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~~2021


	☐	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~~800 Boylston Street, 16^th FloorBoston, ~~Suite 100~~, ~~Las Vegas~~, ~~Nevada~~MA ~~89144~~02199

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (~~702~~877) ~~945-2898~~465-3200

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~~4, 2021, 57,571,046 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~~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	87

	Notes to Unaudited Condensed Consolidated Financial Statements	109

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3325

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5039

Item 4.	Controls and Procedures	5040

PART II. OTHER INFORMATION		5141

Item 1.	Legal Proceedings	5141

Item 1A.	Risk Factors	5141

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5141

Item 6.	Exhibits	5242

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,		September 30,		December 31,
	2020		2019		2021		2020
Assets
Current assets:
Cash and cash equivalents	$	6,218	$	8,374	$	15,327	$	22,800
Accounts receivable, net		10,468		9,184		11,068		9,994
Prepaid expenses and other current assets		4,063		3,047		4,029		2,583
Total current assets		20,749		20,605		30,424		35,377

Property and equipment, net		5,603		3,185		3,312		3,891
Finance lease right of use assets						778		1,355
Operating lease right of use assets		4,720		5,876		2,063		2,610
Intangible assets, net		104,790		115,788		90,196		101,107
Goodwill		286,635		286,635		284,635		284,635
Other assets		2,806		2,304		3,625		3,472
Total assets	$	425,303	$	434,393	$	415,033	$	432,447

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	7,310	$	8,443	$	4,939	$	6,366
Contract liabilities - current portion		20,760		17,346
Deferred revenue - current portion						24,994		22,304
Finance lease liability - current portion		582		555		246		581
Operating lease liability - current portion		1,695		1,851		799		1,316
Contingent consideration - current portion		685		12,680		317		743
Term loans, net - current portion		11,727		—
Total current liabilities		42,759		40,875		31,295		31,310

Contract and other long-term liabilities		2,577		1,264
Deferred revenue - less current portion						1,785		1,602
Warrant liability						7,063		3,040
Deferred tax liability		17,867		20,276		17,307		17,494
Contingent consideration - less current portion						45,730		42,530
Term loans, net						24,331		26,632
Finance lease liability - less current portion		314		811		3		147
Operating lease liability - less current portion		3,264		4,311		2,735		2,927
Term loans, net		3,210		—
Contingent consideration - less current portion		41,230		41,233
Total liabilities		111,221		108,770		130,249		125,682

Commitments and contingencies

Shareholders’ equity:
Common stock		5		5		6		6
Exchangeable shares		54,445		45,681		50,637		54,224
Additional paid in capital		380,729		369,756		398,286		380,881
Accumulated other comprehensive income		683		370
Accumulated other comprehensive income (loss)						(55)		6
Treasury stock		(5,174)		(5,174)		(8,343)		(5,633)
Accumulated deficit		(116,606)		(85,015)		(155,747)		(122,719)
Total shareholders' equity		314,082		325,623		284,784		306,765
Total liabilities and shareholders’ equity	$	425,303	$	434,393	$	415,033	$	432,447

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

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		Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30,		September 30,		September 30,		September 30,		February 18,		September 30,		September 30,		September 30,		September 30,
	2020		2019		2020		2019		2019		2021		2020		2021		2020
Revenues	$	12,587	$	8,754	$	35,027	$	20,034	$	4,928	$	16,257	$	12,587	$	43,833	$	35,027
Cost of revenues		4,620		2,583		13,541		7,090		1,614		5,914		4,620		15,872		13,541
Gross Profit		7,967		6,171		21,486		12,944		3,314		10,343		7,967		27,961		21,486

Operating expenses
Sales and marketing		3,875		3,549		12,396		9,086		1,394		4,351		3,875		11,620		12,396
General and administrative		4,667		5,774		16,607		15,804		1,749		6,281		4,667		17,062		16,607
Research and development		3,012		3,003		9,383		7,610		1,580		3,277		3,012		9,295		9,383
Amortization of intangible assets		3,683		3,830		10,998		9,395		32		3,668		3,683		10,911		10,998
Acquisition costs		—		442		—		33,191		151
Restructuring charges		2		—		3,666		—		—		—		2		—		3,666
Change in fair value of contingent consideration		—		(812)		29		(812)		(37)		1,235		—		3,599		29
Total operating expenses		15,239		15,786		53,079		74,274		4,869		18,812		15,239		52,487		53,079
Loss from operations		(7,272)		(9,615)		(31,593)		(61,330)		(1,555)		(8,469)		(7,272)		(24,526)		(31,593)

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)		—
Interest expense, net												(789)		(441)		(2,501)		(1,113)
Loss from repurchase/issuance of shares												—		—		(5,333)		(1,390)
Change in fair value of warrant liability												(456)		807		(4,023)		3,104
Gain on extinguishment of debt												—		—		3,210		—
Other income (loss), net		(696)		(41)		437		141		12		90		(696)		(9)		437
Total other income (expense), net		(1,137)		(234)		(2,066)		(643)		(158)		(1,155)		(330)		(8,656)		1,038

Loss before income taxes		(8,409)		(9,849)		(33,659)		(61,973)		(1,713)		(9,624)		(7,602)		(33,182)		(30,555)
Benefit from income taxes		384		1,149		2,068		2,819		—		93		384		154		2,068
Net loss		(8,025)		(8,700)		(31,591)		(59,154)		(1,713)		(9,531)		(7,218)		(33,028)		(28,487)

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)			$	(0.17)	$	(0.13)	$	(0.58)	$	(0.53)
Weighted average common shares outstanding, basic and diluted		53,842		52,148		53,301		50,317				57,536		53,842		56,960		53,301

Net loss	$	(8,025)	$	(8,700)	$	(31,591)	$	(59,154)	$	(1,713)	$	(9,531)	$	(7,218)	$	(33,028)	$	(28,487)
Other comprehensive loss:
Other comprehensive gain (loss):
Foreign currency translation gain (loss)		(783)		75		313		261		—		608		(783)		(61)		313
Total other comprehensive gain (loss)		(783)		75		313		261		—		608		(783)		(61)		313
Comprehensive loss	$	(8,808)	$	(8,625)	$	(31,278)	$	(58,893)	$	(1,713)	$	(8,923)	$	(8,001)	$	(33,089)	$	(28,174)

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

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~~2021


													Accumulated																Accumulated
							Additional						Other		Total								Additional						Other		Total
	Common Stock			Exchangeable Shares			Paid in		Treasury		Accumulated		Comprehensive		Shareholders’		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
																	Shares	Amount		Shares	Amount		Capital		Stock		Deficit		Income (Loss)		Equity
Balance - June 30, 2021																	57,512,747	$	6	5,614,121	$	50,637	$	394,950	$	(8,343)	$	(146,216)	$	(663)	$	290,371
Net loss	—		—	—		—		—		—		(31,591)		—		(31,591)	—		—	—		—		—		—		(9,531)		—		(9,531)
Foreign currency translation gain	—		—	—		—		—		—		—		313		313	—		—	—		—		—		—		—		608		608
Share-based compensation	—		—	—		—		6,338		—		—		—		6,338	—		—	—		—		3,336		—		—		—		3,336
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
Share cancellations																	(48,820)		—	—		—		—		—		—		—		—
Vested and issued restricted stock units	433,484		—	—		—		—		—		—		—		—	102,778		—	—		—		—		—		—		—		—
Stock option exercises	8,080		—	—		—		9		—		—		—		9	4,341		—	—		—		—		—		—		—		—
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
Balance - September 30, 2021																	57,571,046	$	6	5,614,121	$	50,637	$	398,286	$	(8,343)	$	(155,747)	$	(55)	$	284,784

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

~~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~~Nine Months Ended September 30, ~~2019~~

~~Successor Period Ended September 30, 2019~~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	—		—	—		—		—		—		(33,028)		—		(33,028)
Foreign currency translation loss	—		—	—		—		—		—		—		(61)		(61)
Share-based compensation	—		—	—		—		7,027		—		—		—		7,027
Issuance of common stock	935,633		—	—		—		6,790		—		—		—		6,790
Common stock repurchases	(525,060)		—	—		—		—		(2,710)		—		—		(2,710)
Share cancellations	(48,820)		—	—		—		—		—		—		—		—
Vested and issued restricted stock units	1,275,220		—	—		—		—		—		—		—		—
Stock option exercises	5,133		—	—		—		1		—		—		—		1
Common stock issued for exchangeable shares	358,658		—	(358,658)		(3,587)		3,587		—		—		—		—
Balance - September 30, 2021	57,571,046	$	6	5,614,121	$	50,637	$	398,286	$	(8,343)	$	(155,747)	$	(55)	$	284,784

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

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

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

500,000

—

—

—

—

—

—

—

3,860

—

—

—

3,860
Share-based compensation

—

—

—

—

—

—

—

—

2,867

—

—

—

2,867
Private placement of common stock, net of costs

3,500,000

—

—

—

—

—

—

—

25,450

—

—

—

25,450
Common stock repurchases

(614,998)

—

—

—

—

—

—

—

—

(5,160)

—

—

(5,160)
Stock option exercises

112,643

—

—

—

—

—

—

—

130

—

—

—

130
Exchangeable shares converted to Common Stock

193,645

—

—

—

—

—

(193,645)

(1,936)

1,936

—

—

—

—
Foreign currency translation gain

—

—

—

—

—

—

—

—

—

—

—

261

261
Deemed dividend for exchangeable shares

—

—

—

—

—

—

—

—

(183)

—

—

—

(183)
Balance - September 30, 2019

52,207,635

$
5

—

$
—

—

$
—

5,568,096

$
45,681

$
367,194

$
(5,160)

$
(48,512)

$
261

$
359,469

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

~~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)~~


													Accumulated
							Additional						Other		Total
	Common Stock			Exchangeable Shares			Paid in		Treasury		Accumulated		Comprehensive		Shareholders’
	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
Adjustment for correction of an error - warrant liability	—		—	—		—		(9,351)		—		6,477		—		(2,874)
Adjustment for correction of an error - shares issued for contingent consideration	—		—	550,388		10,000		—		—		—		—		10,000
Balance - June 30, 2020, as adjusted	53,804,687		5	5,642,188		50,918		372,881		(5,174)		(102,104)		1,466		317,992
Net loss	—		—	—		—		—		—		(7,218)		—		(7,218)
Foreign currency translation gain	—		—	—		—		—		—		—		(783)		(783)
Share-based compensation	—		—	—		—		2,024		—		—		—		2,024
Vested and issued restricted stock units	88,254		—	—		—		—		—		—		—		—
Common stock issued for exchangeable shares	(352,675)		—	352,675		3,527		(3,527)		—		—		—		—
Balance - September 30, 2020	53,540,266	$	5	5,994,863	$	54,445	$	371,378	$	(5,174)	$	(109,322)	$	683	$	312,015

~~Predecessor from December 31, 2018 to February 18, 2019~~Nine Months Ended September 30, 2020


	~~Predecessor~~
~~Balance as of December 31, 2018~~	$	~~(37,142)~~
~~Net loss~~		~~(1,713)~~
~~Share-based compensation~~		61
~~Exercise of stock options~~		13
~~Shareholders'/Members' equity activity~~		~~5,629~~
~~Balance as of February 18, 2019~~	$	~~(33,152)~~

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

~~Table of Contents~~

~~GTY TECHNOLOGY HOLDINGS INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)~~

~~(Amounts in thousands)~~

Successor

Predecessor

February 19,

January 01,


2019

2019

Nine Months Ended

through

through

September 30,

September 30,

February 18,


2020

2019

2019
Cash flows from operating activities:






Net loss

$
(31,591)

$
(59,154)

$
(1,713)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation of property and equipment

439

329

177
Amortization of intangible assets

10,998

9,395

32
Amortization of right of use assets

1,107

861

165
Share-based compensation

6,338

2,867

61
Deferred income tax benefit

(2,068)

(2,819)

—
Loss on issuance of shares

1,390

—

—
Amortization of deferred debt issuance costs

395

—

—
Bad debt expense

90

20

6
Loss on disposal of fixed assets

—

2

—
Foreign exchange loss on payment of vested options

—

21

—
Change in fair value of contingent consideration

29

(812)

(37)
Change in fair value of warrant liability

—

—

(18)
Changes in operating assets and liabilities:

Accounts receivable

(1,387)

(4,789)

2,190
Prepaid expenses and other assets

(1,564)

(150)

202
Accounts payable and accrued liabilities

(1,212)

(6,202)

(781)
Contract and other long-term liabilities

4,708

11,402

—
Operating lease liabilities

(1,202)

(814)

—
Net cash (used in) provided by operating activities

(13,530)

(49,843)

284






Cash flows from investing activities:






Proceeds from cash held in trust

—

217,642

—
Sale of marketable securities

—

—

1,531
Acquisitions, net of cash acquired

—

(179,423)

—
Capitalization of internal-use software

(311)

(793)

—
Capital expenditures

(2,539)

(196)

(15)
Net cash (used in) provided by investing activities

(2,850)

37,230

1,516






Cash flows from financing activities:






Proceeds from borrowings, net of issuance costs

14,543

—

35
Repayments of borrowings

—

(585)

(69)
Contingent consideration payments

(27)

—

—
Stock options exercises

9

130

13
Member distribution

—

—

(500)
Common stock repurchases

—

(5,160)

—
Redemption of Class A Ordinary Shares

—

(113,982)

—
Redemption of Exchangeable Shares - Class C

—

(1,323)

—
Proceeds received from private placement of Class A shares, net of costs

—

125,258

—
Proceeds received from private placement of Common Stock, net of costs

—

25,450

—
Proceeds from disposal of fixed assets

30

—

1
Repayments of finance lease liabilities

(419)

(259)

(19)
Net cash provided by (used in) financing activities

14,136

29,529

(539)






Effect of foreign currency on cash

88

(84)

(721)

Net change in cash and cash equivalents

(2,156)

16,832

540
Cash and cash equivalents, beginning of period

8,374

52

13,929
Cash and cash equivalents, end of period

$
6,218

$
16,884

$
14,469


													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	—		—	—		—		—		—		(28,487)		—		(28,487)
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		—	550,388		10,000		1,334		—		—		—		11,334
Vested and issued restricted stock units	433,484		—	—		—		—		—		—		—		—
Stock option exercises	8,080		—	—		—		9		—		—		—		9
Exchangeable shares converted to common stock	123,621		—	(123,621)		(1,236)		1,236		—		—		—		—
Balance - September 30, 2020	53,540,266	$	5	5,994,863	$	54,445	$	371,378	$	(5,174)	$	(109,322)	$	683	$	312,015

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

Table of Contents

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

~~SUPPLEMENTAL CASH FLOWS DISCLOSURE~~

(Amounts in thousands)


	Nine Months Ended		Nine Months Ended
	September 30,		September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(33,028)	$	(28,487)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment		764		439
Amortization of intangible assets		10,911		10,998
Amortization of right of use assets		1,354		1,107
Share-based compensation		7,027		6,338
Deferred income tax benefit		(154)		(2,068)
Loss on issuance/repurchase of shares		5,333		1,390
Change in fair value of warrant liability		4,023		(3,104)
Amortization of deferred debt issuance costs		648		395
Accrual of paid in kind interest		262		—
Gain on extinguishment of debt		(3,210)		—
Bad debt expense		31		90
Loss on disposal of fixed assets		12		—
Change in fair value of contingent consideration		3,599		29
Changes in operating assets and liabilities:
Accounts receivable		(1,118)		(1,387)
Prepaid expenses and other assets		(1,600)		(1,564)
Accounts payable and accrued liabilities		(1,454)		(1,212)
Deferred revenue and other liabilities		2,868		4,708
Operating lease liabilities		(891)		(1,202)
Net cash used in operating activities		(4,623)		(13,530)

Cash flows from investing activities:
Capital expenditures		(203)		(2,850)
Net cash used in investing activities		(203)		(2,850)

Cash flows from financing activities:
Proceeds from borrowings, net of issuance costs		—		14,543
Contingent consideration payments		(825)		(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		(530)		(419)
Net cash provided by (used in) financing activities		(2,601)		14,136

Effect of foreign currency on cash		(46)		88

Net change in cash and cash equivalents		(7,473)		(2,156)
Cash and cash equivalents, beginning of period		22,800		8,374
Cash and cash equivalents, end of period	$	15,327	$	6,218

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

Table of Contents

GTY TECHNOLOGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SUPPLEMENTAL CASH FLOWS DISCLOSURE

(Amounts in thousands)

Successor

Predecessor

February 19,

January 01,


2019

2019

Nine Months Ended

through

through

September 30,

September 30,

February 18,

2020

2019

2019
Supplemental disclosure of cash flow information:






Cash paid for interest

$
566

$
—

$
—
Cash paid for income taxes

$
42

$
—

$
—

Noncash Investing and Financing Activities:

Common shares issued for contingent consideration

$
1,334

$
—

$
—
Exchangeable shares issued for contingent consideration

$
10,000

$
—

$
—
Share Redemption (Incremental Shares Issued)

$
2,056

$
—

$
—
Purchases of property and equipment included in accounts payable

$
37

$
—

$
—
Shares issued for the Acquisition

$
—

$
172,307

$
—
Reduction in convertible note liability

$
—

$
1,000

$
—
Exchangeable shares converted to Common Stock

$
1,236

$
1,936

$
—
Capital leases

$
—

$
2,714

$
—


	Nine Months Ended		Nine Months Ended
	September 30,		September 30,
	2021		2020
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,556	$	566
Cash paid for income taxes	$	387	$	42

Noncash Investing and Financing Activities:
Exchangeable shares issued for contingent consideration	$	—	$	10,000
Share redemption (incremental shares issued)	$	—	$	2,056
Purchases of property and equipment included in accounts payable	$	—	$	37
Shares issued for contingent consideration	$	—	$	1,334
Exchangeable shares converted to common stock	$	3,587	$	1,236

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

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. ~~(f/k/a GTY Govtech, Inc.), a Massachusetts corporation~~and its subsidiaries (“GTY”, or the “Company” ~~or “Successor”~~)~~, is headquartered in Las Vegas, Nevada.~~

On February 19, 2019 (the “Closing Date”), the Company consummated several acquisitions (collectively, the “Acquisition”), pursuant to which it (i) acquired each of Bonfire Interactive Ltd. (“Bonfire”), CityBase, Inc. (“CityBase”), eCivis Inc. (“eCivis”), Open Counter Enterprises Inc. (“Open Counter”), Questica Inc. and Questica USCDN Inc. (together, “Questica”) and Sherpa Government Solutions LLC (“Sherpa” and together with Bonfire, CityBase, eCivis, Open Counter and Questica, the “Acquired Companies”) and (ii) became the parent company of its predecessor entity, GTY Technology Holdings Inc., a blank check company incorporated in the Cayman Islands (“GTY Cayman”). Until the Acquisition, GTY Cayman did not engage in any operations nor generate any revenues.

In connection with the closing of the Acquisition, the Company changed its name from GTY Govtech, Inc. to GTY Technology Holdings Inc. and became a successor issuer to GTY Cayman and continued the listing of its common stock and warrants on the Nasdaq Capital Market (“NASDAQ”) under the symbols “GTYH” and “GTYHW,” respectively. As of June 2019, the Company’s warrants are no longer listed on any exchange.

~~GTY is a public sector SaaS company which~~ 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 Boston, Massachusetts and has other offices in the United States and Canada. The following is a brief description of ~~each of~~ the ~~Acquired Companies.~~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 and its wholly-owned subsidiary, Bonfire Interactive US Ltd., was incorporated in the United States on January 8, 2018.~~Ontario. Bonfire is a provider of strategic sourcing and procurement software, serving customers in government, the broader public sector, and various ~~highly-regulated~~highly regulated commercial vertical markets.

Bonfire offers customers and their sourcing professionals a modern ~~SaaS~~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

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

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 ~~also~~ 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 ~~USCDN Inc.~~designs and ~~its wholly-owned subsidiary Questica Ltd. design and develop~~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.

~~Questica Inc. was organized~~9

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

(Amounts in ~~1998 as an Ontario corporation, maintains two offices located~~tables in ~~Burlington, Ontario, Canada~~thousands, except share and serves the healthcare, K-12, higher education and local government verticals primarily in North America. Questica USCDN was organized in 2017 as an Ontario corporation and Questica Ltd. was incorporated in 2017 in the United States asper share amounts)

Sherpa, a Delaware corporation. Questica Ltd. is located in Huntington Beach, California, primarily serving the non-profit market and services a limited number of customers in the public and private sector. The majority of Questica Ltd.’s customers are located in the United States and Canada, and as well as some international customers, primarily located in the United Kingdom and Africa.Budget Business

Sherpa

~~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

InOn 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 ~~condensed~~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 restated, 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 ~~and~~the revision for the three months ended March 31, 2020 and June 30, 2020, the Company previously reported a current contingent liability of $10 million associated with an earnout as part of the Questica Acquisition. The earnout was actually settled in March 2020 with a transfer of 1,550,388 exchangeable shares to the former owners of Questica. The Company should have reduced the current contingent liability by $10 million and increased exchangeable shares within equity by the same amountfinancial statement line items adjusted in the ~~first quarter~~affected periods:

Condensed Consolidated Statements of ~~2020. This adjustment is now reflected appropriately in the balance sheet as of September 30, 2020.~~Operations and Comprehensive Loss

While this adjustment decreased current liabilities and increased total equity by $10 million, it would not have affected any previously reported operating results, net income, earnings per share, cash flows or total assets as of and for the three and six months ended March 31, 2020 and June 30, 2020.


	Three Months Ended September 30, 2020
	As Previously Reported		Adjustments		As Revised
Change in fair value of warrant liability	$	—	$	(807)	$	(807)
Net loss	$	8,025	$	(807)	$	7,218
Comprehensive loss	$	8,808	$	(807)	$	8,001
Net loss per share, basic and diluted	$	(0.15)	$	0.02	$	(0.13)

	Nine Months Ended September 30, 2020
	As Previously Reported		Adjustments		As Revised
Change in fair value of warrant liability	$	—	$	(3,104)	$	(3,104)
Net loss	$	31,591	$	(3,104)	$	28,487
Comprehensive loss	$	31,278	$	(3,104)	$	28,174
Net loss per share, basic and diluted	$	(0.59)	$	0.06	$	(0.53)

1110

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

~~Note 3. Going Concern and Liquidity~~

The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $116.6 million and current liabilities exceeded current assets at September 30, 2020. The Company also reported a net loss of approximately $31.6 million and approximately $13.5 million net cash used in operating activities for the nine months ended September 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to further expand its customer base; scale up its production of various products; and increase revenues; however, the Company’s cash position may not be sufficient to support its daily operations through the next twelve months from the date of filing this Quarterly Report on Form 10-Q. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional funds by way of a public or private offering and its ability to further generate sufficient revenues. While the Company believes in the viability of its platform and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect.

The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Condensed Consolidated Statements of Cash Flows
	Nine Months Ended September 30, 2020
	As Previously Reported		Adjustments		As Revised
Net loss	$	31,591	$	(3,104)	$	28,487
Change in fair value of warrant liability	$	—	$	(3,104)	$	(3,104)


Condensed Consolidated Balance Sheet
	As of December 31, 2020
	As Previously Reported		Adjustments		As Revised
Warrant liability	$	—	$	3,040	$	3,040
Additional paid in capital	$	390,232	$	(9,351)	$	380,881
Accumulated deficit	$	(129,030)	$	6,311	$	(122,719)

~~COVID-19 Update~~

~~In December 2019, the emergence of a novel coronavirus, or COVID-19, was reported and in March 2020, the World Health Organization, or WHO, characterized COVID-19 as a pandemic.~~

~~The broader implications of the global emergence of COVID-19 on the Company’s business, operating results, and overall financial performance remain uncertain and they~~ depend on certain developments, including the duration and spread of the outbreak, impact on the Company’s customers and its sales cycles, impact on its partners or employees, and impact on the economic environment and financial markets, all of which are uncertain and cannot be predicted. During the first three quarters of 2020, the Company has seen certain new and existing customers halt or decrease investment in infrastructure, and the Company expects that certain of its current and potential customers will take actions to reduce operating expenses and moderate cash flows, including by delaying sales and requesting extended billing and payment terms. The Company will continue to actively monitor the situation and may take further actions that alter its business operations, as may be required by federal, state, or local authorities, or that the Company determines are in the best interests of its employees, customers, partners, suppliers, and stockholders.

Note 4.3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and disclosures normally included in condensed consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's Annual Report on Form ~~10-~~

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

K10-K for the year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission (“SEC”) on ~~March 13, 2020.~~February 19, 2021. Certain reclassifications have been made to conform to current period presentation.

The Acquisition was accounted for as a business combination using the acquisition method of accounting. The Company’s financial statement presentation distinguishes the results of operations into two distinct periods: (i) the period before the consummation of the Acquisition, which includes the period from January 1, 2019 to the Closing Date (the “2019 Predecessor Period”) and (ii) the periods after consummation of the Acquisition, which includes the period after the Closing Date to September 30, 2019 (“2019 Successor Period) and the three and nine months ended September 30, 2020. The accompanying condensed consolidated financial statements include a black line division which indicates that the Acquired Companies and the Company’s financial information are presented on a different basis and are therefore, not comparable.

Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. See Note 5 – Business Combination for a discussion of the estimated fair values of assets and liabilities recorded in connection with the Acquisition.

The historical financial information of GTY Cayman prior to the Acquisition is not being reflected in the Predecessor financial statements as these historical amounts have been determined not to be useful to a user of the financial statements. GTY Cayman’s operations prior to the Acquisition, other than income from the Trust Account (as defined in Note 12, Shareholders’ Equity) investments and transaction expenses, were nominal.

The Company believes that Predecessor activities related to investments, intangible assets, share-based compensation, goodwill, fair value measurements and notes payable were either quantitatively or qualitatively immaterial. Therefore, the Company did not disclose these Predecessor activities in the following unaudited footnotes.

Principles of Consolidation

The ~~three months and nine months ended September 30, 2020 and 2019 Successor Period~~ condensed consolidated financial statements include all accounts of the Company and its ~~subsidiaries. The 2019 Predecessor Period condensed consolidated financial statements include all accounts of the Acquired Companies and the Acquired Companies’~~ subsidiaries. All material intercompany transactions and balances have been eliminated in the accompanying condensed consolidated financial statements.

Use of Estimates

The preparation of the condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheets and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include revenue recognition, the carrying value of goodwill, the fair value of acquired intangibles, the capitalization of software development costs, the useful lives of intangible assets, share-based compensation, right of use assets, warrant liability, financing and operating lease liabilities, contingent consideration and the valuation allowance of deferred tax assets resulting from net operating losses.

~~Significant Accounting Policies~~COVID-19 Update

~~There have been no material changes to~~In December 2019, the emergence of a novel coronavirus, or COVID-19, was reported and in March 2020, the World Health Organization, or WHO, characterized COVID-19 as a pandemic. The broader implications of the global emergence of COVID-19 on the Company’s ~~significant accounting policies previously disclosed in~~business, operating results, and overall financial performance continue to remain uncertain and they depend on certain developments, including the duration and spread of the outbreak and variants, vaccination rates, impact on the Company’s ~~Annual Report~~customers and its sales cycles, impact on ~~Form 10-K for the fiscal year ended December 31, 2019 as filed with the SEC on March 13, 2020.~~its partners or employees, and impact

1311

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

on the economic environment and financial markets, all of which are uncertain and cannot be predicted. Since March 2020, the Company saw certain new and existing customers halt or decrease investment in infrastructure and, although conditions have improved, the Company expects that certain of its current and potential customers will continue to take actions to reduce operating expenses and moderate cash flows, including by delaying sales and requesting extended billing and payment terms. The Company will continue to actively monitor the situation and may take further actions that alter its business operations, as may be required by federal, state, or local authorities, or that the Company determines are in the best interests of its employees, customers, partners, suppliers, and stockholders.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC on February 19, 2021 aside from those described in Note 2.

Fair Value ~~(Successor)~~

The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value.

●

Level 1 — uses quoted prices in active markets for identical assets or liabilities.

●

Level 2 — uses observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

●

Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment.

The Company’s only material financial instruments carried at fair value as of September 30, 2021 and December 31, 2020, with changes in fair value flowing through current earnings, consist of contingent consideration liabilities recorded in conjunction with business combinations and the fair value of its warrant liabilities are as ~~follows (in thousands):~~follows:


			Fair Value Measurement at								Fair Value Measurement at
			Reporting Date Using								Reporting Date Using
			Quoted Prices in		Significant						Quoted Prices in		Significant
			Active Markets		Other		Significant				Active Markets		Other		Significant
	Balance as of		for Identical		Observable		Unobservable		Balance as of		for Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs		September 30,		Assets		Inputs		Inputs
	2020		(Level 1)		(Level 2)		(Level 3)		2021		(Level 1)		(Level 2)		(Level 3)
Contingent consideration – current	$	685	$	—	$	—	$	685	$	317	$	—	$	—	$	317
Contingent consideration – long term		41,230		—		—		41,230		45,730		—		—		45,730
Warrant liability										7,063		—		—		7,063
Total liabilities measured at fair value	$	41,915	$	—	$	—	$	41,915	$	53,110	$	—	$	—	$	53,110

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

			Fair Value Measurement at
			Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Balance as of		for Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Contingent consideration – current	$	743	$	—	$	—	$	743
Contingent consideration – long term		42,530		—		—		42,530
Warrant liability		3,040		—		—		3,040
Total liabilities measured at fair value	$	46,313	$	—	$	—	$	46,313

There were no transfers made among the three levels in the fair value hierarchy during the three and nine months ended September 30, ~~2020.~~2021.

The following ~~table presents~~tables present additional information about Level 3 liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

Changes in ~~Level 3~~contingent consideration liabilities measured at fair value from December 31, ~~2019~~2020 to September 30, ~~2020~~2021 were as ~~follows (in thousands):~~follows:

Contingent consideration – December 31, 2019

$
53,913
Change in fair value of contingent consideration

29
Issuance of exchangeable shares for contingent consideration

(10,000)
Issuance of common stock for contingent consideration

(1,334)
Gain on issuance of common stock for contingent consideration

(666)
Payments of contingent consideration

(27)
Contingent consideration – September 30, 2020

$
41,915


Contingent consideration – December 31, 2020	$	43,273
Change in fair value of contingent consideration		3,599
Payments of contingent consideration		(825)
Contingent consideration – September 30, 2021	$	46,047

~~Table~~On February 19, 2019, the Company consummated several acquisitions (collectively, the “Acquisition”), pursuant to which it acquired each of ~~Contents~~Bonfire

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

~~(Amounts in tables in thousands, except share~~ , CityBase, eCivis , Open Counter, Questica and ~~per share amounts)~~

~~The change in fair value of contingent consideration was due to~~Sherpa (together with Bonfire, CityBase, eCivis, Open Counter and Questica, the ~~attainment of certain milestones by Questica and Sherpa.~~“Acquired Companies”).

The fair value of the Company’s contingent consideration liabilities recorded as part of the Acquisition has been classified within Level 3 in the fair value hierarchy. The contingent consideration represents the estimated fair value of future payments due to the sellers based on each company’s achievement of annual earnings targets in certain years and other events considered in certain transaction documents. The ~~initial~~ fair values of the contingent consideration were calculated through the use of either Monte Carlo simulation or modified Black-Scholes analyses based on earnings projections for the respective earn-out periods, corresponding earnings thresholds, and approximate timing of payments as outlined in the purchase agreements for each of the Acquired Companies. The analyses utilized the following assumptions: (i) expected term; (ii) risk-adjusted net sales or earnings; (iii) risk-free interest rate; and (iv) expected volatility of earnings. Estimated payments, as determined through the respective models, were further discounted by a credit spread assumption to account for credit risk. The contingent consideration is revalued to fair value each period, and any increase or decrease is recorded in operating income (loss). The fair value of the contingent consideration may be impacted by certain unobservable inputs, most significantly with regard to discount rates, expected volatility and historical and projected performance. Significant changes to these inputs in isolation could result in a significantly different fair value measurement.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

Changes in the warrant liability measured at fair value from December 31, 2020 to September 30, 2021 were as follows:


Warrant liability – December 31, 2020	$	3,040
Change in fair value of warrant liability		4,023
Warrant liability – September 30, 2021	$	7,063

The warrant liability was estimated using a Black-Scholes model derived from a Monte Carlo simulation of the Company’s outstanding public warrants. These inputs were primarily derived from the implied volatility of the traded public warrant price.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and term ~~loan~~loans approximates fair value because of the short-term nature of these instruments.

The Company measures certain assets at fair value on a non-recurring basis, generally annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include goodwill and other intangible assets.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Disaggregation of Revenues


	Successor								Predecessor
							February 19,		January 1, 2019
	Three Months Ended		Three Months Ended		Nine Months Ended		2019 through		through		Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30,		September 30,		September 30,		September 30,		February 18,		September 30,		September 30,		September 30,		September 30,
	2020		2019		2020		2019		2019		2021		2020		2021		2020
Subscriptions, support and maintenance	$	8,986	$	5,920	$	25,144	$	13,393	$	3,253	$	11,649	$	8,986	$	33,147	$	25,144
Professional services		2,903		2,449		8,530		5,287		1,269		3,245		2,903		9,064		8,530
License		674		344		1,300		1,302		383		112		674		256		1,300
Asset sales		24		41		53		52		23		1,251		24		1,366		53
Total revenues	$	12,587	$	8,754	$	35,027	$	20,034	$	4,928	$	16,257	$	12,587	$	43,833	$	35,027

Revenues

Subscription, support and maintenance. The Company ~~provides software hosting services~~delivers its solutions primarily as a subscription service that ~~provide~~provides customers with access to ~~software~~SaaS related support and updates during the term of the arrangement. Revenues are recognized ratably over the contract term as the customer simultaneously receives and consumes the benefits of the subscription, ~~service,~~ as the service is made available by the Company. The first year of subscription fees are typically payable within 30 days after the execution of a contract, and thereafter upon renewal. The Company initially records subscription fees as contract liabilities and ~~recognize~~recognizes revenues on a straight-line basis over the term of the agreement.

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

~~Our~~The Company’s contracts may include variable consideration in the form of usage fees, which are constrained and recognized once the uncertainties associated with the constraint are resolved, which is when usage occurs and the fee is known.

Subscription, support and maintenance revenues also includes ~~on-premise~~kiosk rentals and support or maintenance pertaining to license sales. Revenues from ~~on-premise~~kiosk rentals and support are recognized on a straight-line basis over the support period.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

Revenues from subscription, support and maintenance comprised approximately 72%~~, 67%~~ and ~~66%~~71% of total revenues for the three months ended September 30, 2021 and 2020 and 76% and 72% for the nine months ended September 30, ~~2020, the 2019 Successor Period~~2021 and ~~the 2019 Predecessor Period,~~2020, respectively.

Professional services. The Company’s professional services contracts generate revenues on a time and materials or fixed fee basis. Revenues are recognized as the services are rendered for time and materials contracts. Revenues are recognized when the milestones are achieved and accepted by the customer or on a proportional performance basis for fixed fee contracts. Training revenues are recognized as the services are performed. Revenues from professional services comprised approximately ~~24%, 26%~~20% and ~~26%~~23% of total revenues for the three months ended September 30, 2021 and 2020 and 21% and 24% for the nine months ended September 30, ~~2020, the 2019 Successor Period~~2021 and ~~the 2019 Predecessor Period,~~2020, respectively.

~~License~~License.. Revenues from distinct ~~licenses~~licensed software are recognized upfront when the software is made available to the customer, which normally coincides with contract execution, as this is when the customer has the risks and rewards of the right to use the software. Revenues from licenses comprised approximately ~~4%, 6%~~less than 1% and 8%5% of total revenues for the three months ended September 30, 2021 and 2020 and approximately less than 1% and 4% for the nine months ended September 30, ~~2020, the 2019 Successor Period~~2021 and ~~the 2019 Predecessor Period,~~2020, respectively.

Asset sales. Revenues from asset sales are recognized when the asset, typically a kiosk, has been received by the ~~client~~customer and is fully operational and ready to accept transactions, which is when the customer obtains control and has the risks and rewards of the asset. Asset sales ~~were~~comprised approximately 8% and less than 1% of total revenues for the three months ended September 30, 2021 and 2020 and approximately 3% and less than 1% for the nine months ended September 30, 2021 and 2020, ~~the 2019 Successor Period and the 2019 Predecessor Period.~~respectively.

Restructuring Charges

On March 30, 2020, the Company implemented a global restructuring plan which resulted in an approximate 10% reduction of the Company’s workforce. This action was intended to streamline the Company’s operational reporting and reduce operating cash outflows. The Company recorded pre-tax restructuring charges of approximately $3.7 million which is comprised of one-time employee termination benefits paid over a ~~weighted average~~weighted-average period of approximately 10 months. ~~Approximately $1.3 million was included~~The final termination payment occurred in ~~accounts payable and accrued expenses in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2020.~~

March 2021.

Net Loss per Share

Net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share of common stock is computed similarly to basic net income per share of common stock except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Due to the net loss for the three and nine months ended September 30, ~~2020~~2021 and ~~during the 2019 Successor Period,~~2020, diluted and basic loss per share are the same.

Securities that could potentially dilute net loss per share in the future that were not included in the computation of diluted loss per share at September 30, 2021 and 2020 are as follows:


	2021	2020
Warrants to purchase common stock	27,093,334	27,093,334
Unvested restricted stock units	3,883,241	2,965,861
Options to purchase common stock	240,421	249,566
Total	31,216,996	30,308,761

1615

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

~~Securities that could potentially dilute net loss per share in the future that were not included in the computation of diluted loss per share at September 30, 2020 are as follows:~~


~~Warrants to purchase common stock~~		~~27,093,334~~
~~Unvested restricted stock units~~		~~2,965,861~~
~~Options to purchase common stock~~		~~249,566~~
~~Total~~		~~30,308,761~~

Income Taxes

In determining the quarterly benefit from income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date loss, adjusted for discrete items arising in that quarter. The Company’s annual estimated effective tax rate differs from the U.S. federal statutory rate of 21% as a result of state taxes, foreign taxes and changes in the Company’s valuation allowance for domestic income taxes. For the three and nine months ended September 30, ~~2020, three months ended September 30, 2019~~2021 and ~~the 2019 Successor Period,~~2020, the Company recorded a $0.1 million, $0.4 million, ~~$2.1 million, $1.1~~$0.2 million, and ~~$2.8~~$2.1 million benefit from income taxes, respectively. ~~During the 2019 Predecessor Period, the Company did not record a provision or benefit from income taxes.~~

Recently Adopted Accounting Pronouncements

On January 1, 2020, wethe Company adopted Accounting Standards Update (“ASU”) No. 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The adoption of this new standard did not have a material impact on ~~our~~the Company’s condensed consolidated financial statements.

On January 1, 2020, wethe Company adopted ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under Accounting Standards Codification (“ASC”) 350-40 – Internal Use Software, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. The adoption of this new standard did not have a material impact on ~~our~~the Company’s condensed consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

~~In December 2019,~~On January 1, 2021, the ~~FASB issued~~Company adopted ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income ~~Taxes~~Taxes. ~~, which is intended to simplify~~ASU 2019-12 simplifies various aspects related to accounting for income ~~taxes. ASU 2019-12~~taxes, removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The adoption of this new standard did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (ASU ~~2019-12 is~~2020-06), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. This guidance will be effective for ~~fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. ASU 2019-12 is effective for us~~the Company in the first quarter of ~~fiscal year 2021.~~2022 on a full or modified retrospective basis, with early adoption permitted. The Company ~~has~~does not ~~determined~~expect the ~~impact~~adoption of this guidance to have a material impact on its consolidated financial statements.

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

~~Note 5. Business Combination (Successor)~~

~~Business Combination~~

On February 19, 2019, the Company consummated the business combination, pursuant to which it acquired each of Bonfire, CityBase, eCivis, Open Counter, Questica, and Sherpa. In connection with the closing of the business combination (the “Closing”), pursuant to the merger agreement between the Company, GTY Cayman, and GTY Technology Merger Sub, Inc. (“GTY Merger Sub”), merged with and into GTY Cayman, with GTY Cayman surviving the merger as a direct, wholly-owned subsidiary of the Company, and in connection therewith the Company changed its name from GTY Govtech, Inc. to GTY Technology Holdings Inc. This acquisition qualifies as a business combination under ASC 805 – Business Combinations. Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill.

~~Bonfire Acquisition~~

Under the Bonfire acquisition agreement (the “Bonfire Agreement”), at Closing, the Company acquired Bonfire for aggregate consideration of approximately $48.0 million in cash and 2,156,014 shares of Company common stock (valued at $10.00 per share) and 2,161,741 shares of Bonfire Exchangeco, each of which is exchangeable for shares of Company common stock on a one-for-one basis at any time of the holder’s choosing. Of the shares issued to Bonfire Holders, 2,008,283 shares of Company common stock and 2,093,612 exchangeable shares in the capital stock of Bonfire Exchangeco (the “Bonfire Exchangco Shares”) were subject to transfer restrictions for one year following the business combination. In addition, approximately $3.1 million in cash and 690,000 shares of Company common stock were deposited into escrow for a period of up to one year to cover certain indemnification obligations of the Bonfire Holders. In September 2020, the cash and shares were released from escrow and delivered to the Bonfire Holders.

Additionally, in accordance with the Bonfire Agreement, 1,218,937 unvested options to purchase shares of Bonfire common stock were converted into 408,667 options to purchase shares of Company common stock.

For the year ended December 31, 2019, 193,645 shares of the Bonfire Exchangeco Shares were converted into the Company’s common stock on a one-for-one basis. The Bonfire Exchangeco Shares were subject to the transfer restrictions described above, and the common stock issued for these shares were subject to the same transfer restrictions, discussed above.

For the year ended December 31, 2019, the Company recorded a measurement period adjustment for the decrease in aggregate consideration of $0.1 million relating to the settlement of the working capital adjustment in accordance with the Bonfire Agreement.

~~CityBase Acquisition~~

Under the CityBase acquisition agreement (the “CityBase Agreement”), at Closing, the Company acquired CityBase for aggregate consideration of approximately $62.2 million in cash and 3,155,961 shares of Company common stock (valued at $10.00 per share). Each CityBase Holder may elect to have their shares subject to transfer restrictions for up to one year or to have their shares subject to redemption at the Company’s option for a promissory note in an amount equal to $10.00 per share redeemed, which note would bear interest at a rate of 8% per annum in the first year after issuance and 10.0% per annum thereafter (subject to an increase of 1% for each additional 6 months that has elapsed without full payment of such note(s)) (which option was not exercised and expired on the 90th day after the Closing). Prior to the consummation of the business combination, certain of the CityBase Holders agreed to purchase 380,937 Class A Ordinary Shares of GTY Cayman with the proceeds they would have otherwise received from the closing of the CityBase Transaction, which resulted in an approximate $3.8 million reduction to the amount of cash payable to the CityBase Holders. In addition, approximately $2.1 million in cash and 1,000,000 shares of Company common stock were deposited into escrow for a

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

~~period of up to one year to cover certain indemnification obligations of the CityBase Holders. To date, $1.1 million has been reimbursed to the Company for qualified legal expenses.~~

For the year ended December 31, 2019, the Company recorded measurement period adjustments for (i) the increase in the aggregate consideration of $0.2 million relating to the settlement of the working capital adjustment in accordance with the CityBase Agreement, and (ii) the conversion of $0.04 million of stock consideration to cash consideration for the correction of an investor’s status to a non-accredited investor.

~~eCivis Acquisition~~

Under the eCivis acquisition agreement (the “eCivis Agreement”) and the related eCivis letter agreement (“eCivis Letter Agreement”), at Closing, the Company acquired eCivis for aggregate consideration of approximately $14.0 million in cash and 2,883,433 shares of Company common stock (valued at $10.00 per share) (including 525,060 shares of Company common stock which are redeemable for cash at any time in the sole discretion of the Company for a price of $10.00 per share). The shares not subject to a redemption right were subject to transfer restrictions for one year. In addition, approximately $3.6 million in cash and 242,200 shares of Company common stock were deposited into escrow for a period of up to one year to cover certain indemnification obligations of the eCivis Holders. In October 2020, the shares and $1.9 million in cash were released to the eCivis Holders and $0.2 million was reimbursed to the Company for qualified legal expenses.

For the year ended December 31, 2019, the Company recorded a measurement period adjustment for the increase in aggregate consideration of $0.5 million relating to the settlement of the working capital adjustment in accordance with the eCivis Agreement and the eCivis Letter Agreement.

~~Open Counter Acquisition~~

Under the Open Counter acquisition agreement (the “Open Counter Agreement”) and the related letter agreement (the “Open Counter Letter Agreement”), at Closing, the Company acquired Open Counter for aggregate consideration of approximately $9.7 million in cash and 1,580,990 shares of Company common stock (valued at $10.00 per share) that were issued to the holders of Open Counter capital stock (the “Open Counter Holders”) (including 100,000 shares of Company common stock which have subsequently been redeemed for a promissory note at the sole discretion of the Company within seven days of the Closing (the “OC Redeemable Shares”). Such promissory note would bear interest at a rate of 8% per annum in the first year after issuance and 10.0% per annum thereafter (subject to an increase of 1% for each additional 6 months that has elapsed without full payment of such note(s))). The shares that were not subject to a redemption right are subject to transfer restrictions for one year. In addition, approximately $1.3 million in cash and 164,554 shares of Company common stock were deposited into escrow for a period of one year to cover certain indemnification obligations of the Open Counter Holders. In August 2020, the cash and exchangeable shares were released from escrow and delivered to the Open Counter Holders.

~~Questica Acquisition~~

Under the Questica acquisition agreement (the “Questica Agreement”) and the related letter agreement (the “Questica Letter Agreement”), at Closing, the Company indirectly acquired Questica for aggregate consideration of approximately $44.4 million in cash and an aggregate of 2,600,000 Class A exchangeable shares in the capital stock of Questica Exchangeco, which is exchangeable into shares of the Company’s common stock, and 1,000,000 Class B shares in the capital stock of Questica Exchangeco, which is not exchangeable into shares of Company common stock, that were issued to the holders of Questica capital stock (the “Questica Holders”). In accordance with the Questica Shareholder Agreement, dated as of February 12, 2019, by and among the Company and certain Questica Holders (the “Questica Shareholder Agreement”), 500,000 Class C exchangeable shares in the capital stock of Questica Exchangeco had been redeemable at the sole discretion of the Company at any time for $5.0 million plus all accrued and unpaid dividends, and may be

1916

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

exchanged for shares of Company common stock beginning on the sixty-first day following the Closing for a number of shares of Company common stock equal to $5.0 million plus accrued and unpaid dividends divided by the lesser of (i) $10.00 or (ii) the 5-day volume weighted average price (“VWAP”) at the time of exchange. In June 2019, these shares were redeemed for 500,000 shares of the Company common stock at the market price of $7.72, or $3.9 million, and transferred to permanent equity, and $1.3 million of cash. The incremental $0.2 million above the stated redemption price was recorded as a deemed dividend in the accompanying condensed consolidated financial statements. In addition, approximately $0.1 million in cash and 800,000 of the exchangeable shares described above were deposited into escrow for a period of one year to cover certain indemnification obligations of the Questica Holders. During the nine months ended September 30, 2020, the cash and exchangeable shares were released from escrow and delivered to the Questica Holders.

~~Sherpa Acquisition~~

Under the Sherpa acquisition agreement (the “Sherpa Agreement”) and the related letter agreement (the “Sherpa Letter Agreement”), at Closing, the Company indirectly acquired Sherpa for aggregate consideration of approximately $4.2 million in cash and 100,000 shares of Company common stock (valued at $10.00 per share) all of which are redeemable for a promissory note bearing interest equal to 5.5% per annum in the first year subsequent to issuance and 8.0% per annum thereafter at the sole discretion of the Company within ~~seven~~ days of the Closing. The Company did not elect to redeem these shares. In addition, approximately $0.9 million in cash was deposited into escrow for a period of one year to cover certain indemnification obligations of the Sherpa Holders. In August 2020, the cash was released from escrow and delivered to the former Sherpa owner.

~~The following is a summary of the initial consideration paid and issued to each Acquired Company (in thousands):~~

Deferred

Cash

Stock

Contingent

Adjusted

Tax

Consideration

Consideration

Consideration

Total

Net Assets

Goodwill

Intangibles

Liability
Bonfire

$
51,068

$
50,078
(1)
$
325

$
101,471

$
3,639

$
81,964

$
22,668

$
6,800
CityBase

64,261

41,560

48,410

154,231

782

119,741

48,155

14,447
eCivis

17,592

31,256

5,859

54,707

(1,788)

47,397

12,997

3,899
Open Counter

10,958

17,455

—

28,413

(1,441)

22,524

10,471

3,141
Questica

44,494

31,000
(2)

9,311

84,805

3,652

57,479

33,821

10,147
Sherpa

5,105

1,000

1,898

8,003

1,066

3,497

4,914

1,474
Total

$
193,478

$
172,349

$
65,803

$
431,630

$
5,910

$
332,602

$
133,026

$
39,908

~~(1)~~

~~Includes $21.6 million of convertible stock consideration~~

~~(2)~~

~~Includes $31.0 million of convertible stock consideration~~

During the year ended December 31, 2019, the Company made the Measurement Period Adjustments that resulted in (i) an increase in the aggregate consideration of the Acquisition of $0.4 million relating to the settlement of the working capital adjustments, (ii) the conversion of $0.04 million of stock consideration to cash consideration for the correction of an investor’s status to a non-accredited investor, and (iii) a decrease in intangible assets of $4.4 million, (iv) a decrease in contingent consideration as a result of the Acquisition of $7.5 million and (v) a decrease in the related deferred tax liability of $11.0 million due to updated information regarding facts and circumstances which existed as of the date of the business combination. The Measurement Period Adjustments resulted in a net decrease to goodwill of $13.8 million.

~~The following table is a summary of the measurement period adjustments to consideration paid and issued to each Acquired Company (in thousands):~~

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

Deferred

Cash

Stock

Contingent

Adjusted

Tax

Consideration

Consideration

Consideration

Total

Net Assets

Goodwill

Intangibles

Liability
Bonfire

$
(97)

$
—

$
—

$
(97)

$
—

$
(299)

$
202

$
—
CityBase

246

(42)

(7,535)

(7,331)

—

(13,384)

(2,241)

(8,294)
eCivis

481

—

—

481

—

990

(1,071)

(562)
Open Counter

—

—

—

—

—

(568)

(139)

(707)
Questica

—

—

—

—

—

492

(492)

—
Sherpa

(214)

—

—

(214)

—

(1,000)

(688)

(1,474)
Total

$
416

$
(42)

$
(7,535)

$
(7,161)

$
—

$
(13,769)

$
(4,429)

$
(11,037)

~~The following table is a summary of the final consideration paid and issued to each Acquired Company including the Measurement Period Adjustments (in thousands):~~

Deferred

Cash

Stock

Contingent

Adjusted

Tax

Consideration

Consideration

Consideration

Total

Net Assets

Goodwill

Intangibles

Liability
Bonfire

$
50,971

$
50,078
(1)
$
325

$
101,374

$
3,639

$
81,665

$
22,870

$
6,800
CityBase

64,507

41,518

40,875

146,900

782

106,357

45,914

6,153
eCivis

18,073

31,256

5,859

55,188

(1,788)

48,387

11,926

3,337
Open Counter

10,958

17,455

—

28,413

(1,441)

21,956

10,332

2,434
Questica

44,494

31,000
(2)

9,311

84,805

3,652

57,971

33,329

10,147
Sherpa

4,891

1,000

1,898

7,789

1,066

2,497

4,226

—
Total

$
193,894

$
172,307

$
58,268

$
424,469

$
5,910

$
318,833

$
128,597

$
28,871

~~(1)~~

~~Includes $21.6 million of convertible stock consideration~~

~~(2)~~

~~Includes $31.0 million of convertible stock consideration~~

The following table represents the final allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition-date fair values, including the Measurement Period Adjustments discussed above (in thousands):

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

Bonfire

CityBase

eCivis

Open Counter

Questica

Sherpa

Total
Cash

$
4,641

$
2,191

$
136

$
107

$
6,762

$
632

$
14,469
Accounts receivable, net

323

1,018

720

46

1,257

587

3,951
Prepaid expense and other current assets

607

170

340

—

77

33

1,227
Fixed assets

118

500

56

29

182

2

887
Loan receivable - related party

—

175

—

—

—

—

175
Right of use assets

1,315

—

901

—

296

—

2,512
Other assets

369

783

30

—

1,061

—

2,243
Intangible assets

22,870

45,914

11,926

10,332

33,329

4,226

128,597
Goodwill

81,665

106,357

48,387

21,956

57,971

2,497

318,833
Accounts payable and accrued expenses

(1,085)

(1,192)

(586)

(124)

(909)

(188)

(4,084)
Contract liabilities

(1,221)

(816)

(1,635)

(483)

(2,774)

—

(6,929)
Lease liability - short term

(366)

—

—

—

(296)

—

(662)
Deferred tax liability

(6,800)

(6,153)

(3,337)

(2,434)

(10,147)

—

(28,871)
Other current liabilities

—

—

(3)

(491)

(767)

—

(1,261)
Capital lease obligations - current portion

—

(139)

—

—

—

—

(139)
Contract and other long-term liabilities

(60)

(1,646)

(56)

—

—

—

(1,762)
Capital lease obligation, less current portion

—

(262)

—

—

—

—

(262)
Long term debt

—

—

—

(525)

—

—

(525)
Lease liability - long term

(1,002)

—

(901)

—

—

—

(1,903)
Contingent consideration - pre-existing

—

—

(790)

—

(1,237)

—

(2,027)
Total consideration

$
101,374

$
146,900

$
55,188

$
28,413

$
84,805

$
7,789

$
424,469

~~Transaction Costs~~

~~Transaction costs incurred by the Company associated with the Acquisition were $37.0 million from February 19, 2019 through December 31, 2019.~~

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

Note 6.4. Intangible Assets

The Company recognized goodwill and certain identifiable intangible assets in connection with business combinations. ~~See Note 5.~~ Identifiable intangible assets consist of the following as of September 30, ~~2020 for the Successor (in thousands):~~2021 and December 31, 2020:


	September 30, 2020						September 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Patents / Developed Technology	$	60,084	$	(12,133)	$	47,951	$	60,084	$	(19,617)	$	40,467
Trade Names / Trademarks		16,348		(2,820)		13,528		16,348		(4,431)		11,917
Customer Relationships		51,003		(8,229)		42,774		51,003		(13,341)		37,662
Non-Compete Agreements		1,162		(625)		537		1,162		(1,012)		150
Total Intangibles	$	128,597	$	(23,807)	$	104,790	$	128,597	$	(38,401)	$	90,196


	December 31, 2019						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Patents / Developed Technology	$	60,084	$	(6,496)	$	53,588	$	60,084	$	(14,026)	$	46,058
Trade Names / Trademarks		16,348		(1,579)		14,769		16,348		(3,227)		13,121
Customer Relationships		51,003		(4,400)		46,603		51,003		(9,514)		41,489
Non-Compete Agreements		1,162		(334)		828		1,162		(723)		439
Total Intangibles	$	128,597	$	(12,809)	$	115,788	$	128,597	$	(27,490)	$	101,107

Amortization expense recognized by the Company related to intangible assets was $3.7 million for each of the three months ended September 30, 2021 and September 30, 2020 and was $10.9 million and $11.0 million for the nine months ended September 30, 2021 and September 30, 2020, ~~and the 2019 Successor Period was $11.0 million and $9.4 million,~~ respectively. ~~Amortization expense recognized during the 2019 Predecessor Period was $0.03 million.~~

The estimated aggregate future amortization expense for intangible assets is as ~~follows (in thousands):~~follows:

Three months ended December 31, 2020

$
3,683
Year ended December 31, 2021

14,611
Year ended December 31, 2022

14,276
Year ended December 31, 2023

14,224
Year ended December 31, 2024

14,263
Thereafter

43,733

$
104,790


Three months ending December 31, 2021		3,700
Year ending December 31, 2022		14,276
Year ending December 31, 2023		14,224
Year ending December 31, 2024		14,263
Year ending December 31, 2025		14,224
Thereafter		29,509
	$	90,196

Note ~~7. Related Party Transactions~~

~~Convertible Note~~

On August 8, 2018, GTY Cayman issued the Convertible Note to GTY Investors, LLC (the “Sponsor”), pursuant to which GTY Cayman was able to borrow up to $1 million from the Sponsor from time to time. The Convertible Note does not bear interest. The Sponsor has the option to convert any amounts outstanding under the Convertible Note, up to $1.0 million in the aggregate, into warrants at a conversion price of $1.50 per warrant. The terms of such warrants will be identical to the private placement warrants. During the period ended March 31, 2019, GTY drew down $0.4 million on the

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

Convertible Note, resulting in $1.0 million principal amount outstanding. The $1.0 million principal amount was offset against amounts due from the Sponsor (see “Agreements and Arrangements with Certain Institutional Investors”) and, as of September 30, 2020, there was 0 amount outstanding under the Convertible Note.

~~Agreements and Arrangements with Certain Institutional Investors~~

On February 13, 2019, GTY Cayman, the Sponsor, William D. Green, Joseph M. Tucci and Harry L. You (Messrs. Green, Tucci and You, collectively, the “Founders”) entered into agreements and arrangements with certain institutional investors pursuant to which a total of 1,500,000 Class A Ordinary Shares of GTY Cayman were not redeemed in connection with the business combination (the “Outstanding Cayman Shares”). The holder of Outstanding Cayman Shares which were converted into shares of the Company’s common stock on the Closing Date on a one-for-one basis is entitled to put such shares to the Sponsor and the Founders for a purchase price equal to the price at which GTY Cayman redeemed Class A Ordinary Shares in connection with the business combination, $10.29 (the “redemption price”), payment of such purchase price is guaranteed by the Company, and to receive from the Company a cash payment, if and to the extent necessary, but not to exceed $250,000, in order to provide such shareholder with at least a 5% return on such shares above the redemption price. With respect to 1,000,000 of the Outstanding Cayman Shares, GTY Cayman engaged a broker-dealer to facilitate the purchase of the Outstanding Cayman Shares by an institutional investor prior to the Closing for $9.90 per share and agreed to pay such broker-dealer an amount per share in cash equal to the difference between the redemption price and $9.90. In addition, the Sponsor and the Founders entered into agreements prior to the Closing pursuant to which they were obligated to reimburse the holders of an additional 1,942,953 Class A Ordinary Shares that were not redeemed in connection with the business combination (the “Outstanding Class A Shares”) for losses that may be incurred upon the sale of the Outstanding Class A Shares within a specified period following the Closing, up to an agreed-upon limit, and the Company has agreed to guarantee such reimbursement obligations of the Sponsor. During the Q1 2019 Successor Period, the Company, on behalf of the Sponsor, paid $4.0 million for losses incurred upon the sale of the Outstanding Class A Shares and, in turn, the Company reduced its convertible note liability for $1.0 million (see “Convertible Note”). During the year ended December 31, 2019, the Sponsor reimbursed the Company for the remaining $3.0 million for such losses on the Outstanding Class A Shares. As of September 30, 2020, the Company had no guarantee obligations under these agreements because the Sponsor has no remaining reimbursement obligations.

~~Note 8. Share-Based Compensation~~

~~Stock Options~~

~~In connection with the Acquisition, the Company adopted a stock option plan and issued 408,667 stock options to employees. The total fair value of the stock options at the grant date was $3.6 million.~~

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

~~A summary of stock option activity is as follows:~~

Weighted


Average

Weighted

Remaining

Average

Contractual

Total

Number of

Exercise

Life (in

Intrinsic

Shares

Price

years)

Value
Outstanding as of December 31, 2019

274,559

$
2.14

7.9

$
1,293
Granted

—

—

—

—
Exercised

(8,080)

1.16

Forfeited/expired

(16,913)

1.16

Outstanding as of September 30, 2020

249,566

$
2.24

7.2

$
1,151
Options vested and exercisable

156,612

$
2.21

7.2

$
726

For the three months and nine months ended September 30, 2020, three months ended September 30, 2019 and the 2019 Successor Period, the Company recorded approximately $0.1 million, $0.4 million, $0.3 million and $2.4 million, respectively, of share-based compensation expense related to the options. As of September 30, 2020, the Company has $0.6 million of unrecognized share-based compensation cost to be recognized over 21 months.

~~Restricted Stock Units~~

~~Since the Acquisition, the Company has issued 6,173,236 restricted stock units (“RSUs”) to employees. A portion of the RSUs will vest in ratable annual installments over either~~ ~~two~~ or four years, as applicable, from the grant date, and the remaining RSUs will vest subject to the achievement of certain performance conditions over a three-year performance period, in each case, assuming continuous service by the employees through the applicable vesting dates.

~~A summary of the Company's restricted stock units and related information is as follows:~~

Weighted Average

Number of Units

Grant Price
Unvested as of as of December 31, 2019

3,278,324

$
6.55
Granted

2,693,060

5.31
Vested

(758,421)

5.17
Forfeited/expired

(2,247,102)

7.35
Unvested as of September 30, 2020

2,965,861

$
5.18

For the three and nine months ended September 30, 2020, three months ended September 30, 2019 and the 2019 Successor Period, the Company recorded approximately $1.9 million, $6.0 million, $0.2 million, and $0.4 million, respectively, of share-based compensation expense related to the RSUs. As of September 30, 2020, the Company had unrecognized share-based compensation expense related to all unvested restricted stock units of $12.4 million. The weighted average remaining contractual term of unvested RSUs is approximately ~~1.3 years~~ ~~at September 30, 2020. 946,746 of the unvested RSUs contain performance conditions subject to achieving segment specific revenue and profitability metrics.~~

~~Note 9.~~5. Leases

The Company leases office space under agreements classified as operating leases that expire on various dates through 2030. Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses.

At September 30, 2021, the Company had operating right of use assets of approximately $2.1 million and operating lease liabilities of approximately $3.5 million, which are included in the condensed consolidated balance sheet.

2517

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

At September 30, 2020, the Company had right of use assets of approximately $4.7 million and operating lease liabilities of approximately $5.0 million, which are included in the condensed consolidated balance sheet.

The Company purchases kiosks that are funded by finance leases that expire on various dates through 2023 and are included in fixed assets. At September 30, ~~2020,~~2021, the Company had finance lease right of use assets of $0.8 million and finance lease liabilities of approximately ~~$0.9~~$0.2 million. ~~The weighted-average remaining term and discount rate of the Company’s finance leases are 18.8 months and 14.3%, respectively.~~

The following summarizes quantitative information about the Company’s ~~operating leases (dollars in thousands):~~leases:

Three Months Ended September 30, ~~2020:~~2021:

Bonfire

CityBase

eCivis

Questica

Total
Operating leases










Fixed lease cost

$
109

$
153

$
77

$
104

$
443
Variable lease cost

—

—

—

—

—
Operating lease expense

109

153

77

104

443
Short-term lease rent expense

—

—

—

—

—
Total operating lease expense

$
109

$
153

$
77

$
104

$
443

Bonfire

CityBase

eCivis

Questica

Total

Operating cash outflows from operating leases

$
111

$
166

$
77

$
101

$
455

Right-of-use assets exchanged for operating lease liabilities

$
—

$
—

$
—

$
—

$
—

Weighted-average remaining lease term – operating leases

1.7

1.1

1.7

10.2

6.0

Weighted-average discount rate – operating leases

9.9
%

10.0
%

8.0
%

4.8
%

6.8
%


					Grants
	Procurement		Payments		Management		Budget		Total
Finance lease cost
Amortization of right-of-use assets	$	—	$	58	$	—	$	—	$	58
Interest		—		14		—		—		14
Operating lease cost		115		115		30		109		369
Total lease cost	$	115	$	187	$	30	$	109	$	441

Nine Months Ended September 30, ~~2020:~~2021:

Bonfire

CityBase

eCivis

Questica

Total
Operating leases










Fixed lease cost

$
319

$
458

$
232

$
475

$
1,484
Variable lease cost

—

—

—

—

—
Operating lease expense

319

458

232

475

1,484
Short-term lease rent expense

—

—

—

—

—
Total operating lease expense

$
319

$
458

$
232

$
475

$
1,484

Bonfire

CityBase

eCivis

Questica

Total

Operating cash outflows from operating leases

$
325

$
495

$
232

$
274

$
1,326

Right-of-use assets exchanged for operating lease liabilities

$
—

$
—

$
—

$
—

$
—

Weighted-average remaining lease term – operating leases

1.7

1.1

1.7

10.2

6.0

Weighted-average discount rate – operating leases

9.9
%

10.0
%

8.0
%

4.8
%

6.8
%


					Grants
	Procurement		Payments		Management		Budget		Total
Finance lease cost
Amortization of right-of-use assets	$	—	$	126	$	—	$	—	$	126
Interest		—		66		—		—		66
Operating lease cost		345		345		81		326		1,097
Total lease cost	$	345	$	537	$	81	$	326	$	1,289


							Grants
	Procurement			Payments			Management			Budget			Total
Weighted-average remaining lease term – finance leases		N/A			0.6			N/A			N/A			0.6
Weighted-average remaining lease term – operating leases		0.7			0.2			1.3			9.0			6.8
Weighted-average discount rate – finance leases		N/A			13.0	%		N/A			N/A			13.0	%
Weighted-average discount rate – operating leases		9.9	%		10.0	%		8.0	%		4.8	%		6.2	%

As of September 30, 2021, future minimum lease payments under non-cancellable leases are as follows:


					Grants				Operating		Finance
	Procurement		Payments		Management		Budget		Leases		Leases
Three months ending December 31, 2021	$	119	$	113	$	30	$	97	$	359	$	108
Year Ending December 31, 2022		245		—		123		426		794		157
Year Ending December 31, 2023		—		—		10		380		390		—
Year Ending December 31, 2024		—		—		—		364		364		—
Year Ending December 31, 2025		—		—		—		413		413		—
Thereafter		—		—		—		2,088		2,088		—
Total	$	364	$	113	$	163	$	3,768	$	4,408	$	265
Less present value discount		(22)		(30)		(9)		(813)		(874)		(16)
Present value of lease liabilities	$	342	$	83	$	154	$	2,955	$	3,534	$	249

2618

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

~~As of September 30, 2020, future minimum lease payments under non-cancellable leases are as follows (in thousands):~~

Bonfire

CityBase

eCivis

Questica

Total
Three months ended December 31, 2020

$
117

$
340

$
77

$
102

$
636
Year Ended December 31, 2021

458

1,134

309

404

2,305
Year Ended December 31, 2022

233

211

128

405

977
Year Ended December 31, 2023

—

—

—

361

361
Year Ended December 31, 2024

—

—

—

346

346
Thereafter

—

—

—

2,379

2,379
Total

808

1,685

514

3,997

7,004
Less present value discount

(64)

(200)

(34)

(851)

(1,149)
Present value of lease liabilities

$
744

$
1,485

$
480

$
3,146

$
5,855

Note 6. Term Loans

Credit Facility

~~Note 10. Term Loans~~

On February 14, 2020, the Company entered into an unsecured term loan credit facility (“February 2020 Credit Facility”) that ~~provides~~provided for borrowing of term loans in an aggregate principal amount of $12.0 million. The credit facility ~~has~~had a maturity date of twelve months from the borrowing date of the term loans. On the closing date, the Company fully drew on the credit facility net of deferred issuance costs of $0.7 million. The $0.7 million of deferred issuance costs included $0.4 million of fees to be applied against interest and $0.3 million of other issuance costs. Amounts outstanding under the credit facility ~~bear~~bore interest from the date the term loans were first made until the last day of the fiscal month immediately following the ~~six month~~six-month anniversary of such initial borrowing date at a rate per annum equal to 12 percent. Commencing on the first day of each fiscal month thereafter, the interest rate ~~has~~ increased ~~and shall increase~~ by 1 percent per annum until the termination date. The February 2020 Credit Facility was terminated on November 13, 2020 and $0.2 million of unamortized deferred issuance costs were expensed and included in other income, net.

On November 13, 2020, the Company entered into a senior secured term loan facility (“November 2020 Credit Facility”) that provides for borrowing of term loans ~~have been paid~~ in ~~full~~an aggregate principal amount of $25,000,000. The November 2020 Credit Facility has a maturity date of 30 months from the borrowing of the term loans. On the closing date, the Company fully drew on the November 2020 Credit Facility and ~~all commitments~~replaced the February 2020 Credit Facility. Amounts outstanding under the ~~credit agreement have terminated.~~November 2020 Credit Facility accrue interest at a rate of 8 percent plus LIBOR and 2 percent payment-in-kind (“PIK”) interest. The November 2020 Credit Facility is supported by a security interest in the assets of the Company and includes certain financial covenants pertaining to annual recurring revenue, revenue, and cash. As of September 30, 2021, the Company was compliant with all financial covenants.

For the three and nine months ended September 30, 2021 and 2020, the Company recognized ~~approximately~~$0.9 million, $0.4 million, $2.6 million, and $1.0 million of interest expense, including amortization of deferred issuance costs, respectively, under the ~~credit facility~~February 2020 and ~~amortized approximately $0.4 million of debt issuance costs.~~November 2020 Credit Facilities. At September 30, ~~2020,~~2021, the Company had accrued approximately ~~$0.2~~$0.3 million of accrued cash interest ~~which~~and $0.5 million of PIK interest.

The Company’s term loan is ~~included in accounts payable and accrued expenses in the condensed consolidated balance sheet.~~summarized as follows:


	November 2020 Credit Facility
Principal	$ 25,000
Payment-in-kind ("PIK") accrued interest	465
Unamortized deferred issuance costs	(1,134)
Term loans, net	$ 24,331

Maturity date	May 2023
Interest rate	8% + LIBOR
PIK interest rate	2%

Paycheck Protection Plan Loans (PPP Loans)

In April and May 2020, the Company’s subsidiaries CityBase, eCivis, and Sherpa received $2.0 million, $0.9 million and $0.2 million, respectively, in loan proceeds from the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration ~~(the “SBA”)~~ of the United States government. This program was established under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was created to provide fast and direct economic assistance for American workers, ~~and~~ families, small businesses, and preserves jobs for American industries. The Company ~~is using~~

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

used the funds to support the compensation expenses related to its USU.S. employees. These loans mature two years from the date of issuance and accrue interest at a rate of one percent per ~~annum.~~annum, and the Company accounted for these loans in accordance with ASC 470. During the nine months ended September 30, 2021, the Company recognized $3.2 million in gains on extinguishment of debt associated with the forgiveness of these loans. As of September 30, 2021, all outstanding loans under the PPP had been forgiven.

Note 7. Commitments and Contingencies

Legal Proceedings

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of its business. The Company is not currently a party to any legal proceedings that, if determined adversely to the Company, would have a material adverse effect on the Company.

Indemnification

Additionally, in the ordinary course of business, the Company may provide indemnification of varying scope and terms to customers, vendors, investors, directors and officers with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments that the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has it been sued in connection with these indemnification arrangements.

As of September 30, 2021 and December 31, 2020, the Company has not accrued a liability for any legal proceedings, claims or indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with them is not probable or reasonably estimable.

Note ~~11. Commitments~~8. Shareholders’ Equity

Common Stock – GTY is authorized to issue 400,000,000 shares of common stock with a par value of $0.0001 per share.

On November 25, 2020, the Company entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. (“B. Riley”) and ~~Contingencies~~

~~Successor~~

~~Legal Proceedings~~

~~From~~Needham & Company (“Needham” and together with B. Riley, the “Sales Agents”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time ~~the Companies may become involved in legal proceedings arising in the ordinary course~~at its sole discretion, shares of its ~~business.~~common stock, par value $0.0001 per share, having an aggregate offering price of up to $10.0 million through B. Riley and Needham as its sales agents. The issuance and sale, if any, of shares of common stock by the Company ~~is not presently a party to any legal proceedings that, if determined adversely~~under the At Market Sales Agreement will be made pursuant to the Company’s effective registration statement on Form S-3. During the three months ended March 31, 2021, the Company ~~would have~~sold 935,633 of common shares for $6.8 million in proceeds.

During the three months ended March 31, 2021, the Company issued 358,658 of common shares for the same number of exchangeable shares to the former shareholders of Questica and Bonfire.

On August 25, 2021, the Company instructed its current transfer agent to cancel 48,820 common shares erroneously designated to be issued to a ~~material adverse effect on~~former eCivis shareholder. The former eCivis shareholder received cash consideration instead of shares as part of the ~~Company.~~Acquisition, and the Company’s previous transfer agent failed to cancel these shares.

2720

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

~~On November 19, 2018,~~Share Redemptions

Under the agreements with eCivis, the Company ~~commenced a lawsuit against OpenGov, Inc. (“OpenGov”)~~acquired eCivis for aggregate consideration of approximately $14.0 million in ~~the United States District Court for the Southern District~~cash and 2,883,433 shares of ~~New York captioned GTY Technology Holdings Inc. et al. v. OpenGov, Inc., No. 18-cv-10854 (the “New York Action”), and on November 20, 2018, OpenGov commenced a lawsuit against the~~ Company GTY Cayman, GTY Technology Merger Sub, Inc., GTY Investors, LLC, Mr. You, Mr. Rohleder and Does 1-50 in the Superior Court of the State of California in and for the County of San Mateo captioned OpenGov, Inc. v. GTY Technology Holdings Inc. et al., No. 18-cv-06264 (the “California Action”).

On February 19, 2020, the parties to the New York Action and the California Action entered into a settlement agreement (the “Settlement Agreement”) to resolve all the pending claims in the New York Action and the California Action, without any admission or concession of wrongdoing by the Company or other defendants. Pursuant to the Settlement Agreement, the Company paid OpenGov $3.3 million, net of amounts paid by the Company’s insurers, in exchange for a full and complete release of all claims that were or could have been asserted in the New York Action and the California Action.

~~Indemnification~~

~~In the ordinary course of business, the Company may provide indemnification of varying scope and terms to customers, vendors, investors, directors and officers with respect to certain matters,~~common stock, including but not limited to, losses arising out of our breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor have it been sued in connection with these indemnification arrangements.

As of September 30, 2020, and December 31, 2019, the Company has not accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements is not probable or reasonably estimable.

~~Note 12. Shareholders’ Equity~~

~~Initial Public Offering Redemption Shares~~

~~In connection with a shareholder meeting called to approve the business combination, the Company provided the holders of its then outstanding Class A ordinary~~703,631 shares sold in the Company’s initial public offering (the “public shareholders”) with the opportunity to redeem all or a portion of their public shares. The public shareholders were entitled to redeem their public shares for a pro rata portion of the remaining balance in the trust account established in connection with the Company’s initial public offering for the benefit of the Company’s ~~public shareholders and into~~common stock which ~~substantially all~~are redeemable for cash at any time in the sole discretion of the proceeds from the initial public offering were deposited (the “Trust Account”). The remaining 20,289,478 GTY Cayman public shares were recorded at a redemption value and classified as temporary equity upon the completion of the initial public offering, in accordance with ASC 480 - Distinguishing Liabilities from Equity. In connection with the business combination, 11,073,040 Class A ordinary shares of GTY were redeemedCompany for ~~$114.0 million, at a per share price of approximately $10.29. The remaining 9,216,438 shares with a redemption value of $88.9 million were transferred to permanent equity.~~

~~Subscription Agreement~~

Immediately prior to the Closing, pursuant to subscription agreements (the “Subscription Agreements”), dated as of various dates from January 9, 2019 through February 12, 2019, by and among GTY Cayman and certain institutional and accredited investors party thereto (the “Subscribed Investors”), GTY Cayman issued to the Subscribed Investors an aggregate of 12,863,098 Class A ordinary shares of GTY Cayman for $10.00 per share, for an aggregate cash purchase

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

price of approximately $126.4 million and paid fees of $1.1 million, including three such Subscription Agreements with certain CityBase holders (including Michael Duffy, the chief executive officer of CityBase) for an aggregate of 380,937 Class A ordinary shares of GTY Cayman at a price of $10.00 per share ~~for an aggregate cash purchase price~~(the “Redeemable Shares”). Upon redemption of approximately $3.8 million. The Class A ordinary shares of GTY Cayman issued to the Subscribed Investors were cancelled and exchanged on a one-for-one basis for shares of Company common stock at the Closing.

In connection with the Subscription Agreements, immediately prior to the Closing, the Sponsor surrendered to GTY Cayman for cancellation (at no cost to GTY Cayman) 231,179 Class B ordinary shares, which have been retroactively adjusted in the accompanying statement of shareholders’ equity, and sold 500,000 private placement warrants held by it to an accredited investor in a private placement for an aggregate of $0.3 million or $0.50 per warrant (which was $1.00 per warrant less than the price originally paid for such warrants).

~~GTY Merger Share Exchange~~

In connection with the GTY Merger, all of the issued and outstanding shares of GTY Cayman were exchanged for an equal number of shares of GTY common stock and immediately before the exchange, each outstanding unit was separated into its component Class A ordinary share and warrant. Upon the exchange, 22,978,520 Class A and 13,568,821 Class B ordinary shares of GTY Cayman were exchanged for an aggregate of 36,547,341 shares of common stock of GTY.

~~Shares issued in the Acquisition~~

As part of the consideration for the Acquisition, the Company issued (a) 11,973,154 shares of common stock (as adjusted by the Measurement Period Adjustment – see below), of which 3,937,907 were redeemable at the option of the Company (the “Acquisition Redemption Shares”), (b) 2.6 million Class A and 0.5 million Class C shares (the “Class C Shares”) of Questica Exchangeco (the “Questica Shares”) and 2,161,741 shares of Bonfire Exchangeco shares (collectively, the “Exchange Shares”) that are exchangeable into an equal number of common stock of the Company. The Exchange Shares are recorded as shares of common stock of the Company. The Company also issued 1,000,000 Class B shares of Questica Shares which are not exchangeable for common stock and are therefore not recorded as shares of common stock of the Company. The shares issued as consideration in the Acquisition were valued at $10 per share in the accompanying condensed consolidated financial statements.

The 0.5 million Class C Shares were redeemable at the option of the shareholder at $10 per share, and thus the Company had classified the Class C Shares in the capital stock of Questica Exchangeco as temporary equity in accordance with ASC 480 - "Distinguishing Liabilities from Equity." In June 2019, these shares were redeemed for 0.5 million shares of Common Stock at the market price of $7.72, or $3.9 million, and transferred to permanent equity, and $1.3 million of cash. The incremental $0.2 million above the stated redemption price was recorded as a deemed dividend in the accompanying condensed consolidated financial statements.

~~In April 2019, 193,645 shares of the Bonfire Exchangeco Shares were converted into the Company’s Common Stock on a one-for-one basis (see Note 5).~~

~~During the year ended December 31, 2019, there was a Measurement Period Adjustment to change $41,500, or 4,150 shares, of stock consideration to cash consideration (see Note 5).~~

During the year-ended December 31, 2019, the option to redeem 3,155,961 shares from the acquisition of CityBase was not exercised and expired and the 100,000 OC Redeemable Shares were redeemed. As of March 31, 2019, 525,060 shares of the Acquisition Redemption Shares, resulting from the Redeemable Shares, ~~from the acquisition of eCivis, remained redeemable at the option of the Company. The Redeemable Shares from the acquisition of eCivis require~~ the Company tomust simultaneously redeem additional shares ~~(equal~~from the holder equal to 40% of the number of Redeemable Shares being ~~redeemed).~~ redeemed (the “Additional Shares”) at $10 per share. If the Redeemable Shares were not redeemed by February 12, 2020 and ~~are not redeemed by~~ February 12, 2021, ~~respectively,~~

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

the Company was ~~and will be~~ required to issue additional shares, as calculated based on the number of outstanding Redeemable Shares. OnIn June 2019, 178,571 Redeemable Shares and 71,428 Additional Shares were redeemed and the Company recorded a $0.8 million loss. During February ~~20,~~ 2020, the Company issued 334,254 ~~of these additional shares with respect to the February 12, 2020 deadline~~Additional Shares and recorded a ~~loss of~~ $2.1 ~~million.~~

In March 2020 and April 2020, 246,097 and 230,199 shares of the Bonfire Exchangeco Shares were converted into the Company’s common stock on a one-for-one basis, respectively. In September 2020, to correct an over allocation of common shares held in escrow, 352,675million loss. The remaining 525,060 shares of common stock were ~~returned to the Company and 352,675 of the Bonfire Exchangeco Shares were issued to the Bonfire Holders.~~

~~Common Stock~~ ~~– GTY is authorized to issue 400,000,000 shares of common stock with a par value of $0.0001 per share.~~

~~In March 2019, the Company~~ redeemed ~~100,000 shares of common stock~~ for a ~~promissory note in the principal amount~~total of $1,000,000, bearing interest at a rate of 8% per annum in the first year after issuance and 10.0% per annum thereafter (subject to an increase of 1% for each additional 6 months that has elapsed without full payment of such note(s)) and included these in Treasury Stock in the accompanying condensed consolidated balance sheets.

In April 2019, the Company repurchased 264,998 shares of common stock for $2.6 million. These shares were included in Treasury Stock in the accompanying condensed consolidated balance sheets at the stock price on the date of the repurchases, or $2.4$8.0 million and the ~~remaining $0.2~~Company recorded a $5.3 million ~~is included in Loss from repurchase of shares in the condensed consolidated statements of operations and comprehensive loss.~~

~~In June 2019, the Company issued 3.5 million shares of common stock in a registered direct offering for $25.5 million, at a price of $7.70 per share, net of $1.5 million of offering costs.~~

~~In June 2019, 2 Bonfire employees cashless exercised 284 stock options and the Company issued 117 shares of common stock. For~~loss during the three months ended March 31, ~~2020, Bonfire employees exercised 112,526 stock options for the issuance of shares of common stock. See Note 8.~~

In July 2019, in accordance with the eCivis Agreement and the eCivis Letter Agreement, the Company repurchased 250,000 shares of common stock for $2.5 million. These shares were included in Treasury Stock in the accompanying condensed consolidated balance sheets at the stock price on the date of the repurchases, or $1.7 million, and the remaining $0.8 million is included in Loss from repurchase of shares in the condensed consolidated statements of operations and comprehensive loss.

~~In December 2019 and for the nine months ended September 30, 2020, 97,595 and 433,484 shares of common stock were issued, respectively, for the vesting of RSUs.~~

During the nine months ended September 30, 2020, the Company issued 1,550,388 of exchangeable shares and 336,965 shares of common stock to the former shareholders of Questica and Sherpa, respectively, for contingent consideration related to achieving certain acquisition related milestones.

~~Share Repurchases~~

In March 2019, the Company redeemed 100,000 shares of common stock, the OC Redeemable Shares (see Note 5), for a promissory note in the principal amount of $1,000,000, which was subsequently repaid in March 2019, and included these in Treasury Stock in the accompanying condensed consolidated balance sheets.

In July 2019, in accordance with the eCivis Agreement and the eCivis Letter Agreement, the Company repurchased 250,000 shares of common stock (178,571 Redeemable Shares and 71,428 Additional Shares) for $2.5 million. These shares were included in Treasury Stock in the accompanying condensed consolidated balance sheets at the stock price on

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED STATEMENTS~~

~~(UNAUDITED)~~

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

the date of the repurchases, or $1.7 million, and the remaining $0.8 million is included in Loss from repurchase of shares in the condensed consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2019, the Company repurchased 266,366 shares of common stock for $2.6 million. These shares were included in Treasury Stock in the accompanying condensed consolidated balance sheets at the stock price on the date of the repurchases, or $2.4 million, and the remaining $0.2 million is included in Loss from repurchase of shares in the condensed consolidated statements of operations and comprehensive loss.2021.

Preferred Shares – GTY is authorized to issue ~~1,000,000~~25,000,000 preferred shares with a par value of $0.0001 per share. As of September 30, 2021 and December 31, 2020, there were 0 preferred shares issued or ~~outstanding~~.outstanding.

Warrants

At September 30, 2021 and December 31, 2020, there were a total of 27,093,334 warrants ~~outstanding.~~outstanding including 18,400,000 public warrants and 8,693,334 private warrants. The warrants were originally sold as part of the units offered in the ~~IPO.~~Company’s initial public offering and expire five years from the date of the Acquisition or February 2024. Each warrant entitles the holder thereof to purchase one share of common stock at a price of $11.50 per share, subject to adjustments. The warrants may be exercised only for a whole number of shares of common stock. NaN fractional shares will be issued upon exercise of the warrants.

The Company may call the public warrants for redemption, in whole and not in part, at a price of $0.01 per warrant, upon not less than 30 days’ prior written notice of redemption to each warrant holder, if, and only if, the reported last sale price of common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders. The private warrants ~~were determined~~are not callable for redemption and are marked to ~~be equity classified~~market and included in ~~accordance~~warrant liabilities with ~~ASC 815 - Derivatives~~non-cash fair value adjustments recorded into earnings during each reporting period.

Note 9. Share-Based Compensation

Stock Options

In connection with the Acquisition, the Company adopted a stock option plan and ~~Hedging.~~issued 408,667 stock options to employees. The total fair value of the stock options at the grant date was $3.6 million.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

A summary of stock option activity is as follows:


				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Total
	Number of	Exercise		Life (in	Intrinsic
	Shares	Price		years)	Value
Outstanding as of December 31, 2020	245,904	$	2.26	7.0	$	1,130
Granted	—		—	—		—
Exercised	(5,133)		1.16
Forfeited/expired	(350)		1.16
Outstanding as of September 30, 2021	240,421	$	2.28	6.2	$	1,099
Options vested and exercisable	218,133	$	2.28	6.2	$	998

For the three months ended September 30, 2021 and 2020, the Company recorded approximately less than $0.1 million and $0.1 million, respectively, of share-based compensation expense related to the options. As of September 30, 2021, the Company has less than $0.1 million of unrecognized share-based compensation cost to be recognized over 0.4 years.

Restricted Stock Units

Subsequent to the Acquisition, the Company adopted a plan to issue restricted stock units (“RSUs”) to employees as annual performance awards. RSUs may vest in ratable annual installments over either two or four years, as applicable, from the date, or RSUs may vest subject to the achievement of certain performance conditions over a three-year performance period, in each case, assuming continuous service by the employees through the applicable vesting dates.

A summary of the Company's RSU’s and related information is as follows:


		Weighted Average
	Number of Units	Grant Price
Unvested as of December 31, 2020	3,280,290	$	4.94
Granted	2,017,209		6.46
Vested	(1,064,660)		4.82
Forfeited/expired	(349,598)		5.35
Unvested as of September 30, 2021	3,883,241	$	5.72

For the three months ended September 30, 2021 and 2020, the Company recorded approximately $3.3 million and $1.9 million, respectively, of share-based compensation expense related to the RSUs. As of September 30, 2021, the Company had unrecognized share-based compensation expense related to all unvested RSUs of approximately $14.9 million. The weighted average remaining contractual term of unvested RSUs is approximately 1.0 year at September 30, 2021. 947,276 of the unvested RSUs contain performance conditions subject to achieving segment specific revenue and profitability metrics.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

Note ~~13.~~10. Segment Reporting

The Company conducts ~~the~~its business through the following 65 operating segments: ~~Bonfire, CityBase, eCivis, Open Counter, Questica~~Procurement, Payments, Grants Management, Permitting, and ~~Sherpa.~~Budget.

The accounting policies of the operating segments are the same as those described in Note 4. Non-allocated interest expense and various other administrative costs are reflected in Corporate (GTY). Corporate assets include cash and cash equivalents, prepaid expenses and other current assets.3. The following provides operating information about the Company’s reportable segments for the periods ~~presented (in thousands):~~presented:


	Corporate		Procurement		Payments		Grants Management		Permitting		Budget		Total
Three Months Ended September 30, 2021
Total revenue	$	—		2,690		4,172		1,925		720		6,750	$	16,257
Cost of revenues		—		516		2,245		895		170		2,088		5,914
Income (loss) from operations		(2,088)		(687)		(3,865)		(1,296)		(424)		(109)		(8,469)
Amortization of intangible assets		—		666		1,386		326		302		988		3,668
Depreciation expense		1		44		87		9		9		106		256
Interest income (expense), net		(863)		—		74		—		—		—		(789)
Benefit from (provision for) income taxes		—		—		—		—		—		93		93

Three Months Ended September 30, 2020
Total revenue	$	—		2,100		1,903		1,878		669		6,037	$	12,587
Cost of revenues		—		369		1,289		821		143		1,998		4,620
Income (loss) from operations		(1,421)		(875)		(4,043)		(814)		(473)		354		(7,272)
Amortization of intangible assets		—		666		1,385		330		303		999		3,683
Depreciation expense		—		45		57		24		4		96		226
Interest income (expense), net		(414)		—		(24)		(2)		—		(1)		(441)
Benefit from (provision for) income taxes		—		—		227		237		132		(212)		384

Nine Months Ended September 30, 2021
Total revenue	$	—		7,791		9,220		5,509		2,058		19,255	$	43,833
Cost of revenues		—		1,481		5,738		2,190		492		5,971		15,872
Income (loss) from operations		(5,934)		(2,087)		(13,258)		(3,107)		(1,294)		1,154		(24,526)
Amortization of intangible assets		—		1,976		4,111		976		901		2,947		10,911
Depreciation expense		—		138		267		26		15		318		764
Interest income (expense), net		(2,562)		1		54		6		—		—		(2,501)
Benefit from (provision for) income taxes		—		—		(5)		—		—		159		154

Nine Months Ended September 30, 2020
Total revenue	$	—		5,503		5,957		4,831		1,907		16,829	$	35,027
Cost of revenues		—		1,120		4,419		2,274		427		5,301		13,541
Loss from operations		(8,354)		(4,026)		(14,506)		(3,240)		(1,846)		379		(31,593)
Amortization of intangible assets		—		1,992		4,119		980		904		3,003		10,998
Depreciation expense		—		91		190		32		5		121		439
Interest income (expense), net		(1,031)		2		(81)		(4)		—		1		(1,113)
Benefit from (provision for) income taxes		—		—		1,031		925		528		(416)		2,068

As of September 30, 2021
Goodwill	$	—		68,744		88,327		45,140		21,956		60,468	$	284,635
Assets		19,787		92,652		101,166		54,051		26,762		120,615		415,033

As of December 31, 2020
Goodwill	$	—		68,744		88,327		45,140		21,956		60,468	$	284,635
Assets		31,407		92,841		110,339		55,676		28,474		113,710		432,447

Revenues from North America customers accounted for greater than 90% of the Company’s revenues for the periods presented.

3123

Table of Contents

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

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

GTY

Bonfire

CityBase

eCivis

OpenCounter

Questica

Sherpa

Total
Successor
















Three Months Ended September 30, 2020
















Total revenue

$
—

$
2,100

$
1,903

$
1,878

$
669

$
4,389

$
1,648

$
12,587
Cost of goods sold

—

369

1,289

821

143

927

1,071

4,620
Income (loss) from operations

(1,421)

(875)

(4,043)

(814)

(473)

411

(57)

(7,272)

Successor
















Three Months Ended September 30, 2019
















Total revenue

$
—

$
1,174

$
1,551

$
1,638

$
407

$
3,083

$
901

$
8,754
Cost of goods sold

—

277

958

454

105

653

136

2,583
Income (loss) from operations

(2,441)

(1,634)

(4,354)

17

(614)

(537)

(52)

(9,615)

Successor

Nine Months Ended September 30, 2020
















Total revenue

$
—

$
5,503

$
5,957

$
4,831

$
1,907

$
12,319

$
4,510

$
35,027
Cost of goods sold

—

1,120

4,419

2,274

427

2,609

2,692

13,541
Income (loss) from operations

(8,354)

(4,026)

(14,506)

(3,240)

(1,846)

374

5

(31,593)
















Successor
















February 19, 2019 through September 30, 2019
















Total revenue

$
—

$
2,385

$
4,634

$
3,200

$
929

$
6,311

$
2,575

$
20,034
Cost of goods sold

—

643

3,168

1,087

263

1,468

461

7,090
Loss from operations

(21,989)

(7,911)

(12,821)

(1,885)

(1,363)

(12,611)

(2,750)

(61,330)

Predecessor

January 1, 2019 through February 18, 2019
















Total revenue

$
—

$
593

$
820

$
673

$
298

$
1,913

$
631

$
4,928
Cost of goods sold

—

124

746

267

51

296

130

1,614
Income (loss) from operations

—

(741)

(1,499)

(265)

46

550

354

(1,555)
















Successor
















As of September 30, 2020
















Goodwill

$
—

$
68,744

$
88,327

$
47,140

$
21,956

$
57,971

$
2,497

$
286,635
Assets

18,830

92,366

112,701

58,214

28,068

103,526

11,598

425,303
















Successor
















As of December 31, 2019
















Goodwill

$
—

$
68,744

$
88,327

$
47,140

$
21,956

$
57,971

$
2,497

$
286,635
Assets

25,899

92,803

122,851

59,456

29,995

97,013

6,376

434,393

~~Revenues from North America customers accounted for greater than 90% of the Company’s revenues for the periods presented.~~

Note ~~14.~~11. Subsequent Events

The Company has evaluated events from September 30, ~~2020~~2021 through the date the financial statements were issued. There were no subsequent events that need disclosure.

3224

Table of Contents

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on ~~March 13, 2020.~~February 19, 2021. Certain statements in this Quarterly Report on Form 10-Q are ~~"forward-looking statements"~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the ~~"Securities Act"~~“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~"Exchange Act"~~“Exchange Act”). These statements involve a number of risks, uncertainties and other factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors ~~which~~that could materially affect such forward-looking statements can be found in the section entitled ~~"Risk Factors"~~“Risk Factors” in our Annual Report on Form 10-K for the year ended December ~~31, 2019, our Quarterly Report for the quarter ended March~~ 31, 2020 and elsewhere in this Form 10-Q. Investors are urged to consider these factors carefully in evaluating any forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date hereof, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Certain statements in the following discussions are based on non-GAAP financial measures. A “non-GAAP financial measure” is a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of comprehensive income, balance sheets or statements of cash flows of the issuer; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. The Company includes non-GAAP financial measures in this Management’s Discussion and Analysis, as the Company’s management believes that these measures and the information they provide are useful to investors because they permit investors to view the Company’s performance using the same tools that management uses and to better evaluate the Company’s ongoing business performance. In order to better align the Company’s reported results with the internal metrics used by the ~~Company's~~Company’s management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting related to the Acquisition. See “Reconciliation of Non-GAAP Revenues” below for more information and reconciliations of such measures to the nearest comparable GAAP measures.

Overview

~~GTY Technology Holdings Inc. (“GTY”, “we,” or the “Company”) is~~We are a public sector company that offers a cloud-based suite of solutions primarily for North American state and local governments. Our six wholly-owned subsidiaries are Bonfire, ~~Interactive Ltd. (“Bonfire”),~~ CityBase, ~~Inc. (“CityBase”),~~ eCivis, ~~Inc. (“eCivis”),~~ Open Counter, ~~Enterprises Inc. (“Open Counter”),~~ Questica ~~Inc. (“Questica”),~~ and ~~Sherpa Government Solutions (“Sherpa”).~~Sherpa. Through our operating subsidiaries, we serve some of the fastest growing segments in the government technology sector, ~~including~~specifically procurement, payments, grants management, permitting, and budgeting.

We were formed on August 11, 2016 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “business combination”). Until the business combination, we did not engage in any operations nor generate any revenues. We recognized an opportunity to replace costly legacy on-premises software systems with scalable and efficient ~~Software as a Service, or~~ SaaS products. Our search led to the acquisition (the “Acquisition”) of Bonfire, CityBase, eCivis, Open Counter, Questica, and Sherpa on February 19, ~~2019 (the “Closing Date”).~~2019.

Our customers are primarily located in the United States and Canada, including counties, municipalities, special districts, law enforcement agencies and public school districts. We plan to continue to increase our customer base by leveraging our comprehensive product portfolio with our existing customer base, investing in direct sales to new customers, and ~~utilizing partnerships~~using relationships with other companies that offer complementary products and services.

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We have historically signed a high percentage of agreements with new customers, as well as renewal agreements with existing customers, in the second and third quarters of each year and usually during the last month of the quarter. This can be attributed to buying patterns typical in the public sector. As the terms of most of our customer agreements are measured in full year increments, agreements initially entered into in any given month of any quarter will generally come up for

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renewal at that same time in subsequent years. This seasonality is reflected in our invoicing and cash flows with our highest collections occurring in the second ~~and third quarters and lower collections in the first and fourth quarters.~~half of each calendar year.

Our variable consideration or usage fee revenue is also dependent on the payment patterns of our customers’ constituents. Historically, a high percentage of these usage fees have been earned in the second and fourth quarters of each year. This seasonality is also reflected in our revenues and cash flows during the respective periods.

The Acquisition was accounted for as a business combination under GAAP and resulted in a change in accounting basis as of the date of the Acquisition. As a result, our condensed consolidated financial statements for the period beginning on February 19, 2019 are presented on a different basis than that for the periods before February 19, 2019, and therefore are not comparable. As a result of the application of the acquisition method of accounting, our condensed consolidated financial statements and certain presentations are separated into two distinct periods to indicate the different ownership and accounting basis between the periods presented: (i) the period before the consummation of the Acquisition, which includes the period from January 1, 2019 to the Closing Date (“2019 Predecessor Period”), and (ii) the periods on and after the consummation of the acquisition, which includes the period including and after the Closing Date to September 30, 2019 (“2019 Successor Period”), and the three months and nine months ended September 30, 2020.

Expansion and Further Penetration of Our Customer Base. We employ a strategy that focuses on acquiring new customers and growing our relationships with existing customers over time. We believe that significant opportunity exists for us to acquire new customers as well as expand the use of our platforms by selling additional products and increasing the number of users within our current customers’ organizations.

Investment in Growth. We plan to continue to invest in our business so that we can capitalize on our market opportunity. We intend to continue to grow our sales and marketing team to acquire new customers and to increase sales to existing customers. We intend to continue to grow our research and development team to extend the functionality and range of our applications. We also intend to invest in new and improved ITinformation technology solutions to support our business. However, we expect our sales and marketing expenses and research and development expenses as a percentage of revenues to decrease over time as we grow our revenues and gain economies of scale by increasing our customer base and increase sales to our existing customer base. We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term.

Leveraging ~~Partnerships~~Relationships. We plan to continue to strengthen and expand our relationships with technology vendors, professional services firms, and resellers. These relationships enable us to increase the speed of deployment and offer a wider range of integrated services to our customers. We intend to support these existing relationships, seek additional relationships and further expand our channel of resellers to help us increase our presence in existing markets and to expand into new markets. Our business and results of operations will be significantly affected by ~~our success~~whether we succeed in leveraging and expanding these relationships.

Market Adoption of Our Platforms. A key focus of our sales and marketing efforts is creating market awareness about the benefits of our cloud-based SaaS platforms. The market for SaaS solutions is less mature than the market for on-premise software applications, and potential customers may be slow or unwilling to migrate from their legacy solutions. Our business and operating results will be significantly affected by the degree to and speed with which organizations adopt our solutions.

Key Components of our Results of Operations

Revenues

Subscription, support and maintenance. We ~~provide software hosting services that~~deliver our solutions primarily as a subscription service and provide customers with access to ~~software related~~SaaS-related support and updates during the term of the arrangement. Revenues are recognized ratably over the contract

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term as the customer simultaneously receives and consumes the benefits of the subscription service. ~~The first year of subscription~~Subscription fees are typically payable within 30 days after the execution of a contract, and thereafter upon renewal. We initially record subscription fees as contract liabilities and recognize revenues on a straight-line basis over the term of the agreement.

Our contracts may include variable consideration in the form of usage fees, which are included in the transaction price in the period in which the usage occurs and the fee is known.

Revenues from subscription, support and maintenance comprised approximately 72% and 71% of total revenues for the three months ended September 30, 2021 and 2020 and 76% and 72% for the nine months ended September 30, ~~2020.~~2021 and 2020, respectively.

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Professional services. Our professional services contracts generate revenues on a time and materials, or fixed fee or subscription basis. Revenues are recognized as the services are rendered for time and materials contracts. Revenues are recognized when the milestones are achieved and accepted by the customer or on a proportional performance basis for fixed fee contracts. Revenues are recognized ratably over the contract term for subscription contracts. The milestone method for revenue recognition is used when there is substantive uncertainty at the date the contract is entered into regarding whether the milestone will be achieved. Training revenues are recognized as the services are performed. Revenues from professional services comprised approximately ~~24%~~20% and 23% of total revenues for the three months ended September 30, 2021 and 2020 and 21% and 24% for the nine months ended September 30, ~~2020.~~2021 and 2020, respectively.

~~License.~~License. Revenues from distinct ~~licenses~~licensed software are recognized upfront when ~~the~~that software is made available to the customer, which normally coincides with contract execution, as this is when the customer has the risks and rewards of the right to use the software. Revenues from licenses comprised approximately 4%less than 1% and 5% of total revenues for the three months ended September 30, 2021 and 2020 and approximately less than 1% and 4% for the nine months ended September 30, ~~2020.~~2021 and 2020, respectively.

Asset ~~sales.~~sales. Revenues from asset sales are recognized when the asset, typically a kiosk, has been received by the ~~client~~customer and is fully operational and ready to accept transactions, which is when the customer obtains control and has the risks and rewards of the asset. ~~Revenues from asset~~Asset sales comprised approximately 8% and less than 1% of total revenues for the three months ended September 30, 2021 and 2020 and approximately 3% and less than 1% for the nine months ended September 30, ~~2020.~~2021 and 2020, respectively.

Cost of Revenues

Cost of revenues primarily consists of salaries and benefits of personnel relating to our hosting operations and support, implementation, and grants research. Cost of revenues includes data center costs including depreciation of the Company’s data center assets, third-party licensing costs, consulting fees, and the amortization of acquired technology from recent acquisitions.

Operating Expenses

Sales and marketing

Sales and marketing expenses consist primarily of personnel costs of our sales and marketing employees, including salaries, sales commissions and incentives and benefits, travel and related costs, outside consulting fees, marketing programs, including lead generation, and costs of advertising and trade shows. We defer sales commissions and amortize them ratably over the expected customer life. We expect that sales and marketing expenses will increase as we expand our direct sales teams and increase sales through our strategic relationships and resellers.

Research and development

Research and development expenses consist primarily of salaries and benefits associated with our engineering, product and quality assurance personnel. Research and development expenses also include the cost of third-party contractors. Other than internal-use software development costs that qualify for capitalization, research and development costs are expensed as incurred. We expect research and development costs to increase as we develop new solutions and make improvements to our existing platforms.

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General and administrative

General and administrative expenses consist primarily of salaries and benefits with our executive, finance, legal, human resources, compliance and other administrative personnel, accounting, auditing and legal professional services fees, recruitment costs, and other corporate-related expenses. We expect that general and administrative expenses will increase as we scale our business, but at a ~~slower~~lower rate ~~than sales and marketing and research and development, as we incur the costs of compliance associated with being a publicly-traded company, including legal, audit and consulting fees.~~

~~Restatement of Previously Issued Financial Statements~~over time.

In the Company’s condensed financial statements as of and for the three months ended March 31, 2020 and June 30, 2020, we previously reported a current contingent liability of $10 million associated with an earnout as part of the Questica Acquisition. The earnout was actually settled in March 2020 with a transfer of 1,550,388 exchangeable shares to the former owners of Questica. We should have reduced the current contingent liability by $10 million and increased exchangeable shares within equity by the same amount in the first quarter of 2020. This adjustment is now reflected appropriately in the balance sheet as of September 30, 2020.

~~Results of Operations~~

We accounted for the Acquisition as a business combination, which resulted in a new basis of accounting. Refer to Note 4 of the notes to our condensed consolidated financial statements for additional information. As a result of the Acquisition, our condensed consolidated financial statements for the period after February 19, 2019 is presented on a different basis than that for the periods before February 19, 2019 due to the application of purchase accounting as of February 19, 2019 and, therefore, are not comparable.

~~The Acquisition resulted in the following principal impacts for the period subsequent to the Acquisition date:~~

●

A reduction in revenues in the three and nine months ended September 30, 2020 and the 2019 Successor Period as a result of the contract liabilities at the Acquisition date being recorded at fair value, an amount less than its then carrying value;

●

Increased amortization expense resulting from recording of intangible assets at fair value. We record amortization of acquired developed technology in cost of revenues, amortization of customer relationships in sales and marketing expenses, and amortization of covenants not to compete and tradename intangible assets in general and administrative expenses;

●

~~Contingent consideration issued as part of the Acquisition was recorded at fair value each period with changes in fair value recorded in general and administrative costs; and~~

●

~~Transaction costs were expensed as incurred as a separate line item in our condensed consolidated statement of operations;~~

We believe reviewing our operating results by combining the results of the 2019 Predecessor Period and 2019 Successor Period (“S/P Combined Period”) is more useful in discussing our overall operating performance when compared to the nine months ended September 30, 2020.

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Results of Operations

Three Months Ended September 30, ~~2020~~2021 Compared to the Three Months Ended September 30, ~~2019~~2020

Total revenues

Our total revenues were ~~$12.6~~$16.3 million for the three months ended September 30, ~~2020.~~2021. Excluding the $0.1 million impact of purchase accounting, our total non-GAAP revenues for the three months ended September 30, ~~2020~~2021 was ~~$12.7~~$16.4 million compared to ~~$9.8~~$12.7 million for the three months ended September 30, ~~2019,~~2020, representing a ~~30%~~29% increase. This increase was driven by an increase in the number of customers, an increase in the number of users added by existing customers and an increase in the number of products purchased by existing customers. The change in revenues for each operating segment is provided in the following table (in thousands, except percentages):

Generally Accepted Accounting Principles (“GAAP”)

Non-GAAP

Total

Total

Increase /

Increase /

Total

Total

Increase /

Increase /

Revenues

Revenues

(Decrease)

(Decrease)

Revenues

Revenues

(Decrease)

(Decrease)


2020

2019

in Dollars

in %

2020

2019

in Dollars

in %

Bonfire

$
2,100

$
1,174

$
926

79
%
$
2,100

$
1,310

$
790

60
%
CityBase

1,903

1,551

352

23
%

2,031

1,708

323

19
%
eCivis

1,878

1,638

240

15
%

1,878

1,857

21

1
%
Open Counter

669

407

262

64
%

669

532

137

26
%
Questica

4,389

3,083

1,306

42
%

4,389

3,450

939

27
%
Sherpa

1,648

901

747

83
%

1,648

901

747

83
%
Total

$
12,587

$
8,754

$
3,833

44
%
$
12,715

$
9,758

$
2,957

30
%



	Generally Accepted Accounting Principles (“GAAP”)								Non-GAAP
	Total		Total		Increase /		Increase /		Total		Total		Increase /		Increase /
	Revenues		Revenues		(Decrease)		(Decrease)		Revenues		Revenues		(Decrease)		(Decrease)
	2021		2020		in Dollars		in %		2021		2020		in Dollars		in %
Procurement	$	2,690	$	2,100	$	590	28	%	$	2,690	$	2,100	$	590	28	%
Payments		4,172		1,903		2,269	119	%		4,277		2,031		2,246	111	%
Grants Management		1,925		1,878		47	3	%		1,925		1,878		47	3	%
Permitting		720		669		51	8	%		720		669		51	8	%
Budget		6,750		6,037		713	12	%		6,750		6,037		713	12	%
Total	$	16,257	$	12,587	$	3,670	29	%	$	16,362	$	12,715	$	3,647	29	%

A reconciliation of non-GAAP revenues and other non-GAAP financial measures is included in the section titled “Reconciliation of Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q.

Total cost of revenues

Our total cost of revenues for the three months ended September 30, 2021 increased primarily as a result of costs associated with our asset sales, headcount additions to support our revenue growth and share-based compensation resulting from the grant of restricted stock units. The change in cost of revenues for each operating segment is due to the following (in thousands, except percentages):



	Total Cost of		Total Cost of		Increase /		Increase /
	Revenues		Revenues		(Decrease)		(Decrease)
	2021		2020		in Dollars		in %
Procurement	$	516	$	369	$	147	40	%
Payments		2,245		1,289		956	74	%
Grants Management		895		821		74	9	%
Permitting		170		143		27	19	%
Budget		2,088		1,998		90	5	%
Total	$	5,914	$	4,620	$	1,294	28	%

Procurement

Procurement’s total cost of revenues increased by $0.1 million or 40% primarily due to a $0.1 million or 45% increase in salaries and benefits driven by a 30% increase in average headcount from September 30, 2020 to September 30, 2021.

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Payments

Payments’ total cost of revenues increased by $1.0 million or 74% primarily due to a $0.6 million increase in costs associated with our asset sales, a $0.1 million increase in bank fees, a $0.1 million increase in costs associated with finance lease liabilities, and a $0.1 million increase in amortization of internal-use software.

Grants Management

Grants Management’s total cost of revenues increased by $0.1 million or 9% primarily due to a $0.3 million or 271% increase in the cost of third-party contractors offset by a $0.1 million or 60% decrease in royalty costs.

Permitting

Permitting’s total cost of revenues was materially consistent year-over-year.

Budget

Budget’s total cost of revenues increased by $0.1 million or 5% primarily due to a $0.3 million or 34% increase in salaries and wages and a $0.2 million or 104% increase in share-based compensation related to the issuance of restricted stock units, partially offset by a $0.3 million or 54% decrease in royalty costs.

Operating expenses (sales and marketing, general and administrative, and research and development)

Our operating expenses (including sales and marketing, general and administrative and research and development expenses) for the three months ended September 30, 2021 have increased due primarily to an increase in share-based compensation expense resulting from the issuance of restricted stock units, salaries and wages from an increase in headcount, reestablishment of business travel, and expansion of third-party costs to support operations. The change in operating expenses for each operating segment is due to the following (in thousands, except percentages):



	Total		Total
	Operating		Operating		Increase /		Increase /
	Expenses		Expenses		(Decrease)		(Decrease)
	2021		2020		in Dollars		in %
Procurement	$	2,195	$	1,940	$	255	13	%
Payments		3,558		3,271		287	9	%
Grants Management		1,998		1,541		457	30	%
Permitting		671		696		(25)	(4)	%
Budget		3,399		2,669		730	27	%
Corporate		2,088		1,437		651	45	%
Total	$	13,909	$	11,554	$	2,355	20	%

Procurement

Procurement’s total operating expense increased by $0.3 million or 13% due to a $0.1 million or 28% increase in research and development expenses, a $0.1 million or 14% increase in general and administration expenses, and a $0.1 million or 5% increase in sales and marketing expenses. The increase in research and development expenses is due to a $0.1 million or 16% increase in salaries and wages primarily driven by a 10% increase in average headcount from September 30, 2020 to September 30, 2021. The increase in general and administration expenses is primarily due to an increase in share-based compensation expense resulting from the issuance of restricted stock units. The increase in sales and marketing costs was primarily due to an increase in third-party costs to support marketing.

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Payments

Payments’ total operating expense increased by $0.3 million or 9% primarily due to a $0.2 million increase in commissions and a $0.1 million increase in share-based compensation expense resulting from the issuance of restricted stock units.

Grants Management

Grants Management’s total operating expense increased by $0.5 million or 30% primarily due to a $0.4 million or 59% increase in sales and marketing costs and a $0.1 million or 19% increase in general and administrative expenses. The increase in sales and marketing costs was primarily due to a $0.2 million or 43% increase in salaries and benefits driven by a 36% increase in average headcount from September 30, 2020 to September 30, 2021, a $0.2 million increase in third-party commissions expense, and a $0.1 million increase in commissions. The increase in general and administration expenses is primarily due to a $0.1 million increase in share-based compensation expense resulting from the issuance of restricted stock units.

Permitting

Permitting’s total operating expense was materially consistent year-over-year.

Budget

Budget’s total operating expenses increased by $0.7 million or 27% primarily due to a $0.5 million or 53% increase in general and administrative expenses and a $0.2 million or 34% increase in research and development expenses. The increase in general and administrative expenses was due to a $0.7 million increase in share-based compensation expense, partially offset by a $0.1 million or 30% decrease in salaries and wages and a $0.1 million or 16% decrease in third-party costs. The increase in research and development expenses was due to a $0.1 million increase in salaries and wages and a $0.1 million or 114% increase in share-based compensation expense resulting from the issuance of restricted stock units. The increase in salaries and wages was primarily driven by a declining U.S. dollar relative to the Canadian dollar.

Corporate

Corporate expenses are primarily comprised of outside services including legal, accounting and consulting fees, payroll and related expenses, corporate insurance, and share-based compensation. Corporate expenses increased by $0.7 million or 45% due primarily to a $0.5 million or 237% increase in salaries and wages and a $0.2 million increase in share-based compensation expense. The increase in salaries and wages was primarily due to a 200% increase in average headcount from September 30, 2020 to September 30, 2021.

Other operating expenses

Amortization of intangible assets

Amortization of intangible assets consists of the amortization of finite lived intangibles resulting from the Acquisition as described in Note 4 of the notes to our condensed consolidated financial statements.

Acquisition costs

Acquisition costs consists primarily of Acquisition transaction costs, capital market advisory fees, and bonuses incurred as a result of the transaction or a change in control.

Restructuring costs

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was comprised of one-time employee termination benefits paid over a weighted average period of approximately 10 months.

Change in fair value of contingent consideration

The change in fair value of contingent consideration consists of any adjustments to the contingent consideration liability since the Acquisition.

Other income (expense)

Interest income (expense)

Interest income (expense) is primarily comprised of the investments held by GTY Corporate, offset by interest under the November 2020 Credit Facility.

Loss on repurchase/issuance of shares

Loss on repurchase/issuance of shares is comprised of the difference in fair value between the price in which shares are issued and the market value on the date of grant.

Change in fair value of warrant liability

Change in fair value between the current price of the Company’s warrants and the previously reported price.

Other income (loss)

Other income (loss) is comprised primarily of unrealized gains and losses associated with transactions in currencies that are not denominated in U.S. Dollars.

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

Total revenues

Our total revenues were $43.8 million for the nine months ended September 30, 2021. Excluding the $0.4 million impact of purchase accounting, our total non-GAAP revenues for the nine months ended September 30, 2021 was $44.2 million compared to $35.6 million for the nine months ended September 30, 2020, representing a 24% increase. This increase was driven by an increase in the number of customers, an increase in the number of users added by existing customers and an increase in the number of products purchased by existing customers. The change in revenues for each operating segment is provided in the following table (in thousands, except percentages):


	Generally Accepted Accounting Principles (“GAAP”)								Non-GAAP


	Total		Total		Increase /		Increase /		Total		Total		Increase /		Increase /
	Revenues		Revenues		(Decrease)		(Decrease)		Revenues		Revenues		(Decrease)		(Decrease)
	2021		2020		in Dollars		in %		2021		2020		in Dollars		in %
Procurement	$	7,791	$	5,503	$	2,288	42	%	$	7,791	$	5,526	$	2,265	41	%
Payments		9,220		5,957		3,263	55	%		9,551		6,352		3,199	50	%
Grants Management		5,509		4,831		678	14	%		5,509		4,851		658	14	%
Permitting		2,058		1,907		151	8	%		2,058		1,907		151	8	%
Budget		19,255		16,829		2,426	14	%		19,255		16,980		2,275	13	%
Total	$	43,833	$	35,027	$	8,806	25	%	$	44,164	$	35,616	$	8,548	24	%

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Total cost of revenues

Our total cost of revenues for the nine months ended September 30, 2021 increased primarily as a result of headcount additions to support our revenue growth and share-based compensation resulting from the grant of restricted stock units. The change in cost of revenues for each operating segment is due to the following (in thousands, except percentages):


`
									Total Cost		Total Cost
									of		of		Increase /		Increase /
	Total Cost of		Total Cost of		Increase /		Increase /		Revenues		Revenues		(Decrease)		(Decrease)
	Revenues		Revenues		(Decrease)		(Decrease)		2021		2020		in Dollars		in %
	2020		2019		in Dollars		in %
Bonfire	$	369	$	277	$	92	33	%
CityBase		1,289		958		331	35	%
eCivis		821		454		367	81	%
Open Counter		143		105		38	36	%
Questica		927		653		274	42	%
Sherpa		1,071		136		935	688	%
Procurement									$	1,481	$	1,120	$	361	32	%
Payments										5,738		4,419		1,319	30	%
Grants Management										2,190		2,274		(84)	(4)	%
Permitting										492		427		65	15	%
Budget										5,971		5,301		670	13	%
Total	$	4,620	$	2,583	$	2,037	79	%	$	15,872	$	13,541	$	2,331	17	%

Procurement

~~Bonfire~~

~~Bonfire’s~~Procurement’s total cost of revenues increased by $0.4 million or 32% primarily due to a ~~$0.04~~$0.3 million or ~~17%~~31% increase in salaries and benefits ~~a $0.03 million increase in share-based compensation associated with the issuance of restricted stock units~~ and a ~~$0.03~~$0.1 million increase in amortization of internal-use software. The increase in salaries and benefits was primarily driven by a 5%declining U.S. dollar and a 13% increase in average headcount from September 30, ~~2019~~2020 to September 30, ~~2020. Hosting tools and services were materially consistent with the comparative year-over-year period.~~

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~~CityBase~~2021.

~~CityBase’s~~Payments

Payments’ total cost of revenues increased by $1.3 million or 30% primarily due to a $0.7 million increase in costs associated with our asset sales, a $0.5 million increase in bank fees and a $0.2 million increase in amortization of internal-use software, partially offset by a $0.1 million decrease in costs associated with kiosk operations.

Grants Management

Grants Management’s total cost of revenues decreased by $0.1 million or 4% primarily due to a $0.2 million ~~increase~~decrease in ~~bank fees associated with its usage fee revenue and a $0.1 million or 19% increase in salaries and benefits.~~

~~eCivis~~

eCivis’ total cost of revenues increased primarily due to a $0.2 million or 64% increase in salaries and benefits and a $0.1 million increase in third-party contractors. The increase in salaries and benefits was primarily drivenroyalties, offset by ~~a 37% increase in average headcount from September 30, 2019 to September 30, 2020 to support its professional services backlog.~~

~~Open Counter~~

~~Open Counter’s total cost of revenues was materially consistent year-over-year.~~

~~Questica~~

~~Questica’s total cost of revenues increased primarily due to a $0.2 million increase in salaries and benefits and~~ a $0.1 million increase in share-based compensation expense associated with the issuance of restricted stock units.

Permitting

Permitting’s total cost of revenues increased by $0.1 million primarily due to a $0.1 million or 15% increase in salaries and wages due to a 20% increase in headcount from September 30, 2020 to September 30, 2021.

Budget

Budget’s total cost of revenues increased by $0.7 million or 13% primarily due to a $0.7 million or 24% increase in salaries and wages and a $0.4 million increase in share-based compensation expense, partially offset by a $0.5 million decrease in royalties. The increase in salaries and ~~benefits was~~wages is primarily ~~driven by~~due to a ~~35%~~23% increase in average headcount from September 30, ~~2019~~2020 to September 30, ~~2020 to support its professional services backlog.~~2021.

~~Sherpa~~32

~~Sherpa’s total cost~~Table of revenues increased primarily due to a $0.4 million increase in salaries and benefits, a $0.4 million increase in royalty payments and a $0.1 million increase in share-based compensation expense associated with the issuance of restricted stock units. The increase in royalty payments was due to an increase in third-party sales of license products to two enterprise customers.Contents

Operating expenses (sales and marketing, general and administrative, and research and development)

Our operating expenses (including sales and marketing, general and administrative and research and development expenses) for the ~~three~~nine months ended September 30, ~~2020~~2021 have decreased due primarily to the restructuring plan implemented in March of 2020. The change in operating expenses for each operating segment is due to the following (in thousands, except percentages):



	Total		Total
	Operating		Operating		Increase /		Increase /		Operating		Operating		Increase /		Increase /
	Expenses		Expenses		(Decrease)		(Decrease)		Expenses		Expenses		(Decrease)		(Decrease)
	2020		2019		in Dollars		in %		2021		2020		in Dollars		in %
Bonfire	$	1,940	$	2,188	$	(248)	(11)	%
CityBase		3,271		3,631		(360)	(10)	%
eCivis		1,541		1,348		193	14	%
Open Counter		696		615		81	13	%
Questica		2,147		1,978		169	9	%
Sherpa		522		544		(22)	(4)	%
Procurement									$	6,420	$	6,259	$	161	3	%
Payments										9,429		11,526		(2,097)	(18)	%
Grants Management										5,435		4,816		619	13	%
Permitting										1,959		2,300		(341)	(15)	%
Budget										8,799		7,974		825	10	%
Corporate		1,437		2,022		(585)	(29)	%		5,935		5,511		424	8	%
Total	$	11,554	$	12,326	$	(772)	(6)	%	$	37,977	$	38,386	$	(409)	(1)	%

~~Bonfire~~Procurement

~~Bonfire’s~~Procurement’s total operating expense ~~decreased~~increased by $0.2 million or 3% primarily due to a $0.4 million or 33% increase in research and development expenses and a $0.2 million or ~~15%~~16% increase in general and administrative expenses, partially offset by a $0.4 million or 12% decrease in sales and marketing expenses. The $0.4 million increase in research and development expenses was primarily driven by a $0.3 million decrease in internal-use software capitalization and a $0.1 million increase in share-based compensation resulting from the issuance of restricted stock units. The $0.2 million increase in general and administrative expenses is due to a $0.1 million or 9% increase in salaries and wages and a $0.1 million increase in share-based compensation expense. The increase in salaries and wages was driven by a 9% increase in average headcount from September 30, 2020 to September 30, 2021. The $0.4 million decrease in sales and marketing expenses was due primarily to a ~~$0.1~~$0.2 million or 8% decrease in salaries and wages and a $0.2 million decrease in ~~travel~~share-based compensation expense. The $0.2 million decrease in salaries and ~~trade~~wages is due primarily to a 9% decrease in average headcount from September 30, 2020 to September 30, 2021.

Payments

Payments’ total operating expense decreased by $2.1 million or 18% primarily due to a $1.0 million or 23% decrease in research and development expenses, a $0.8 million or 29% decrease in sales and marketing expenses and $0.3 million or 7% decrease in general and administrative expenses. The $1.0 million decrease in research and development expenses is primarily due to a $0.8 million or 21% decrease in salaries and wages and a $0.2 million decrease in share-based compensation expense. The decrease in salaries and wages was driven primarily by a 15% decrease in average headcount from September 30, 2020 to September 30, 2021. The $0.8 million decrease in sales and marketing expenses is due to a $0.8 million decrease in share-based compensation expense. The $0.3 million decrease in general and administrative expenses is primarily due to a $0.4 million decrease in share-based compensation expense.

Grants Management

Grants Management’s total operating expense increased by $0.6 million or 13% primarily due to a $0.7 million or 43% increase in sales and marketing costs and a $0.1 million or 9% increase in research and development expenses, partially offset by a $0.2 million or 11% decrease in general and administrative expense. The $0.7 million in increase in sales and marketing is mainly due to a $0.3 million increase in third-party commissions expense, a $0.3 million or 23% increase in salaries and a $0.2 million increase in commissions. The increase in research and development expenses is due primarily due to a $0.1 million or 6% increase in salaries and wages driven by a 3% increase in average headcount from September 30, 2020 to September 30, 2021. The $0.2 million decrease in general and administrative expenses is primarily due to a $0.2 million decrease in rent expense.

3833

Table of Contents

~~shows resulting from the COVID-19 pandemic~~Permitting

Permitting’s total operating expenses decreased by $0.3 million or 15% primarily due a $0.2 million or 24% decrease in sales and marketing expenses and a $0.1 million or ~~12%~~34% decrease in general and administrative expenses. The $0.2 million decrease in sales and marketing is primarily due to a $0.2 million or 32% decrease in salaries and ~~wages. The decrease in salaries and wages was due primarily to~~benefits driven by a ~~21%~~22% decrease in average headcount from September 30, ~~2019~~2020 to September 30, ~~2020 driven mainly by our March 2020 restructuring.~~

~~CityBase~~

~~CityBase’s total operating expense decreased primarily due to a $0.3~~2021. The $0.1 million ~~or 20% decrease in research and development expenses and a $0.2 million or 14%~~ decrease in general and administrative ~~expenses and offset by~~costs is primarily due to a $0.1 million ~~or 23% increase in sales and marketing. The~~ decrease in ~~research~~salaries and ~~development~~wages.

Budget

Budget’s total operating expenses ~~was~~increased by $0.8 million or 10% primarily due to a $0.5 million or ~~32% decrease~~10% increase in ~~salaries~~general and ~~wages~~administrative expenses, and ~~partially offset by~~ a ~~$0.2~~$0.3 million or 20% increase in research and development expenses. These increases are primarily due to an increase in share-based compensation ~~associated with~~expense resulting from the issuance of restricted stock units. The decrease in salaries and wages was due primarily to a 34% decrease in average headcount from September 30, 2019 to September 30, 2020. The decrease in general and administrative expenses is due primarily to a $0.2 million or 30% decrease in salaries and wages. The decrease in salaries and wages was due primarily to a 26% decrease in average headcount from September 30, 2019 to September 30, 2020. The increase in sales and marketing was due primarily to a $0.2 million increase in share-based compensation associated with the issuance of stock options and a $0.1 million or 27% increase in salaries and wages. The increase in salaries and wages was due primarily to a 17% increase in average headcount from September 30, 2019 to September 30, 2020. These increases were partially offset by a $0.2 million decrease in travel and marketing largely resulting from the COVID-19 pandemic.

~~eCivis~~

eCivis’ total operating expense increased primarily due to a $0.2 million or 86% increase in general and administrative expenses. The increase in general and administrative costs was primarily driven by a $0.2 million increase in share-based compensation associated with the issuance of restricted stock units.

~~Open Counter~~

~~Open Counter’s total operating expenses was materially consistent year-over-year.~~

~~Questica~~

~~Questica’s total operating expenses increased primarily due to a $0.2 million increase in share-based compensation expense associated with the issuance of restricted stock units.~~

~~Sherpa~~

~~Sherpa’s total operating expenses was materially consistent year-over-year.~~

Corporate

Corporate expenses are primarily comprised of outside services including legal, accounting and consulting fees, payroll and related expenses, corporate insurance, and share-based compensation. Corporate expenses ~~decreased~~increased by ~~$0.6~~$0.4 million or 8% due primarily due to a ~~$0.5~~$0.2 million ~~decrease~~increase in insurance expense and a $0.2 million or 22% increase in salaries and wages and a $0.1 million decrease in travel costs largely resulting from the COVID-19 pandemic. The decrease in salaries and wages is due primarily to a 52% decrease in average headcount from September 30, 2019 to September 30, 2020 driven mainly by our March 2020 restructuring.wages.

Other operating expenses

Amortization of intangible assets

Amortization of intangible assets consists of the amortization of finite lived intangibles resulting from the Acquisition as described in Note 54 of the notes to our condensed consolidated financial statements.

~~Table of Contents~~

Acquisition costs

Acquisition costs consists primarily of Acquisition transaction costs, capital market advisory fees, and bonuses incurred as a result of the transaction or a change in control.

Restructuring costs

Change in fair value of contingent consideration

The change in fair value of contingent consideration consists of any adjustments to the contingent consideration liability since the Acquisition.

Other income (expense)

Interest income (expense)

Interest income (expense) is primarily comprised of the investments held by GTY Corporate, offset by interest under ~~our credit facility executed in February 2020.~~the November 2020 Credit Facility.

Table of Contents

Loss on repurchase/issuance of shares

Loss on repurchase/issuance of shares is comprised of the difference in fair value between the price in which shares are issued and the market value on the date of ~~grant as described in Note 12 of the notes to our condensed consolidated financial statements.~~

~~Other income (loss)~~

~~Other income (loss) is comprised primarily of unrealized gains and losses associated with transactions in currencies that are not denominated in U.S. Dollars.~~

~~Nine Months Ended September 30, 2020 Compared to the Successor/Predecessor (“S/P”) Combined Period~~

~~Total revenues~~

Our total revenues were $35.0 million for the nine months ended September 30, 2020. Excluding the $0.6 million impact of purchase accounting, our total non-GAAP revenues for the nine months ended September 30, 2020 was $35.6 million compared to $28.5 million for the S/P Combined Period, representing a 25% increase. This increase was driven by an increase in the number of customers, an increase in the number of users added by existing customers and an increase in the number of products purchased by existing customers. The change in revenues for each operating segment is provided in the following table (in thousands, except percentages):

~~Table of Contents~~

Generally Accepted Accounting Principles (“GAAP”)

Non-GAAP

February 19,

January 01,

2019

2019

Total

through

through

Total

Increase /

Increase /

Total

Total

Increase /

Increase /


Revenues

September 30,

February 18,

Revenues

(Decrease)

(Decrease)

Revenues

Revenues

(Decrease)

(Decrease)

2020

2019

2019

2019

in Dollars

in %

2020

2019

in Dollars

in %

Bonfire

$
5,503

$
2,385

$
593

$
2,978

$
2,525

85
%
$
5,526

$
3,498

$
2,028

58
%
CityBase

5,957

4,634

820

5,454

503

9
%

6,352

5,833

519

9
%
eCivis

4,831

3,200

673

3,873

958

25
%

4,851

4,622

229

5
%
Open Counter

1,907

929

298

1,227

680

55
%

1,907

1,642

265

16
%
Questica

12,319

6,311

1,913

8,224

4,095

50
%

12,470

9,680

2,790

29
%
Sherpa

4,510

2,575

631

3,206

1,304

41
%

4,510

3,262

1,248

38
%
Total

$
35,027

$
20,034

$
4,928

$
24,962

$
10,065

40
%
$
35,616

$
28,537

$
7,079

25
%

~~A reconciliation of non-GAAP revenues and other non-GAAP financial measures is included in the section titled “Reconciliation of Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q.~~

~~Total cost of revenues~~

Our total cost of revenues for the nine months ended September 30, 2020 increased primarily as a result of headcount additions to support our revenue growth and share-based compensation resulting from the grant of restricted stock units. The change in cost of revenues for each operating segment is due to the following (in thousands, except percentages):

`



February 19,

January 01,






Total Cost

2019

2019

Total Cost

of

through

through

of

Increase /

Increase /

Revenues

September 30,

February 18,

Revenues

(Decrease)

(Decrease)

2020

2019

2019

2019

in Dollars

in %

Bonfire

$
1,120

$
643

$
124

$
767

$
353

46
%
CityBase

4,419

3,168

746

3,914

505

13
%
eCivis

2,274

1,087

267

1,354

920

68
%
Open Counter

427

263

51

314

113

36
%
Questica

2,609

1,468

296

1,764

845

48
%
Sherpa

2,692

461

130

591

2,101

355
%
Total

$
13,541

$
7,090

$
1,614

$
8,704

$
4,837

56
%

~~Bonfire~~

Bonfire’s total cost of revenues increased primarily due to a $0.2 million or 35% increase in salaries and benefits, a $0.1 million increase in share-based compensation expense associated with the issuance of restricted stock units, and a $0.05 increase in amortization of capitalized internal-use software. The increase in salaries and benefits was primarily driven by a 12% increase in average headcount from September 30, 2019 to September 30, 2020. Hosting tools and services were materially consistent with the comparative year-over-year period.

~~CityBase~~

CityBase’s total cost of revenues increased primarily due to a $0.2 million increase in bank fees and a $0.1 million increase in share-based compensation associated with the issuance of restricted stock units.

~~eCivis~~

eCivis’ total cost of revenues increased primarily due to a $0.7 million or 68% increase in salaries and benefits and a $0.1 million increase in share-based compensation associated with the issuance of restricted stock units. The increase in salaries and benefits was primarily driven by a 34% increase in average headcount from September 30, 2019 to September 30, 2020 to support its professional services backlog.

~~Table of Contents~~

~~Open Counter~~

Open Counter’s total cost of revenues increased primarily due to a $0.1 million increase in salaries and benefits. The increase in salaries and benefits was primarily driven by a 33% increase in average headcount from September 30, 2019 to September 30, 2020.

~~Questica~~

Questica’s total cost of revenues increased primarily due to a $0.5 million or 36% increase in salaries and benefits and $0.2 million increase in share-based compensation resulting from the issuance of restricted stock units. The increase in salaries and benefits was primarily driven by a 46% increase in average headcount from September 30, 2019 to September 30, 2020 to support its professional services backlog.

~~Sherpa~~

Sherpa’s total cost of revenues increased primarily due to a $1.1 million increase in salaries and benefits, a $0.2 million increase in share-based compensation expense and a $0.8 million in third-party royalties.

~~Operating expenses (sales and marketing, general and administrative, and research and development)~~

Our operating expenses (including sales and marketing, general and administrative and research and development expenses) for the nine months ended September 30, 2020 have increased primarily due to increases in headcount resulting from growth in the business. The change in operating expenses for each operating segment is due to the following (in thousands, except percentages):

February 19,

January 01,

2019

2019

Operating

through

through

Operating

Increase /

Increase /

Expenses

September 30,

February 18,

Expenses

(Decrease)

(Decrease)


2020

2019

2019

2019

in Dollars

in %

Bonfire

$
6,259

$
7,559

$
1,178

$
8,737

$
(2,478)

(28)
%
CityBase

11,526

8,791

1,518

10,309

1,217

12
%
eCivis

4,816

2,976

575

3,551

1,265

36
%
Open Counter

2,300

1,289

202

1,491

809

54
%
Questica

6,555

4,440

1,103

5,543

1,012

18
%
Sherpa

1,419

1,180

147

1,327

92

7
%
Corporate

5,511

6,265

—

6,265

(754)

(12)
%
Total

$
38,386

$
32,500

$
4,723

$
37,223

$
1,163

3
%

~~Bonfire~~

Bonfire’s total operating expenses decreased due to a $1.4 million or 29% decrease in sales and marketing expenses, a $0.8 million or 31% decrease in general and administrative expenses, and a $0.3 million or 20% decrease in research and development expenses. The decrease in sales and marketing expenses and general and administrative expenses were primarily driven by a $0.8 million and $0.7 million decrease, respectively, in share-based compensation associated with the issuance of stock options from the Acquisition. Sales and marketing also decreased by $0.3 million and $0.2 million due to a decrease in travel and marketing and a decrease in salaries and wages, respectively. The decrease in research and development expenses was primarily driven by a $0.3 million increase in capitalization of internal-use software associated with the development of new products.

~~CityBase~~

CityBase’s total operating expenses increased due to a $1.4 million or 94% increase in sales and marketing expenses, a $0.5 million or 14% increase in general and administrative expenses and offset by a $0.7 million or 14% decrease in research and development expenses. The increase in sales and marketing was due to a $0.8 million or 66% increase in

~~Table of Contents~~

salaries and wages and a $0.7 million increase in share-based compensation expense and offset partially by a decrease in travel. The increase in salaries and wages was driven by a 53% increase in average headcount from September 30, 2019 to September 30, 2020 and the increase share-based compensation expense was due to the issuance of restricted stock units. The $0.5 million increase in general and administrative expenses was due primarily by a $1.4 million increase in share-based compensation expense, offset largely by a decrease in third-party costs. The $0.7 million decrease in research and development expenses was due primarily to a $0.9 million or 22% decrease in salaries and wages and a $0.2 million decrease in third-party expenses and partially offset by a $0.4 million increase in share-based compensation expense. The decrease in salaries and wages was driven by a 20% decrease in average headcount from September 30, 2019 to September 30, 2020 largely attributable to the March 2020 restructuring.

~~eCivis~~

eCivis total operating expenses increased due to a $0.9 million or 84% increase in general and administrative expenses, a $0.2 million or 17% increase in sales and marketing expenses, and a $0.1 million or 13% increase in research and development expenses. The increase in general and administrative expenses was due to a $0.4 million increase in share-based compensation, a $0.3 million increase in salaries and benefits and a $0.2 million increase in third-party costs. The increase in sales and marketing expenses was due primarily to a $0.2 million increase in salaries and wages driven by a 28% increase in average headcount from September 30, 2019 to September 30, 2020. The increase in research and development expenses was due primarily to a $0.1 million increase in salaries and wages driven by a 9% increase in average headcount from September 30, 2019 to September 30, 2020.

~~Open Counter~~

Open Counter’s total operating expenses increased primarily due to a $0.6 million increase in sales and marketing expenses driven by a $0.6 million increase in salaries and wages and a $0.2 million increase in share-based compensation expense. The increase in salaries and wages was driven by a 600% increase in average headcount from September 30, 2019 to September 30, 2020.

~~Questica~~

~~Questica’s total operating expenses increased primarily due to a $0.9 million increase in share-based compensation associated with the issuance of restricted stock units.~~

~~Sherpa~~

~~Sherpa’s total operating expenses increased largely due to an increase in share-based compensation expense associated with the issuance of restricted stock units.~~

~~Corporate~~

Corporate expenses decreased by $0.8 million primarily due to a $0.6 million decrease in legal fees and a $0.5 million decrease in accounting and consulting fees and offset by a $0.3 million increase in share-based compensation expense. The increase in share-based compensation is due to the issuance of restricted stock units. The decrease in legal, accounting and consulting fees is largely due to operational efficiencies gained with the corporate hiring.

~~Other operating expenses~~

~~Amortization of intangible assets~~

Amortization of intangible assets consists of the amortization of finite lived intangibles resulting from the Acquisition as described in Note 5 of the notes to our condensed consolidated financial statements.

~~Table of Contents~~

~~Acquisition costs~~

~~Acquisition costs consists primarily of Acquisition transaction costs, capital market advisory fees, and bonuses incurred as a result of the transaction or a change in control.~~

~~Restructuring costs~~

Change in fair value of ~~contingent consideration~~warrant liability

~~The change in fair value of contingent consideration consists of any adjustments to the contingent consideration liability since the Acquisition.~~

~~Other income (expense)~~

~~Interest income (expense)~~

~~Interest income (expense) is primarily comprised of the investments held by GTY Corporate offset by interest under our credit facility executed in February of 2020.~~

~~Loss on repurchase/issuance of shares~~

~~Loss on repurchase/issuance of shares is comprised of the difference~~Change in fair value between the current price ~~in which shares are issued~~of the Company’s warrants and the ~~market value on the date of grant as described in Note 12 of the notes to our condensed consolidated financial statements.~~previously reported price.

Other income (loss)

Other income (loss) is comprised primarily of unrealized gains and losses associated with transactions in currencies that are not denominated in U.S. Dollars.

Reconciliation of Non-GAAP Revenues

To supplement our condensed consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, we have provided certain financial measures that have not been prepared in accordance with GAAP ~~defined as “non-GAAP~~(“non-GAAP financial ~~measures,”~~measures”), which include (i) non-GAAP revenues, (ii) non-GAAP gross profit and non-GAAP gross margin and (iii) non-GAAP loss from operations.

We use these non-GAAP financial measures internally in analyzing our financial results and believe that these metrics are useful to investors, as a supplement to the corresponding GAAP measure, in evaluating our ongoing operational performance and trends. However, it is important to note that particular items we exclude from, or include in, our non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Non-GAAP Revenues. Non-GAAP revenues are defined as GAAP revenues adjusted for the impact of purchase accounting resulting from ~~its~~a company’s business combination which reduced its acquired contract liabilities to fair value. The Company believes that presenting non-GAAP revenues is useful to investors as it eliminates the impact of the purchase accounting adjustments to revenues to allow for a direct comparison between current and future periods.

~~Table of Contents~~

Non-GAAP Gross ~~profit~~Profit and Non-GAAP Gross ~~margin.~~Margin. Non-GAAP gross profit is defined as GAAP gross profit adjusted for the impact of purchase accounting resulting from ~~its~~a company’s business combination and share-based compensation included in cost of revenues. Non-GAAP gross margin is defined as non-GAAP gross profit divided by non-GAAP revenues. The Company believes that presenting non-GAAP gross profit and margin is useful to investors as it eliminates the impact of the purchase accounting adjustments to allow for a direct comparison between periods.

Non-GAAP Loss from ~~operations.~~Operations. Non-GAAP loss from operations is defined as GAAP loss from operations adjusted for the impact of purchase accounting to revenues resulting from ~~its~~a company’s business combination, the amortization of acquired intangible assets, share-based compensation, acquisition related costs, goodwill impairment expense, restructuring charges and the change in fair value of contingent consideration. The Company believes that presenting non-GAAP loss from operations is useful to investors as it eliminates the impact of certain non-cash and acquisition related expenses to allow a direct comparison of loss from operations between all periods presented.

Table of Contents

Below is a reconciliation of non-GAAP revenues, non-GAAP gross profit and non-GAAP gross margin and non-GAAP loss from operations to their most directly comparable GAAP financial measures (in thousands, except percentages):


	Three Months Ended									Three Months Ended
	September 30,			June 30,			September 30,			September 30,			June 30			September 30,
	2020			2020			2019			2021			2021			2020
Revenues	$	12,587		$	11,164		$	8,754		$	16,257		$	14,317		$	12,587
Purchase accounting adjustment to revenue		128			146			1,004			105			104			128
Non-GAAP Revenues	$	12,715		$	11,310		$	9,758		$	16,362		$	14,421		$	12,715


Gross Profit	$	7,967		$	6,770		$	6,171		$	10,343		$	9,101		$	7,967
Purchase accounting adjustment to revenue		128			146			1,004			105			104			128
Share-based compensation		225			132			—			447			363			225
Non-GAAP Gross Profit	$	8,320		$	7,048		$	7,175		$	10,895		$	9,568		$	8,320

Gross Margin		63	%		61	%		70	%		64	%		64	%		63	%
Non-GAAP Gross Margin		65	%		62	%		74	%		67	%		66	%		65	%

Loss from operations	$	(7,272)		$	(7,801)		$	(9,615)		$	(8,469)		$	(7,921)		$	(7,272)
Purchase accounting adjustment to revenue		128			146			1,004			105			104			128
Amortization of intangibles		3,683			3,642			3,830			3,668			3,644			3,683
Share-based compensation		2,024			1,019			556			3,336			1,868			2,024
Acquisition costs		—			—			442
Restructuring charges		2			198			—			—			—			2
Change in fair value of contingent consideration		—			—			(812)			1,235			1,250			—
Non-GAAP Loss from operations	$	(1,435)		$	(2,796)		$	(4,595)		$	(125)		$	(1,055)		$	(1,435)


	Nine Months Ended September 30,
	2021			2020
Revenues		43,833			35,027
Purchase accounting adjustment to revenue		331			589
Non-GAAP Revenues	$	44,164		$	35,616

Gross Profit		27,961			21,486
Purchase accounting adjustment to revenue		331			589
Share-based compensation		1,102			575
Non-GAAP Gross Profit	$	29,394		$	22,650

Gross Margin		64	%		61	%
Non-GAAP Gross Margin		67	%		64	%

Loss from operations	$	(24,526)		$	(31,593)
Purchase accounting adjustment to revenue		331			589
Amortization of intangibles		10,911			10,998
Share-based compensation		7,027			6,338
Restructuring charges		—			3,666
Change in fair value of contingent consideration		3,599			29
Non-GAAP Loss from Operations	$	(2,658)		$	(9,973)

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Table of Contents

Nine Months Ended September 30,


2020

2019

Revenues - Successor Period

$
35,027

$
20,034

Revenues - Predecessor Period

—

4,928

Pro forma as Adjusted Revenues

35,027

24,962

Purchase accounting adjustment to revenue

589

3,575

Non-GAAP Pro forma as Adjusted Revenues

$
35,616

$
28,537

Gross Profit - Successor Period

$
21,486

$
12,944

Gross Profit - Predecessor Period

—

3,314

Pro forma as Adjusted Gross Profit

21,486

16,258

Purchase accounting adjustment to revenue

589

3,575

Share-based compensation

575

—

Non-GAAP Pro forma as Adjusted Gross Profit

$
22,650

$
19,833

Gross Margin - Successor Period

61
%

65
%
Gross Margin - Predecessor Period

N/A
%

67
%
Pro forma as Adjusted Gross Margin

61
%

65
%
Non-GAAP Pro forma as Adjusted Gross Margin

64
%

69
%

Loss from operations - Successor Period

$
(31,593)

$
(61,330)

Loss from operations - Predecessor Period

—

(1,555)

Pro forma as Adjusted Loss from operations

(31,593)

(62,885)

Purchase accounting adjustment to revenue

589

3,575

Amortization of intangibles

10,998

9,427

Share-based compensation

6,338

2,928

Acquisition costs

—

33,342

Restructuring charges

3,666

—

Change in fair value of contingent consideration

29

(849)

Non-GAAP Pro forma as Adjusted Loss from operations

$
(9,973)

$
(14,462)

~~Table of Contents~~

Below is a reconciliation of non-GAAP revenues to revenues by operating ~~segment (in thousands, except percentages):~~segment:


	Three Months Ended September 30,																					Three Months Ended September 30,
										Open									Total									Grants									Total
	Bonfire			CityBase			eCivis			Counter			Questica			Sherpa			Revenues			Procurement			Payments			Management			Permitting			Budget			Revenues
Successor Revenues 2020	$	2,100		$	1,903		$	1,878		$	669	��	$	4,389		$	1,648		$	12,587
Revenues 2021																						$	2,690		$	4,172		$	1,925		$	720		$	6,750		$	16,257
Purchase accounting adjustment to revenues																							—			105			—			—			—			105
Non-GAAP Revenues 2021																						$	2,690		$	4,277		$	1,925		$	720		$	6,750		$	16,362

Revenues 2020																						$	2,100		$	1,903		$	1,878		$	669		$	6,037		$	12,587
Purchase accounting adjustment to revenues		—			128			—			—			—			—			128			—			128			—			—			—			128
Non-GAAP Revenues 2020	$	2,100		$	2,031		$	1,878		$	669		$	4,389		$	1,648		$	12,715		$	2,100		$	2,031		$	1,878		$	669		$	6,037		$	12,715

Pro forma Revenues - S/P combined Period 2019	$	1,174		$	1,551		$	1,638		$	407		$	3,083		$	901		$	8,754
Purchase accounting adjustment to revenues		136			157			219			125			367			—			1,004
Non-GAAP Pro forma as Adjusted Revenues 2019	$	1,310		$	1,708		$	1,857		$	532		$	3,450		$	901		$	9,758

% change		60	%		19	%		1	%		26	%		27	%		83	%		30	%		28	%		111	%		3	%		8	%		12	%		29	%

	Nine Months Ended September 30,																					Nine Months Ended September 30,
										Open									Total									Grants									Total
	Bonfire			CityBase			eCivis			Counter			Questica			Sherpa			Revenues			Procurement			Payments			Management			Permitting			Budget			Revenues
Successor Revenues 2020	$	5,503		$	5,957		$	4,831		$	1,907		$	12,319		$	4,510		$	35,027
Revenues 2021																						$	7,791		$	9,220		$	5,509		$	2,058		$	19,255		$	43,833
Purchase accounting adjustment to revenues																							—			331			—			—			—			331
Non-GAAP Revenues 2021																						$	7,791		$	9,551		$	5,509		$	2,058		$	19,255		$	44,164

Revenues 2020																						$	5,503		$	5,957		$	4,831		$	1,907		$	16,829		$	35,027
Purchase accounting adjustment to revenues		23			395			20			—			151			—			589			23			395			20			—			151			589
Non-GAAP Revenues 2020	$	5,526		$	6,352		$	4,851		$	1,907		$	12,470		$	4,510		$	35,616		$	5,526		$	6,352		$	4,851		$	1,907		$	16,980		$	35,616

Pro forma Revenues - S/P combined Period 2019	$	2,978		$	5,454		$	3,873		$	1,227		$	8,224		$	3,206		$	24,962
Purchase accounting adjustment to revenues		520			379			749			415			1,456			56			3,575
Non-GAAP Pro forma as Adjusted Revenues 2019	$	3,498		$	5,833		$	4,622		$	1,642		$	9,680		$	3,262		$	28,537

% change		58	%		9	%		5	%		16	%		29	%		38	%		25	%		41	%		50	%		14	%		8	%		13	%		24	%

Liquidity and Capital Resources

As of September 30, ~~2020,~~2021, we had a cash balance of approximately ~~$6.2~~$15.3 million. ~~Through~~From the date of the Acquisition through September 30, ~~2020,~~2021, our liquidity needs ~~were~~have been satisfied through proceeds from the January–February 2020 private investment in public equity, or PIPE, transactions, proceeds from our initial public offering that were released in February 2019 from the ~~Trust Account (see Note 12-Shareholders’ Equity-to~~trust account established in connection with such offering for the ~~unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q), proceeds from the PIPE Transaction (as defined below),~~benefit of our shareholders, proceeds from our June 2019 registered direct offering, proceeds from our February 2020 ~~debt facility~~and November 2020 credit facilities, proceeds from issuances of stock under our at-the-market offering program, and loan proceeds in April–May 2020 from the Paycheck Protection Program.

Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the condensed consolidated financial statements, we had an accumulated deficit of approximately $116.6 million and current liabilities exceeded current assets at September 30, 2020. We also reported a net loss of approximately $31.6 million and approximately $13.5 million net cash used in operating activities for the nine months ended September 30, 2020. These factors raise substantial doubt about our ability to continue as a going concern.

~~Table of Contents~~

We are attempting to further expand our customer ~~base;~~base, scale up production of various products; and increase revenues; however, our cash position may not be sufficient to support our daily operations through the next twelve months from the date of filing this 10-Q. Our ability to continue as a going concern is dependent upon our ability to raise additional funds by way of a public or private offering and our ability to further generate sufficient revenues. While we believe in the viability of our platforms, and in our ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect.

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COVID-19 Update

In December 2019, the emergence of a novel coronavirus, or COVID-19, was reported and in March 2020, the World Health Organization, or WHO, characterized COVID-19 as a pandemic. We responded by immediately restricting non-essential travel and enabled work-from-home protocols. Shortly thereafter, and in line with guidance provided by government agencies and international organizations, we restricted all travel, mandated a work-from-home policy across our global workforce, and moved all in-person customer-facing events to virtual ones. We expect these restrictions to stay in effect during the fourth quarter of 2020. We also responded by launching the GTY COVID Emergency Response Program, where a number of GTY products were offered free for a few months to allow our customers to move quickly to solve their infrastructure problems and prevent interruption to government services.

As a result of the pandemic, we ~~have seen purchasing decisions being deferred~~saw certain new and existing customers since March 2020 halt, defer or ~~delayed,~~decrease investment in infrastructure; other customers postpone the implementation of projects, thus causing delays in services ~~revenue due to the delayed implementation of projects,~~revenue; and an impact on new business pipeline and large deals. WeAlthough conditions have ~~also seen a decrease in travel-related~~improved, we expect that certain of our current and potential customers will continue to take actions to reduce operating expenses and ~~advertising~~moderate cash flows during the remainder of 2021, including by delaying sales and ~~trade show expenses. We expect to see similar impacts in the fourth quarter of 2020.~~

requesting extended billing and payment terms.

The broader implications of the global emergence of COVID-19 on our business, operating results, and overall financial performance, remain uncertain and they depend on certain developments, including the duration and spread of the outbreak, the emergence and prevalence of COVID-19 variants, vaccination rates, the impact on our customers and our sales cycles, impact on our partners or employees, and impact on the economic environment and financial markets, all of which are uncertain and cannot be predicted. We are conducting business as usual with certain continuing limitations to employee travel, employee work locations, and marketing events, among other modifications. We have observed other companies taking precautionary and preemptive actions to address COVID-19, and the effects it has had and is expected to have on business and the economy. During the first three quarters of 2020, we have seen certain new and existing customers halt or decrease investment in infrastructure, and we expect that certain of our current and potential customers will take actions to reduce operating expenses and moderate cash flows, including by delaying sales and requesting extended billing and payment terms. We will continue to actively monitor the situation and may take further actions that alter our business operations, as may be required by evolving guidance from public health officials and federal, state, or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders.

~~PIPE Transaction~~

Immediately prior to the closing of the business combination (the “Closing”), pursuant to subscription agreements (the “Subscription Agreements”), dated as of various dates from January 9, 2019 through February 12, 2019, by and among GTY Cayman and certain institutional and accredited investors party thereto (the “Subscribed Investors”), GTY Cayman issued to the Subscribed Investors an aggregate of 12,853,098 Class A ordinary shares of GTY for $10.00 per share, for an aggregate cash purchase price of approximately $126.3 million, including three such Subscription Agreements with certain CityBase holders (including Michael Duffy, the chief executive officer of CityBase) for an aggregate of 380,937 Class A ordinary shares of GTY Cayman at a price of $10.00 per share, for an aggregate cash purchase price of approximately $3.8 million (the “PIPE Transaction”). The Class A ordinary shares of GTY Cayman issued to the Subscribed Investors were cancelled and exchanged on a one-for-one basis for shares of Company common stock at the Closing.

Historical Cash Flows

The following table sets forth a summary of our cash flows for the periods ~~indicated (amounts in thousands):~~indicated:

~~Table of Contents~~


	Successor				Predecessor
			February 19, 2019		January 1, 2019		Nine Months Ended		Nine Months Ended
	Nine Months Ended		through		through		September 30,		September 30,
	September 30,		September 30,		February 18,		2021		2020
	2020		2019		2019
Net cash (used in) provided by operating activities	$	(13,530)	$	(49,843)	$	284
Net cash (used in) provided by investing activities	$	(2,850)	$	37,230	$	1,516
Net cash used in operating activities							$	(4,623)	$	(13,530)
Net cash used in investing activities							$	(203)	$	(2,850)
Net cash provided by (used in) financing activities	$	14,136	$	29,529	$	(539)	$	(2,601)	$	14,136

Net Cash ~~(Used in) Provided by~~Used In Operating Activities

Our net loss and cash flows from operating activities are significantly influenced by the Acquisition and our investments in headcount and infrastructure to support anticipated growth.

For the nine months ended September 30, 2021, net cash used in operations was $4.6 million resulting from our net loss of $33.0 million and changes in operating assets and liabilities of $2.2 million, offset by net non-cash expenses of $30.6 million. The $30.6 million of non-cash expenses was comprised of $10.9 million of amortization of intangible assets acquired as a result of the Acquisition, $7.0 million from share-based compensation resulting from our issuance of stock options and restricted stock units, a $5.3 million loss associated with the redemption of common stock, a $4.0 million change in fair value of warrant liability, and a $3.6 million change in contingent consideration, offset by a $3.2 million gain on extinguishment of debt. The changes in operating assets and liabilities of $2.2 million was comprised primarily of a $1.6 million increase in prepaid expenses and other assets, a $1.5 million decrease in accounts payable and accrued liabilities, a $1.1 million increase in accounts receivable, and a $0.9 million decrease in operating lease liabilities, offset by a $2.9 million increase in deferred revenue.

For the nine months ended September 30, 2020, net cash used in operations was $13.5 million resulting from our net loss of ~~$31.6~~$28.5 million and changes in operating assets and liabilities of $0.7 million, offset by net non-cash expenses of ~~$18.7~~$15.6 million. The ~~$18.7~~$15.6 million of non-cash expenses was comprised of $11.0 million of amortization of intangible assets

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acquired as a result of the Acquisition, $6.3 million from share-based compensation resulting from our issuance of stock options and restricted stock units and a $1.4 million loss on issuance of shares, offset by $3.1 million change in fair value of warrant liability and $2.1 million of deferred tax benefits related to the tax and book basis difference on the amortization of intangible assets. The changes in operating assets and liabilities of $0.7 million was comprised primarily of a $1.4 million increase in accounts receivable, a $1.2 million decrease in accounts payable and a $1.6 million increase in prepaid expenses, offset by a $4.7 million increase in contract and other long-term liabilities.

For the 2019 Successor Period, net cash used in operations was $49.8 million resulting from our net loss of $59.2 million and changes in operating assets and liabilities of $0.6 million and offset by net non-cash expenses of $9.9 million. The $9.9 million of non-cash expenses was comprised of $9.4 million of amortization of intangible assets acquired as a result of the Acquisition and $2.9 million from share-based compensation offset by $2.8 million of deferred tax benefits related to the tax and book basis difference on the amortization of intangible assets. The changes in operating assets and liabilities of $0.6 million was comprised, in part, by a “Make Whole” payment of $0.8 million in conjunction with an agreement for investors to buy a portion of the Acquisition Redemption Shares at a price less than the previously agreed redemption price.

For the 2019 Predecessor Period, net cash provided by operations was $0.3 million resulting from our changes in operating assets and liabilities of $1.6 million and net non-cash expenses of $0.4 million offset by our net loss of $1.7 million. The $1.6 million of net cash flows provided as a result of changes in our operating assets and liabilities was primarily due to a $2.2 million decrease in accounts receivable resulting from seasonality in billings, offset by a $0.8 million decrease in accounts payable. The $0.4 million of non-cash expenses was primarily comprised of $0.2 million of depreciation of property and equipment.

Net Cash ~~(Used in) Provided by~~Used In Investing Activities

Our primary investing activities have consisted of ~~investments~~capital expenditures.

For the nine months ended September 30, 2021, cash used in ~~marketable securities and~~investing activities was $0.2 million resulting from capital expenditures. ~~In February 2019, we completed our Acquisition and the resulting cash flow impact is described below in the Successor Period.~~

For the nine months ended September 30, 2020, cash used in investing activities was $2.9 million resulting largely from $2.5 million of capital expenditures associated with lease improvements and furniture purchases at Questica’s new facility.

For the 2019 Successor Period, cash provided by investing activities was $37.2 million resulting from $217.6 million of proceeds from cash held in a trust and offset primarily due to the Acquisition which had a cash purchase price of $179.4 million net of cash acquired and $1.0 million of capital expenditures and capitalization of internal-use software.

~~Table of Contents~~

~~For the 2019 Predecessor Period, cash provided by investing activities was $1.5 million due to a $1.5 million sale of marketable securities by Questica.~~

Net Cash Provided By (Used in) Financing Activities

For the nine months ended September 30, 2021, cash used in financing activities was $2.6 million primarily due to $8.0 million in redemptions of common shares, $0.8 million in contingent consideration payments, and $0.5 million in repayments of finance lease liabilities, offset by $6.8 million in proceeds from the issuance of common stock.

For the nine months ended September 30, 2020, cash provided by financing activities was $14.1 million primarily due to $11.3 million of proceeds from the issuance of our term loan, net of issuance costs and $3.2 million of proceeds from loans provided under the Payment Protection Program, offset by $0.4 million in repayments of finance lease obligations.

For the 2019 Successor Period, cash provided by financing activities was $29.5 million primarily as a result of the private placement of Class A shares of $125.3 million and proceeds received from the successful registered direct offering of common stock of $25.5 million, net of costs and offset primarily by the redemption of shares in the amount of $114.0 million and $5.2 million of common stock repurchases.

~~For the 2019 Predecessor Period, cash used in financing activities was $0.5 million primarily as a result of member distributions of $0.5 million.~~

Critical Accounting Policies and Use of Estimates

See Note 43 of the notes to our unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements

The impact of recently issued accounting standards is set forth in Note 4,3, Summary of Significant Accounting Policies, of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

We are not party to any off-balance sheet transactions. ~~Other than the guarantees described in Note 7. Related Party Transactions to the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q, we~~We have no guarantees or obligations other than those which arise out of normal business operations.

Contractual Obligations and Commitments

As of September 30, ~~2020,~~2021, there were no significant changes to our contractual obligations from those presented as of December 31, ~~2019~~2020 in our ~~Current~~Annual Report on Form 10-K filed with the SEC on ~~March 13, 2020.~~February 19, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

During the three and nine months ended September 30, ~~2020,~~2021, there were no material changes to our interest rate risk disclosures, market risk disclosures and foreign currency exchange rate risk disclosures reported in our ~~Current~~Annual Report on Form 10-K filed with the SEC on ~~March 13, 2020~~February 19, 2021 for the year ended December 31, ~~2019.~~2020.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, to allow timely decisions regarding required disclosure.

~~Table of Contents~~

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

With respect to the ~~quarter~~three and nine months ended September 30, ~~2020,~~2021, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures are ~~effective.~~effective excluding the accounting for warrants as described in Note 2.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles. ~~Based on its evaluation, management concluded that our internal control over financial reporting was effective as of~~

During the nine months ended September 30, ~~2020.~~2021 and in response to the SEC Statement on April 12, 2021, the Company has identified a material weakness associated with its accounting for warrants. The Company inappropriately relied upon the broad consensus among special purpose acquisition companies that these warrants were subject to equity treatment under a fixed accounting model. However, consistent with the SEC Statement, the Company revised its historical financial statements to account for the private warrants as liabilities. The Company is in the process of implementing new policies to remediate the material weakness, mainly the adoption of new policies and procedures associated with the accounting of non-routine and complex transactions.

Changes in Internal Control over Financial Reporting

~~During~~We are taking actions to remediate the ~~most recently completed fiscal quarter,~~material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there ~~has been~~was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Notwithstanding the identified material weaknesses, management has concluded that the consolidated financial statements included in this quarterly report on Form 10-Q present fairly, in all material respects, the Company's financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted accounting principles (U.S. GAAP).

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

~~None~~On March 19, 2021, the Company received a request from the Securities and Exchange Commission (the “SEC”) for documents relating to the Company’s business combination consummated on February 19, 2019 and related transactions, including those described in a Form 8-K filed by the Company on February 14, 2019. The Company has cooperated in the SEC’s investigation and intends to cooperate with any additional requests it receives from the SEC.

Item 1A.Risk Factors

The reader should carefully consider, in connection with the other information in this Quarterly Report on Form 10-Q, the factors discussed in the section entitled “Risk Factors” of our ~~2019~~2020 Annual Report on Form ~~10-K and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.~~10-K. These factors could cause our actual results to differ materially from those stated in forward-looking statements contained in this document and elsewhere.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

~~None~~None.

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Item 6.Exhibits.


Exhibit Number		Description
3.1		Amended and Restated Bylaws of the Company (f/k/a GTY Govtech, Inc.) dated July 26, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2021).

~~31.1~~4.1		Assignment and Acknowledgement among the Company, Continental Stock Transfer & Trust Company and Broadridge Corporate Issuer Solutions, Inc. dated as of September 20, 2021 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 22, 2021).

4.2		Amendment to Warrant Agreement between the Company and Broadridge Corporate Issuer Solutions, Inc. dated as of September 20, 2021 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 22, 2021).

10.1*		Amended and Restated Employment Agreement dated July 1, 2021 between the Company and TJ Parass.⁽¹⁾

31.1*		Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~31.2*		Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~32.1**		Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~32.2**		Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS~~101.INS*		Inline XBRL Instance Document
~~101.SCH~~101.SCH*		Inline XBRL Taxonomy Extension Schema Document
~~101.CAL~~101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.PRE~~101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101)

* Filed herewith.

**Furnished herewith.

⁽¹⁾ By mutual consent, the parties corrected a typographical error in this agreement. A corrected and complete copy of it is included as Exhibit 10.1 to this Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 54^th day of November, ~~2020.~~2021.

GTY TECHNOLOGY HOLDINGS INC.

	/s/ TJ Parass
	Name:	TJ Parass
	Title:	Chief Executive Officer
		(Principal Executive Officer)

	/s/ John Curran
	Name:	John Curran
	Title:	Chief Financial Officer
		(Principal Financial Officer)

5343


Contingent consideration – December 31, 2019	$	53,913
Change in fair value of contingent consideration		29
Issuance of exchangeable shares for contingent consideration		(10,000)
Issuance of common stock for contingent consideration		(1,334)
Gain on issuance of common stock for contingent consideration		(666)
Payments of contingent consideration		(27)
Contingent consideration – September 30, 2020	$	41,915


																Deferred
	Cash		Stock			Contingent				Adjusted						Tax
	Consideration		Consideration			Consideration		Total		Net Assets		Goodwill		Intangibles		Liability
Bonfire	$	51,068	$	50,078	(1)	$	325	$	101,471	$	3,639	$	81,964	$	22,668	$	6,800
CityBase		64,261		41,560			48,410		154,231		782		119,741		48,155		14,447
eCivis		17,592		31,256			5,859		54,707		(1,788)		47,397		12,997		3,899
Open Counter		10,958		17,455			—		28,413		(1,441)		22,524		10,471		3,141
Questica		44,494		31,000	(2)		9,311		84,805		3,652		57,479		33,821		10,147
Sherpa		5,105		1,000			1,898		8,003		1,066		3,497		4,914		1,474
Total	$	193,478	$	172,349		$	65,803	$	431,630	$	5,910	$	332,602	$	133,026	$	39,908


Three months ended December 31, 2020	$	3,683
Year ended December 31, 2021		14,611
Year ended December 31, 2022		14,276
Year ended December 31, 2023		14,224
Year ended December 31, 2024		14,263
Thereafter		43,733
	$	104,790


	GTY		Bonfire		CityBase		eCivis		OpenCounter		Questica		Sherpa		Total
Successor
Three Months Ended September 30, 2020
Total revenue	$	—	$	2,100	$	1,903	$	1,878	$	669	$	4,389	$	1,648	$	12,587
Cost of goods sold		—		369		1,289		821		143		927		1,071		4,620
Income (loss) from operations		(1,421)		(875)		(4,043)		(814)		(473)		411		(57)		(7,272)

Successor
Three Months Ended September 30, 2019
Total revenue	$	—	$	1,174	$	1,551	$	1,638	$	407	$	3,083	$	901	$	8,754
Cost of goods sold		—		277		958		454		105		653		136		2,583
Income (loss) from operations		(2,441)		(1,634)		(4,354)		17		(614)		(537)		(52)		(9,615)

Successor
Nine Months Ended September 30, 2020
Total revenue	$	—	$	5,503	$	5,957	$	4,831	$	1,907	$	12,319	$	4,510	$	35,027
Cost of goods sold		—		1,120		4,419		2,274		427		2,609		2,692		13,541
Income (loss) from operations		(8,354)		(4,026)		(14,506)		(3,240)		(1,846)		374		5		(31,593)

Successor
February 19, 2019 through September 30, 2019
Total revenue	$	—	$	2,385	$	4,634	$	3,200	$	929	$	6,311	$	2,575	$	20,034
Cost of goods sold		—		643		3,168		1,087		263		1,468		461		7,090
Loss from operations		(21,989)		(7,911)		(12,821)		(1,885)		(1,363)		(12,611)		(2,750)		(61,330)

Predecessor
January 1, 2019 through February 18, 2019
Total revenue	$	—	$	593	$	820	$	673	$	298	$	1,913	$	631	$	4,928
Cost of goods sold		—		124		746		267		51		296		130		1,614
Income (loss) from operations		—		(741)		(1,499)		(265)		46		550		354		(1,555)

Successor
As of September 30, 2020
Goodwill	$	—	$	68,744	$	88,327	$	47,140	$	21,956	$	57,971	$	2,497	$	286,635
Assets		18,830		92,366		112,701		58,214		28,068		103,526		11,598		425,303

Successor
As of December 31, 2019
Goodwill	$	—	$	68,744	$	88,327	$	47,140	$	21,956	$	57,971	$	2,497	$	286,635
Assets		25,899		92,803		122,851		59,456		29,995		97,013		6,376		434,393


`			February 19,		January 01,
	Total Cost		2019		2019		Total Cost
	of		through		through		of		Increase /		Increase /
	Revenues		September 30,		February 18,		Revenues		(Decrease)		(Decrease)
	2020		2019		2019		2019		in Dollars		in %
Bonfire	$	1,120	$	643	$	124	$	767	$	353	46	%
CityBase		4,419		3,168		746		3,914		505	13	%
eCivis		2,274		1,087		267		1,354		920	68	%
Open Counter		427		263		51		314		113	36	%
Questica		2,609		1,468		296		1,764		845	48	%
Sherpa		2,692		461		130		591		2,101	355	%
Total	$	13,541	$	7,090	$	1,614	$	8,704	$	4,837	56	%