Keeping a Casual Eye on ASUR, Part IV

The stock soars on news that the interim CEO picked up 500k shares. So far, so good for Sandberg and associates. The stock is now higher than the cash-out offer. The gamble of small holders to turn down the 36 cents per share in cash may yet work out.

We'll keep an eye on this, for reasons I mentioned in previous posts.

Keeping a Casual Eye on ASUR, Part III

As I mentioned in a previous post ("Keeping a Casual Eye on ASUR"), I closed out my positions in Asure Software (Nasdaq: ASUR) at .25, but I planned to keep a casual eye on the stock to see

if Red Oak succeeds in unlocking some shareholder value here. If so, it might be worth considering piggybacking on their next venture in micro cap shareholder activism.

David Sandberg and his associates have succeeded in ousting ASUR's management: "Shareholders oust Forgent’s board". Now it will be interesting to see if Sandberg can make the company profitable again and increase shareholder value. If memory serves, his average cost on this is about 18 cents per share.

Keeping a Casual Eye on ASUR, Part II

As I mentioned in a previous post ("Keeping a Casual Eye on ASUR"), I closed out my positions in Asure Software (Nasdaq: ASUR) at .25, but I planned to keep a casual eye on the stock to see

if Red Oak succeeds in unlocking some shareholder value here. If so, it might be worth considering piggybacking on their next venture in micro cap shareholder activism.

Red Oak and other current ASUR shareholders just suffered a setback: after the close yesterday, ASUR management announced that the firm had lost its trial against its former law firm, and was liable for nearly $5 million in damages, attorney's fees, and interest. If that judgment stands, that would wipe out half of the cash on ASUR's balance sheet. The stock dropped 20% on this news, in response to which a commenter on the company's Yahoo! Finance message board wrote,

1. Warrent Buffett: "You should invest in a business that even a fool can run, because someday a fool will."

2. Now, I understand why Warrent Buffett doesn't like cigar butts anymore.

3. Why this pending lawsuit is not on the 10K?

The litigation actually was mentioned in the company's 10-K, but, to be honest, I didn't pay enough attention to it. I lucked out with the verdict being released now versus last month, when I still held the stock. I wonder if this verdict was a surprise to Red Oak Partners as well. I am going to e-mail David Sandberg at Red Oak now and ask him. I'll update this post with his answer if he is kind enough to respond.

Penny Ante Arbitrage V: Conclusion

In previous posts (e.g., "Penny Ante Arbitrage" and "Penny Ante Arbitrage Update") I mentioned that I bought 749 shares of Asure Software (Nasdaq Capital Market: ASUR) at between 17 and 18 cents per share in several different accounts, in the hopes of getting them cashed out at 36 cents each after the company's proposed 750-1 reverse split (the first step in the company's plan to go private). In my last post on this, I mentioned that this go-private plan was foiled. Yesterday, I set GTC limit orders at .24 on each of my ASUR positions (not knowing, of course, that the stock would spike higher today). Today those orders filled at an average price of .25, so these positions have all been closed out.

A Note about the Light Posting Here Recently

Mainly, it's been due to my attention being focused on a few new projects, and partly it's due to my being a little more selective in updating certain topics here. For example, I considered writing a post about U.S. Energy Corp's (Nasdaq: USEG) recent quarterly report and conference call, but since there wasn't enough material new information to spark my interest (the company remains on the same general trajectory since I last commented on it), I figured a post on it wouldn't be of much interest to anyone else. Similarly, there have been several press releases and filings by the management of Asure Software (Nasdaq Capital Market: ASUR) in support of its go-private plan, and several press releases and filings by institutional investors who oppose the plan since my last post on it. Again, not enough material new information to inspire me to write another follow-up post on it at this point (though after reading over my comments on my last post on the subject, I just added a correction in that post's comment thread).

As always, feel free to suggest topics for future posts. If I'm interested in the topic, and I think I might have something useful to add to the discussion, I'll post on it as time permits.

Penny Ante Arbitrage Update III

In previous posts ("Penny Ante Arbitrage" and "Penny Ante Arbitrage Update") I mentioned that I bought 749 shares of Asure Software (Nasdaq Capital Market: ASUR) at between 17 and 18 cents per share in several different accounts, in the hopes of getting them cashed out at 36 cents each after the company's proposed 750-1 reverse split (the first step in the company's plan to go private). Today, a hedge fund issued a press release ("Pinnacle Fund Issues Letters Requesting Asure Software Abandon its Pending Go-Private Transaction, Requests Shareholder List.") opposing the company's plan to go private. Excerpt:

NEW YORK, May 4 /PRNewswire/ -- Pinnacle Fund (controlled by Pinnacle Partners, LLC which is partly controlled by Red Oak Partners, LLC) announced today that it has issued two letters to Asure Software ("ASUR" or the "Company") requesting that its concerns be addressed, including: a) calling a 2009 annual meeting - thus far ASUR's Board has failed to call nor indicated its intention to call such a meeting; b) excess compensation at the senior management level; c) increasing shareholder representation on a Board which currently has very low insider stock ownership and representation along major shareholders; c) the inability of management to historically forecast its business; and d) an imprudent going-private transaction despite the Company's ability to realize the bulk of ASUR's stated cost savings while remaining public as well as to save additional monies by not paying out certain stockholders at 2x current market price levels. Pinnacle's first letter was issued on April 17th, 2009, followed by a second letter and a shareholder list request issued on May 4, 2009. The letters ask for "immediate and radical changes in the cost structure" to better align costs with revenues and that ASUR abandon its pending go-private transaction and instead effect immediate changes - inclusive of Board changes, setting a date for its annual meeting, and enacting both a reverse stock split in order to satisfy NASDAQ minimum price requirements and an active stock repurchase program.

David Sandberg, the portfolio manager of the Pinnacle Fund, further states, "We would still like to work with the Company's current board and management to address and resolve our concerns. But unless the board and management withdraw from this go-private proposal and map out a workable strategy to restore profitability, our ability to work together appears limited and a proxy fight more inevitable."

According to its 13-D amended today, Red Oak Partners owns 7.35% of the outstanding shares of Asure Software (Nasdaq: ASUR), which it acquired this year. In its two recent letters to Asure's management, Red Oak criticized the company's recent mismanagement, and questioned whether it was necessary to go private to achieve significant cost savings. For example, Red Oak noted that, as a micro-cap company, Asure could save money by hiring a less expensive, smaller auditing firm than Ernst & Young.

David Sandberg of Red Oak Partners was kind enough to spend a few minutes on the phone with me discussing this today, and, in addition to reiterating some of the points in his two letters to Asure's management, he mentioned that he invested in this stock with a higher price target in mind than 36 cents per share. He said that he could have easily had an assistant open a bunch of accounts holding 749 shares each, but he thought he could unlock more value by getting more effective management in place. He noted the cash on the company's balance sheet, that both of the company's businesses are high-margin ones, and said he thought a 70 cent price target was reasonable for the stock, given more effective management.

I'd be happy to take the 36 cent bird in the hand over the 70 cent birds in the bush here, and I imagine most small shareholders would be as well. We'll see what happens.

Penny Ante Arbitrage Update II

In previous posts ("Penny Ante Arbitrage" and "Penny Ante Arbitrage Update") I mentioned that I bought 749 shares of Asure Software (Nasdaq Capital Market: ASUR) at between 17 and 18 cents per share in several different accounts, in the hopes of getting them cashed out at 36 cents each after the company's proposed 750-1 reverse split (the first step in the company's plan to go private). Today Asure announced that it has mailed out the proxies for this deal and will be holding a shareholder meeting to vote on it on June 2nd ("Asure Software Provides Update on Plan to Take Company Private"). From the press release:

"The plan to privatize the Company remains on track. Proxies were mailed to Asure shareholders this week and assuming the shareholders approve the proposal, the Company will become private in June 2009. The privatization will enable the Company to save in excess of $1M a year by suspending public reporting. However, we intend to keep remaining shareholders informed and continue an open dialogue as we execute our strategy. These savings, combined with our positive outlook on revenue and other recent expense reductions, will put us on a solid path to build a profitable business in the very near future," commented Richard Snyder, Asure's Chairman and Chief Executive Officer.

Under the terms of the proposed transaction, shareholders owning fewer than 750 shares of the Company's common stock immediately prior to the date the transaction takes effect would be entitled to receive cash of $0.36 per share. Shareholders owning 750 shares or more would continue to hold their shares following the completion of the transaction.

If you own shares of ASUR, don't forget to vote.

Penny Ante Arbitrage Update

In a post last month ("Penny Ante Arbitrage") I mentioned that I bought 749 shares each of Asure Software, Inc. (Nasdaq: ASUR) in several different accounts at an average price of 18 cents per share, in the hopes of getting them cashed out at 36 cents per share, as part of Asure's proposed plan to take itself private.

Today Asure announced its financial results for its 2009 fiscal second quarter. The two salient points for our purposes are these:

- The CEO says the plan to take the company private is on track:

"Our plans for going private remain on track, with our preliminary proxy filing currently under standard review by the SEC."

- Based on the updated balance sheet and burn rate numbers, it looks like the company will still have more than enough cash to buy out fractional shares at 36 cents each, assuming the reverse split happens within the next two quarters. As of January 31^st, the company had $9,056,000 in cash + $3,074,000 in short term investments + $1,528,000 in net receivables - $7,226,000 in total liabilities = $6,432,000. The company had a net loss in the last quarter of $1,539,000. Assuming another two quarters of similar losses before the reverse split would leave the company with about $3.4 million in cash. Assuming the number of shareholders is the about the same as reported in the last 10-K, the maximum amount it should cost the company to cash out fractional shares is about $2.7 million.

Penny Ante Arbitrage

Asure Software, Inc. (Nasdaq: ASUR) is a money-losing micro cap stock I bought in 2007 when it appeared on the Magic Formula list. I sold it for a large loss last year, but for some reason I looked up the stock again last week. When I did, a comment on the stock's Yahoo! Finance message board alerted me to an opportunity to possibly squeeze a drop of lemonade from this lemon.

Last month, Asure Software announced that it plans to take the company private, in order to save about $1 million in annual compliance costs associated with being a public company. The company currently has about 10,000 shareholders, and, according to the press release, needs to have fewer than 300 shareholders in order to voluntarily terminate the registration of its common stock under the Securities Exchange Act of 1934. The company intends to reduce its shareholder count by means of a 750-1 reverse split, followed immediately by a 1-750 forward split, while cashing out any fractional shares at 36 cents per share, on a pre-split basis. The stock closed today at 17 cents, and the company has a market cap as of today's close of $5.29 million with an enterprise value of -$7.93 million.

Since the company isn't profitable, one question that came to mind was whether it would have the cash to pay 36 cents for each fractional share, assuming the shareholders approve the reverse merger. The company has burned through an average of about $1.34 million in cash per quarter over the last four quarters, while revenues have held fairly steady at about $2.7 million per quarter. Assuming those trends continue, and the reverse split takes place within a couple of quarters, the company ought to have enough cash to payout 36 cents per fractional share. Here's how I figure that:

Using the company's most recent balance sheet data, as of its last 10-k, the company had $10,554,000 in cash + $3,289,000 in short-term investments + $1,333,000 in net receivables = $15,166,000. Subtracting from that the company's total liabilities of $7,499,000 = $7,667,000. Subtracting $2,680,000 in cash burn ($1.34 million per quarter x 2 quarters) = $4,987,000. According to the company's 10-k, there were 10,054 shareholders as of October. Assuming that each shareholder will have the maximum number of fractional shares (749), the company will have to cash out 7,530,446 shares. At 36 cents per share, that would cost $2,710,960.

Based on that, I piggybacked on that commenter's idea and bought 749 shares of ASUR at an average price of 18 cents per share in each of a few different brokerage accounts.

The banner image above is from Asure Software's website.