Net proceeds from issuance of stock 15,192 587 Net change in client fund obligations 6,562 - Net cash used in financing activities 32,299 (1,143) Effect of foreign exchange rates 97 14 Net increase in cash and cash equivalents 11,609 838 Cash and cash equivalents at beginning of period 1,158 320 Cash and cash equivalents at end of period $12,767 $1,158 SUPPLEMENTAL INFORMATION: Cash paid for: Interest $1,415 $995 Non-cash Investing and Financing Activities: Note receivable from customer - 601 Subordinated notes payable- Mangrove acquisition 6,000 - Accrued purchases of property and equipment - 17 The accompanying notes are an integral part of these consolidated financial statements. F-6Table of Contents ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) NOTE 1 - THE COMPANYAsure Software, Inc., a Delaware corporation incorporated in 1985, is a provider of cloud-based software-as-a-service (“SaaS”) time and labormanagement and Agile Workplace management solutions that enable organizations to manage their office environments as well as their human resource andpayroll processes effectively and efficiently. Asure develops, markets, sells and supports its offerings worldwide through its principal office in Austin, Texas andthrough additional offices in Dedham, Massachusetts; Tampa, Florida; Traverse City, Michigan and London, United Kingdom.NOTE 2 - SIGNIFICANT ACCOUNTING POLICIESBASIS OF PRESENTATIONAsure has prepared its consolidated financial statements in accordance with U.S. generally accepted accounting principles and has included the accountsof its wholly owned subsidiaries. We have eliminated all significant intercompany transactions and balances in consolidation. Asure has made certainreclassifications to the prior year’s financial statements to conform to the current year presentation. SEGMENTSThe chief operating decision maker is Asure’s Chief Executive Officer who reviews financial information presented on a company-widebasis. Accordingly, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Asure determined thatit has a single reporting segment and operating unit structure.USE OF ESTIMATESPreparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments thataffect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year end and the reported amounts of revenues andexpenses during the fiscal year. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful livesof fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions. Asurebases its estimates on historical experience and on various other assumptions its management believes reasonable under the given circumstances. These estimatescould be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Managementperiodically evaluates estimates used in the preparation of the financial statements for continued reasonableness. Asure makes appropriate adjustments, if any, tothe estimates used prospectively based upon such periodic evaluation.CONTINGENCIESAlthough Asure has been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of December31, 2016, we were not party to any pending legal proceedings.LIQUIDITY As of December 31, 2016, Asure’s principal sources of liquidity consisted of approximately $12,767 of cash and cash equivalents, future cash generatedfrom operations and $3,000 available for borrowing under our Wells Fargo revolver discussed in Note 6 – Notes Payable. Cash and cash equivalents were $1,158at December 31, 2015.F-7Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)In December 2016, we completed an underwritten public offering of 1,949,250 shares of common stock at the public offering price of $8.00 per share,which includes 254,250 shares sold pursuant to the underwriters’ full exercise of their over-allotment option. Our net proceeds, after deducting the underwritingdiscounts and commissions and other estimated offering expenses, were approximately $14,400. We intend to use the net proceeds received from the offering forgeneral corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, assets or technologies. Wesubsequently used a portion of the proceeds to reduce approximately $3.0 million of our secured subordinated indebtedness payable in connection with the 2016acquisition of Mangrove and for the three acquisitions we closed in January 2017, as discussed in Note 14- Subsequent Events.Our Wells Fargo Credit Agreement was amended in March 2015 to authorize us to optionally prepay, subject to specified conditions, the SubordinatedNote Payable to Roomtag and to revise the leverage ratio beginning with the quarter ended March 31, 2015 to a leverage ratio of not greater than 3.5 to 1.0 with thelevels stepping down thereafter. We also amended the Credit Agreement in November 2015. The November 2015 amendment increased the applicable marginrelative to the LIBOR rate upon which we compute the interest payable. We agreed that if our leverage ratio is (a) less than or equal to 2.25:1, (b) greater than2.25:1 but less than or equal to 2.75:1, (c) greater than 2.75:1 but less than or equal to 3.25:1 or (d) greater than 3.25:1, the applicable margin relative to the LIBORrate would be 3.00, 3.50, 4.00 or 4.50 percentage points, respectively. We further agreed that until the leverage ratio testing period ended September 30, 2016, wewill pay interest based on the 4.50 percentage point margin level.We amended our Credit Agreement in March 2016. Under this amendment, we expanded our overall credit facility by $12,500 to $29,188. This includes a$26,188 term facility which is due on March 21, 2019 and a $3,000 revolving credit facility. The amendment also changed the applicable margin rates fordetermining the interest rate payable on the loan as follows:Total Leverage Ratio Base Rate Margin LIBOR Rate Margin ≤ 2.75:1 3.50% 4.50%> 2.75:1 but ≤ 3.25:1 4.00% 5.00%≥ 3.25:1 4.50% 5.50%The outstanding principal amount of the term loan is payable as follows: · $491 on June 30, 2016 and the last day of each fiscal quarter thereafter up to March 31, 2017; and· $655 on June 30, 2017 and the last day of each fiscal quarter thereafter. The amendment also changed our leverage ratio requirements under the Credit Agreement. We have now agreed to a leverage ratio not to exceed 5.00:1at March 31, 2016, stepping down to 2.25:1 at December 31, 2018.As of December 31, 2016, we were in compliance with all covenants and all payments remain current. We expect to be in compliance or be able to obtaincompliance through debt repayments with the available cash on hand or as we expect to be generated from the ordinary course of operations over the next twelvemonths from the issuance of the consolidated financial statements. Management is focused on growing our existing product offering, as well as our customer base, to increase our recurring revenues. We have made andwill continue to explore additional strategic acquisitions. We expect to fund any future acquisitions with equity, available cash, future cash from operations, or debtfrom outside sources. We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operationsor future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital inthe future. However, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believesthat we have sufficient capital and liquidity to fund and cultivate the growth of our current and future operations for at least the next twelve months from theissuance of the consolidated financial statements and to maintain compliance with the terms of our debt agreements and related covenants or to obtain compliancethrough debt repayments made with the available cash on hand or anticipated for receipt in the ordinary course of operations. CASH AND CASH EQUIVALENTSCash and cash equivalents include cash deposits and highly liquid investments with an original maturity of three months or less when purchased.F-8Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) FUNDS HELD FOR CLIENTSFunds held for clients represent assets that, based upon the Company’s intent, are restricted for use solely for the purposes of satisfying the obligations toremit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client fund obligations on our Consolidated Balance Sheets.Funds held for clients are held in demand deposit accounts at major financial institutions and are classified as a current asset on our Consolidated Balance Sheetssince these funds are held solely for the purposes of satisfying the client fund obligations.Client fund obligations represent the Company’s contractual obligations to remit funds to satisfy clients’ payroll and tax payment obligations and arerecorded on the Consolidated Balance Sheets at the time that the Company impounds funds from clients. The client fund obligations represent liabilities that willbe repaid within one year of the balance sheet date. The Company has reported client fund obligations as a current liability on the Consolidated Balance Sheetstotaling $22,981 and $0 as of December 31, 2016 and December 31, 2015, respectively. The Company has classified funds held for clients as a current asset sincethese funds are held solely for the purposes of satisfying client funds obligations. The Company has reported cash flows related to purchases, sales and maturitiesof corporate and client funds marketable securities on a gross basis in the investing section of the Statements of Consolidated Cash Flows. The Company hasreported cash flows related to client fund investments with original maturities of ninety days or less on a net basis within the net increase in restricted cash and cashequivalents and other restricted assets held to satisfy client fund obligations in the investing section of the Statements of Consolidated Cash Flows. The Companyhas reported cash flows related to cash received from and paid on behalf of clients on a net basis within the net increase in client fund obligations in the financingactivities section of the Statements of Consolidated Cash Flows. FAIR VALUE OF FINANCIAL INSTRUMENTSWe apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis, andnon-financial assets and liabilities such as goodwill, intangible assets and property and equipment that are measured at fair value on a non-recurring basis.CONCENTRATION OF CREDIT RISKWe grant credit to customers in the ordinary course of business. We limit concentrations of credit risk related to our trade accounts receivable due to ourlarge number of customers, including third-party resellers, and their dispersion across several industries and geographic areas. We perform ongoing creditevaluations of our customers and maintain reserves for potential credit losses. We require advanced payments or secured transactions when deemed necessary. Asure reviews potential customers’ credit ratings to evaluate customers’ ability to pay an obligation within the payment term, which is usually net thirtydays. If we receive reasonable assurance of payment and know of no barriers to legally enforce the payment obligation, we may extend credit to customers. Weplace accounts on “Credit Hold” if a placed order exceeds the credit limit or sooner if circumstances warrant. We follow our credit policy consistently androutinely monitor our delinquent accounts for indications of uncollectability. ALLOWANCE FOR DOUBTFUL ACCOUNTSAsure maintains an allowance for doubtful accounts at an amount we estimate to be sufficient to provide adequate protection against losses resulting fromextending credit to our customers. We base this allowance, in the aggregate, on historical collection experience, age of receivables and general economicconditions. 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 following table summarizes the annual changes in our allowance for doubtful accounts: Balance at December 31, 2014 $120 Provision for doubtful accounts receivable 100 Write-off of uncollectible accounts receivable (75)Balance at December 31, 2015 $145 Provision for doubtful accounts receivable 265 Write-off of uncollectible accounts receivable (72)Balance at December 31, 2016 $338 F-9Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) INVENTORY Inventory consists of finished goods and is stated at the lower of cost or market, cost being determined using the first-in, first-out method. Inventoryincludes purchased LCD panels and a full range of biometric and card recognition clocks that we sell as part of our workforce and workspace managementsolutions. We routinely assess our on-hand inventory for timely identification and measurement of obsolete, slow-moving or otherwise impaired inventory. PROPERTY AND EQUIPMENTWe record property and equipment, including software, furniture and equipment, at cost less accumulated depreciation. We record depreciation using thestraight-line method over the estimated economic useful lives of the assets, which range from two to five years. Property and equipment also includes leaseholdimprovements and capital leases which we record at cost less accumulated amortization. We record amortization of leasehold improvements and capital leasesusing the straight-line method over the shorter of the lease term or over the life of the respective assets, as applicable. We recognize gains or losses related toretirements or disposition of fixed assets in the period incurred. We expense repair and maintenance costs as incurred. We periodically review the estimatedeconomic useful lives of our property and equipment and make adjustments, if necessary, according to the latest information available.BUSINESS COMBINATIONSAsure has accounted for our acquisitions using the acquisition method of accounting based on ASC 805— Business Combinations , which requiresrecognition and measurement of all identifiable assets acquired and liabilities assumed at their full fair value as of the date we obtain control. We have determinedthe fair value of assets acquired and liabilities assumed 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 have used our bestestimates and assumptions to measure the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, our estimates are inherentlyuncertain 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 estimatedfair values of the net assets recorded for the acquisitions will result in an adjustment to goodwill. Upon the conclusion of the measurement period or finaldetermination of the values of assets acquired or liabilities assumed, whichever comes first, we record any subsequent adjustments to our consolidated statementsof comprehensive loss. GOODWILL AND OTHER INTANGIBLE ASSETSGoodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired in abusiness combination. We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests if indicators ofpotential impairment exist, by first assessing qualitative factors to determine whether it is necessary to perform the two-step goodwill impairment test. Ifdetermined to be necessary, the two-step impairment test should be used to identify any potential impairment and measure an impairment loss, if any. Step one ofthe impairment test consists of comparing the fair value of the reporting unit with the aggregate carrying value, including goodwill. If the carrying value of areporting unit exceeds the reporting unit’s fair value, step two must be performed to determine the amount, if any, of the goodwill impairment. We tested goodwillusing the qualitative factors during 2016 and 2015. There has been no impairment of goodwill for the periods presented. See Notes 4 and 5 for additionalinformation regarding goodwill. We amortize intangible assets not considered to have an indefinite useful life using the straight-line method over their useful lives.We currently amortize our acquired intangible assets with definite lives over periods ranging from one to nine years. Each reporting period, we evaluate theestimated remaining useful life of intangible assets and assess whether events or changes in circumstances warrant a revision to the remaining period ofamortization or indicate that impairment exists. We have not identified any impairments of finite-lived intangible assets during any of the periods presented. SeeNote 5 – Goodwill and Other Intangible Assets for additional information regarding intangible assets. IMPAIRMENT OF LONG-LIVED ASSETSIn accordance with ASC 350, Asure reviews and evaluates our long-lived assets for impairment whenever events or changes in circumstances indicatethat we may not recover their net book value. When such factors and circumstances exist, we compare the assets’ carrying amounts against the estimatedundiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts are greater than the undiscounted cash flows, weestimate the fair values of those assets by discounting the projected cash flows. We record any excess of the carrying amounts over the fair values as impairmentsin that fiscal period. We have identified no impairment of long-lived assets during any of the periods presented.F-10Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) ORIGINAL ISSUE DISCOUNTSWe recognize original issue discounts, when incurred on the issuance of debt, as a reduction of the current loan obligations that we amortize to interestexpense over the life of the related indebtedness using the effective interest rate method. We record the amortization as interest expense – amortization of OID inthe Consolidated Statements of Comprehensive Loss. At the time of any repurchases or retirements of related debt, we will write off the remaining amount of netoriginal issue discounts and include them in the calculation of gain/(loss) on retirement in the consolidated statements of comprehensive loss. REVENUE RECOGNITIONOur revenues consist of software-as-a-service (“SaaS”) offerings, time-based software subscriptions, and perpetual software license sale arrangementsthat also, typically, include hardware, maintenance/support and professional services elements. We recognize revenue when persuasive evidence of anarrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Software and software-related elements are recognizedin accordance with ASC 985-605 Software Revenue Recognition . We recognized non-software revenue elements in accordance with ASC 605-25 RevenueRecognition Multiple-Element Arrangements. Since we currently offer our software solutions under either a perpetual license, time-based subscription or SaaSmodel, revenue recognition timing varies based on which form of software rights the customer purchases. SaaS arrangements and time-based software subscriptions typically have an initial term ranging from one to three years and are renewable on an annualbasis. A typical SaaS arrangement will also include hardware, setup and implementation services. We allocate the value of the SaaS arrangement to each separateunit of accounting based on vendor-specific objective evidence (“VSOE”) of selling price, when it exists, third-party evidence of selling price for like services orbest estimated selling price. Revenue allocated to the SaaS/software subscription element is recognized ratably over the non-cancellable term of theSaaS/subscription service. We recognize revenue allocated to other units of accounting included in the arrangement as outlined in the paragraphs below.We typically sell perpetual software licenses in multiple-element arrangements that include hardware, maintenance/support and professional services. Wegenerally recognize software license revenues, determined under the residual method, on the date we deliver the product to the customer if VSOE of fair valueexists for all undelivered elements of the software arrangement. If VSOE of fair value does not exist for an undelivered element, we defer the entire softwarearrangement and recognize it ratably over the remaining non-cancellable maintenance term after we have delivered all other undelivered elements. We base VSOEof fair value for our maintenance, training and installation services on the prices charged for these services when sold separately. We recognize revenue allocatedto hardware, maintenance and services elements included in the arrangement as outlined below. Hardware devices sold to customers (typically time clock, LCD panel and other peripheral devices) are not essential to the functionality of the softwareand as such we treat them as non-software elements for revenue recognition purposes. We recognize hardware revenue when title passes to the customer, typicallythe date we ship the hardware. If we sell hardware under a hardware-as-a-service (“HaaS”) arrangement, title to the hardware remains with Asure and werecognize hardware usage revenue ratably over the non-cancellable term of the hardware service delivery, typically one year. Our professional services offerings which typically include data migration, set up, training, and implementation services are also not essential to thefunctionality of our products, as third parties or customers themselves can perform these services. Set up and implementation services typically occur at the start ofthe software arrangement while certain other professional services, depending on the nature of the services and customer requirements, may occur several monthslater. We can reasonably estimate professional services performed for a fixed fee and recognize this on a proportional performance basis. We recognize revenuefor professional services engagements billed on a time and materials basis as we deliver the services. We recognize revenues on all other professional servicesengagements upon the earlier of the completion of the services deliverable or the expiration of the customer’s right to receive the service. We recognize maintenance/support revenues ratably over the non-cancellable term of the support agreement. Initial maintenance/support terms aretypically one to three years and are renewable on an annual basis. We do not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return,refund or cancellation rights have expired or acceptance has occurred. Our 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 andother revenue. We recognize deferred revenues when we complete the service and over the terms of the arrangements, primarily ranging from one to three years. F-11Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) ADVERTISING COSTSWe expense advertising costs as we incur them. Advertising expenses were $109 and $42 for 2016 and 2015, respectively. We recorded these expensesas part of sales and marketing expenses on our Consolidated Statements of Comprehensive Loss. LEASE OBLIGATIONSAsure recognizes its lease obligations with scheduled rent increases over the term of the lease on a straight-line basis. Accordingly, we charge the totalamount of base rentals over the term of our leases to expense on a straight-line method, recording the amount of rental expense in excess of lease payments as adeferred rent liability. As of December 31, 2016 and 2015, we had no deferred rent liabilities. We also recognize capital lease obligations and record the underlyingassets and liabilities on our Consolidated Balance Sheets. As of December 31, 2016 and 2015, Asure had $163 and $327 in capital lease obligations, respectively. FOREIGN CURRENCY TRANSLATIONWe measure the financial statements of our foreign subsidiaries using the local currency as the functional currency. Accordingly, we translate the assetsand liabilities of these foreign subsidiaries at current exchange rates at each balance sheet date. We record translation adjustments arising from the translation ofnet assets located outside of the United States into United States dollars in accumulated other comprehensive loss as a separate component of stockholders’ equity.We translate income and expenses from the foreign subsidiaries using monthly average exchange rates. We include net gains and losses resulting from foreignexchange transactions in other income and expenses, which were not significant in 2016 and 2015. INCOME TAXES We account for income taxes using the liability method under ASC 740, Accounting for Income Taxes, which requires recognition of deferred tax assetsand liabilities for the expected future tax consequences of events included in the financial statements. Under the liability method, we determine deferred tax assetsand liabilities 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 whichwe expect the differences to reverse. We reduce deferred tax assets by a valuation allowance when it is more likely than not that we will not realize somecomponent or all of the deferred tax assets. SHARE BASED COMPENSATION We adopted Statement ASC 718 effective August 1, 2005, using the modified prospective application transition method. The modified prospectiveapplication method requires that companies recognize compensation expense on stock-based payment awards that are modified, repurchased or cancelled after theeffective date. We estimate the fair value of each award granted from our stock option plan at the date of grant using the Black-Scholes option pricingmodel. During 2016 and 2015, we granted 454,000 and 257,000 stock options, respectively.As of December 31, 2016, we expect to recognize $338 of unrecognized compensation costs related to non-vested option grants over the course of thefollowing three years. We issued 278,000 shares of common stock related to exercises of stock options granted from our stock option plan for 2016 and 240,000 shares in 2015.F-12Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB issued FASB ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenuerecognition requirements in ASC 605, “Revenue Recognition”. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transferof promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods orservices. The guidance provides a five-step process to achieve that core principle. ASU 2014-09 requires disclosures enabling users of financial statements tounderstand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitativedisclosures are required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill acontract. In August 2015, the FASB issued FASB ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”,which deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017,including interim periods within that reporting period, using one of two retrospective application methods. Early application is permitted only as of annualreporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued FASBASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”. ASU2016-08 clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, “Revenue fromContracts with Customers: Identifying Performance Obligations and Licensing.” ASU 2016-10 clarifies the implementation guidance in Topic 606 for identifyingperformance obligations and determining when to recognize revenue on licensing agreements for intellectual property. In May 2016, the FASB issued ASU No.2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting.” ASU 2016-11 rescinds certain SEC staff comments previously madein regard to these ASU’s. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvementsand Practical Expedients” that provide guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts andcontract modifications at transition. We are currently evaluating the effect that the adoption of ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016- 10, ASU2016-11, ASU 2016-12 and ASU 2016-20 will have on our consolidated financial statements. In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,” which requiresmanagement to perform interim and annual assessments of an entity’s ability to continue as a going concern (meet its obligations as they become due) within oneyear after the date that the financial statements are issued. If conditions or events raise substantial doubt about the entity’s ability to continue as a going concern,certain disclosures are required. This ASU is effective for annual reporting periods ending after December 15, 2016, and interim reporting periods thereafter. Weadopted the provisions of ASU 2014-15 on January 1, 2016. This adoption did not have any impact on our consolidated financial statements.In April 2015, the FASB issued ASU 2015-03,” Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt IssuanceCosts”. This ASU requires reporting entities to record costs paid to third parties that are directly related to issuing debt, and that otherwise would not be incurred,as a deduction to the corresponding debt for presentation purposes. In addition, in August 2015, FASB issued ASU 2015-15, “Interest — Imputation of Interest(Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SECParagraphs Pursuant to Staff Announcement at the June 18, 2015 Emerging Issues Task Force (“EITF”) Meeting”. Given the absence of authoritative guidancewithin ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, ASU 2015-15 states the SEC staff would not object to an entity deferring andpresenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement,regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The provisions of each ASU are effective for fiscal years, andinterim periods within those fiscal years, beginning after December 15, 2015. A reporting entity should apply each amendment retrospectively. We adopted ASU2015-03 on January 1, 2016 for debt issuance costs on our term loan, on a retrospective basis. The impact of adopting ASU 2015-03 on our current periodconsolidated financial statements was the classification of all deferred financing costs as a deduction to the corresponding debt in addition to the reclassification ofdeferred financing costs in other current and long term assets to short and long term notes payable as of December 31, 2015, within the consolidated balance sheetsto conform to the current period presentation. Other than these reclassifications and additional disclosures, the adoption of ASU 2015-03 did not have an impact onour consolidated financial statements.F-13Table of Contents ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. Inventory within the scope of this update is required to bemeasured at the lower of its cost or net realizable value, with net realizable value being the estimated selling price in the ordinary course of business, lessreasonably predictable costs of completion, disposal, and transportation. This ASU is effective prospectively for fiscal years and interim periods beginning afterDecember 15, 2016, with early adoption permitted. The Company plans to adopt this standard in the first quarter of fiscal year 2017 prospectively and does notexpect a material effect on its consolidated financial statements.In September 2015, the FASB issued ASU 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments,” whichrequires acquirers to recognize adjustments to provisional amounts identified during the reporting period in which the adjustment amounts are determined.Acquirers should record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any,as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Application of the standard, whichshould be applied prospectively, is required for the annual and interim periods beginning after December 15, 2015. We adopted the provisions of ASU 2015-16 onJanuary 1, 2016. The adoption did not have a material impact on our consolidated financial statements.In November 2015, the FASB issued ASU No. 2015-17,” Income Taxes: Balance Sheet Classification of Deferred Taxes”, to require that deferred taxliabilities and assets be classified entirely as non-current. This amended guidance is effective for fiscal years beginning after December 15, 2016, including interimperiods within those years. Early adoption is permitted, and the amended guidance may be applied prospectively to all deferred tax liabilities and assets orretrospectively to all periods presented. We are currently evaluating the effects and timing of the adoption of ASU 2015-17, which must be adopted by the firstquarter of 2017.In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The core principle of the standard is that a lessee should recognize theassets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) anda right-of-use asset representing its right to use the underlying asset for the lease term. We will be required to adopt the new standard in the first quarter of 2019.We are currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”which eliminates the diversity in practice related to eight cash flow classification issues. This ASU is effective for on January 1, 2018 with early adoptionpermitted. We believe its adoption will not significantly impact our consolidated financial statements.In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment (Topic 350)”, which eliminates Step 2 from thegoodwill impairment test. ASU 2017-04 is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permittedfor interim or annual goodwill impairment tests performed after January 1, 2017 and should be applied prospectively. We plan to adopt this standard in the firstquarter of fiscal year 2017 and do not expect a material impact on our consolidated financial statements.In March 2016 the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting”, which will reduce complexity in accounting standards related to share-based payment transactions, including, among others, (1) accountingfor income taxes, (2) classification of excess tax benefits on the statement of cash flow, (3) forfeitures, and (4) statutory tax withholding requirements. The ASU iseffective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods. The Company will adopt theamendments as of January 1, 2017, and the Company is currently evaluating the full impact of these amendments. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 806): Clarifying the Definition of a Business”, which providesguidance in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affectsmany areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for public companies for fiscal years beginningafter December 15, 2017, including interim periods within those periods, with early adoption permitted under certain circumstances. We are currently evaluatingthe effects and timing of the adoption of ASU 2017-01. F-14Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) NOTE 3 - FAIR VALUE MEASUREMENTSAccounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuringfair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements.ASC 820 establishes a three-tier fair value hierarchy, which is based on the reliability of the inputs used in measuring fair values. These tiers include: Level 1:Quoted prices in active markets for identical assets or liabilities; Level 2:Quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active for identical or similarassets or liabilities; and model-driven valuations whose significant inputs are observable; and Level 3:Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets orliabilities. The following table presents the fair value hierarchy for our financial assets measured at fair value on a recurring basis as of December 31, 2016 andDecember 31, 2015, respectively: Fair Value Measure at December 31, 2016 Total Quoted Significant Carrying Prices Other Significant Value at in Active Observable Unobservable December 31, Market Inputs Inputs Description2016 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $12,767 $12,767 $- $- Total $12,767 $12,767 $- $- Fair Value Measure at December 31, 2015 Total Quoted Significant Carrying Prices Other Significant Value at in Active Observable Unobservable December 31, Market Inputs Inputs Description2015 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $1,158 $1,158 $- $- Total $1,158 $1,158 $- $- Liabilities: Contingent consideration 173 $- $- $173 Total $173 $- $- $173 The following summarizes quantitative information about Level 3 fair value measurements.Contingent consideration In connection with the acquisition of FotoPunch, Inc. (“FotoPunch”) in July 2014, we recorded contingent consideration based upon the expectedachievement of certain milestone goals. We will record any changes to the fair value of contingent consideration due to changes in assumptions used in preparingthe valuation model in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).F-15Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) Contingent consideration is valued using a multi-scenario discounted cash flow method. The assumptions used in preparing the discounted cash flowmethod include estimates for outcomes if milestone goals are achieved and the probability of achieving each outcome. Management estimates probabilities andthen applies them to management’s conservative case forecast, most likely case forecast and optimistic case forecast with the various scenarios. The Companyretained a third party expert to assist in determining the value of the contingent consideration as of December 31, 2016 and 2015. As of December 31, 2016, the third party expert determined the value of the contingent consideration for the FotoPunch acquisition was zero. Thevaluation of the contingent consideration was based on a Monte Carlo simulation model for fiscal 2017 to 2018. Management provided revenue projections (anunobservable input) of $228 and $251 for fiscal 2017 and fiscal 2018, respectively. As of December 31, 2015, the contingent consideration was valued at $173 andwas based on a Monte Carlo simulation model for fiscal 2016 to 2018, with fiscal 2016 being a partial year from January 1, 2016 to September 30, 2016.Management provided revenue projections (an unobservable input) of $650, $2,203 and $3,925 for fiscal 2016 (partial year), fiscal 2017 and fiscal 2018,respectively.The following table summarizes the annual changes in our contingent consideration: Balance at December 31, 2014 $327 Adjustment to purchase accounting (65)Change in fair value of earnout (89)Balance at December 31, 2015 $173 Change in fair value of earnout (173)Balance at December 31, 2016 $- Changes to the estimated fair value of contingent consideration were primarily due to revisions to the Company’s expectations of earn-out achievement. Other Financial Assets and Liabilities Financial assets and liabilities with carrying amounts approximating fair value include cash and cash equivalents, trade accounts receivable, accountspayable, accrued expenses and other current liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their shortmaturities.Our line of credit and notes payable, including current portion, as of December 31, 2016, had a carrying value of $30,036. This carrying valueapproximates 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. NOTE 4 - ACQUISITIONSSubsequent to December 31, 2016, through stock and asset purchases, we closed three strategic acquisitions: Personnel Management Systems, Inc., aleading provider of outsourced HR solutions; Corporate Payroll, Inc. (Payroll Division), a leading provider of payroll services; and Payroll Specialties NW, Inc., aleading provider of payroll services. See Note 14- Subsequent Events for more information about the Stock Purchase Agreement and Asset Purchase Agreements.2016 AcquisitionThrough the stock and asset purchases described below, we have entered into the human resource management, payroll processing and benefitsadministration services businesses, which we intend to integrate into our existing AsureForce® product line.Stock Purchase AgreementIn March 2016, we acquired all of the issued and outstanding shares of common stock (the “Shares”) of Mangrove Employer Services, Inc. of Tampa,Florida (“Mangrove”). Pursuant to this stock purchase, we acquired the payroll division of Mangrove, which is engaged in the human resource management andpayroll processing businesses. The aggregate consideration for the Shares consisted of (i) $11,348 in cash, a portion of which was used to pay certain obligations ofMangrove and (ii) a secured subordinated promissory note (the “Note”) in the principal amount of $6,000, subject to adjustment as provided in the Stock PurchaseAgreement. We funded the cash payment with proceeds from our credit agreement with Wells Fargo. The Note bears interest at an annual rate of 3.50% andmatures in March 2018, with the first installment of principal due in March 2017 and the second installment of principal due in March 2018. The Stock PurchaseAgreement contains certain customary representations, warranties, indemnities and covenants. Details regarding the financing of the acquisition are described inthe below Notes Payable table. Transaction costs for this acquisition were $706 and we expensed them as incurred.F-16Table of Contents ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)Asset Purchase AgreementIn March 2016, we also acquired substantially all the assets of Mangrove COBRAsource Inc., a benefits administration services business which then wasa wholly owned subsidiary of Mangrove. The aggregate consideration for the assets was $1,036, which Mangrove COBRAsource applied to pay off certain loanbalances. The Asset Purchase Agreement contains certain customary representations, warranties, indemnities and covenants. Following is the purchase price allocation for the acquisition of Mangrove. We recorded the transaction using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date ofacquisition. The $8,700 of intangible assets subject to amortization consist of $1,200 allocated to Customer Relationships, $6,900 in Developed Technology and$600 for Trade Names. We estimated the fair value of the Customer Relationships and Developed Technology using the excess earnings method, a form of theincome approach. We discounted cash flow projections using a rate of 18.1%, which reflects the risk associated with the intangible asset related to the other assetsand the overall business operations to us. We estimated the fair value of the Trade Names using the relief from royalty method based upon a 1.2% royalty rate forthe payroll division and 0.5% for the benefits administration services business. The Company believes significant synergies are expected to arise from this strategic acquisition. This factor contributed to a purchase price that was inexcess of the fair value of the net assets acquired and, as a result, the Company recorded goodwill. A portion of acquired goodwill will be deductible for taxpurposes.We based the allocations on fair values at the date of acquisition: Amount Assets acquired Accounts receivable $523 Funds held for clients 16,419 Fixed assets 258 Other assets 28 Goodwill 8,837 Intangibles 8,700 Total assets acquired $34,765 Liabilities assumed Accounts payable 64 Accrued other liabilities 282 Client fund obligations 16,419 Total liabilities assumed $16,765 Net assets acquired $18,000 Unaudited Pro Forma Financial InformationThe following unaudited summary of pro forma combined results of operation for the years ended December 31, 2016 and 2015 gives effect to theacquisition of Mangrove and the acquisition of assets of COBRAsource as if we had completed them on January 1, 2015. This pro forma summary does not reflectany 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.F-17Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)We present this pro forma summary for informational purposes only and it is not necessarily indicative of what our actual results of operations wouldhave been had the acquisitions taken place as of January 1, 2015, nor is it indicative of future consolidated results of operations. FOR THE YEAR FOR THE YEAR ENDEDDECEMBER 31, ENDEDDECEMBER 31, 2016 2015 Revenues $37,671 $35,137 Net income (loss) $(148) $(3,113)Net income (loss) per common share: Basic and diluted $(0.02) $(0.50) Weighted average shares outstanding: Basic 6,533 6,176 Diluted 6,533 6,176 NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS Asure accounted for its historical acquisitions in accordance with ASC 805, Business Combinations . We recorded the amount exceeding the fair value ofnet assets acquired at the date of acquisition as goodwill. We recorded intangible assets apart from goodwill if the assets had contractual or other legal rights or ifthe assets could be separated and sold, transferred, licensed, rented or exchanged. Asure’s goodwill relates to the acquisitions of ADI and Legiant in 2011, theacquisition of PeopleCube in 2012, and the acquisitions of FotoPunch and Roomtag in 2014 and Mangrove in 2016. The following table summarizes the annual changes in our goodwill: Balance at December 31, 2014 $17,500 Adjustments to goodwill (60)Foreign exchange adjustments to goodwill (4)Balance at December 31, 2015 $17,436 Goodwill recognized upon acquisition of Mangrove 8,837 Foreign exchange adjustments to goodwill (14)Balance at December 31, 2016 $26,259 F-18Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)The gross carrying amount and accumulated amortization of our intangible assets as of December 31, 2016 and 2015 are as follows: December 31, 2016 Intangible Assets Weighted AverageAmortizationPeriod (in Years) Gross AccumulatedAmortization Net Developed Technology 12.7 $10,915 $(3,408) $7,507 Customer Relationships 7.3 14,011 (10,270) 3,741 Reseller Relationships 7 853 (640) 213 Trade Names 14.5 1,294 (707) 587 9.8 $27,073 $(15,025) $12,048 December 31, 2015 Intangible Assets Weighted AverageAmortizationPeriod (in Years) Gross AccumulatedAmortization Net Developed Technology 7.6 $4,015 $(2,208) $1,807 Customer Relationships 7.2 12,811 (8,959) 3,852 Reseller Relationships 7 853 (518) 335 Trade Names 5 694 (669) 25 Covenant not-to-compete 2 229 (222) 7 7.3 $18,602 $(12,576) $6,026 We record amortization expense using the straight-line method over the estimated useful lives of the intangible assets, as noted above. Amortizationexpenses were $2,253 and $1,866 for 2016 and 2015, respectively, included in Operating Expenses. Amortization expenses recorded in Cost of Sales were $425and $425 for 2016 and 2015, respectively. The following table summarizes the future estimated amortization expense relating to our intangible assets as of December 31, 2016: Calendar Years 2017 $2,907 2018 2,558 2019 1,927 2020 1,360 2021 1,559 Thereafter 1,737 $12,048 F-19Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) NOTE 6 - NOTES PAYABLE The following table summarizes our outstanding debt as of the dates indicated: Notes Payable Maturity Stated InterestRate Balance as ofDecember 31,2016 Balance as ofDecember 31,2015 Subordinated Notes Payable- Mangrove acquisition 3/18/2018 3.50% $6,000 $- Term Loan - Wells Fargo 3/20/2019 6.50% 24,715 13 687 Total Notes Payable $30,715 $13,687 Short-term notes payable $5,455 $1,031 Long-term notes payable $25,260 $12,656 On January 1, 2016, we adopted ASU 2015-03 for debt issuance costs on our term loan, on a retrospective basis. The impact of adopting ASU 2015-03on our current period consolidated financial statements was the classification of all deferred financing costs as a deduction to corresponding debt in addition to thereclassification of deferred financing costs in other current and long term assets to short and long term notes payable as of December 31, 2015, within theConsolidated Balance Sheets to conform to the current period presentation. The following table summarizes the debt issuance costs as of the dates indicated: Notes Payable Gross NotesPayable atDecember 31,2016 Debt IssuanceCosts Net Notes PayableatDecember 31,2016 Notes payable, current portion $5,455 $- $5,455 Notes payable, net of current portion 25,260 (679) 24,581 Total Notes Payable $30,715 $(679) $30,036 Notes Payable Gross NotesPayable atDecember 31,2015 Debt IssuanceCosts Net Notes PayableatDecember 31,2015 Notes payable, current portion $1,031 $- $1,031 Notes payable, net of current portion 12,656 (394) 12,262 Total Notes Payable $13,687 $(394) $13,293 The following table summarizes the future principal payments related to our outstanding debt: Year Ended Gross Amount December 31, 2017 $5,455 December 31, 2018 5,619 December 31, 2019 19,641 Gross Notes Payable $30,715 Subordinated Notes Payable- Mangrove AcquisitionIn March 2016, we acquired all of the issued and outstanding shares of common stock (the “Shares”) of Mangrove. Pursuant to this stock purchase, weacquired the payroll division of Mangrove, which is engaged in the human resource management and payroll processing businesses. The aggregate considerationfor the Shares consisted of (i) $11,348 in cash, a portion of which was used to pay certain obligations of Mangrove and (ii) a secured subordinated promissory note(the “Note”) in the principal amount of $6,000, subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceedsfrom the Credit Agreement with Wells Fargo. The Note bears interest at an annual rate of 3.50% and matures in March 2018, with the first installment of principalof $3,000 due in March 2017 and the second installment of principal of $3,000 due in March 2018.F-20Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) Term Loan - Wells Fargo In March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and the lenders thatare party thereto. The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults,bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the defaultsare subject to customary notice and grace period provisions. In March 2014 and in connection with the Credit Agreement, we and our wholly-owned activesubsidiaries entered into a Guaranty and Security Agreement with Wells Fargo Bank. Under the Guaranty and Security Agreement, we and each of our wholly-owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’assets.The Credit Agreement provided for a term loan in the amount of $15,000 maturing in March 2019. We used the proceeds of the term loan to finance therepayment of all amounts outstanding under our loan agreement with Deerpath and the payment of certain fees, cost and expenses related to the Credit Agreement. The Credit Agreement also provided for a revolving loan commitment in the aggregate amount of up to $3,000. The outstanding principal amount of therevolving loan is due and payable in March 2019. As of December 31, 2016, $0 was outstanding and $3,000 was available for borrowing under the revolver. Additionally, the Credit Agreement provided for a $10,000 uncommitted incremental term loan facility to support permitted acquisitions.Under the Credit Agreement, we were required to maintain a fixed charge coverage ratio of not less than 1.5 to 1.0 beginning with the quarter ended June30, 2014 and each calendar quarter thereafter, and a leverage ratio of not greater than 3.5 to 1.0 beginning with the quarter ended June 30, 2014 with the levelsstepping down thereafter. We amended the Credit Agreement in August 2014, March 2015 and November 2015. The August 2014 amendment revised the leverageratio beginning with the quarter ended September 30, 2014 to a leverage ratio of not greater than 3.6 to 1.0 with the levels stepping down thereafter. The March2015 amendment authorized us to optionally prepay, subject to specified conditions, the Subordinated Note Payable to Roomtag and revised the leverage ratiobeginning with the quarter ended March 31, 2015 to a leverage ratio of not greater than 3.5 to 1.0 with the levels stepping down thereafter. The November 2015amendment increased the applicable margin relative to the LIBOR rate upon which we compute the interest payable. We agreed that if our leverage ratio is (a) lessthan or equal to 2.25:1, (b) greater than 2.25:1 but less than or equal to 2.75:1, (c) greater than 2.75:1 but less than or equal to 3.25:1 or (d) greater than 3.25:1, theapplicable margin relative to the LIBOR rate would be 3.00, 3.50, 4.00 or 4.50 percentage points, respectively. We further agreed that until the leverage ratiotesting period ending September 30, 2016, we will pay interest based on the 4.50 percentage point margin level. In March 2016, we amended the Credit Agreement. Under this amendment, we expanded the Credit Agreement by $12,500 to $29,188. The amendmentchanges the applicable margin rates for determining the interest rate payable on the loan as follows: Total Leverage Ratio Base Rate Margin LIBOR Rate Margin ≤ 2.75:1 3.50% 4.50%> 2.75:1 but ≤ 3.25:1 4.00% 5.00%≥ 3.25:1 4.50% 5.50%The March 2016 amendment also amends our leverage ratio requirements under the Credit Agreement. We have now agreed to a leverage ratio not toexceed 5.00:1 at March 31, 2016, stepping down to 2.25:1 at December 31, 2018. The Credit Agreement contains customary affirmative and negative covenants, including, among others, limitations with respect to debt, liens,fundamental changes, sale of assets, prepayment of debt, investments, dividends and transactions with affiliates. The outstanding principal amount of the term loan is payable as follows:· $491 on June 30, 2016 and the last day of each fiscal quarter thereafter up to March 31, 2017; and· $655 on June 30, 2017 and the last day of each fiscal quarter thereafter, with a final payment of the remaining balance due on March 31, 2019As of December 31, 2016, we were in compliance with all covenants and all payments remain current. We expect to be in compliance or be able to obtaincompliance through debt repayments with available cash on hand or as we expect to generate from the ordinary course of operations over the next twelve months. F-21Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)NOTE 7 - PROPERTY AND EQUIPMENTProperty and equipment and related depreciable useful lives as of December 31, 2016 and 2015 are composed of the following: December 31, 2016 2015 Software: 3-5 years $7,090 $5,928 Furniture and equipment: 2-5 years 7,087 4,637 Internal support equipment: 2-4 years 696 696 Vehicle: 7 years - - Capital leases: lease term or life of the asset 178 178 Leasehold improvements: lease term or life of the improvement 2,610 2,243 17,661 13,682 Less accumulated depreciation (15,783) (11,470) $1,878 $2,212 We record the amortization of our capital leases as depreciation expense on our Consolidated Statements of Comprehensive Loss. Depreciation andamortization expenses relating to property and equipment were approximately $935 and $721 for 2016 and 2015, respectively. NOTE 8 - STOCKHOLDERS’ EQUITY SHARE REPURCHASE PROGRAM Pursuant to Asure’s stock repurchase plan, we may repurchase up to 450,000 shares of our common stock. We have repurchased a total of 384,000 shares forapproximately $5,000 over the life of the plan. Management will periodically assess repurchasing additional shares, depending on our cash position, marketconditions, financial covenants and other factors. While the program remains in place, we did not repurchase any shares during 2016 or 2015.STOCK AND STOCK OPTION PLANSAsure has one active equity plan, the 2009 Equity Plan (the “2009 Plan”). The 2009 Plan provides for the issuance of non-qualified and incentive stockoptions to our employees and consultants. We generally grant stock options with exercise prices greater than or equal to the fair market value at the time ofgrant. The options generally vest over three to four years and are exercisable for a period of five to ten years beginning with the date of grant. Our shareholdersapproved an amendment to the 2009 Plan in June 2014 to increase the number of shares reserved under the plan from 1,200,000 to 1,400,000. We have a total of614,000 options granted and outstanding pursuant to the 2009 Plan as of December 31, 2016. We use the Black-Scholes option valuation model to value employee stock awards. We estimate stock price volatility based upon our historical volatility.Estimated option life and forfeiture rate assumptions are derived from historical data. For stock-based compensation awards with graded vesting, we recognizecompensation expense using the straight-line amortization method.Total compensation expense recognized in the Consolidated Statements of Comprehensive Loss for stock based awards was $226 and $409 for 2016 and2015, respectively.F-22Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)The following table summarizes the assumptions used to develop their fair value for 2016 and 2015: Year Ended December 31, 2016 2015 Risk-free interest rate .97% 1.90%Expected volatility 0.38 0.59 Expected life in years 3.44 3.61 Dividend yield - - As of December 31, 2016, Asure had reserved shares of common stock for future issuance as follows:Options outstanding 614,000 Options available for future grant 200,000 Shares reserved 814,000 The following table summarizes activity under all Plans during 2016 and 2015. Year Ended December 31, 2016 Year Ended December 31, 2015 Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price Outstanding at the beginning of the year 640,000 $4.40 735,000 $3.51 Granted 454,000 6.70 257,000 5.76 Exercised (278,000) 2.69 (240,000) 2.44 Canceled (202,000) 5.61 (112,000) 5.88 Outstanding at the end of the year 614,000 $6.47 640,000 $4.40 Options exercisable at the end of the year 130,000 $5.71 324,000 $3.09 Weighted average fair value of options granted during the year $1.53 $5.76 The following table summarizes the outstanding and exercisable options and their exercise prices as of December 31, 2016: OPTIONS OUTSTANDING OPTIONS EXERCISABLE RANGE OFEXERCISE PRICES NUMBEROUTSTANDING ATDECEMBER 31, 2016 WEIGHTED-AVERAGEREMAININGCONTRACTUALLIFE (YEARS) WEIGHTED-AVERAGEEXERCISE PRICE NUMBEREXERCISABLEAND VESTED ATDECEMBER 31, 2016 WEIGHTED-AVERAGEEXERCISE PRICE $1.68– 5.27 $99,000 $3.46 $5.01 $32,000 $4.97 5.28 -- 6.33 314,000 3.66 5.57 82,000 5.86 6.34 – 9.00 201,000 4.61 8.61 16,000 6.42 $1.68 -- 9.00 614,000 3.94 $6.47 130,000 $5.71 The aggregate intrinsic value of options outstanding and options exercisable is $1,302 and $365, respectively, at December 31, 2016.NOTE 9 - DEFINED CONTRIBUTION PLANWe sponsor a defined contribution 401(k) plan that is available to substantially all employees. Our Board of Directors may amend or terminate the plan atany time. We provided matching contributions to the plan of $198 and $179 in 2016 and 2015, respectively. F-23Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)NOTE 10 - REVENUE CONCENTRATIONDuring 2016 and 2015, there were no customers who individually represented 10% or more of consolidated revenue. NOTE 11 - NET LOSS PER SHAREThe following table sets forth the computation of basic and diluted net loss per common share for 2016 and 2015. We have excluded stock options to acquire 614,000 and 640,000 shares for 2016 and 2015, respectively, from the computation of the dilutive stockoptions because the effect of including the stock options would have been anti-dilutive. Year Ended Year Ended December 31, December 31, 2016 2015 Net Loss $(972) $(1,757)Weighted-average shares of common stock outstanding 6,533,000 6,176,000 Basic and diluted net loss per share $(0.15) $(0.28) NOTE 12 - INCOME TAXES The components of pre-tax loss for the years ended December 31, 2016 and 2015 are as follows: 2016 2015 Domestic $(865) $(1,404)Foreign 82 (134) Total $(783) $(1,538)The components of the provision for income taxes attributable to continuing operations for the years ended December 31, 2016 and 2015 are as follows: 2016 2015 Current: Federal $- $- State 16 25 Foreign - 6 Total current 16 31 Deferred: Federal 155 165 State 18 23 Foreign - - Total deferred 173 188 $189 $219 F-24Table of Contents ASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of our deferred taxes at December 31, 2016 and 2015 are as follows: 2016 2015 DEFERRED TAX ASSETS: Current deferred tax assets Deferred revenue $393 $382 Accrued expenses 388 85 Other - 51 781 518 Valuation allowance (781) (518)Net current deferred tax assets - - Noncurrent deferred tax assets Net operating losses 39,560 40,389 Research and development credit carryforwards 4,188 4,490 Minimum tax credit carryforwards 161 161 Acquired intangibles - 183 Share based compensation 10 11 Other 102 22 44,021 45,256 Valuation allowance (42,736) (44,496)Net noncurrent deferred tax assets 1,285 760 Noncurrent deferred tax liabilities Acquired intangibles (525) - Fixed assets (765) (764)Goodwill (812) (640)Total noncurrent deferred tax liabilities (2,102) (1,404) Net current deferred tax asset (liability) - - Net noncurrent deferred tax liability $(817) $(644) At December 31, 2016, we had federal net operating loss carryforwards of approximately $115,738, research and development credit carryforwards ofapproximately $5,113 and alternative minimum tax credit carryforwards of approximately $161. The net operating loss and research and development creditcarryforwards will expire in varying amounts from 2018 through 2036, if not utilized. Minimum tax credit carryforwards carry forward indefinitely. As a result of various acquisitions by us in prior years, we may be subject to a substantial annual limitation in the utilization of the net operating lossesand credit carryforwards due to the “change in ownership” provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration ofnet operating losses before utilization. Due to the uncertainty surrounding the timing of realizing the benefits of its favorable tax attributes in future tax returns, we have placed a valuationallowance against our net deferred tax assets, exclusive of goodwill. During the year ended December 31, 2016, the valuation allowance decreased byapproximately $1,497 due primarily to operations, including expiration of tax carryforwards. Approximately $8,251 of the valuation allowance relates to taxbenefits for stock option deductions included in our net operating loss carryforward which we will allocate, if and when realized, directly to contributed capital tothe extent the benefits exceed amounts attributable to book deferred compensation expense. We consider undistributed earnings of our foreign subsidiaries as permanently reinvested and, accordingly, we have made no provision for U.S. federal orstate income taxes thereon. F-25Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)Our provision for income taxes attributable to continuing operations differs from the expected tax expense (benefit) amount computed by applying thestatutory federal income tax rate of 34% to income before income taxes as a result of the following: For 2016 For 2015 Computed at statutory rate $(266) $(521)State taxes, net of federal benefit (34) 109 Permanent items and other 189 188 Credit carryforwards (59) (1)Foreign income taxed at different rates (45) 118 Tax carryforwards not benefitted 404 326 $189 $219 Under ASC 740-10, Income Taxes , we periodically review the uncertainties and judgments related to the application of complex income tax regulationsto determine income tax liabilities in several jurisdictions. We use a “more likely than not” criterion for recognizing an asset for unrecognized income tax benefitsor a liability for uncertain tax positions. We have determined we have the following unrecognized assets or liabilities related to uncertain tax positions as ofDecember 31, 2016. We do not anticipate any significant changes in such uncertainties and judgments during the next twelve months. To the extent we are requiredto recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability. The reconciliation of ourunrecognized tax benefits is as follows:Balance at January 1, 2015 $1,288 Additions based on tax positions related to the current year 28 Additions for tax positions of prior years (26)Balance at December 31, 2015 $1,290 Additions based on tax positions related to the current year 25 Additions for tax positions of prior years (96)Balance at December 31, 2016 $1,219 As of December 31, 2016, we had $1,219 of unrecognized tax benefits, which would affect the effective tax rate if recognized. The Company’sassessment of its unrecognized tax benefits is subject to change as a function of the Company’s financial statement audit. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the twelve months ended December 31,2016, we recognized $2 of interest and penalties in our income tax expense. We file tax returns in the U.S. federal jurisdiction and in several state and foreign jurisdictions. We are no longer subject to U.S. federal income taxexaminations for years ending before December 31, 2013 and are no longer subject to state and local or foreign income tax examinations by tax authorities foryears ending before December 31, 2012. We are not currently under audit for federal, state or any foreign jurisdictions.F-26Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted) NOTE 13 - LEASE COMMITMENTS Asure’s future minimum lease payments under all operating and capital leases as of December 31, 2016 are as follows: CALENDAR YEAR ENDING: OPERATINGLEASEOBLIGATIONS CAPITALLEASEOBLIGATIONS 2017 830 145 2018 646 18 2019 503 -- 2020 445 -- 2021 315 -- Thereafter 27 -- $2,766 $163 Less: Sublease income (510) - TOTAL $2,256 $163 Less current portion of obligations (145)Long-term portion of obligations $(18)Total rent expense under all operating leases for 2016 and 2015 were $1,014 and $724, respectively. At December 31, 2016 and 2015, approximately10.7% and 23.4%, respectively, of our total operating lease obligations relates to our corporate office facility at Wild Basin in Austin, Texas. Subsequent toDecember 31, 2016, we entered into a lease agreement for new corporate office facilities to accommodate our growth. This lease obligation is not included above.It will account for approximately 44.4% of our total future operating lease obligations. Approximately 66.0% of our total operating lease obligation at December31, 2016 relates to our office facility in Tampa, Florida, where Mangrove is based.NOTE 14 - SUBSEQUENT EVENTSThe Company evaluated subsequent events through March 20, 2017, the date of the filing of this Annual Report on Form 10-K with the SEC, to ensurethat this filing includes appropriate disclosure of events both recognized in the financial statements as of December 31, 2016, and events which occurredsubsequent to December 31, 2016 but were not recognized in the financial statements. The Company has determined that there were no subsequent events whichrequired recognition, adjustment to or disclosure in the financial statements except as below and except as disclosed in Note 13.2017 AcquisitionsIn January 2017, we closed three strategic acquisitions: Personnel Management Systems, Inc., a leading provider of outsourced HR solutions; CorporatePayroll, Inc. (Payroll Division), a leading provider of payroll services; and Payroll Specialties NW, Inc., a leading provider of payroll services. Stock Purchase AgreementIn January 2017, we closed on the acquisition of all of the outstanding shares of common stock (the “Shares”) of Personnel Management Systems, Inc., aWashington corporation (“PMSI”), pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), among us, PMSI, the sellers identified therein, andthe stockholders’ representative named therein. The aggregate consideration for the 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 withproceeds from our recent public stock offering. The PMSI Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principaland all accrued interest under the PMSI Note is payable at maturity. The Stock Purchase Agreement contains certain customary representations, warranties,indemnities and covenants.F-27Table of ContentsASURE SOFTWARE, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share data or otherwise noted)Asset Purchase AgreementIn January 2017, we closed on the acquisition of substantially all the assets of Corporate Payroll, Inc., an Ohio corporation (“CPI”), relating to its payrollservice 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 public stock offering.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 ofour common stock entered into a six month lock-up agreement with us. The CPI Asset Purchase Agreement contains certain customary representations, warranties,indemnities and covenants.Asset Purchase AgreementIn January 2017, we closed on the acquisition of substantially all the assets of Payroll Specialties NW, Inc., an Oregon corporation (“PSNW”), pursuant toan Asset Purchase Agreement (the “PSNW Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $3,010 in cash and (ii) asubordinated promissory note (the “PSNW Note”) in the principal amount of $600, subject to adjustment as provided in the PSNW Asset Purchase Agreement. Wefunded the cash payment with proceeds from our recent public stock offering. 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. The PSNW Asset Purchase Agreement contains certaincustomary representations, warranties, indemnities and covenants. Amendment to Credit AgreementIn March 2017, we amended our Credit Agreement with Wells Fargo Bank, N.A to, among other things, obtain an additional term loan in the amount of$5,000,000. Upon disbursement of the additional term loan, the aggregate principal amount outstanding under our terms loans will be approximately $29,714,453.The aggregate outstanding principal amount of the term loans is payable as follows:• $742,861.33 on June 30, 2017 and the last day of each fiscal quarter thereafter.We will use the proceeds of the additional term loan to repay a portion of all amounts outstanding under the secured subsordinated note we issued inconnection with the Mangrove acquisition. In the March 2017 amendment, in accordance with the terms of the Credit Agreement, Wells Fargo has consented tosuch early repayment of the Mangrove note, subject to the condition, among others, that the repayment of the Mangrove note will not exceed $5,879,000.The March 2017 amendment also amends our fixed charge coverage ratio and leverage ratio. We have now agreed to:• a fixed charge coverage ratio of not less than 1.25 to 1.0 beginning with the quarter ending March 31, 2017 and each calendar quarter thereafter up toDecember 31, 2017, and not less than 1.5 to :1.0 beginning with the quarter ending March 31, 2018 and each calendar quarter thereafter up to December 31, 2018,and• a leverage ratio of not greater than 4.25 to 1.0 beginning with the quarter ending March 31, 2017, stepping down to 3.0 to 1.0 at March 31, 2018. F-28Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized. ASURE SOFTWARE, INC. March 20, 2017By /s/ PATRICK GOEPEL Patrick Goepel Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in thecapacities and on the date indicated.Signature Title Date /s/ PATRICK GOEPEL Chief Executive Officer March 20, 2017 Patrick Goepel (Principal Executive Officer) and Director /s/ BRAD WOLFE Chief Financial Officer March 20, 2017 Brad Wolfe (Principal Financial and Accounting Officer) /s/ DAVID SANDBERG Chairman of the Board March 20, 2017 David Sandberg /s/ ADRIAN PERTIERRA Director March 20, 2017 Adrian Pertierra /s/ J. RANDALL WATERFIELD Director March 20, 2017 J. Randall Waterfield /s/ MATTHEW BEHRENT Director March 20, 2017 Matthew Behrent 25Table of Contents INDEX TO EXHIBITS EXHIBITNUMBERDOCUMENT DESCRIPTION2.1Asset Purchase Agreement dated October 1, 2011 by and among Asure Software, Inc., ADI Software, LLC and ADI Time, LLC (1) 2.2Asset Purchase Agreement dated December 14, 2011 by and among Asure Software, Inc., ADI Legiant, LLC and WG Ross Corp. (2) 2.3Stock Purchase Agreement dated July 1, 2012 between Meeting maker Holding B.V. and PeopleCube Holding B.V. and Asure Software, Inc. (3) 2.4Code Purchase and Perpetual License Agreement dated October 9, 2012 between Asure Software, Inc. and FotoPunch, Inc. (4) 2.5Stock Purchase Agreement, dated March 18, 2016, by and among Asure Software, Inc., Mangrove Employer Services, Inc., the Persons listedthereto, and Richard S. Cangemi, as Stockholder Representative (21) 3.1Restated Certificate of Incorporation (5) 3.2Certificate of Amendment to the Restated Certificate of Incorporation (6) 3.3(Second) Certificate of Amendment to the Restated Certificate of Incorporation (7) 3.4Amended and Restated Bylaws (8) 4.1Specimen Certificate for the Common Stock (9) 4.2Amended and Restated Rights Agreement, dated as of October 28, 2009 between Asure Software, Inc. and American Stock Transfer & TrustCompany (10) 4.3Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock (10) 4.4Form of Rights Certificate (10) 4.5Form of 9% Subordinated Convertible Promissory Note (1) 4.6Form of 15% Subordinated Promissory Note (1) 4.7Form of Securities Purchase Agreement for 9% Subordinated Convertible Promissory Note (1) 4.8Form of Securities Purchase Agreement for 15% Subordinated Promissory Note (1) 4.9Registration Rights Agreement (1) 4.10Amended and Restated Registration Rights Agreement dated March 10, 2012 (11) 4.11Amendment Agreement with respect to the Amended and Restated 9% Convertible Promissory Notes (11) 4.12Promissory Note dated October 2011 issued in connection with acquisition of certain assets from ADI Time, LLC (2) 4.13Letter Agreement from Patrick Goepel relating to forfeiture of option rights (2) 4.14Stock Option Agreement for Patrick Goepel (2) 4.15Stock Option Agreement for Steve Rodriguez (2) 10.1Amended Restricted Stock Plan, effective May 23, 2006 (12) 10.22009 Equity Plan, amended as of June 26, 2012 (13) 26Table of Contents10.3Amendment No. 3 to 2009 Equity Plan (13) 10.4Form of Option Agreement under the 2009 Equity Plan (13) 10.5Stock Purchase Agreement dated September 25,2009 with Patrick Goepel (14) 10.6Amended and Restated Employment Agreement dated July 2, 2011 with Patrick Goepel (2) 10.9Employment Letter with Steve Rodriguez, dated as of August 15, 2011 (2) 10.10Credit Agreement between Asure Software, Inc. and JPMorgan Chase Bank, N.A. (1) 10.11Fourth Amendment to Lease Agreement with WB One & Two LTD (15) 10.12Lease Agreement to Premises located at 200 Crossings Boulevard, Warwick, Rhode Island (2) 10.13Sixth Amendment to Lease Agreement with Wild Basin I & II Investors, LP (2) 10.14First Amendment to Loan Agreement effective as of December 31, 2012 by and among Asure Software Inc., ADI Software, LLC, Asure Legiant,LLC Meeting Maker - United States, Inc. and Deerpath Funding, LP (16) 10.15Form of Common Stock Purchase Agreement dated as of May 30, 2013 (17) 10.16Second Amendment to Loan Agreement effective as of March 31, 2013 by and among Asure Software Inc., ADI Software, LLC, Asure Legiant,LLC Meeting Maker - United States, Inc. and Deerpath Funding, LP (18) 10.17Third Amendment to Loan Agreement effective as of September 30, 2013 by and among Asure Software Inc., ADI Software, LLC, AsureLegiant, LLC Meeting Maker - United States, Inc. and Deerpath Funding, LP (19) 10.18Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are parties thereto as theLenders, and Asure Software, Inc., as Borrower, Dated as of March 20, 2014 (20) 10.19Guaranty and Security Agreement between Asure Software, Inc. and Wells Fargo Bank, National Association, dated March 20, 2014 (20) 10.20Asset Purchase Agreement dated March 18, 2016 by and between Mangrove COBRASource, Inc. and Asure COBRAsource, LLC (21) 10.21Amendment Number Five to Credit Agreement, dated as of March 21, 2016, by and among Wells Fargo Bank, National Association, asadministrative agent for the Lenders, each Lender party thereto, and Asure Software, Inc. (21) 10.22Secured Subordinated Promissory Note, dated March 18, 2016, by and among Asure Software, Inc., Richard S. Cangemi, as StockholderRepresentative and attorney-in-fact for Richard S. Cangemi and Paul D. Zugay, as Principal Shareholders (22)10.23Employee Stock Purchase Plan (23) 10.24Amendment Number Six to Credit Agreement, dated as of March 10, 2017, by and among Wells Fargo Bank, National Association, asadministrative agent for the Lenders, each Lender party thereto, and Asure Software, Inc. (24) 10.25Amendment Number Seven to Credit Agreement, dated as of March 20, 2017, by and among Wells Fargo Bank, National Association, asadministrative agent for the Lenders, each Lender party thereto, and Asure Software, Inc. * 14Code of Business Conduct and Ethics (8) 21Subsidiaries of the Company* 23.1Consent of Marcum LLP* 23.2Consent of Ernst & Young LLP* 31.1Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32.1Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished, not filed)* 32.2Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished, not filed)* 101The following materials from Asure Software, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL(Extensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Loss, (3)the Consolidated Statements of Cash Flows, and (4) Notes to Consolidated Financial Statements.27Table of Contents (1) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2011 filed with the SEC onNovember 14, 2011.(2)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 30, 2012. (3) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 6, 2012.(4) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2012. (5) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended October 31, 2004 filed with the SEC onDecember 15, 2004. (6) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 29, 2009.(7)Incorporated by reference to Appendix C to the Company’s 2012 Proxy Statement filed with the SEC on May 23, 2012.(8) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2012.(9)Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 filed with the SEC on December 13, 2012.(10)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 28, 2009.(11)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 12, 2012.(12) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended April 30, 2006 filed with the SEC on June 14,2006. (13) Incorporated by reference to the Company’s 2013 Proxy Statement filed with the SEC on April 30, 2013. (14) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 28, 2009.(15) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2010 filed with the SEC on May 17,2010. (16)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on April 1, 2013.(17)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 5, 2013. (18)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 7, 2013.(19)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 2, 2013.(20)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 25, 2014.(21)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 21, 2016.(22)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 30, 2016. (23)Incorporated by reference to the Company’s Registration Statement on Form S-8 (No. 333-215097) filed with the SEC on December 14, 2016.(24)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2017. *Filed herewith28 Exhibit 10.25 Execution Version AMENDMENT NUMBER SEVEN TO CREDIT AGREEMENT THIS AMENDMENT NUMBER SEVEN TO CREDIT AGREEMENT (this “ Amendment ”), dated as of March 20, 2017, is entered into by andamong WELLS FARGO BANK, NATIONAL ASSOCIATION , a national banking association, as administrative agent for the Lenders (in such capacity,together with its successors and assigns in such capacity, “ Agent ”), each Lender party hereto, and ASURE SOFTWARE, INC. , a Delaware corporation (“Borrower ”). RECITALS A. Borrower, Agent and the financial institutions party thereto (the “ Lenders ”) have previously entered into that certain Credit Agreement, datedas of March 20, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), pursuant to which the Lenders havemade certain loans and financial accommodations available to Borrower. Capitalized terms used herein without definition shall have the meanings ascribed theretoin the Credit Agreement. B. Borrower has notified Agent that it desires to pay in full the Indebtedness outstanding under the Mangrove Subordinated Note (the “ MangroveNote Payoff ”) on or about March 20, 2017, the outstanding balance of which is $5,879,000 as of the Seventh Amendment Effective Date. C. On the Seventh Amendment Effective Date (as defined below), but immediately prior to the funding of the Additional Term Loan (as definedbelow), the outstanding principal balance of the Term Loan was $24,714,453.11 (the “ Original Term Loan ”). In order to finance a portion of the Mangrove NotePayoff, Borrower has requested that on the Seventh Amendment Effective Date, the Lenders make an additional Term Loan to Borrower in the aggregate amountof $5,000,000 (the “ Additional Term Loan ” and together with the Original Term Loan, the “ Term Loans ”) so that after disbursing the proceeds of the AdditionalTerm Loan, the aggregate principal amount of the Term Loans will be $29,714,453.11. D. Borrower has further requested that Agent and the Lenders amend certain other provisions of the Credit Agreement and consent to theMangrove Note Payoff. The Lender Group has agreed to such amendments and consent pursuant to the terms hereunder. AMENDMENT NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement . Effective upon the Seventh Amendment Effective Date (as defined in Section 3 below): (a) Schedule 1.1 of the Credit Agreement is hereby amended by adding the following new definition in alphabetical order: “ Seventh Amendment Effective Date ” means March 20, 2017. (b) The definition of “Credit Amount” set forth in Schedule 1.1 of the Credit Agreement is hereby amended and restated in its entirety asfollows: “ Credit Amount ” means, as of any date of determination, the result of (a) TTM Recurring Revenue calculated as of the lastmonth for which financial statements have most recently been delivered pursuant to Section 5.1 of the Agreement minus the aggregate amount ofreserves, if any, established by Agent under Section 2.1(c) of the Agreement, times (b) the applicable amount set forth in thefollowing table for the date set forth opposite thereto: Applicable amountFor any date of determination occurring on orduring the fiscal quarter ending1.15March 31, 20171.10June 30, 20171.00September 30, 20171.00December 31, 20170.90March 31, 20180.80June 30, 20180.80September 30, 20180.80December 31, 2018 (c) The definition of “EBITDA” set forth in Schedule 1.1 of the Credit Agreement is hereby amended and restated in its entirety asfollows: “ EBITDA ” means, with respect to any fiscal period: (a) Borrower’s consolidated net earnings (or loss), minus (b) without duplication, the sum of the following amounts of Borrower for such period to the extent included in determiningconsolidated net earnings (or loss) for such period: (i) any extraordinary, unusual, or non-recurring gains, (ii) interest income, (iii) any software development costs to the extent capitalized during such period, (iv) exchange, translation or performance gains relating to any hedging transactions or foreign currencyfluctuations, and (v) income arising by reason of the application of FAS 141R, 2 plus (c) without duplication, the sum of the following amounts of Borrower for such period to the extent included in determiningconsolidated net earnings (or loss) for such period: (i) any extraordinary, unusual, or non-recurring non-cash losses, (ii) Interest Expense, (iii) tax expense based on income, profits or capital, including federal, foreign, state, franchise and similar taxes(and for the avoidance of doubt, specifically excluding any sales taxes or any other taxes held in trust for a GovernmentalAuthority), (iv) depreciation and amortization for such period, (v) with respect to any Permitted Acquisition after the Closing Date (other than the Mangrove Acquisition andthe January 2017 Acquisitions), costs, fees, charges, or expenses consisting of out-of-pocket expenses owed by Borrower orany of its Subsidiaries to any Person for services performed by such Person in connection with such Permitted Acquisitionincurred within 180 days (Borrower may request an addback for such expenses incurred after 180 days but within 365 days inAgent’s sole discretion) of the consummation of such Permitted Acquisition, (i) up to an aggregate amount (for all such itemsin this clause (v)) for such Permitted Acquisition not to exceed the greater of (1) $500,000 and (2) 5.0% of the Purchase Priceof such Permitted Acquisition and (ii) in any amount to the extent such costs, fees, charges, or expenses in this clause (v) arepaid with proceeds of new equity investments in exchange for Qualified Equity Interests of Borrower contemporaneouslymade by Permitted Holders, (vi) with respect to any Permitted Acquisitions after the Closing Date: (A) purchase accounting adjustments,including, without limitation, a dollar for dollar adjustment for that portion of revenue that would have been recorded in therelevant period had the balance of deferred revenue (unearned income) recorded on the closing balance sheet and beforeapplication of purchase accounting not been adjusted downward to fair value to be recorded on the opening balance sheet inaccordance with GAAP purchase accounting rules; and (B) non-cash adjustments in accordance with GAAP purchaseaccounting rules under FASB Statement No. 141 and EITF Issue No. 01-3, in the event that such an adjustment is required byBorrower’s independent auditors, in each case, as determined in accordance with GAAP, (vii) fees, costs, charges and expenses, in respect of Earn-Outs incurred in connection with any PermittedAcquisition to the extent permitted to be incurred under the Agreement that are required by the application of FAS 141R to beand are expensed by Borrower and its Subsidiaries, (viii) non-cash compensation expense (including deferred non-cash compensation expense), or other non-cashexpenses or charges, arising 3 from the sale or issuance of Equity Interests, the granting of stock options, and the granting of stock appreciation rights andsimilar arrangements (including any repricing, amendment, modification, substitution, or change of any such Equity Interests,stock option, stock appreciation rights, or similar arrangements) minus the amount of any such expenses or charges when paidin cash to the extent not deducted in the computation of net earnings (or loss), (ix) one time non-cash restructuring charges, (x) non-cash exchange, translation, or performance losses relating to any hedging transactions or foreigncurrency fluctuations, (xi) non-cash losses on sales of fixed assets or write-downs of fixed or intangible assets, (xii) with respect to the January 2017 Acquisitions, one-time acquisition and integration charges consisting of (i)out-of-pocket fees, costs, and expenses owed by Borrower or any of its Subsidiaries to any Person for legal, accounting,valuation or other professional services performed by such Person in connection with the January 2017 Acquisitions, or (ii)employee severance payments and moving costs, and lease terminations and associated relocation charges and costs, incurredas a result of the January 2017 Acquisitions, in each case to the extent incurred within 180 days (Borrower may request anaddback for such expenses incurred after 180 days but within 365 days in Agent’s sole discretion) of the consummation ofsuch January 2017 Acquisitions, up to an aggregate amount (for all such items in this clause (xiv)) not to exceed $1,400,000. in each case, determined on a consolidated basis in accordance with GAAP. For the purposes of calculating EBITDA for any period of 4 consecutive fiscal quarters (each, a “ Reference Period ”), (a) if atany time during such Reference Period (and after the Closing Date), Borrower or any of its Subsidiaries shall have made aPermitted Acquisition, EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto (includingpro forma adjustments arising out of events which are directly attributable to such Permitted Acquisition, are factuallysupportable, and are expected to have a continuing impact, in each case to be agreed by Agent) or in such other manneracceptable to Agent as if any such Permitted Acquisition or adjustment occurred on the first day of such Reference Period, (b)EBITDA for the fiscal quarter ended March 31, 2016, shall be deemed to be $879,376, (c) EBITDA for the fiscal quarterended June 30, 2016, shall be deemed to be $2,628,033, (d) EBITDA for the fiscal quarter ended September 30, 2016, shall bedeemed to be $2,289,793, and (e) EBITDA for the fiscal quarter ended December 31, 2016, shall be deemed to be $2,217,470. (d) The definition of “Fixed Charges” set forth in Schedule 1.1 of the Credit Agreement is hereby amended and restated in its entirety asfollows: “ Fixed Charges ” means, with respect to any fiscal period and with respect to Borrower determined on a consolidated basis inaccordance with GAAP, the sum, without duplication, of (a) Interest Expense accrued (other than interest 4 paid-in-kind, amortization of financing fees, and other non-cash Interest Expense) during such period, (b) principal paymentsin respect of Indebtedness that are required to be paid during such period, other than regularly scheduled payment (but notpayments following acceleration) by Borrower (directly or indirectly) of interest and principal on the CPI Subordinated Note,the PMSI Subordinated Note, and the PSNW Subordinated Note, to the extent such payments are permitted to be made underthe CPI Subordination Agreement, the PMSI Subordination Agreement, and the PSNW Subordination Agreement,respectively, and (c) all federal, state, and local income taxes accrued during such period, and (d) all Restricted Payments paid(whether in cash or other property, other than common Equity Interest) during such period; provided that the amountscorresponding to clauses (a) and (b) of this definition shall be annualized during the period of time from the SeventhAmendment Effective Date through the fiscal quarter ending September 30, 2017. (e) The definition of “Term Loan Amount” set forth in Schedule 1.1 of the Credit Agreement is hereby amended and restated in itsentirety as follows: “ Term Loan Amount ” means $29,714,453.11. (f) Section 2.2 of the Credit Agreement is hereby amended and restated in its entirety as follows: 2.2 Term Loan . Subject to the terms and conditions of this Agreement, on the Seventh Amendment Effective Dateeach Lender with a Term Loan Commitment agrees (severally, not jointly or jointly and severally) to make term loans(collectively, the “ Term Loan ”) to Borrower in an amount equal to such Lender’s Pro Rata Share of the Term Loan Amount.The principal of the Term Loan shall be repaid on the following dates and in the following amounts: DateInstallment AmountJune 30, 2017 and the last day of each fiscal quarterthereafter$742,861.33 The outstanding unpaid principal balance and all accrued and unpaid interest on the Term Loan shall be due and payable onthe earlier of (i) the Maturity Date, and (ii) the date of the acceleration of the Term Loan in accordance with the terms hereof.Any principal amount of the Term Loan that is repaid or prepaid may not be reborrowed. All principal of, interest on, andother amounts payable in respect of the Term Loan shall constitute Obligations hereunder. (g) Section 7 of the Credit Agreement is hereby amended and restated in its entirety as follows: 7. FINANCIAL COVENANTS. Borrower covenants and agrees that, until termination of all of the 5 Commitments and payment in full of the Obligations, Borrower will: (a) Fixed Charge Coverage Ratio . Have a Fixed Charge Coverage Ratio, measured on a quarter-end basis, of not lessthan the applicable ratio set forth in the following table for the applicable date set forth opposite thereto: Applicable RatioApplicable Date(s)1.25:1.00March 31, 2017, June 30, 2017, September 30,2017, and December 31, 20171.50:1.00March 31, 2018, June 30, 2018, September 30,2018, and December 31, 2018 (b) Leverage Ratio . Have a Leverage Ratio, measured on a quarter-end basis, of not greater than the applicable ratioset forth in the following table for the applicable date set forth opposite thereto: Applicable RatioApplicable Date(s)4.25:1.00March 31, 20174.25:1.00June 30, 20174.25:1.00September 30, 20174.00:1.00December 31, 20173.75:1.00March 31, 20183.50:1.00June 30, 20183.25:1.00September 30, 20183.00:1.00December 31, 2018 (h) Schedule C-1 to the Credit Agreement is hereby amended and restated in its entirety to read as Schedule C-1 attached hereto. 2. Consent . Under the terms of the Mangrove Subordinated Note, the first payment of principal in an amount equal to $3,000,000 is due andpayable on March 18, 2017, and the second payment of the remaining principal balance, together with all accrued and unpaid interest, is due on March 18, 2018(such second payment, the “ Second Payment ”). The Second Payment would not be permitted to be made prior to March 18, 2018 under Section 6.4 (Disposal ofAssets) of the Credit Agreement, Section 6.6 (Prepayments and Amendments) of the Credit Agreement, or under the Mangrove Subordination Agreement becausesuch payment constitutes a prepayment of the Indebtedness owing under the Mangrove Subordinated Note, and because such 6 payment does not constitute a “Permitted Disposition” under clause (r) of the definition thereof. In light of the foregoing, Borrower has requested that Agent andthe Lenders consent to the making of the Second Payment in connection with the Mangrove Note Payoff, notwithstanding the limitations described above. Agent and the Lenders hereby consent to the Second Payment subject to the satisfaction of each of the following conditions: (a)Borrower shall have delivered to Agent a certificate from an Authorized Person, in the form attached hereto as Exhibit A . (b)The aggregate amount of the Mangrove Note Payoff shall not exceed $5,879,000. (c)The Mangrove Note Payoff shall be consummated on or before March 20, 2017. (d)The proceeds of the Additional Term Loan shall be used to finance a portion of the Mangrove Note Payoff. (e) Agent shall have received a duly executed payoff letter in respect of the Indebtedness owing under the Mangrove Subordinated Note, and suchother releases, documents and agreements as Agent may reasonably request to evidence the release of any collateral securing payment of the Indebtedness owingunder the Mangrove Subordinated Note, in each case, in form and substance satisfactory to Agent. The limited consent set forth herein shall be limited precisely as written and shall not be deemed to be (a) a waiver, consent or modification of any otherterm or condition of the Credit Agreement or (b) prejudice any right or remedy which Agent or the Lenders may now or in the future have under or in connectionwith the Credit Agreement. 3. Conditions Precedent to Amendment Number Seven . This Amendment shall become effective as of the date hereof (such date, the “Seventh Amendment Effective Date ”) upon satisfaction or waiver by the Lender Group of each of the following conditions precedent: (a) This Amendment . Agent shall have received (i) this Amendment, duly executed by Borrower, and (ii) the Reaffirmation of Guarantyattached hereto, duly executed by each Guarantor; (b) Fee Letter . Agent shall have received that certain Third Amended and Restated Fee Letter, by and between Borrower and Agent,dated as of even date herewith (the “ Third Amended and Restated Fee Letter ”), duly executed by Borrower; (c) Opinion Letter . Agent shall have received a satisfactory opinion of Borrower’s and Guarantors’ counsel; (d) Representations and Warranties . Immediately after giving effect to this Amendment, except to the extent any such representation andwarranty solely relates to an earlier specified date, the representations and warranties contained in Section 4 below shall be true and correct in all material respects(except that such materiality qualifier shall not be applicable to any portion of any representation and warranty that already is qualified or modified by materialityin the text thereof); and (e) Fees and Expenses Paid . There shall have been paid to Agent for the account of Agent, all fees and expenses (including fees andexpenses of counsel to Agent) incurred in connection with this Amendment and the transactions contemplated hereby, and all other fees and expenses due andpayable on or before the date hereof under any Loan Document. 7 4. Representations and Warranties . Borrower represents and warrants as follows: (a) Authority . Borrower has the requisite corporate power and authority to execute and deliver this Amendment and the Third Amendedand Restated Fee Letter, and to perform its obligations hereunder and under the Loan Documents (as amended hereby) to which it is a party. The execution,delivery and performance by Borrower of this Amendment and the Third Amended and Restated Fee Letter have been duly approved by all necessary corporateaction, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. (b) Enforceability . Each of this Amendment and the Third Amended and Restated Fee Letter has been duly executed and delivered byBorrower. Each of this Amendment, the Third Amended and Restated Fee Letter and the Credit Agreement (as amended or modified hereby) is the legal, valid andbinding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect, except to the extent that (i) theenforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement ofcreditors’ rights or general principles of equity or (ii) the availability of the remedies of specific performance or injunctive relief are subject to the discretion of thecourt before which any proceeding therefor may be brought. (c) Representations and Warranties . Immediately after giving effect to this Amendment, the representations and warranties contained inthe Credit Agreement are true, complete and accurate in all respects as of the date hereof, except for representations and warranties which relate exclusively to anearlier date, which shall be true and correct in all respects as of such earlier date. (d) No Default . Immediately after giving effect to this Amendment, no Default or Event of Default exists or is continuing. 5. No Waiver . The execution of this Amendment and any documents related hereto shall not be deemed to be a waiver of any Default or Eventof Default under the Credit Agreement or breach, default or event of default under any Loan Document, whether or not known to Agent or any of the Lenders andwhether or not existing as of the date hereof. 6. Release . (a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receiptand sufficiency of which is hereby acknowledged, Borrower, on behalf of itself, and its successors, assigns and other legal representatives (Borrower and all suchother persons being hereinafter referred to collectively as “ Releasors ” and individually as a “ Releasor ”), hereby absolutely, unconditionally and irrevocablyreleases, remises and forever discharges Agent, each Lender, and its successors and assigns, and its present and former shareholders, affiliates, subsidiaries,divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all such other persons being hereinafterreferred to collectively as “ Releasees ” and individually as a “ Releasee ”), of and from all demands, actions, causes of action, suits, covenants, contracts,controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set off,demands and liabilities whatsoever (individually, an “ Indemnified Claim ” and collectively, “ Indemnified Claims ”) of every name and nature, known orunknown, suspected or unsuspected, both at law and in equity, which Releasors may now or hereafter own, hold, have or claim to have against Releasees or any ofthem for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, foror on account of, or in relation to, or in any way in connection with any of the Agreement or any of the other Loan Documents or transactions thereunder or relatedthereto. (b) It is the intention of Borrower that this Amendment and the release set forth above shall constitute a full and final accord andsatisfaction of all claims that may have or hereafter be deemed to have 8 against Releasees as set forth herein. In furtherance of this intention, Borrower, on behalf of itself and each other Releasor, expressly waives any statutory orcommon law provision that would otherwise prevent the release set forth above from extending to claims that are not currently known or suspected to exist in anyReleasor’s favor at the time of executing this Amendment and which, if known by Releasors, might have materially affected the agreement as provided forhereunder. Borrower, on behalf of itself and each other Releasor, acknowledges that it is familiar with Section 1542 of California Civil Code:“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW ORSUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWNBY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.” (c) Borrower, on behalf of itself and each other Releasor, waives and releases any rights or benefits that they may have under Section1542 to the full extent that they may lawfully waive such rights and benefits, and Borrower, on behalf of itself and each other Releasor, acknowledges that itunderstands the significance and consequences of the waiver of the provisions of Section 1542 and that it has been advised by counsel as to the significance andconsequences of this waiver. (d) Borrower understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense andmay be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions ofsuch release. (e) Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter bediscovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above. 7. Choice of Law and Venue; Jury Trial Waiver . THIS AMENDMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDINGCHOICE OF LAW AND VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE SET FORTH IN SECTION 12 OF THE CREDIT AGREEMENT,AND SUCH PROVISIONS ARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS. 8. Counterparts . This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each ofwhich when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Deliveryof an executed counterpart of a signature page to this Amendment by telefacsimile or other electronic method of transmission shall be effective as delivery of amanually executed counterpart of this Amendment. 9. Reference to and Effect on the Loan Documents . (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”,“hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereof” or wordsof like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full forceand effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower withoutdefense, offset, claim or contribution. 9 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver ofany right, power or remedy of Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms orconditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly toreflect the terms and conditions of the Credit Agreement as modified or amended hereby. 10. Ratification . Borrower hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement, as amendedhereby, and the Loan Documents effective as of the date hereof. 11. Estoppel . To induce Agent to enter into this Amendment and to continue to make advances to Borrower under the Credit Agreement,Borrower hereby acknowledges and agrees that, immediately before and after giving effect to this Amendment, as of the date hereof, there exists no Default orEvent of Default and no right of offset, defense, counterclaim or objection in favor of Borrower or any Guarantor as against Agent or any Lender with respect tothe Obligations. [The remainder of the page is intentionally left blank.] 10 IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. BORROWER : ASURE SOFTWARE, INC., a Delaware corporation By: Name: Title: Amendment Number Seven to Credit Agreement WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Agent and sole Lender By: Name: Title: Amendment Number Seven to Credit Agreement EXHIBIT A CERTIFICATE OF AUTHORIZED PERSON [on Borrower’s letterhead] To:Wells Fargo Bank, National Association 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 Attn: Technology Finance Manager Re:Certificate dated March 20, 2017 Ladies and Gentlemen: Reference is hereby made to that certain Credit Agreement, dated as of March 20, 2014 (as amended restated, supplemented or otherwise modified fromtime to time, the “ Credit Agreement ”), among the lenders identified on the signature pages of the Credit Agreement (each of such lenders, together with itssuccessors and permitted assigns, is referred to hereinafter individually, as a “ Lender ”, and collectively, as “ Lenders ”), Wells Fargo Bank, National Association,as administrative agent for the Lenders (in such capacity, together with its successors and permitted assigns in such capacity, “ Agent ”), and Asure Software, Inc.,a Delaware corporation (“ Borrower ”). Initially capitalized terms used in this certificate (this “ Certificate ”) but not defined herein shall have the meaningascribed to such terms in the Credit Agreement. Pursuant to that certain Amendment Number Seven to Credit Agreement, dated as of March 20, 2017, between Agent and Borrower (the “ Amendment ”),the undersigned Authorized Person of Borrower hereby certifies as of the date hereof 1 that: 1.no Default or Event of Default has occurred and is continuing as of the date hereof or (after giving effect to the consent contained in Section 2 of theAmendment) would result as a consequence of the Mangrove Note Payoff (as defined in the Amendment); 2.Borrower is projected to be in compliance with each financial covenant in Section 7 of the Credit Agreement as of each of the next 4 fiscal quarterperiods, after giving effect to the Mangrove Note Payoff; 3.after giving effect to the Mangrove Note Payoff, Borrower has Liquidity of at least $4,000,000; and 4.Borrower is Solvent both before and after giving effect to the Mangrove Note Payoff. [Signature Page Follows] 1 This certificate is to be dated as of, and delivered in connection with, the Mangrove Note Payoff. Exhibit A IN WITNESS WHEREOF , this Certificate is executed by the undersigned as of the date first above written. ASURE SOFTWARE, INC., a Delaware corporation By: Name: Title: Exhibit A Schedule C-1Commitments as of the Seventh Amendment Effective Date LenderRevolver CommitmentTerm Loan CommitmentTotal CommitmentWells Fargo Bank, National Association $3,000,000$29,714,453.11$32,714,453.11All Lenders$3,000,000$29,714,453.11$32,714,453.11 REAFFIRMATION OF GUARANTY Dated as of March 20, 2017 Each of the undersigned (each a “ Guarantor ” and collectively, the “ Guarantors ”), has executed the Guaranty and Security Agreement, dated as ofMarch 20, 2014 (the “ Guaranty ”), in favor of Wells Fargo Bank, National Association, a national banking association (“ Agent ”), respecting the obligations ofAsure Software, Inc., a Delaware corporation (“ Borrower ”), under that certain Credit Agreement dated as of March 20, 2014, by and between Borrower, theLenders signatory thereto and Agent, owing to the Lender Group under and pursuant to the Loan Documents (as that term is defined in the Credit Agreement).Concurrently herewith, the terms of the Credit Agreement are being amended pursuant to that certain Amendment Number Seven to Credit Agreement attachedhereto (the “ Amendment ”). Each Guarantor acknowledges the terms of the Amendment and reaffirms and agrees that: (a) its Guaranty remains in full force andeffect; (b) nothing in such Guaranty obligates Agent to notify the undersigned of any changes in the loans and financial accommodations made available toBorrower (as that term is defined in the Amendment) or to seek reaffirmation of such Guaranty; and (c) no requirement to so notify any of the undersigned or toseek reaffirmation in the future shall be implied by the execution of this reaffirmation. GUARANTORS:ASURE COBRASOURCE, LLC, a Delaware limited liability company By: Name: Title: MANGROVE EMPLOYER SERVICES, INC., a Florida corporation By: Name: Title: MANGROVE PAYROLL SERVICES, INC., a Florida corporation By: Name: Title: Reaffirmation of Guaranty MANGROVE SOFTWARE, INC., a Florida corporation By: Name: Title: PERSONNEL MANAGEMENT SYSTEMS, INC., a Washington corporation By: Name: Title: Reaffirmation of Guaranty EXHIBIT 21 LIST OF SUBSIDIARIES Subsidiary Location Asure Software UK Ltd. United KingdomAsure COBRASource, LLC DelawareMangrove Employer Services, Inc FloridaPersonnel Management Systems, Inc. WashingtonEXHIBIT 23.1 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT We consent to the incorporation by reference in the Registration Statements of Asure Software, Inc. on Form S-3 (File Nos. 333-182828, 333-212317and 333-216075) and Form S-8 (File Nos. 333-175186 and 333-215097) of our report dated March 20, 2017, with respect to our audit of the consolidated financialstatements of Asure Software, Inc. as of December 31, 2016 and for the year then ended, which report is included in this Annual Report on Form 10-K of AsureSoftware, Inc. for the year ended December 31, 2016. /s/ Marcum LLP Marcum LLPIrvine, CaliforniaMarch 20, 2017EXHIBIT 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following registration statements, and in the related prospectuses thereto, of Asure Software,Inc. (Form S-3 Nos. 333-182828, 333-212317 and 333-216075 and Form S-8 Nos. 333-175186 and 333-215097) of our report dated March 30, 2016, with respectto the consolidated financial statements of Asure Software, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2015. /s/ Ernst & Young LLP Austin, TexasMarch 20, 2017EXHIBIT 31.1 CERTIFICATION OF PERIODIC REPORTPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Patrick Goepel, certify that: 1.I have reviewed the Annual Report on Form 10-K of the Company for the calendar year ended December 31, 2016 (the “Report”); 2.Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by thisReport; 3.Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Company as of, and for, the periods presented in the Report; 4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Company and we have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within theseentities, particularly during the period in which the Report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in the Report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and (d)Disclosed in the Report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recentcalendar year ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controlover financial reporting; and 5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theCompany’s auditors and to the Audit Committee of the Board of Directors: (a)All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controlover financial reporting. /s/ PATRICK GOEPEL Patrick GoepelChief Executive OfficerMarch 20, 2017 EXHIBIT 31.2CERTIFICATION OF PERIODIC REPORTPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Brad Wolfe, certify that: 1.I have reviewed the Annual Report on Form 10-K of the Company for the calendar year ended December 31, 2016 (the “Report”); 2.Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by thisReport; 3.Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Company as of, and for, the periods presented in the Report; 4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Company and we have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within theseentities, particularly during the period in which the Report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in the Report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and (d)Disclosed in the Report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recentcalendar year ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controlover financial reporting; and 5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theCompany’s auditors and to the Audit Committee of the Board of Directors: (a)All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controlover financial reporting. /s/ BRAD WOLFE Brad WolfeChief Financial OfficerMarch 20, 2017 EXHIBIT 32.1 CERTIFICATION OF PERIODIC REPORTPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Patrick Goepel, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that: 1.The Annual Report on Form 10-K of the Company for the calendar year ended December 31, 2016 (the “Report”) fully complies with the requirementsof section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ PATRICK GOEPEL Patrick Goepel Chief Executive Officer March 20, 2017 A signed original of this written statement required by Section 906 has been provided to Asure Software, Inc. and will be retained by Asure Software, Inc. andfurnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section1350 and is not being filed as part of the Report or as a separate disclosure document.EXHIBIT 32.2CERTIFICATION OF PERIODIC REPORTPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Brad Wolfe, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that: 1.The Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2016 (the “Report”) fully complies with the requirements ofsection 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ BRAD WOLFE Brad Wolfe Chief Financial Officer March 20, 2017 A signed original of this written statement required by Section 906 has been provided to Asure Software, Inc. and will be retained by Asure Software, Inc. andfurnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section1350 and is not being filed as part of the Report or as a separate disclosure document.

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