ASURE SOFTWARE INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements about our financial results,
which may include expected U.S GAAP and non-U.S. GAAP financial and other
operating and non-operating results, including revenue, net income, diluted
earnings per share, operating cash flow growth, operating margin improvement,
deferred revenue growth, expected revenue run rate, expected tax rates,
share-based compensation expenses, amortization of purchased intangibles,
amortization of debt discount and shares outstanding. The achievement or success
of the matters covered by such forward-looking statements involves risks,
uncertainties and assumptions. If any such risks or uncertainties materialize or
if any of the assumptions prove incorrect, the Company's results could differ
materially from the results expressed or implied by the forward-looking
statements we make. The risks and uncertainties referred to above include-but
are not limited to-risks associated with possible fluctuations in the Company's
financial and operating results; the Company's rate of growth and anticipated
revenue run rate, including impact of the current environment, the spread of
major pandemics or epidemics (including COVID-19) and other related
uncertainties such as government-imposed travel restrictions, interruptions to
supply chains and extended shut down of businesses, reductions in employment and
an increase in business failures, specifically among our clients, the Company's
ability to convert deferred revenue and unbilled deferred revenue into revenue
and cash flow, and ability to maintain continued growth of deferred revenue and
unbilled deferred revenue; errors, interruptions or delays in the Company's
services or the Company's Web hosting; breaches of the Company's security
measures; domestic regulatory developments, including changes to or
applicability to our business of privacy and data securities laws, money
transmitter laws and anti-money laundering laws; the financial and other impact
of any previous and future acquisitions; the nature of the Company's business
model, including risks related to government contracts; the Company's ability to
continue to release, gain customer acceptance of and provide support for new and
improved versions of the Company's services; successful customer deployment and
utilization of the Company's existing and future services; changes in the
Company's sales cycle; competition; various financial aspects of the Company's
subscription model; unexpected increases in attrition or decreases in new
business; the Company's ability to realize benefits from strategic partnerships
and strategic investments; the emerging markets in which the Company operates;
the Company's ability to hire, retain and motivate employees and manage the
Company's growth; changes in the Company's customer base; technological
developments; litigation and any related claims, negotiations and settlements,
including with respect to intellectual property matters or industry-specific
regulations; unanticipated changes in the Company's effective tax rate;
regulatory pressures on economic relief enacted as a result of the COVID-19
pandemic that change or cause different interpretations with respect to
eligibility for such programs; factors affecting the Company's term loan;
fluctuations in the number of Company shares outstanding and the price of such
shares; collection of receivables; interest rates; factors affecting the
Company's deferred tax assets and ability to value and utilize them; the
potential negative impact of indirect tax exposure; the risks and expenses
associated with the Company's real estate and office facilities space; and
general developments in the economy, financial markets, credit markets and the
impact of current and future accounting pronouncements and other financial
reporting standards.

Further information on these and other factors that could affect the Company's
financial results is included in the reports on Forms 10-K, 10-Q and 8-K, and in
other filings we make with the SEC from time to time. These documents are
available on the SEC Filings section of the Investor Information section of the
Company's website at investor.asuresoftware.com. Asure assumes no obligation and
does not intend to update these forward-looking statements, except as required
by law.

OVERVIEW

Our Business

The following review of Asure's financial position as of September 30, 2021 and
December 31, 2020, and results of operations for the three and nine months ended
September 30, 2021 and 2020 should be read in conjunction with our 2020 Annual
Report on Form 10-K filed with the SEC on March 11, 2021. Asure's internet
website address is www.asuresoftware.com. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available through the investor relations
page of our internet website free of charge as soon as reasonably practicable
after they are electronically filed, or furnished to, the SEC. Asure's internet
website and the information contained in our website or connected to our website
are not incorporated into this Quarterly Report on Form 10-Q, however we do post
information on the investor relations page of our website that we believe may be
of interest to our investors.

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Asure is a leading provider of cloud-based Human Capital Management ("HCM")
software and services. We help small and medium-sized businesses grow by
offering the HR tools necessary to build a better workforce, providing the
resources to stay compliant with ever changing federal, state, and local tax
jurisdictions and labor laws, ultimately freeing their cash flows so they can
spend their financial capital on growing their business rather than back-office
overhead that impedes growth. Asure's HCM suite, named AsureHCM, includes
cloud-based Payroll & Tax, HR, and Time & Attendance software as well as HR
Services ranging from HR projects to completely outsourcing payroll and HR
staff. We also offer these products and services through our network of Reseller
Partners.

We are a leading provider of cloud-based HCM solutions, delivered as a
software-as-a-service ("SaaS") for small and medium-sized businesses ("SMBs").
From recruitment to retirement, our solutions help more than 80,000 SMBs across
the United States grow their businesses. About 10,000 of our clients are direct
and approximately 70,000 remaining clients are indirect as they have contracts
with Reseller Partners that white label our solutions.

We strive to be the most trusted HCM resource to entrepreneurs and are focused
on less densely populated U.S. metropolitan cities where fewer of our
competitors have a presence. Our solution strategy solves three primary
challenges that prevent businesses from growing: HR complexity, allocation of
human and financial capital, and the ability to build great teams. We have
invested in, and intend to continue to invest in, research and development to
expand our solution. Asure HCM, our user-friendly solution, reduces the
administrative burden on employers and increases employee productivity while
managing the complete employment lifecycle.

Impact of the COVID-19 pandemic

In March 2020, the World Health Organization declared the COVID-19 outbreak to
be a global pandemic. In response, federal, state and local governments imposed
various restrictions on social and commercial activity to promote social
distancing in an effort to slow the spread of the disease, and certain
restrictions remain in place. Beginning in February 2020, we took various
actions in order to minimize the risk of COVID-19 to our employees, our clients,
and the communities in which we operate, and in March 2020, we prohibited all
business-related travel and began transitioning our employees to work-from-home
arrangements. As of June 1, 2021, we have opened our offices and resumed in
person work. We continue to take proactive measures, including regular cleaning
of the offices, and monitoring of the Center for Disease Control guidelines for
returning to work. We will continue to actively monitor the situation and may
take further actions that alter our business operations as may be required by
federal, state or local authorities or that we determine are in the best
interests of our employees and clients.

Beginning in 2020, the COVID-19 pandemic disrupted the operations of our clients
and client prospects and may continue to do so for an indefinite period of time.
Across many industries, temporary and permanent business closures as well as
business occupancy limitations have resulted in significant layoffs and employee
furloughs since late March 2020. Because we charge our clients on a per-employee
basis for certain services we provide, decreases in the headcounts of our
clients at the onset of the pandemic negatively impacted our recurring revenue
during 2020. We expect our recurring revenue in future periods to continue to be
negatively impacted by headcount reductions until employment levels across our
client base return to pre-pandemic levels. Further, at the onset of the COVID-19
pandemic, a limited number of new clients temporarily delayed service
implementation. As the COVID-19 pandemic continues to create uncertainty and the
potential for ongoing business disruptions, we may experience similar
client-driven delays in service implementation in the future.

In 2020, we continued to aggressively invest in sales and marketing and in
research and development to drive future growth and expand our market share.
Lower headcount at our clients and the other pandemic-related factors described
above, which had and may continue to have a negative impact on recurring
revenue, combined with increased sales and marketing and research and
development expenses, cumulatively had an adverse impact on our operating
results for the year ended December 31, 2020. We expect net income to be
negatively affected by the impact of the pandemic on our recurring revenue and
our deliberate, increased level of investment in sales and marketing and
research and development to drive the growth of our business.

Prior to the COVID-19 pandemic, our sales force traveled frequently to market
our solution set. The current remote work environment presents a unique
opportunity because each sales employee is able to meet virtually with a greater
number of client prospects in a given day than they would if conducting
in-person meetings. Although we have not experienced such challenges to date, if
clients and client prospects are not as willing or available to engage by video
conference and teleconference, the shift from in-person to virtual sales
meetings could negatively affect our sales efforts, impede client acquisition
and lengthen our sales cycles, which would negatively impact our business and
results of operations and could impact our financial condition in the future.

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The employee retention tax credit ("ERTC") for 2020 was established under the
CARES Act and amended by the Taxpayer Certainty and Disaster Tax Relief Act of
2020 and provided for changes in the employee retention credit for 2020 and
provided an additional credit. The Company evaluated its eligibility for the
ERTC for the three quarters lapsed in 2021. It was determined that the Company
qualified for the employee retention credit for each quarter ended in 2021. As a
result, as of September 30, 2021 approximately $10,533 was recognized in
Interest (expense) income, net for the ERTC. For further discussion, see Note 10
- Employee Retention Credit.

We are unable to estimate the full impact the COVID-19 pandemic could have on
our business and results of operations in the future due to numerous
uncertainties, including the severity of the disease, the occurrence of variant
strains, the duration of the outbreak, actions that may be taken by governmental
authorities, the impact it may have on the business of our clients and other
factors identified in Part I, Item 1A "Risk Factors" in our 2020 Annual Report
on Form 10-K. As a result, the effect of the ongoing COVID-19 pandemic may not
be fully reflected in our results of operations and overall financial
performance until future periods.

Acquisitions

On September 30, 2021, our subsidiary, Evolution Payroll Processing LLC ("EPP"),
acquired certain assets of a New Jersey corporation, which were used to provide
payroll processing services. The aggregate purchase price we paid for the assets
was $24,150, including: (i) $15,000 in cash at closing, (ii) the delivery of a
promissory note of $4,350, and (iii) the delivery of 523 shares of the Company's
common stock which the parties agreed had an aggregate value of $4,800 as of
September 30, 2021. At closing, the face amount of the promissory note was
adjusted to $4,318 to account for a shortfall in working capital. The agreement
is subject to future adjustments to the purchase price, including working
capital and an earnout.

Also on September 30, 2021, EPP acquired certain assets of a Vermont
corporation, which were used to provide payroll processing services. The
aggregate purchase price for these assets was $14,750, paid as follows: (i)
$10,325 in cash at closing, (ii) the delivery of a promissory note in the amount
of $2,213, and (iii) the delivery of 244 shares of the Company's common stock
which the parties agreed had an aggregate value of $2,213 as of September 30,
2021. The agreement is subject to a future working capital adjustment to the
purchase price.

OPERATING RESULTS (in thousands)

Three and nine months completed September 30, 2021 Compared to the three and nine months ended September 30, 2020

The following table presents, for the fiscal periods indicated, the percentage of total income represented by certain elements of the condensed consolidated statements of comprehensive income of the Company:

                                                      Three Months Ended September 30,               Nine Months Ended September 30,
                                                         2021                   2020                    2021                   2020
Revenues                                                      100  %                100  %                   100  %                100  %
Gross profit                                                   60  %                 57  %                    61  %                 58  %
Sales and marketing                                            22  %                 22  %                    20  %                 20  %
General and administrative                                     39  %                 37  %                    37  %                 34  %
Research and development                                        8  %                 11  %                     7  %                  9  %
Amortization of intangible assets                              14  %                 15  %                    14  %                 15  %
Total operating expenses                                       83  %                 86  %                    78  %                 77  %
Interest income (expense) and other, net                       (3) %                 (2) %                    (2) %                 (2) %
(Loss) gain on extinguishment of debt                          (2) %                  -  %                    15  %                  -  %
Employee retention tax credit                                  59  %                  -  %                    19  %                  -  %
Gain (loss) from operations before income taxes                31  %                (32) %                    15  %                (21) %
Net income (loss)                                              30  %                (30) %                    14  %                (21) %



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Revenue

Revenues are comprised of recurring revenues, professional services, hardware,
and other revenues. We expect our revenues to increase as we introduce new
applications, expand our client base and renew and expand relationships with
existing clients. As a percentage of total revenues, we expect our mix of
recurring revenues, and professional services, hardware and other revenues to
remain relatively constant. While revenue mix varies by product, recurring
revenue represented over 91% of total revenue in the third quarter.

Our income comes from the following sources (in thousands):

                                                Three Months Ended September 30,                   Variance
                                                    2021                2020                $                   %
Recurring                                       $   16,374          $  15,273          $   1,101                   7  %
Professional services, hardware and other            1,607                742                865                 117  %
Total                                           $   17,981          $  16,015          $   1,966                  12  %


                                                Nine Months Ended September 30,                    Variance
                                                    2021                2020                $                   %
Recurring                                       $   51,688          $  47,442          $   4,246                   9  %
Professional services, hardware and other            3,263              1,635              1,628                 100  %
Total                                           $   54,951          $  49,077          $   5,874                  12  %



Revenue for the three months ended September 30, 2021, increased sequentially
$813 or 5%, from $17,168 for the three months ended June 30, 2021 primarily due
to increased demand of our ERTC service and underlying growth in our core
business.

Recurring income

Recurring revenues include fees for our payroll, payroll tax, time and labor
management, and other Asure solutions as well as fees charged for form filings
and delivery of client payroll checks and reports. These revenues are derived
from fixed amounts charged per billing period and sometimes an additional fee
per employee or transaction processed. We do not require clients to enter into
long-term contractual commitments for our services. Our billing period varies by
client based on when each client pays its employees, which may be weekly,
bi-weekly, semi-monthly or monthly. We also generate recurring revenue from our
Reseller Partners that license our solutions. Because recurring revenues are
based, in part, on fees for use of our applications and the delivery of checks
and reports that are levied on a per-employee basis, our recurring revenues
increase as our clients hire more employees. Recurring revenues are recognized
in the period services are rendered.

Recurring revenues include revenues relating to the annual processing of payroll
forms, such as Form W-2 and Form 1099, and revenues from processing unscheduled
payroll runs (such as bonuses) for our clients. Because payroll forms are
typically processed in the first quarter of the year and many of our clients are
subject to form filing requirements mandated by the Affordable Care Act ("ACA"),
first quarter revenues and margins are generally higher than in subsequent
quarters. We anticipate our revenues will continue to exhibit this seasonal
pattern related to ACA form filings for so long as the ACA (or replacement
legislation) includes employer reporting requirements. In addition, we often
experience increased revenues during the fourth quarter due to unscheduled
payroll runs for our clients that occur before the end of the year. Therefore,
we expect the seasonality of our revenue cycle to decrease to the extent clients
utilize more of our non-payroll applications.

This revenue line also includes interest earned on funds held for clients. We
collect funds from clients in advance of either the applicable due date for
payroll tax submissions or the applicable disbursement date for employee payment
services. These collections from clients are typically disbursed from one to 30
days after receipt, with some funds being held for up to 120 days. We typically
invest funds held for clients in money market funds, demand deposit accounts,
commercial paper, fixed income securities and certificates of deposit until they
are paid to the applicable tax or regulatory agencies or to client employees.
The amount of interest we earn from the investment of client funds is also
impacted by changes in interest rates.

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Revenue for the three months ended September 30, 2021 was $17,981, an increase
of $1,966, or 12%, from $16,015 for the three months ended September 30, 2020.
The 12% growth was split between two-thirds organic and one-third inorgranic
growth. The inorganic growth was driven by an increase in clients from our
acquisitions at the beginning of 2021. Higher account balances in funds held for
clients increased interest revenue compared to the prior year.

Revenue for the nine months ended September 30, 2021 was $54,951, an increase of
$5,874, or 12%, from $49,077 for the nine months ended September 30, 2020.
Recurring revenue increased primarily due to an increase in clients due to our
acquisitions at the beginning of 2021 and higher account balances in funds held
for clients and correlated interest revenue.

Professional services, materials and other income

Professional Services, Hardware and Other Revenues represents implementation
fees, one-time consulting projects, on-premise maintenance, and hardware devices
to enhance our software products.

Professional services, hardware and other revenue increased $865, or 117%, for
the three months ended September 30, 2021 from the similar period in 2020 due to
the continued success of our Employee Retention Tax Credit ("ERTC") service
launch, which we anticipate to have a positive impact on our operating results
through 2021.

Professional services, hardware and other revenue increased $1,628, or 100%, for
the nine months ended September 30, 2021 from the similar period in 2020, due to
the implementation of our ERTC service in 2021.

Although our total customer base is widely spread across industries, our sales
are concentrated in small to medium-sized businesses. We continue to target
small and medium-sized businesses across industries as prospective customers.
Geographically, we sell our products primarily in the United States.

In addition to continuing to develop our workforce solutions and release of new
software updates and enhancements, we continue to actively explore other
opportunities to acquire additional products or technologies to complement our
current software and services.

Gross profit and gross margin

Consolidated gross profit for the three months ended September 30, 2021 was
$10,868, an increase of $1,795, or 20%, from $9,073 for the three months ended
September 30, 2020. Gross margin as a percentage of revenue was 60% for the
three months ended September 30, 2021 as compared to 57% for the three months
ended September 30, 2020. Our increase in gross margin is primarily attributable
to the increase in revenue and more efficient operations.

Consolidated gross profit for the nine months ended September 30, 2021 was
$33,305, an increase of $5,018, or 18%, from $28,287 for the nine months ended
September 30, 2020. Gross margin as a percentage of revenue was 61% for the nine
months ended September 30, 2021 as compared to 58% for the nine months ended
September 30, 2020. Our increase in gross margin is primarily attributable to
the increase in revenue and more efficient operations.

Our cost of sales relates primarily to direct product costs, compensation for
operations and related consulting expenses, hardware expenses, facilities and
related expenses and the amortization of our purchased software development
costs. We include intangible amortization related to developed and acquired
technology within cost of sales.

Sales and marketing costs

Sales and marketing expenses primarily consist of salaries and related expenses
for sales and marketing staff, including stock-based expenses, commissions, as
well as marketing programs, which include events, corporate communications and
product marketing activities.

Selling and marketing expenses for the three months ended September 30, 2021
were $3,897, an increase of $324, or 9%, from $3,573 for the three months ended
September 30, 2020. The increase in sales and marketing is primarily due to
increased personnel costs offset by lower discretionary marketing spend as we
focus on hiring direct sales personnel. Sales and marketing expenses as a
percentage of revenue remained flat at 22% for the three months ended
September 30, 2021 from 22% for the same period in 2020.

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Selling and marketing expenses for the nine months ended September 30, 2021 were
$11,130, an increase of $1,213, or 12%, from $9,917 for the nine months ended
September 30, 2020, primarily due to increased personnel costs offset by lower
discretionary marketing spending as we focus on hiring direct sales personnel.
Selling and marketing expenses as a percentage of revenue remained flat at 20%
for the nine months ended September 30, 2021 from 20% for the same period in
2020.

We continue to grow and increase our cost of sales as we focus on hiring direct sales staff, increasing our brand recognition and generating leads.

General and administrative expenses

General and administrative expenses primarily consist of salaries and related
expenses, including stock-based expenses for finance and accounting, legal,
internal audit, human resources and management information systems personnel,
legal costs, professional fees, and other corporate expenses such as transaction
costs for acquisitions.

General and administrative expenses for the three months ended September 30,
2021 were $7,005, an increase of $1,058, or 18%, from $5,947 for the three
months ended September 30, 2020, primarily attributable to increased personnel,
contracting and placement costs. General and administrative expenses as a
percentage of revenue increased to 39% for the three months ended September 30,
2021 from 37% for the same period in 2020.

General and administrative expenses for the nine months ended September 30, 2021
were $20,324, an increase of $3,840, or 23%, from $16,484 for the nine months
ended September 30, 2020, primarily attributable to increased personnel,
contracting and placement costs. General and administrative expenses as a
percentage of revenue increased to 37% for the nine months ended September 30,
2021 from 34% for the same period in 2020.

We continue to improve the efficiency of our payroll operations by continually reassessing our relationships with suppliers.

Research and development costs

Research and development (“R&D”) expenses primarily include salaries and related expenses, including equity expenses for employees supporting our R&D activities.

R&D expenses for the three months ended September 30, 2021 were $1,505, a
decrease of $300, or 17%, from $1,805 for the three months ended September 30,
2020. The decrease in R&D expense is primarily attributable to an increase in
investment costs offset by an increase in capitalization costs. R&D expenses as
a percentage of revenues decreased to 8% for the three months ended
September 30, 2021 from 11% for the same period in 2020.

R&D expenses for the nine months ended September 30, 2021 were $3,972, a
decrease of $384, or 9%, from $4,356 for the nine months ended September 30,
2020. The decrease in R&D expense is primarily attributable to an increase in
investment costs offset by an increase in capitalization costs. R&D expenses as
a percentage of revenues decreased to 7% for the nine months ended September 30,
2021 from 9% for the same period in 2020.

We will continue to enhance our products and technologies through expansion of
our technological resources by increasing headcount and development
partnerships, as well as through organic improvements and acquired intellectual
property. We will continue to expand the breadth of integration between our
solutions, allowing direct clients and resellers the ability to easily add and
implement components across our entire solution set. We believe that our
expanded investment in product, engineering, SaaS hosting, mobile and hardware
technologies lays the groundwork for broader market opportunities and represents
a key aspect of our competitive differentiation. Native mobile applications,
common user interface, expanded web service integration and other technologies
are all part of our initiatives.

Our development efforts for future releases and enhancements are driven by
feedback received from our existing and potential customers and by gauging
market trends. We believe we have the appropriate development team to design and
enhance our solution suite and integrated platform. We have also made
significant investments outside of core R&D into compliance and certifications,
including SOC I Type 2 and SOC II Type 2 certifications, BIPA, CCPA, and other
initiatives.

Amortization of intangible assets

Amortization expense in operating expenses for the three months ended
September 30, 2021 was $2,534, an increase of $110, or 5%, from $2,424 for the
three months ended September 30, 2020. Amortization expense as a percentage of
revenue was 14% and 15% for the three months ended September 30, 2021 and 2020,
respectively.
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Amortization expense in operating expenses for the nine months ended
September 30, 2021 was $7,590, an increase of $468, or 7%, from $7,122 for the
nine months ended September 30, 2020. Amortization expense as a percentage of
revenue was 14% and 15% for the nine months ended September 30, 2021 and 2020,
respectively.

Other Income (Expense), Net

Other income (expense), net for the three months ended September 30, 2021 was a
gain of $9,661 compared to a loss of $408 for the three months ended
September 30, 2020. The gain is attributed to $10,533 in Employee Retention
Credits, discussed earlier in this Management's Discussion and Analysis of
Financial Condition and Results of Operations under Impact of the COVID-19
Pandemic. Other income (expense), net as a percentage of revenue was income of
54% and an expense of 3% for the three months ended September 30, 2021 and
September 30, 2020, respectively. Interest expenses for the three months ended
September 30, 2021 and 2020 are composed primarily of interest expense on notes
payable.

Other income (expense), net for the nine months ended September 30, 2021 was a
gain of $17,868 compared to a loss of $807 for the nine months ended
September 30, 2020. The gain is attributed to $10,533 in Employee Retention
Credits, discussed earlier in this Management's Discussion and Analysis of
Financial Condition and Results of Operations under Impact of the COVID-19
Pandemic. Other income (expense), net as a percentage of revenue was income of
33% and expense of 2% for the nine months ended September 30, 2021 and
September 30, 2020, respectively. Interest expenses for the nine months ended
September 30, 2021 and 2020 is composed primarily of interest expense on notes
payable.

Income Taxes

For the three months ended September 30, 2021 and 2020, we recorded an income
tax expense attributable to continuing operations of $260 and benefit of $325,
respectively, an increase of $585 or 180%.

For the nine months ended September 30, 2021 and 2020, we recorded an income tax
expense attributable to continuing operations of $663 and $71, respectively, an
increase of $592 or 834%.

Income (Loss) From Operations

We generated income from operations of $5,328, or $0.28 per share, during the
three months ended September 30, 2021, compared to a loss from operations of
$4,759, or $0.30 per share, during the three months ended September 30, 2020.
Income and loss from operations as a percentage of total revenues was 30% and
30% for the three months ended September 30, 2021 and 2020, respectively.

We generated income from operations of $7,494, or $0.39 per share, during the
nine months ended September 30, 2021, compared to a loss from operations of
$10,470, or $0.66 per share, during the nine months ended September 30, 2020.
Income and loss from operations as a percentage of total revenues was 14% and
21% for the nine months ended September 30, 2021 and 2020, respectively.

We intend to continue to implement our corporate strategy for growing our
software and services business by investing in areas that directly generate
revenue and positive cash flows for the Company. However, uncertainties and
challenges remain, including the effects of COVID-19, inflation and supply chain
disruptions, and there can be no assurance that we can successfully grow our
revenues or achieve profitability during the remainder of fiscal year 2021.

LIQUIDITY AND CAPITAL RESOURCES (in thousands)

                                September 30, 2021       December 31, 2020
Cash and cash equivalents(1)   $            11,506      $           28,577


(1) This balance excludes cash equivalents in funds held for customers

Working Capital. We had working capital of $17,356 at September 30, 2021, an
increase of $9,148 from working capital of $8,208 at December 31, 2020. Working
capital as of September 30, 2021 and December 31, 2020 includes $1,501 and
$4,416 of short-term deferred revenue, respectively. Deferred revenue is an
obligation to perform future services. We expect that deferred revenue will
convert to future revenue as we perform our services, but this does not
represent future payments. Deferred revenue can vary based on seasonality,
expiration of initial multi-year contracts and deals that are billed after
implementation rather than in advance of service delivery.
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Operating Activities. Net cash used in operating activities of $1,144 for the
nine months ended September 30, 2021 was primarily driven by non-cash
adjustments to our net income of approximately $7,026, primarily due to
depreciation and amortization, and net income of $7,494. This was offset by
changes in operating assets and liabilities, which resulted in a use of $15,473
in cash. Net cash provided by operating activities of $2,296 for the nine months
ended September 30, 2020 was driven by non-cash adjustments to our net loss of
approximately $14,017, primarily due to depreciation and amortization, offset by
our net loss of $10,470. Changes in operating assets and liabilities resulted in
a use of $1,251 in cash.

Investing Activities. Net cash used in investing activities of $21,042 for the
nine months ended September 30, 2021 is primarily due to our third quarter
acquisitions totaling $25,526. Net cash used in investing activities of $15,312
for the nine months ended September 30, 2020 is primarily due to the purchase
and sale of available-for-sale securities.

Financing Activities. Net cash used in financing activities was $133,990 for the
nine months ended September 30, 2021, which primarily consisted of a net
decrease in client fund obligations of $146,206 and payments of notes payable of
$15,073. These amounts were offset by proceeds from our notes payable of
$29,425. Net cash provided by financing activities was $65,494 for the nine
months ended September 30, 2020, which primarily consisted of a net increase in
client fund obligations of $68,441.

Sources of Liquidity. As of September 30, 2021, the Company's principal sources
of liquidity consisted of approximately $11,506 of cash and cash equivalents,
cash generated from operations of our business over the next twelve months, and
$20,000 available for borrowing under our credit facility with Structural
Capital Investments III, LP, which is discussed in Note 5 - Notes Payable, to
the Condensed Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Preparation of the Condensed Consolidated Financial Statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of the assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. These
estimates are subjective in nature and involve judgments. The more significant
estimates made by management include the valuation allowance for the gross
deferred tax assets, useful lives of fixed assets, the determination of the fair
value of its long-lived assets, and the fair value of assets acquired and
liabilities assumed during acquisitions. We base our estimates on historical
experience and on various other assumptions management believes reasonable under
the given circumstances. These estimates could be materially different under
different conditions and assumptions. Additionally, the actual amounts could
differ from the estimates made. Management periodically evaluates estimates used
in the preparation of the Condensed Consolidated Financial Statements for
continued reasonableness. We make appropriate adjustments, if any, to the
estimates used prospectively based upon such periodic evaluation. Information
regarding recent accounting pronouncements is provided in Note 2, Significant
Accounting Policies, to the Condensed Consolidated Financial Statements. Such
information is incorporated by reference herein.

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