ASURE SOFTWARE INC - FORM 8-K/A - EX-99.3 - February 29, 2012

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EXHIBIT 99.3
 
 
ASURE SOFTWARE, INC.
 
INDEX TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
 
Page
   
Introduction to Unaudited Pro Forma Condensed Combined Financial Information
2
   
Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2011
4
   
Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2010
5
   
Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 2011
6
   
Notes to Unaudited Pro Forma Condensed Combined Financial Information
7
 

 
 
 
 
INTRODUCTION TO ASURE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
(Amounts in thousands, except per share data)
 
On December 14, 2011, the Company, through Asure Legiant, LLC, a wholly owned subsidiary of the Company (“Purchaser”), purchased substantially all of the assets and assumed certain liabilities of WG Ross Corp., d/b/a Legiant (“Seller”), relating to its cloud computing time and attendance software and management services pursuant to an Asset Purchase Agreement (“APA”) by and among the Company, Purchaser, Seller and, with respect to Section 6.6 only, ADI Software, LLC, a wholly owned subsidiary of the Company. The APA contains certain customary representations, warranties, indemnities and covenants of the Company, Purchaser and Seller.

 The purchase price for the assets was $4,000,000, consisting of $1,511,231.98 in cash and three subordinated promissory notes of the Purchaser in the aggregate principal amount of $2,488,768.02, as adjusted pursuant to the terms of the APA. One of the promissory notes is for an aggregate principal amount of $250,000, bears interest at an annual rate of 0.20%, and will mature on February 1, 2012. The second promissory note is for an aggregate principal amount of $477,536.05, bears interest at an annual rate of 5.00%, and will mature on October 1, 2014. The third promissory note is for an aggregate principal amount of $1,761,231.97, bears interest at an annual rate of 0.20%, and will mature on October 1, 2014. The Purchaser may offset any indemnification payments owed by the Seller under the APA against up to $1 million under the third promissory note. All three promissory notes are guaranteed by the Company and are subordinated to the Company’s bank financing. The cash portion of the purchase price was funded with the Company’s cash on hand and proceeds from the Company’s bank financing.

The business combination was accounted for under ASC 805, “Business Combinations.”  The application of purchase accounting under ASC 805 requires the total purchase price to be allocated to the fair value of assets acquired and liabilities assumed based on their fair values at the acquisition date, with amounts exceeding fair value being recorded as goodwill.  The Company is currently in the process of assessing and finalizing the fair value of the assets acquired and the liabilities assumed.  The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed (in thousands):
 
Assets Acquired
      
Cash
   $ -  
Short-term investments
     -  
Accounts receivable
     5  
Inventory
     26  
Fixed assets
     30  
Other assets
     -  
Goodwill
     2,167  
Customer relationships (7 year useful life)
     801  
Reseller Relationship (7 years useful life)
     709  
Trade names (1 year useful life)
     30  
Non-compete agreements (3 year useful life)
     26  
Total assets acquired
    
3,794
  
         
Liabilities assumed
        
Accounts payable
     (10 ) 
Accrued compensation and benefits
     -  
Accrued other liabilities
     (88 ) 
Deferred revenue
     -  
Total liabilities assumed
     (98 ) 
         
Net assets acquired
   $ 3,696  
 
 
2
 

The following unaudited pro forma condensed combined balance sheet assumes the acquisition occurred on September 30, 2011 and the unaudited pro forma condensed combined statements of operations and notes thereto, assume that the Acquisition occurred at the beginning of the periods presented.  The unaudited pro forma condensed combined financial information is derived from, and should be read in conjunction with, the consolidated financial statements of Asure Software for the year ended December 31, 2010 filed on Form 10-K and Legiant for the year ended December 31, 2010 included herein and the unaudited interim consolidated financial statements of Asure Software for the nine months ended September 30, 2011 filed on Form 10-Q and Legiant for the nine months ended September 30, 2011 included herein. The unaudited pro forma condensed combined financial information includes unaudited pro forma adjustments that are factually supportable and directly attributable to the Acquisition. In addition, with respect to the unaudited pro forma condensed combined financial information, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information was prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805 – Business Combinations. Certain amounts in the Legiant historical financial statements have been reclassified to conform to classifications used by Asure Software, Inc.

The unaudited pro forma condensed combined statements of operations do not include non-recurring transaction costs associated with the Acquisition that are no longer capitalized as part of the acquisition.
 
The following pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of (i) the results of operations and financial position that would have been achieved had the Acquisition taken place on the dates indicated or (ii) the future operations of the combined company. The following information should be relied on only for the limited purpose of presenting what the results of operations and financial position of the combined businesses of Asure Software and Legiant might have looked like had the Acquisition taken place at an earlier date.
 
 
3
 
 
Unaudited Pro Forma Condensed Balance Sheet
 
(Amounts in thousands, except per share data)
 
   
Asure 09/30/11
    
Legiant 09/30/11
    
Pro Forma Combined Adjustments
      
Pro Forma Combined
9/30/11
  
                           
ASSETS
                          
 Current Assets:
                          
   Cash and cash equivalents
    
6,082
      
190
    
(1,511
)
a
    
4,761
  
   Accounts receivable trade
    
996
      
70
              
1,066
  
   Allowance
    
(17
)
    
-
              
(17
)
   Notes receivable
    
120
      
-
              
120
  
   Inventory
    
6
      
-
              
6
  
   Prepaid expenses and other current assets
    
227
      
-
              
227
  
Total Current Assets
    
7,414
      
260
    
(1,511
)
      
6,163
  
   Property and equipment, net
    
221
      
59
    
(17
)
b
    
263
  
   Intangible assets, net
    
2,258
      
-
    
1,566
  
c
    
3,824
  
   Goodwill
    
-
      
-
    
2,166
  
d
    
2,166
  
    Total Assets
    
9,893
      
319
    
2,204
        
12,416
  
                                 
LIABILITIES AND STOCKHOLDERS’EQUITY
                                
   Current Liabilities:
                                
Accounts payable
    
686
      
54
    
(11
)
e
    
729
  
Line of Credit
    
500
                      
500
  
Accrued compensation and benefits
    
72
      
-
              
72
  
Other accrued Liabilities
    
399
      
56
              
455
  
Deferred Revenue
    
2,522
      
910
    
 
 
 
    
3,432
  
Total Current Liabilities
    
4,179
      
1,020
    
(11
)
      
5,188
  
Long-term deferred revenue
    
150
      
-
              
150
  
Subordinated notes (related parties $800)
    
1,450
      
493
    
1,985
  
f
    
3,928
  
 Subordinated convertible notes (related parties $800)
    
1,400
      
-
              
1,400
  
Other long-term obligations
    
4
      
-
              
4
  
   Total Liabilities
    
7,183
      
1,513
    
1,974
        
10,670
  
 Owner’s Equity
    
2,710
      
(1,194
)
  
230
  
g
    
1,746
  
Total Liabilities and Stockholders’ Equity
    
9,893
      
319
    
2,204
        
12,416
  
 
(The accompanying notes are an integral part of the Pro Forma consolidated financial information)
 
 
4
 
 
Unaudited Pro Forma Condensed Statement of Operations
 
(Amounts in thousands, except per share data)
 
   
Asure
Twelve Months
Ended Dec-10
    
Legiant
Twelve Months
Ended Dec-10
    
Pro Forma
Combined
Adjustments
      
Pro Forma Combined
Twelve Months
Ended Dec-10
  
                           
Revenues
                          
Revenues
    
10,033
      
3,139
    
-
        
13,172
  
Total Revenues
    
10,033
      
3,139
              
13,172
  
                                 
Cost of Sales
                                
Cost of sales
    
2,259
      
965
    
114
  
a
    
3,338
  
Total Cost of Sales
    
2,259
      
965
    
114
        
3,338
  
                                 
Gross Margin
    
7,774
      
2,174
    
(114
)
      
9,834
  
                                 
Operating Expense
                                
Selling, general and administrative expenses
    
5,693
      
1,929
    
(61
 ) 
b
    
7,561
  
Research and development
    
1,445
                      
1,445
  
Loss on lease agreement
    
1,203
      
-
              
1,203
  
Amortization of intangibles
    
598
      
-
    
140
  
a
    
738
  
Total Operating Expenses
    
8,939
      
1,929
    
79
        
10,947
  
                                 
Income (Loss) from Operations
    
(1,165
)
    
245
    
(193
)
      
(1,113
)
                                 
Other Income and (Expenses)
                                
Interest income
    
5
      
42
              
47
  
Gain on Investments
    
130
      
-
              
130
  
Foreign currency translation (loss) gain
    
(54
)
    
-
              
(54
)
Other income (expenses)
    
(61
)
    
(45
)
  
(34
)
c
    
(140
)
Total Other Income and (Expense)
    
20
      
(3
)
  
(34
)
      
(17
)
                                 
Income (Loss) From Operations, Before Income Taxes
    
(1,145
)
    
242
    
(227
)
      
(1,130
)
Benefit (provision) for income taxes
    
8
      
-
              
8
  
Net Income (Loss)
  
$
(1,137
)
    
242
    
(227
)
      
(1,122
)
                                 
Net income per common share:
                                
Basic
  
$
(0.37
)
                        (0.36 ) 
Diluted
  
$
(0.37
)
                        (0.36 ) 
                                 
Weighted-average common shares outstanding:
                                
Basic
    
3,087
                       3,087  
Diluted
    
3,087
                       3,087  
 
(The accompanying notes are an integral part of the Pro Forma consolidated financial information)
 
 
5
 
Unaudited Pro Forma Condensed Statement of Operations
 
(Amounts in thousands, except per share data)
 
   
Asure
Nine Months
Ended 09/30/11
    
Legiant
Nine Months
Ended 09/30/11
    
Pro Forma
Combined
Adjustments
      
Pro Forma Combined
Nine Months
Ended 9/30/11
  
Revenues
                          
Revenues
    
7,293
      
2,038
              
9,331
  
Total Revenues
    
7,293
      
2,038
              
9,331
  
                                 
Cost of Sales
                                
Cost of sales
    
1,363
      
410
      
86
  
a
    
1,859
  
Total Cost of Sales
    
1,363
      
410
      
86
        
1,859
  
                                   
Gross Margin
    
5,930
      
1,628
      
(86
)
      
7,472
  
                                   
Operating Expense
                                  
Selling, general and administrative expenses
    
4,340
      
1,261
      
-
        
5,601
  
Research and development
    
1,150
                        
1,150 
  
Amortization of Intangibles
    
449
              
105 
  
a
    
554
  
Total Operating Expenses
    
5,939
      
1,261
      
105
        
7,305
  
                                   
(Loss) Income from Operations
    
(9
)
    
367
      
(191
)
      
167
  
                                   
Other Income and (Expenses)
                                  
Interest income
    
8
      
(1
)
              
7
  
Foreign currency translation gain (loss)
    
47
      
-
                
47
  
Other income (expenses)
    
(20
)
    
(25
)
    
(45
)
c
    
(90
)
Total Other Income and (Expense)
    
35
      
(26
)
    
(45
)
      
(36
)
                                   
(Loss) Income From Operations, Before Income Taxes
    
26
      
341
      
(236
)
      
131
  
Benefits (provision) for income taxes
    
(30
)
    
-
                
(30
)
Net (Loss) Income
  
$
(4
)
    
341
      
(236
)
    
$
101
  
                                   
Net (Loss) income per common share:
                                  
Basic
  
$
(0.00
)
                      
  0.03
  
Diluted
  
$
(0.00
)
                      
  0.03
  
                                   
Weighted-average common shares outstanding:
                                  
Basic
    
3,085
                        
  3,085
  
Diluted
    
3,085
                        
  3,085
  
 
(The accompanying notes are an integral part of the Pro Forma consolidated financial information)
 
 
6
 
 
ASURE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME FOR TWELVE MONTHS ENDED 12/31/10
AND NINE MONTHS ENDED 09/30/11
(Amounts in thousands, except per share data)
 
Notes to Pro Forma Balance Sheet:
(a)     Cash used in acquisition of $1,511
(b)     Adjustment to FA for NBV of Vehicle & Shed not purchased
(c)     Estimated value of intangible assets acquired in acquisition
(d)     Estimated value of goodwill acquired in acquisition
(e)     Adjustment in estimated value of accounts payable
(f)     Note payable to seller
(g)     Reduction in Legiant equity account at acquisition
 
Notes to Pro Forma Income Statement:
 
(a)  
Reflects adjustments to the historical intangible amortization expense resulting from the effects of the preliminary purchase price associated with the acquisition of Legiant.  The final allocation of the actual purchase price is subject to the final valuation of the acquired assets, but that allocation is not expected to differ materially from the preliminary allocation presented in this pro forma condensed combined financial information.
 
(b)   
Expenses excluded on transaction costs associated with the Acquisition that are no longer capitalized as part of the acquisition $61k for twelve months ended December 31, 2010.
 
(c)   
Reflects Interest expense on acquisition related debt
 
 
 
7
 

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