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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

GTY TECHNOLOGY HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Massachusetts

001-37931

83-2860149

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification No.)

1180 North Town Center Drive, Suite 100, Las Vegas, Nevada 89144

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (702) 945-2898

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

 

 

 

 

 

Common Stock, par value $0.0001 per share

 

GTYH

 

Nasdaq Stock Market LLC

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 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 such filing requirements for the past 90 days. Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 

As of August 5, 2021, 57,513,605 shares of common stock, par value $0.0001 per share, were outstanding.

GTY TECHNOLOGY HOLDINGS INC.

Form 10-Q

For the Quarter Ended June 30, 2021

Table of Contents

    

Page No.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

3

Unaudited Condensed Consolidated Balance Sheets

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

4

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

5

Unaudited Condensed Consolidated Statements of Cash Flows

7

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

39

PART II. OTHER INFORMATION

40

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 6.

Exhibits

41

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands)

June 30, 

December 31, 

    

2021

  

2020

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

15,359

$

22,800

Accounts receivable, net

12,045

9,994

Prepaid expenses and other current assets

 

4,228

 

2,583

Total current assets

 

31,632

 

35,377

 

 

Property and equipment, net

3,471

3,891

Finance lease right of use assets

1,277

1,355

Operating lease right of use assets

2,378

2,610

Intangible assets, net

93,864

101,107

Goodwill

284,635

284,635

Other assets

 

3,748

 

3,472

Total assets

$

421,005

$

432,447

 

 

Liabilities and Shareholders’ Equity

 

 

Current liabilities:

Accounts payable and accrued expenses

$

5,285

$

6,366

Deferred revenue - current portion

 

24,656

 

22,304

Finance lease liability - current portion

483

581

Operating lease liability - current portion

1,174

1,316

Contingent consideration - current portion

729

743

Total current liabilities

 

32,327

 

31,310

Deferred revenue - less current portion

2,158

1,602

Warrant liability

6,607

3,040

Deferred tax liability

17,871

17,494

Contingent consideration - less current portion

44,880

42,530

Term loans, net

24,021

26,632

Finance lease liability - less current portion

8

147

Operating lease liability - less current portion

 

2,762

 

2,927

Total liabilities

 

130,634

 

125,682

 

 

Commitments and contingencies

 

 

Shareholders’ equity:

 

 

Common stock

 

6

 

6

Exchangeable shares

 

50,637

 

54,224

Additional paid in capital

 

394,950

 

380,881

Accumulated other comprehensive income (loss)

 

(663)

 

6

Treasury stock

(8,343)

(5,633)

Accumulated deficit

(146,216)

(122,719)

Total shareholders' equity

 

290,371

 

306,765

Total liabilities and shareholders’ equity

$

421,005

$

432,447

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(Amounts in thousands, except per share amounts)

Three Months Ended

Three Months Ended

Six Months Ended

Six Months Ended

June 30, 

June 30, 

June 30, 

June 30, 

    

2021

2020

2021

2020

    

Revenues

$

14,317

$

11,164

$

27,576

$

22,440

Cost of revenues

 

5,216

 

4,394

 

9,958

 

8,921

Gross Profit

 

9,101

 

6,770

 

17,618

 

13,519

Operating expenses

Sales and marketing

3,507

3,667

7,269

8,521

General and administrative

5,588

4,491

10,781

11,940

Research and development

3,033

2,573

6,018

6,371

Amortization of intangible assets

3,644

3,642

7,243

7,315

Restructuring charges

198

3,664

Change in fair value of contingent consideration

1,250

2,364

29

Total operating expenses

17,022

14,571

33,675

37,840

Loss from operations

(7,921)

(7,801)

(16,057)

(24,321)

Other income (expense)

Interest expense, net

(853)

(436)

(1,712)

(672)

Loss from repurchase/issuance of shares

666

(5,333)

(1,390)

Change in fair value of warrant liability

471

3,860

(3,567)

2,297

Gain on extinguishment of debt

2,971

3,210

Other income, net

(28)

634

(99)

1,133

Total other income (expense), net

2,561

4,724

(7,501)

1,368

Loss before income taxes

(5,360)

(3,077)

(23,558)

(22,953)

Benefit from (provision for) income taxes

(109)

(837)

61

1,684

Net loss

(5,469)

(3,914)

(23,497)

(21,269)

Net loss per share, basic and diluted

$

(0.10)

$

(0.07)

$

(0.41)

$

(0.40)

Weighted average common shares outstanding, basic and diluted

57,497

53,481

56,667

53,028

Net loss

$

(5,469)

$

(3,914)

$

(23,497)

$

(21,269)

Other comprehensive gain (loss):

Foreign currency translation gain (loss)

(924)

(953)

(669)

1,096

Total other comprehensive gain (loss)

(924)

(953)

(669)

1,096

Comprehensive loss

$

(6,393)

$

(4,867)

$

(24,166)

$

(20,173)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(Amounts in thousands, except share amounts)

Three Months Ended June 30, 2021

Accumulated

Additional

Other

Total

Common Stock

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Stock

    

Deficit

    

Income (Loss)

    

Equity

Balance - March 31, 2021

57,435,994

6

5,614,121

50,637

393,082

(8,343)

(140,747)

261

294,896

Net loss

 

 

 

 

 

 

 

(5,469)

 

 

(5,469)

Foreign currency translation loss

(924)

(924)

Share-based compensation

1,868

1,868

Vested and issued restricted stock units

76,753

Balance - June 30, 2021

 

57,512,747

$

6

 

5,614,121

$

50,637

$

394,950

$

(8,343)

$

(146,216)

$

(663)

$

290,371

Six Months Ended June 30, 2021

Accumulated

Additional

Other

Total

Common Stock

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Stock

    

Deficit

    

Income (Loss)

    

Equity

Balance - December 31, 2020

 

55,570,282

$

6

 

5,972,779

$

54,224

$

390,232

$

(5,633)

$

(129,030)

$

6

$

309,805

Adjustment for correction of an error - warrant liability

 

 

 

(9,351)

6,311

(3,040)

Balance - December 31, 2020, as adjusted

55,570,282

$

6

5,972,779

$

54,224

$

380,881

$

(5,633)

$

(122,719)

$

6

$

306,765

Net loss

 

 

 

 

 

 

 

(23,497)

 

 

(23,497)

Foreign currency translation loss

(669)

(669)

Share-based compensation

 

 

 

 

3,691

 

 

 

 

3,691

Issuance of common stock

935,633

6,790

6,790

Common stock repurchases

(525,060)

(2,710)

(2,710)

Vested and issued restricted stock units

1,172,442

Stock option exercises

792

 

 

 

 

1

 

 

 

1

Common stock issued for exchangeable shares

358,658

 

 

(358,658)

 

(3,587)

 

3,587

 

 

 

Balance - June 30, 2021

 

57,512,747

$

6

 

5,614,121

$

50,637

$

394,950

$

(8,343)

$

(146,216)

$

(663)

$

290,371

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(Amounts in thousands, except share amounts)

Three Months Ended June 30, 2020

Accumulated

Additional

Other

Total

Common Stock

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Stock

    

Deficit

    

Income

    

Equity

Balance - March 31, 2020

 

52,919,162

$

5

5,321,999

$

43,220

$

377,572

$

(5,174)

(100,807)

$

2,419

$

317,235

Adjustment for correction of an error - warrant liability

(9,351)

2,617

(6,734)

Adjustment for correction of an error - shares issued for contingent consideration

550,388

10,000

10,000

Balance - March 31, 2020, as adjusted

52,919,162

5

5,872,387

53,220

368,221

(5,174)

(98,190)

2,419

320,501

Net loss

 

(3,914)

(3,914)

Foreign currency translation gain

(953)

(953)

Share-based compensation

1,019

1,019

Share redemption (incremental shares issued)

1,334

1,334

Shares issued for contingent consideration

336,965

Vested and issued restricted stock units

313,980

Stock option exercises

4,381

5

5

Exchangeable shares converted to common stock

230,199

(230,199)

(2,302)

2,302

Balance - June 30, 2020

 

53,804,687

$

5

 

5,642,188

$

50,918

$

372,881

$

(5,174)

$

(102,104)

$

1,466

$

317,992

Six Months Ended June 30, 2020

Accumulated

Additional

Other

Total

Common Stock

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Stock

    

Deficit

    

Income

    

Equity

Balance - December 31, 2019

 

52,303,862

$

5

5,568,096

$

45,681

$

369,756

$

(5,174)

(85,015)

$

370

$

325,623

Adjustment for correction of an error - warrant liability

(9,351)

4,180

(5,171)

Balance - December 31, 2019, as adjusted

52,303,862

5

5,568,096

45,681

360,405

(5,174)

(80,835)

370

320,452

Net loss

 

(21,269)

(21,269)

Foreign currency translation gain

1,096

1,096

Share-based compensation

4,314

4,314

Share redemption (incremental shares issued)

334,254

2,056

2,056

Shares issued for contingent consideration

336,965

550,388

10,000

1,334

11,334

Vested and issued restricted stock units

 

345,230

Stock option exercises

 

8,080

9

9

Exchangeable shares converted to common stock

476,296

(476,296)

(4,763)

4,763

Balance - June 30, 2020

 

53,804,687

$

5

 

5,642,188

$

50,918

$

372,881

$

(5,174)

$

(102,104)

$

1,466

$

317,992

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

Six Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

2020

Cash flows from operating activities:

 

  

  

Net loss

$

(23,497)

$

(21,269)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depreciation of property and equipment

 

508

 

213

Amortization of intangible assets

7,243

7,315

Amortization of right of use assets

582

719

Share-based compensation

3,691

4,314

Deferred income tax benefit

(61)

(1,684)

Loss on issuance/repurchase of shares

5,333

1,390

Change in fair value of warrant liability

3,567

(2,297)

Amortization of deferred debt issuance costs

338

213

Accrual of paid in kind interest

262

Gain on extinguishment of debt

(3,210)

Bad debt expense

5

65

Loss on disposal of fixed assets

21

Change in fair value of contingent consideration

2,364

29

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(1,974)

 

(1,886)

Prepaid expenses and other assets

 

(1,911)

 

(1,220)

Accounts payable and accrued liabilities

 

(1,070)

 

(1,571)

Deferred revenue and other liabilities

2,603

2,099

Operating lease liabilities

 

(578)

 

(741)

Net cash used in operating activities

 

(5,784)

 

(14,311)

 

  

 

  

Cash flows from investing activities:

 

  

 

  

Capital expenditures

(105)

(2,253)

Net cash used in investing activities

 

(105)

 

(2,253)

 

 

  

Cash flows from financing activities:

 

  

 

  

Proceeds from borrowings, net of issuance costs

 

 

14,543

Contingent consideration payments

(28)

(27)

Stock options exercises

1

9

Common stock repurchases

(8,043)

Proceeds from issuance of common stock, net of costs

6,790

Proceeds from disposal of fixed assets

6

30

Repayments of finance lease liabilities

 

(288)

 

(282)

Net cash provided by (used in) financing activities

 

(1,562)

 

14,273

 

  

 

  

Effect of foreign currency on cash

 

10

 

(93)

 

 

Net change in cash and cash equivalents

(7,441)

(2,384)

Cash and cash equivalents, beginning of period

 

22,800

 

8,374

Cash and cash equivalents, end of period

$

15,359

$

5,990

 

  

 

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SUPPLEMENTAL CASH FLOWS DISCLOSURE

(Amounts in thousands)

Six Months Ended

Six Months Ended

June 30, 

June 30, 

2021

2020

Supplemental disclosure of cash flow information:

 

  

 

  

Cash paid for interest

$

1,032

$

183

Cash paid for income taxes

$

$

Noncash Investing and Financing Activities:

Exchangeable shares issued for contingent consideration

$

$

10,000

Share redemption (incremental shares issued)

$

$

2,056

Shares issued for contingent consideration

$

$

1,334

Exchangeable shares converted to common stock

$

3,587

$

4,763

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

(Amounts in tables in thousands, except share and per share amounts)

Note 1. Organization and Business Operations

GTY Technology Holdings Inc. and its subsidiaries (“GTY” or the “Company”) offers a cloud-based suite of solutions primarily for North American state and local governments. GTY’s cloud-based suite of solutions for state and local governments addresses functions in procurement, payments, grant management, budgeting and permitting.

The Company is headquartered in Las Vegas, Nevada and has other offices in the United States and Canada.  The following is a brief description of the Company’s primary subsidiaries and their businesses.

Bonfire, a Procurement Business

Bonfire Interactive Ltd. (“Bonfire” or “Procurement”) was incorporated on March 5, 2012 under the laws of the Province of Ontario. Bonfire is a provider of strategic sourcing and procurement software, serving customers in government, the broader public sector, and various highly regulated commercial vertical markets. Bonfire offers customers and their sourcing professionals a modern software-as-a-service (“SaaS”) application that helps find, engage, evaluate, negotiate and award vendor and supplier contracts. Bonfire delivers workflow automation, data collection and analysis, and collaboration to drive cost savings, compliance, and strategic outcomes. All of Bonfire’s applications are delivered as a SaaS offering, and Bonfire offers implementation and premium support services.

CityBase, a Payments Business

CityBase, Inc. (“CityBase” or “Payments”), a Delaware corporation headquartered in Chicago, provides dynamic content, digital services, and integrated payments via a SaaS platform that includes technological functionality accessible via web and mobile, kiosk, point-of-sale, and other channels. CityBase software integrates its platform to underlying systems of record, billing, and other source systems, and configures payments and digital services to meet the requirements of its customers, which include government agencies and utility companies.

eCivis, a Grants Management Business

eCivis, Inc. (“eCivis” or “Grants Management”), a Delaware corporation headquartered in Los Angeles, California, is a leading SaaS provider of grants management and indirect cost reimbursement solutions that enable its customers to standardize and streamline complex grant processes in a fully integrated platform. The eCivis platform consists of four core cloud-based products, including grants research, grants management, sub-recipient management, and cost allocation and recovery. To assist its customers in the implementation of its cloud-based products, eCivis offers one-time implementation services, including data integration, grants migration and change management. Additionally, eCivis provides ongoing grants management training, cost allocation plan consulting and cost recovery services.

Open Counter, a Permitting Business

Open Counter Enterprises Inc. (“Open Counter” or “Permitting”), a Delaware corporation headquartered in Boston, Massachusetts, is a developer and provider of software tools for cities to streamline permitting and licensing services for municipal governments. Open Counter provides customers with software through a hosted platform and provides professional services related to software implementation.

Questica, a Budget Business

Questica Software Inc. (“Questica” and, collectively with Sherpa, “Budget”) is an Ontario corporation organized in 1998 and headquartered in Burlington, Ontario, Canada.  Questica designs and develops budgeting software that supports the unique requirements of the public sector. The Questica suite of products are part of a comprehensive web-based budgeting preparation, performance, management and data visualization solution that enables public sector and non-profit organizations to improve and shorten their budgeting cycles.

9

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

(Amounts in tables in thousands, except share and per share amounts)

Sherpa, a Budget Business

Sherpa Government Solutions LLC (“Sherpa” and, collectively with Questica, “Budget”) is a Colorado limited liability company headquartered in Denver, Colorado, established in 2004. Sherpa is a leading provider of public sector budgeting software and consulting services that help state and local governments create and manage budgets and performance. Customers purchase Sherpa’s software and then engage its consulting services to configure the software and receive training on how to manage the software going forward.  Following implementation, customers continue to use the software in exchange for maintenance or subscription fees.

Note 2. Restatement of Previously Issued Financial Statements

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission together issued a “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”), concluding that SPAC warrants may require classification as a liability rather than equity. The SEC Statement discussed “certain features of warrants issued in SPAC transactions” that “may be common across all entities”. It focused in part on provisions in warrant agreements for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and specifically whether the warrant holder is an input into the pricing of a fixed-for-fixed option on equity shares. According to the SEC Staff Statement, if the warrant holder is not an input into such pricing, these provisions would preclude the warrant from being classified in equity and thus require classification as a liability. As a result of the SEC Statement, the Company reevaluated the accounting treatment of the public warrants and private warrants issued in connection with its initial public offering and previously recorded as equity on the Company’s consolidated balance sheet. The Company’s public warrants were correctly classified as equity. Because the Company’s private warrants do not contain a provision whereby the Company can call the warrants, however, the private warrants should have been recorded at fair value as a liability in the Company’s consolidated balance sheet. The Company assessed this error and determined it was not material to previously issued financial statements. Accordingly, the Company has revised, rather than restate, its previously issued 2020 quarterly and annual financial statements in the Company’s filings for 2021 on Forms 10-Q and 10-K filings.  Additionally, the historical quarterly and annual financial statements prior to the business combination were not restated due to the change in accounting as we believe the information is no longer relevant to investors.  

The following tables present the effect of the revision for the financial statement line items adjusted in the affected periods:

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended June 30, 2020

As Previously Reported

Adjustments

As Revised

Change in fair value of warrant liability

$

$

(3,860)

$

(3,860)

Net loss

$

7,774

$

(3,860)

$

3,914

Comprehensive loss

$

8,727

$

(3,860)

$

4,867

Net loss per share, basic and diluted

$

(0.15)

$

0.08

$

(0.07)

Six Months Ended June 30, 2020

As Previously Reported

Adjustments

As Revised

Change in fair value of warrant liability

$

$

(2,297)

$

(2,297)

Net loss

$

23,566

$

(2,297)

$

21,269

Comprehensive loss

$

22,470

$

(2,297)

$

20,173

Net loss per share, basic and diluted

$

(0.44)

$

0.04

$

(0.40)

10

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

(Amounts in tables in thousands, except share and per share amounts)