GTY Technology (GTYH) 8-K Entry into a Material Definitive Agreement

Exhibit 99.1

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial statements are based on Bonfire’s, CityBase’s, eCivis’s, Open Counter’s, Questica’s and Sherpa’s historical financial statement (“the Targets”) and GTY’s historical financial statements, as adjusted to give effect to the business combination, on February 19, 2019, under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). The unaudited pro forma combined statement of operations for the nine months ended September 30, 2018 gives effect to the business combination as if it had occurred on January 1, 2018. The unaudited pro forma combined balance sheet as of September 30, 2018 gives effect to the business combination as if it had occurred on September 30, 2018. The business combination will be accounted for as an acquisition under ASC 805, pursuant to which GTY will be treated as the accounting acquirer and the six Targets as the acquirees. This determination was primarily based on existing GTY shareholders having voting control, and GTY’s current board of directors and management comprising the board of directors and management, of New GTY following the business combination. All six Targets will be deemed the accounting predecessors.

The assumptions and estimates underlying the unaudited adjustments to the unaudited pro forma combined financial statements are described in the accompanying notes, which should be read together with the unaudited pro forma combined financial statements.

The historical financial information has been adjusted to give effect to pro forma events that are related and/or directly attributable to the business combination, are factually supportable and are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the business combination. The pro forma adjustments are based on preliminary estimates and currently available information and assumptions that GTY management believes are reasonable. The notes to the unaudited pro forma combined financial statements provide a discussion of how such adjustments were derived and presented in the unaudited pro forma combined financial statements. Changes in facts and circumstances or discovery of new information may result in revised estimates. As a result, there may be material adjustments to the pro forma combined financial statements.

The Questica and Bonfire audited balance sheets as of September 30, 2018 were denominated in Canadian dollars. We converted the Questica and Bonfire audited balance sheets using the U.S. Dollar exchange rate as of September 30, 2018. The Questica and Bonfire audited statements of operations for the nine months ended September 30, 2018 were denominated in Canadian dollars. We converted the Questica and Bonfire audited statements of operations to U.S. Dollars based on the average exchange rate for the period ended September 30, 2018.

The unaudited pro forma combined financial statements should be read together with GTY’s, Bonfire’s, CityBase’s, eCivis’s, Open Counter’s, Questica’s and Sherpa’s historical financial statements, “GTY’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Bonfire’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “CityBase’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “eCivis’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Open Counter’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Questica’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Sherpa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included in Form S-4 filed on January 11, 2019.

Transaction Summary

The details of the transaction are disclosed elsewhere in this Form 8K.

Unaudited Pro Forma Combined Balance Sheet as of September 30, 2018

	GTY (1)		Bonfire (1)			CityBase (1)			eCivis (1)			OpenCounter  (1)			Questica  (1)			Sherpa (1)		Pro Forma Adjustments			Pro Forma Combined
ASSETS
Current assets
Cash and cash equivalents	$	373,532		6,251,607			10,177,975			99,685			76,943			4,250,794			799,808		563,736,096	(2)		17,390,625
																					(3,127,878	)(3)
																					(12,676,552	)(4)
																					(21,860,985	)(5)
																					(190,102,485	)(6)
																					(460,037,208	)(7)
																					(3,072,587	)(8)
																					122,501,880	(9)
Investments				-			-			-			-			1,520,575			-		(1,520,575	)(5)		-
Accounts receivable, net		-		382,628			735,830			1,011,671			371,280			3,318,797			595,517		(6,415,723	)(5)		-
Prepaid expense and other current assets		45,448		507,675			136,912			461,464			-			108,390			31,644		-			1,291,533
Total current assets		418,980		7,141,910			11,050,717			1,572,820			448,223			9,198,556			1,426,969		(12,576,017	)		18,682,158
Cash in escrow		-		-			-			-			-			-			-		11,348,751	(6)		11,348,751
Fixed assets		-		127,609			620,625			61,734			31,246			440,289			2,688		-			1,284,191
Loan receivable - related party		-		-			176,401			-			-			-			-		(176,401	)(5)		-
Other assets		-		279,679			500,854			51,053			350			1,052,863			-		-			1,884,799
Intangible assets		-		-			402,784			335,996			-			978,695			-		111,052,525	(6)		112,770,000
Goodwill		-		-			122,933			585,000			-			1,911,403			-		385,073,555	(6)		387,692,891
Cash and cash equivalents held in Trust Account		563,736,096		-			-			-			-			-			-		(563,736,096	)(2)		-
Total assets	$	564,155,076		7,549,198			12,874,314			2,606,603			479,819			13,581,806			1,429,657		(69,013,683	)		533,662,790
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	3,127,878		342,090			2,576,017			546,234			249,909			431,896			119,140		(3,127,878	)(3)		-
																					(4,265,286	)(5)
Contract liabilities		-		-			1,120,628			-			1,101,359			5,636,800			-		(4,400,921	)(6)		3,457,866
Other current liabilities		-		1,832,337			-			2,438,935			-			958,245			43,865		(5,273,382	)(5)		-
Notes payable and accrued expenses - related party		430,000		-			-			-			-			-			-		-			430,000
Long-term debt - current portion		-		-			400,000			-			-			-			-		(400,000	)(5)		-
Capital lease obligations - current portion		-		-			143,545			-			-			-			-		(143,545	)(5)		-
Short term notes payable		-		-			1,574,284			-			450,000			-			-		(2,024,284	)(5)		-
Total current liabilities		3,557,878		2,174,427			5,814,474			2,985,169			1,801,268			7,026,941			163,005		(19,635,296	)		3,887,866
Deferred underwriting fees		19,320,000		-			-			-			-			-			-		(19,320,000	)(4)		-
Contract and other long-term liabilities				62,395			3,164,157			97,201			-			296,225			-		(2,027,188	)(6)		1,592,790
Deferred rent		-		40,427			-			-			-			-			-		(40,427	)(6)		-
Long-term debt, less current portion		-		-			310,076			-			451,073			-			-		(761,149	)(5)		-
Capital lease obligation, less current portion		-		-			299,517			-			-			-			-		(299,517	)(5)		-
Contingent consideration		-		-			-			836,000			-			2,060,007			-		18,610,751	(6)		21,506,758
Total long-term liabilities		19,320,000		102,822			3,773,750			933,201			451,073			2,356,232			-		(3,837,530	)		23,099,548
Total liabilities		22,877,878		2,277,249			9,588,224			3,918,370			2,252,341			9,383,173			163,005		(23,472,826	)		26,987,414
Commitments and contingencies
Temporary equity
Preferred stock		-		11,210,916			30,803,780			-			-			-			-		(42,014,696	)(6)		-
Ordinary shares subject to possible redemption		536,277,190		-			-			-			-			-			-		(536,277,190	)(7)		-
Stockholders' equity
Members' capital		-		-			-			-			-			-			1,266,652		(1,266,652	)(6)		-
Common Stock, $0.0001 par value		1,537		1,272			1			48,645			6,548			484,219			-		(533,753	)(6)		8,469
Additional paid-in-capital		-		455,438			1,554,750			3,826,358			120,379			-			-		-			493,360,129
																					263,866,786	(6)
																					(5,963,857	)(6)
																					33,831,000	(6)
																					76,239,982	(7)
																					(3,072,587	)(8)
																					122,501,880	(9)
Accumulated other comprehensive income		-		-			-			-			-			(26,128	)		-		26,128	(6)		-
Retained earnings (accumulated deficit)		4,998,471		(6,395,677	)		(29,072,441	)		(5,186,770	)		(1,899,449	)		3,740,542			-		(20,196,127	)(5)		13,306,778
																					60,674,780	(6)
																					6,643,449	(4)
Total stockholders' equity (deficit)		5,000,008		(5,938,967	)		(27,517,690	)		(1,311,767	)		(1,772,522	)		4,198,633			1,266,652		532,751,029			506,675,376
Total liabilities and stockholders' equity	$	564,155,076		7,549,198			12,874,314			2,606,603			479,819			13,581,806			1,429,657		(69,013,683	)		533,662,790

Pro Forma Adjustments to the Unaudited September 30, 2018 Combined Balance Sheet:

(1) Derived from audited balance sheets as of September 30, 2018, except for GTY, which was derived from its unaudited balance sheet as of September 30, 2018. The Questica and Bonfire audited balance sheets as of September 30, 2018 were denominated in Canadian dollars. We converted the audited Questica and Bonfire balance sheets using the U.S. Dollar exchange rate as of September 30, 2018.

(2) To liquidate investments held in trust by GTY.

(3) To reflect the payments of GTY’s accounts payable and accrued expenses.

(4) To reflect the payments of other transaction fees of $12.7 million (including $3.25 million of deferred underwriting fees, $7.6 million of GTY’s transaction expenses and $1.8 million in Target expenses). The deferred underwriting fees of $19.3 million, was reduced by $16.1 million. The amendment resulted in a $16.1 million increase to retained earnings, offset by the payment of other transaction expenses of $9.5 million which resulted in a net increase to retained earnings of $6.6 million.

(5) To reflect the dividends of Target cash, receivables and investment balances, net of payable and debt balances, to Target shareholders.

(6) The preliminary estimates of purchase price, goodwill, intangibles and deferred tax liability is as follows:

	Cash Consideration		Stock Consideration		Cash Earn-out		Stock Earn- out (paid in a fixed number of shares)			Stock Earn-out (paid in a variable number of shares)		Escrowed Cash		Escrowed Stock		Total		Adjusted Net Assets			Goodwill		Intangibles		Deferred Tax Liability
Bonfire	$	47,301,329	$	43,177,550	$	101,000	$	-		$	101,000	$	3,394,301	$	6,900,000	$	100,975,180	$	(904,290	)	$	90,790,770	$	15,841,000	$	4,752,300
CityBase		57,097,256		30,345,460		5,260,000		46,211,000	(x)		-		2,100,000		10,000,000		151,013,716		(2,733,762	)		140,695,978		18,645,000		5,593,500
eCivis		13,712,565		28,834,333		-		19,475,000	(x)		-		3,550,000		2,422,003		67,993,901		(2,278,015.44	)		61,218,817		12,933,000		3,879,900
OpenCounter		9,322,901		15,809,900		-		-			-		1,304,450		1,645,540		28,082,791		(331,630.96	)		23,253,322		7,373,000		2,211,900
Questica		43,998,449		41,000,000		-		9,046,000	(x)		-		100,000		8,000,000		102,144,449		380,235			69,182,014		46,546,000		13,963,800
Sherpa		7,321,235		1,000,000		-		-			1,800,000		900,000		-		11,021,235		466,844			2,551,991		11,432,000		3,429,600
Total	$	178,753,734	$	160,167,243	$	5,361,000	$	74,732,000		$	1,901,000	$	11,348,751	$	28,967,543	$	461,231,271	$	(5,400,620	)	$	387,692,891	$	112,770,000	$	33,831,000

(x) Shares are issued and escrowed at closing and subject to future earn-out.

Under the acquisition method of accounting, the acquired tangible and intangible assets and assumed liabilities are recognized based on their estimated fair values as of the business combination closing date. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed as of September 30, 2018 and have been prepared to illustrate the estimated effect of the business combination.

GTY recognized a deferred tax benefit as a result of the acquisitions. Due to the acquisitions, a temporary difference between the book and the tax basis for the intangible assets acquired of $33.8 million (based upon an estimated 30% effective tax rate for the Targets) was created resulting in a deferred tax liability and additional goodwill. With the increase in the deferred tax liability, GTY reduced its deferred tax asset valuation allowance by the amount of net operating loss that could offset the amortization of the deferred tax liability associated with the value of the intangible assets acquired resulting in the recognition of a deferred tax benefit (credit to retained earnings) of approximately $33.8 million.

This adjustment of contract liabilities represents the estimated adjustment to decrease the assumed contract liabilities to a fair value of approximately $5.1 million, a reduction of $6.4 million from the carrying value. The calculation of fair value is preliminary and subject to change. The fair value was determined based on the estimated costs to fulfill the remaining service obligations plus a normal profit margin. After the acquisition, this adjustment will have a continuing impact and will reduce revenue related to the assumed performance obligations as the services are provided.

The purchase price allocation is dependent upon certain valuation and other studies that have not yet been completed. Accordingly, the pro forma purchase price allocation is subject to further adjustments as additional information becomes available and as additional analyses and final valuations are conducted following the completion of the business combination. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

The following is the preliminary estimate of the fair value of the assets acquired, liabilities assumed and ensuing goodwill identified, reconciled to the purchase price transferred:

	Bonfire			CityBase			eCivis			OpenCounter			Questica			Sherpa			Total
Cash and cash equivalents	$	-		$	-		$	-		$	-		$	-		$	-		$	-
Cash in escrow	$	3,394,301		$	2,100,000		$	3,550,000		$	1,304,450		$	100,000		$	900,000			11,348,751
Investments		-			-			-			-			1,520,575			-			1,520,575
Accounts receivable, net		382,628			735,830			1,011,671			371,280			3,318,797			595,517			6,415,723
Prepaid expense and other current assets		507,675			136,912			461,464			-			108,390			31,644			1,246,085
Fixed assets		127,609			620,625			61,734			31,246			440,289			2,688			1,284,191
Loan receivable - related party		-			176,401			-			-			-			-			176,401
Other assets		279,679			500,854			51,053			350			1,052,863			-			1,884,799
Intangible assets		15,841,000			18,645,000			12,933,000			7,373,000			46,546,000			11,432,000			112,770,000
Goodwill		90,790,770			140,695,978			61,218,817			23,253,322			69,182,014			2,551,991			387,692,891
Accounts payable and accrued expenses		(342,090	)		(2,576,017	)		(546,234	)		(249,909	)		(431,896	)		(119,140	)		(4,265,286	)
Contract liabilities		-			(493,076	)		-			(484,598	)		(2,480,192	)		-			(3,457,866	)
Deferred rent		-			-			-			-			-			-			-
Deferred tax liability		(4,752,300	)		(5,593,500	)		(3,879,900	)		(2,211,900	)		(13,963,800	)		(3,429,600	)		(33,831,000	)
Other current liabilities		(1,832,337	)		-			(2,438,935	)		-			(958,245	)		(43,865	)		(5,273,382	)
Capital lease obligations - current portion		-			(143,545	)		-			-			-			-			(143,545	)
Contract and other long-term liabilities		(27,454	)		(1,392,229	)		(42,768	)		-			(130,339	)		-			(1,592,790	)
Capital lease obligation, less current portion		-			(299,517	)		-			-			-			-			(299,517	)
Contingent consideration		(3,394,301	)		(2,100,000	)		(4,386,000	)		(1,304,450	)		(2,160,007	)		(900,000	)		(14,244,758	)
Total consideration	$	100,975,180		$	151,013,716		$	67,993,901		$	28,082,791		$	102,144,449		$	11,021,235		$	461,231,271

Goodwill represents expected synergies from combining operations and the assembled workforce.

Customer relationships, the trade name and non-compete agreements were measured using the multiple-period excess earnings method, the relief from royalty method and the lost income method, respectively.

The fair value of the stock consideration was based upon the closing price of common share of GTYH on February 20, 2019 and the price paid by PIPE investors or $10.00 per share.

The following represents the pro forma adjustments related to the acquisitions:

										Net
	Adjusted			Adjust						Pro forma
	Equity			Par Value			Acquisition			Adjustment
Cash		-			-			(190,102,485	)		(190,102,485	)
Cash in escrow		-			-			11,348,751			11,348,751
Intangible assets		(1,717,475	)		-			112,770,000			111,052,525
Goodwill		(2,619,336	)					387,692,891			385,073,555
Contract liabilities		7,858,787			-			(3,457,866	)		4,400,921
Contract and other long-term liabilities		3,619,978			-			(1,592,790	)		2,027,188
Contingent consideration		-			-			18,610,751			18,610,751
Preferred stock		42,014,696			-			-			42,014,696
Members' capital		1,266,652			-			-			1,266,652
Common Stock, $0.0001 par value		540,685			(6,932	)		-			533,753
Stock consideration		-						(263,866,786	)		(263,866,786	)
Additional paid in capital		5,956,925			6,932			-			5,963,857
Deferred tax liability		-			-			(33,831,000	)		(33,831,000	)
Accumulated other comprehensive income		(26,128	)		-			-			(26,128	)
Retained earnings (accumulated deficit)		(60,674,780	)		-			-			(60,674,780	)

(7) To reflect the cancellation of ordinary shares for shareholders electing cash conversion amounting to $460.0 million, with the remainder transferred to permanent equity.

(8) To reflect additional payments of $3.1 million to Target companies primarily related to Target employee bonuses that were payable upon the closing of the business combination.

(9) Immediately prior to the Closing, pursuant to those certain subscription agreements (the “Subscription Agreements”), dated as of various dates from January 9, 2019 through February 12, 2019, by and among the Company and certain institutional and accredited investors party thereto (the “Subscribed Investors”), GTY Cayman issued to the Subscribed Investors an aggregate of 12,853,633 Class A Ordinary Shares of GTY Cayman 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 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.

Unaudited Pro Forma Combined Statement of Operations — Nine Months Ended September 30, 2018

	GTY (1)			Bonfire (1)			CityBase (1)			eCivis (1)			OpenCounter   (1)			Questica   (1)			Sherpa (1)			Pro Forma Adjustments			Pro Forma Combined
Total revenue	$	-			2,258,612			4,081,116			3,744,912			1,212,853			7,583,170			2,142,986			(2,593,400	)(4)		18,430,250
Cost of goods sold		-			555,435			3,023,387			1,282,733			372,746			704,734			171,049			-			6,110,084
Gross profit		-			1,703,177			1,057,729			2,462,179			840,107			6,878,436			1,971,937			(2,593,400	)		12,320,166
Costs and Expenses:
General and administrative		3,598,337			1,925,493			4,679,132			1,262,399			1,174,297			5,944,947			758,047			-			19,342,652
Amortization of intangible assets		-			-			-			-			-			-			-			9,001,010	(2)		9,001,010
Sales and marketing		-			2,134,454			938,656			888,442			14,049			-			-			-			3,975,601
Research and development		-			1,228,924			3,128,351			973,436			-			-			-			-			5,330,711
		3,598,337			5,288,871			8,746,139			3,124,277			1,188,346			5,944,947			758,047			9,001,010			37,649,974
Operating Income (loss)		(3,598,337	)		(3,585,694	)		(7,688,410	)		(662,098	)		(348,239	)		933,489			1,213,890			(11,594,410	)		(25,329,809	)
Other expenses (income):
Interest expense (income)		(6,919,340	)		(37,191	)		300,096			4,961			81,889			(5,563	)		(1,526	)		-			(6,576,674	)
Grant income		-			(101,490	)		-			-			-			-			-			-			(101,490	)
Other expense		-			6,932			1,326,849			-			807			-			-			-			1,334,588
Foreign exchange (gain) loss		-			(211,034	)		-			-			-			(481,914	)		-			-			(692,948	)
Acquisition costs		-			-			-			159,696									-			-			159,696
Gain on sale of ETO buisness		-			-			-			-			-			(873,734	)		-			-			(873,734	)
Other income		-			-			-			(57,532	)		(10,000	)		(3,297	)		-			-			(70,829	)
Total other expense (income), net		(6,919,340	)		(342,783	)		1,626,945			107,125			72,696			(1,364,508	)		(1,526	)		-			(6,821,391	)
Income (loss) before income taxes		3,321,003			(3,242,911	)		(9,315,355	)		(769,223	)		(420,935	)		2,297,997			1,215,416			(11,594,410	)		(18,508,418	)
Income tax expense		-			-			-			-			-			(667,642	)		-			(303,854	)(3)		(971,496	)
Net income (loss)		3,321,003			(3,242,911	)		(9,315,355	)		(769,223	)		(420,935	)		1,630,355			1,215,416			(11,898,264	)		(19,479,914	)
Net income (loss) per common share:
Basic	$	0.21																							$	(0.40	)
Diluted	$	0.05																							$	(0.40	)
Weighted average common shares outstanding (4):
Basic		15,526,979																					32,984,049			48,511,028
Diluted		69,000,000																					(20,488,972	)		48,511,028

Pro Forma Adjustments to the Unaudited Combined Statement of Operations:

(1) Derived from audited statements of operations for the nine months ended September 30, 2018, except for GTY, which was derived from its unaudited statement of operations for the nine months ended September 30, 2018. The Questica and Bonfire audited statements of operations for the nine months ended September 30, 2018 were denominated in Canadian dollars. We converted the audited Questica and Bonfire statements of operations to U.S. Dollars based on the average exchange rate for the period ended September 30, 2018.

(2) Represents the amortization of intangibles related to the business combination. We adjusted our estimated useful life of the acquired intangible assets to 10 years. The estimated useful lives were determined based on a review of the time period over which economic benefit is estimated to be generated as well as additional factors. Factors considered include contractual life, the period over which a majority of cash flow is expected to be generated, and/or management’s view based on historical experience with similar assets.

The following table details the intangible assets for each Target Company and its related amortization for the nine months ended September 30, 2018:

																Nine Months
																Ended
																September
	Economic															30, 2018
	Life (Years)	Bonfire		CityBase		eCivis		OpenCounter		Questica		Sherpa		Total		Amortization
Patents / Developed Technology	6-10	$	7,504,000	$	10,761,000	$	4,455,000	$	3,795,000	$	14,980,000	$	1,232,000	$	42,727,000	$	3,573,197
Trade Names / Trademarks	1 - 13		2,984,000		6,287,000		2,354,000		998,000		8,990,000		352,000		21,965,000		1,486,313
Customer Relationships	10		5,174,000		1,317,000		6,009,000		2,511,000		21,566,000		9,583,000		46,160,000		3,462,000
Non-Compete Agreements	3		179,000		280,000		115,000		69,000		1,010,000		265,000		1,918,000		479,500
		$	15,841,000	$	18,645,000	$	12,933,000	$	7,373,000	$	46,546,000	$	11,432,000	$	112,770,000	$	9,001,010

(3) Although Sherpa is an LLC, we presented the income tax effect related to Sherpa’s net income of $1,215,416 for the nine months ended September 30, 2018 based on the estimated blended federal and state statutory tax rate of 25%.

(4) The pro forma adjustments to revenue by $2.6 million for the nine months ended September 30, 2018 reflects the difference between prepayments related to contract liabilities and the fair value of the assumed performance obligations as they are satisfied, assuming the transaction was consummated on January 1, 2018.

(5) Weighted average common shares outstanding — basic and diluted is adjusted to reflect the following:

Nine Months Ended September 30, 2018
GTY public shares electing cash conversion	(45,084,578	)
GTY PIPE shareholders	12,853,633
GTY shareholders	80,741,973
Shares outstanding	48,511,028
Weighted average share calculation, basic and diluted
Target Company Shareholders	12,063,152
GTY shareholders	36,447,876
Weighted average shares, basic and diluted	48,511,028
Ownership percentages
Target Company Shareholders	25	%
GTY shareholders	75	%
	100	%