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Table of Contents

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 September 30, 2020

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

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

None.

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 November 5, 2020, 53,540,266 shares of common stock, par value $0.0001 per share were outstanding.

Table of Contents

GTY TECHNOLOGY HOLDINGS INC.

Form 10-Q

For the Quarter Ended September 30, 2020

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

8

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

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

33

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.

Controls and Procedures

50

PART II. OTHER INFORMATION

51

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 6.

Exhibits

52

2

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands)

September 30, 

December 31, 

    

2020

  

2019

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

6,218

$

8,374

Accounts receivable, net

10,468

9,184

Prepaid expenses and other current assets

 

4,063

 

3,047

Total current assets

 

20,749

 

20,605

 

 

  

Property and equipment, net

5,603

3,185

Operating lease right of use assets

4,720

5,876

Intangible assets, net

104,790

115,788

Goodwill

286,635

286,635

Other assets

 

2,806

 

2,304

Total assets

$

425,303

$

434,393

 

 

  

Liabilities and Shareholders’ Equity

 

 

  

Current liabilities:

Accounts payable and accrued expenses

$

7,310

$

8,443

Contract liabilities - current portion

 

20,760

 

17,346

Finance lease liability - current portion

582

555

Operating lease liability - current portion

1,695

1,851

Contingent consideration - current portion

685

12,680

Term loans, net - current portion

11,727

Total current liabilities

 

42,759

 

40,875

Contract and other long-term liabilities

2,577

1,264

Deferred tax liability

17,867

20,276

Finance lease liability - less current portion

314

811

Operating lease liability - less current portion

 

3,264

 

4,311

Term loans, net

3,210

Contingent consideration - less current portion

41,230

41,233

Total liabilities

 

111,221

 

108,770

 

 

  

Commitments and contingencies

 

 

  

Shareholders’ equity:

 

 

  

Common stock

 

5

 

5

Exchangeable shares

 

54,445

 

45,681

Additional paid in capital

 

380,729

 

369,756

Accumulated other comprehensive income

 

683

 

370

Treasury stock

(5,174)

(5,174)

Accumulated deficit

(116,606)

(85,015)

Total shareholders' equity

 

314,082

 

325,623

Total liabilities and shareholders’ equity

$

425,303

$

434,393

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

3

Table of Contents

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(Amounts in thousands, except per share amounts)

Successor

Predecessor

February 19, 2019

January 1, 2019

Three Months Ended

Three Months Ended

Nine Months Ended

through

through

September 30, 

September 30, 

September 30, 

September 30,

February 18,

    

2020

2019

2020

2019

    

2019

Revenues

$

12,587

$

8,754

$

35,027

$

20,034

$

4,928

Cost of revenues

 

4,620

 

2,583

 

13,541

 

7,090

 

1,614

Gross Profit

 

7,967

 

6,171

 

21,486

 

12,944

 

3,314

Operating expenses

Sales and marketing

3,875

3,549

12,396

9,086

1,394

General and administrative

4,667

5,774

16,607

15,804

1,749

Research and development

3,012

3,003

9,383

7,610

1,580

Amortization of intangible assets

3,683

3,830

10,998

9,395

32

Acquisition costs

442

33,191

151

Restructuring charges

2

3,666

Change in fair value of contingent consideration

(812)

29

(812)

(37)

Total operating expenses

15,239

15,786

53,079

74,274

4,869

Loss from operations

(7,272)

(9,615)

(31,593)

(61,330)

(1,555)

Other income (expense)

Interest income (expense), net

(441)

(65)

(1,113)

248

(170)

Gain (loss) from repurchase/issuance of shares

(128)

(1,390)

(1,032)

Other income (loss), net

(696)

(41)

437

141

12

Total other income (expense), net

(1,137)

(234)

(2,066)

(643)

(158)

Loss before income taxes

(8,409)

(9,849)

(33,659)

(61,973)

(1,713)

Benefit from income taxes

384

1,149

2,068

2,819

Net loss

(8,025)

(8,700)

(31,591)

(59,154)

(1,713)

Deemed dividend for Exchangeable Shares - Series C

(183)

Net loss applicable to common shareholders

$

(8,025)

$

(8,700)

$

(31,591)

$

(59,337)

$

(1,713)

Net loss per share, basic and diluted

$

(0.15)

$

(0.17)

$

(0.59)

$

(1.18)

Weighted average common shares outstanding, basic and diluted

53,842

52,148

53,301

50,317

Net loss

$

(8,025)

$

(8,700)

$

(31,591)

$

(59,154)

$

(1,713)

Other comprehensive loss:

Foreign currency translation gain (loss)

(783)

75

313

261

Total other comprehensive gain (loss)

(783)

75

313

261

Comprehensive loss

$

(8,808)

$

(8,625)

$

(31,278)

$

(58,893)

$

(1,713)

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

4

Table of Contents

GTY TECHNOLOGY HOLDINGS INC.

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

(Amounts in thousands, except share amounts)

Three Months Ended September 30, 2020

Accumulated

Additional

Other

Total

Common Stock

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

Successor

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Stock

    

Deficit

    

Income

    

Equity

Balance - June 30, 2020

 

53,804,687

$

5

 

5,091,800

$

40,918

$

382,232

$

(5,174)

$

(108,581)

$

1,466

$

310,866

Net loss

 

 

 

 

 

 

 

(8,025)

 

 

(8,025)

Foreign currency translation loss

(783)

(783)

Share-based compensation

2,024

2,024

Shares issued for contingent consideration

1,550,388

10,000

10,000

Common stock issued for exchangeable shares

(352,675)

352,675

3,527

(3,527)

Vested and issued restricted stock units

88,254

Balance - September 30, 2020

 

53,540,266

$

5

 

6,994,863

$

54,445

$

380,729

$

(5,174)

$

(116,606)

$

683

$

314,082

Nine Months Ended September 30, 2020

Accumulated

Additional

Other

Total

Common Stock

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

Successor

    

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

Net loss

 

 

 

 

 

 

 

(31,591)

 

 

(31,591)

Foreign currency translation gain

 

 

 

 

 

313

313

Share-based compensation

 

 

 

 

6,338

 

 

 

 

6,338

Share Redemption (Incremental Shares Issued)

334,254

 

 

 

 

2,056

 

 

 

2,056

Shares issued for contingent consideration

336,965

 

1,550,388

 

10,000

1,334

 

11,334

Vested and issued restricted stock units

433,484

 

 

 

 

Stock option exercises

8,080

 

 

 

 

9

 

 

 

9

Common stock issued for exchangeable shares

123,621

 

 

(123,621)

 

(1,236)

 

1,236

 

 

 

Balance - September 30, 2020

 

53,540,266

$

5

 

6,994,863

$

54,445

$

380,729

$

(5,174)

$

(116,606)

$

683

$

314,082

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

5

Table of Contents

GTY TECHNOLOGY HOLDINGS INC.

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

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

Three Months Ended September 30, 2019

Accumulated

Additional

Other

Total

Common Stock

Class A

Class B

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

Successor

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Stock

    

Deficit

    

Income

    

Equity

Balance - June 30, 2019

 

52,155,614

$

5

$

$

5,761,741

$

47,617

$

364,614

$

(3,413)

(39,812)

$

186

$

369,197

Net loss

 

(8,700)

(8,700)

Share-based compensation

556

556

Measurement period adjustment to Common Stock issued for acquisitions

(4,150)

(42)

(42)

Common stock repurchases

 

(250,000)

(1,747)

(1,747)

Stock option exercises

 

112,526

130

130

Exchangeable shares converted to Common Stock

193,645

(193,645)

(1,936)

1,936

Foreign currency translation gain

75

75

Balance - September 30, 2019

 

52,207,635

$

5

 

$

 

$

 

5,568,096

$

45,681

$

367,194

$

(5,160)

$

(48,512)

$

261

$

359,469

Successor Period Ended September 30, 2019

Accumulated

Additional

Other

Total

Common Stock

Class A

Class B

Exchangeable Shares

Paid in

Treasury

Accumulated

Comprehensive

Shareholders’

Successor

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Stock

    

Deficit

    

Income

    

Equity

Balance - February 19, 2019

 

$

 

898,984

$

 

13,568,821

$

1

 

$

$

$

$

9,920

$

$

9,921

Net loss

 

 

 

 

 

 

 

 

 

 

 

(59,154)

 

 

(59,154)

Ordinary shares no longer subject to possible redemption

 

 

 

9,216,438

 

1

 

 

 

 

 

88,190

 

 

722

 

 

88,913

Private placement of Class A shares, net of costs

 

 

12,863,098

 

2

 

 

 

 

 

125,256

 

 

 

 

125,258

Exchange of shares in GTY Merger

 

36,547,341

 

4

 

(22,978,520)

 

(3)

 

(13,568,821)

 

(1)

 

 

 

 

 

 

 

Common Stock issued for acquisitions

 

11,969,004

 

1

 

 

 

 

 

 

 

119,688

 

 

 

 

119,689

Shares convertible into Common Stock issued for acquisitions

 

 

 

 

 

 

5,761,741

 

47,617

 

 

 

 

 

47,617

Common stock issued for exchangeable shares