8-K: Asure Software Completes $39.5 Million Acquisition of Lathem Time, Bolstering Time and Attendance Offerings

Asure Software, Inc. has finalized its acquisition of Lathem Time 2025, LLC for $39.5 million, expanding its portfolio in time and attendance products, financed by a $40 million loan from MidCap Financial Trust.

Summary

• Asure Software, Inc. (the Company) completed the acquisition of 100% of the membership interests of Lathem Time 2025, LLC (Lathem) on July 1, 2025.
• The purchase price for Lathem was $39.5 million, subject to certain adjustments based on working capital and inventory costs.
• Lathem is primarily a provider of time and attendance products.
• To finance the acquisition, Asure Software borrowed the remaining $40 million available under its Credit Agreement with MidCap Financial Trust.
• The Credit Agreement was amended to add Lathem as a guarantor and increase the minimum liquidity threshold from $6.0 million to $7.5 million.
• The final payment fee paid to lenders under the loan was increased from 1.00% to 2.00% of the advanced amount, unless refinanced with MidCap and the lenders.
• The loan requires interest-only payments until April 1, 2029 (Amortization Start Date), followed by 12 equal monthly principal payments, with a maturity date of April 1, 2030.
• Any remaining loan proceeds after the acquisition will be used for future Permitted Acquisitions.
• Prior to the acquisition, Lathem underwent a Pre-Closing Restructuring, converting from a Georgia corporation (Lathem Time Corporation) to a Delaware limited liability company (Lathem Time 2025, LLC) and becoming a qualified subchapter S subsidiary of Pendulum Holding, Inc. (the Seller).
• The Seller Parties (Pendulum Holding, Inc. and its equityholders) are jointly and severally liable for indemnification against various losses, including those related to pre-closing taxes, undisclosed liabilities, and breaches of representations and warranties, up to a cap of $2,000,000.
• The Seller Parties are also responsible for 50% of the R&W Insurance Policy Expenses and 100% of all Transfer Taxes and Insurance Policy Continuation Expenses.

Sentiment

Score: 7

Explanation: The acquisition represents a strategic expansion and growth opportunity for Asure Software, which is generally positive. While there are increased financing costs and liquidity requirements, these are manageable within the context of a growth strategy. The detailed legal agreements and indemnification provisions suggest a thorough due diligence process.

Positives

• The acquisition of Lathem Time expands Asure Software's offerings in the time and attendance products sector, potentially enhancing market position and revenue streams.
• The successful financing of the acquisition demonstrates access to capital for strategic growth initiatives.
• The company has secured a representation and warranty insurance policy, which provides a layer of protection against potential breaches of seller representations.

Negatives

• The final payment fee on the loan increased from 1.00% to 2.00%, raising the cost of debt.
• The minimum liquidity threshold was increased from $6.0 million to $7.5 million, which could impose tighter cash management requirements on the company.
• The Seller Note, a portion of the purchase price, is subject to reduction based on working capital deficits and additional inventory costs, potentially reducing the cash received by the seller.

Risks

• Potential for undisclosed liabilities not adequately reflected or reserved against in financial statements.
• Risks related to intellectual property, including infringement, misappropriation, or other violations of third-party rights, or challenges to the validity or enforceability of the acquired intellectual property.
• Non-compliance with data privacy laws (e.g., HIPAA, CCPA, GDPR, BIPA) and telecommunications laws (e.g., TCPA, CAN-SPAM), including risks of security incidents or unauthorized processing of personal information.
• Non-compliance with payroll processing laws and anti-money laundering laws.
• Liabilities arising from employee benefit matters, including non-compliance with ERISA or the Code, or underfunded plans.
• Employment-related claims, such as those concerning wages, hours, discrimination, or proper classification of independent contractors.
• Tax liabilities from pre-closing periods, including those related to the company's S-corporation status or any state and local tax (SALT) elections.
• Legal proceedings or governmental orders against the acquired company or challenging the transaction.
• Breach of non-competition, non-solicitation, or non-interference covenants by the seller parties.
• Risks associated with the integration of Lathem's business and operations into Asure Software.

Future Outlook

Asure Software intends to utilize any remaining portion of the $40 million loan proceeds for future Permitted Acquisitions, indicating a continued strategy of growth through M&A. The company will also focus on integrating Lathem's time and attendance products into its existing business.

Management Comments

• Asure Software's management has demonstrated a strategic commitment to expanding its product offerings and market reach through targeted acquisitions, as evidenced by the consummation of the Lathem Time acquisition.
• Management has secured financing to support this growth, indicating confidence in the company's ability to manage increased debt and liquidity requirements.
• The company's Chief Financial Officer certified the estimated closing working capital statement, reflecting management's oversight of financial reporting related to the transaction.

Industry Context

The acquisition of Lathem Time, a provider of time and attendance products, aligns with the broader trend in the Human Capital Management (HCM) software industry towards integrated solutions. Companies like Asure Software are seeking to offer comprehensive platforms that cover various aspects of workforce management, from payroll and benefits to time tracking. This acquisition strengthens Asure's position in the time and attendance segment, a critical component of HCM, allowing it to better compete with larger, more diversified HCM providers.

Comparison to Industry Standards

• The insurance policies maintained by Lathem are stated to be of the type and in amounts customarily carried by persons conducting a similar business, and sufficient for compliance with applicable laws and contracts, indicating adherence to general industry norms for risk coverage.
• The company's information security program, including safeguards for Personal Information and IT Systems, is designed to be consistent with industry standards applicable to its operating sector, suggesting a commitment to cybersecurity best practices.
• The document does not provide specific financial benchmarks or comparable company performance metrics to allow for a detailed assessment against industry financial standards.

Management Changes

Corporate Governance

Legal Proceedings

• No Actions are pending or threatened against the Company or by the Company, Seller, or any Affiliate of Seller that challenge or seek to prevent, enjoin, or otherwise delay the transactions contemplated by the agreement.
• No outstanding Governmental Orders or unsatisfied judgments, penalties, or awards against or affecting the Company or its properties/assets.

Related Party Transactions

• No Contracts or other arrangements involving the Company in which Seller or its Affiliates, or any Equityholder, or any of their respective directors, managers, governors, officers, or employees, or any immediate family members, is a party, has a financial interest, or otherwise owns or leases any asset, property, or right used by the Company, except for those disclosed in the agreement (e.g., Pre-Closing Restructuring).

Stakeholder Impact

• **Shareholders (Asure Software):** Potential for long-term growth and increased market share through expanded product offerings, but also increased debt and associated costs.
• **Shareholders (Lathem Time / Seller Equityholders):** Received $39.5 million in consideration, subject to adjustments, and a $2.0 million Seller Note, with ongoing indemnification obligations.
• **Employees (Lathem Time):** Retention agreements and bonus agreements were put in place for key employees, and accrued paid time off and sales commissions were addressed, aiming to ensure continuity and incentivize retention.
• **Lenders (MidCap Financial Trust):** Benefited from an increased final payment fee on the loan and the addition of Lathem Time as a guarantor, enhancing security for their credit exposure.
• **Customers (Lathem Time):** Expected continuity of service and potential for enhanced offerings under Asure Software's ownership.
• **Suppliers (Lathem Time):** Business relationships are expected to continue, with no indication of termination or reduction.

Next Steps

• Integration of Lathem Time's operations and products into Asure Software's existing business.
• Potential future Permitted Acquisitions using remaining loan proceeds.
• Preparation and delivery of the Closing Working Capital Statement by Buyer within 90 days.
• Resolution of any working capital or inventory cost adjustments post-closing.
• Ongoing compliance with amended Credit Agreement terms, including the increased minimum liquidity threshold and loan repayment schedule.

Key Dates

Keywords

Acquisition, SEC Filing, 8-K, Asure Software, Lathem Time, Time and Attendance, Equity Purchase Agreement, Credit Agreement, Debt Financing, Corporate Governance, Risk Management, Financial Reporting, Mergers and Acquisitions, Human Capital Management, Payroll Software