Exhibit 99.7
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 statements (“the Targets”) and the Company’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 year ended December 31, 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 December 31, 2018 gives effect to the Business Combination as if it had occurred on December 31, 2018. The Business Combination will be accounted for as an acquisition under ASC 805, pursuant to which the Company will be treated as the accounting acquirer and the six Targets as the acquirees. This determination was primarily based on existing Company stockholders having voting control, and the Company’s current board of directors and management comprising the board of directors and management, of the Company 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 the Company’s 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 December 31, 2018 were denominated in Canadian dollars. We converted the Questica and Bonfire audited balance sheets using the U.S. Dollar exchange rate as of December 31, 2018. The Questica and Bonfire audited statements of operations for the year ended December 31, 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 year ended December 31, 2018.
The unaudited pro forma combined financial statements should be read together with the Company’s, Bonfire’s, CityBase’s, eCivis’s, Open Counter’s, Questica’s and Sherpa’s historical financial statements, “The Company’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 elsewhere in this Form 8-K12B/A.
Business Combination Summary
The details of the Business Combination are disclosed elsewhere in this Form 8-K12B/A.
Unaudited Pro Forma Combined Balance Sheet as of December 31, 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 | $ | 52,048 | $ | 4,808,909 | $ | 3,917,496 | $ | 133,942 | $ | 103,429 | $ | 3,329,114 | $ | 923,942 | $ | 217,641,647 | (2 | ) | $ | 17,139,040 | ||||||||||||||||||
(5,928,645 | ) | (3 | ) | |||||||||||||||||||||||||||||||||||
(11,175,785 | ) | (4 | ) | |||||||||||||||||||||||||||||||||||
(12,051,106 | ) | (5 | ) | |||||||||||||||||||||||||||||||||||
(190,102,485 | ) | (6 | ) | |||||||||||||||||||||||||||||||||||
(113,942,759 | ) | (7 | ) | |||||||||||||||||||||||||||||||||||
(3,072,587 | ) | (8 | ) | |||||||||||||||||||||||||||||||||||
122,501,880 | (9 | ) | ||||||||||||||||||||||||||||||||||||
Investments | - | - | - | - | - | 1,398,284 | - | (1,398,284 | ) | (5 | ) | - | ||||||||||||||||||||||||||
Accounts receivable, net | - | 476,963 | 1,082,844 | 1,140,999 | 182,280 | 2,679,085 | 425,675 | (5,987,846 | ) | (5 | ) | - | ||||||||||||||||||||||||||
Prepaid expense and other current assets | 39,740 | 546,667 | 158,800 | 357,732 | - | 160,918 | 25,801 | - | 1,289,658 | |||||||||||||||||||||||||||||
Total current assets | 91,788 | 5,832,539 | 5,159,140 | 1,632,673 | 285,709 | 7,567,401 | 1,375,418 | (3,515,970 | ) | 18,428,698 | ||||||||||||||||||||||||||||
Cash in escrow | - | - | - | - | - | - | - | 11,348,751 | (6 | ) | 11,348,751 | |||||||||||||||||||||||||||
Fixed assets | - | 119,717 | 526,267 | 54,221 | 29,493 | 392,605 | 2,064 | - | 1,124,367 | |||||||||||||||||||||||||||||
Loan receivable - related party | - | - | 176,909 | - | - | - | - | (176,909 | ) | (5 | ) | - | ||||||||||||||||||||||||||
Other assets | - | 377,228 | 851,601 | 47,373 | 350 | 1,054,727 | - | - | 2,331,279 | |||||||||||||||||||||||||||||
Intangible assets | - | - | 377,750 | 301,381 | - | 885,202 | - | 111,205,667 | (6 | ) | 112,770,000 | |||||||||||||||||||||||||||
Goodwill | - | - | 122,933 | 585,000 | - | 1,810,257 | - | 382,250,354 | (6 | ) | 384,768,544 | |||||||||||||||||||||||||||
Cash and cash equivalents held in Trust Account | 217,641,647 | - | - | - | - | - | - | (217,641,647 | ) | (2 | ) | - | ||||||||||||||||||||||||||
Total assets | $ | 217,733,435 | 6,329,484 | 7,214,600 | 2,620,648 | 315,552 | 11,710,192 | 1,377,482 | 283,470,246 | 530,771,639 | ||||||||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 5,928,645 | 445,985 | 2,979,758 | 519,782 | 244,792 | 305,198 | 156,468 | (5,928,645 | ) | (3 | ) | - | |||||||||||||||||||||||||
(4,651,983 | ) | (5 | ) | |||||||||||||||||||||||||||||||||||
Contract liabilities | - | 1,730,899 | 1,463,520 | 2,751,937 | 1,012,220 | 4,773,584 | - | (6,804,653 | ) | (6 | ) | 4,927,507 | ||||||||||||||||||||||||||
Other current liabilities | - | 143,394 | - | 3,444 | - | 1,094,522 | 75,523 | (1,316,883 | ) | (5 | ) | - | ||||||||||||||||||||||||||
Notes payable and accrued expenses - related party | 660,000 | - | - | - | - | - | - | - | 660,000 | |||||||||||||||||||||||||||||
Warrant liability | - | - | 86,739 | - | - | - | - | (86,739 | ) | (5 | ) | - | ||||||||||||||||||||||||||
Capital lease obligations - current portion | - | - | 138,531 | - | - | - | - | - | 138,531 | |||||||||||||||||||||||||||||
Short term notes payable | - | - | - | - | 450,000 | - | - | (450,000 | ) | (5 | ) | - | ||||||||||||||||||||||||||
Total current liabilities | 6,588,645 | 2,320,278 | 4,668,548 | 3,275,163 | 1,707,012 | 6,173,304 | 231,991 | (19,238,903 | ) | 5,726,038 | ||||||||||||||||||||||||||||
Deferred underwriting fees | 3,250,000 | - | - | - | - | - | - | (3,250,000 | ) | (4 | ) | - | ||||||||||||||||||||||||||
Contract and other long-term liabilities | - | 89,652 | 2,759,675 | 85,776 | - | 279,785 | - | (1,864,635 | ) | (6 | ) | 1,350,253 | ||||||||||||||||||||||||||
Deferred rent | - | 62,120 | - | - | - | - | - | (62,120 | ) | (6 | ) | - | ||||||||||||||||||||||||||
Long-term debt, less current portion | - | - | - | - | 433,098 | - | - | (433,098 | ) | (5 | ) | - | ||||||||||||||||||||||||||
Capital lease obligation, less current portion | - | - | 267,862 | - | - | - | - | - | 267,862 | |||||||||||||||||||||||||||||
Contingent consideration | - | - | - | 866,556 | - | 1,225,301 | - | 18,610,751 | (6 | ) | 20,702,608 | |||||||||||||||||||||||||||
Total long-term liabilities | 3,250,000 | 151,772 | 3,027,537 | 952,332 | 433,098 | 1,505,086 | - | 13,000,898 | 22,320,723 | |||||||||||||||||||||||||||||
Total liabilities | 9,838,645 | 2,472,050 | 7,696,085 | 4,227,495 | 2,140,110 | 7,678,390 | 231,991 | (6,238,005 | ) | 28,046,761 | ||||||||||||||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||||||||||||||||||
Temporary equity | ||||||||||||||||||||||||||||||||||||||
Preferred stock | - | 10,895,910 | 31,367,862 | - | - | - | - | (42,263,772 | ) | (6 | ) | - | ||||||||||||||||||||||||||
Ordinary shares subject to possible redemption | 202,894,780 | - | - | - | - | - | - | (202,894,780 | ) | (7 | ) | - | ||||||||||||||||||||||||||
Stockholders' equity | ||||||||||||||||||||||||||||||||||||||
Members' capital | - | - | - | - | - | - | 1,145,491 | (1,145,491 | ) | (6 | ) | - | ||||||||||||||||||||||||||
Common Stock, $0.0001 par value | 1,470 | 92,707 | 1 | 48,645 | 6,548 | - | - | (140,901 | ) | (6 | ) | 8,470 | ||||||||||||||||||||||||||
Additional paid-in-capital | - | 520,111 | 1,755,549 | 3,833,613 | 121,764 | 458,595 | - | - | 506,072,100 | |||||||||||||||||||||||||||||
�� | 263,866,786 | (6 | ) | |||||||||||||||||||||||||||||||||||
(6,696,632 | ) | (6 | ) | |||||||||||||||||||||||||||||||||||
33,831,000 | (6 | ) | ||||||||||||||||||||||||||||||||||||
88,952,021 | (7 | ) | ||||||||||||||||||||||||||||||||||||
(3,072,587 | ) | (8 | ) | |||||||||||||||||||||||||||||||||||
122,501,880 | (9 | ) | ||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income | - | - | - | - | - | (174,165 | ) | - | 174,165 | (6 | ) | - | ||||||||||||||||||||||||||
Retained earnings (accumulated deficit) | 4,998,540 | (7,651,294 | ) | (33,604,897 | ) | (5,489,105 | ) | (1,952,870 | ) | 3,747,372 | - | (12,479,553 | ) | (5 | ) | (3,355,692 | ) | |||||||||||||||||||||
57,001,900 | (6 | ) | ||||||||||||||||||||||||||||||||||||
(7,925,785 | ) | (4 | ) | |||||||||||||||||||||||||||||||||||
Total stockholders' equity (deficit) | 5,000,010 | (7,038,476 | ) | (31,849,347 | ) | (1,606,847 | ) | (1,824,558 | ) | 4,031,802 | 1,145,491 | 534,866,803 | 502,724,878 | |||||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 217,733,435 | $ | 6,329,484 | $ | 7,214,600 | $ | 2,620,648 | $ | 315,552 | $ | 11,710,192 | $ | 1,377,482 | $ | 283,470,246 | $ | 530,771,639 |
Pro Forma Adjustments to the Unaudited December 31, 2018 Combined Balance Sheet:
(1) | Derived from audited balance sheets as of December 31, 2018. The Questica and Bonfire audited balance sheets as of December 31, 2018 were denominated in Canadian dollars. We converted the audited Questica and Bonfire balance sheets using the U.S. Dollar exchange rate as of December 31, 2018. |
(2) | To liquidate investments held in trust by the Company. |
(3) | To reflect the payments of the Company’s accounts payable and accrued expenses. |
(4) | To reflect the payments of other transaction fees of $11.2 million (including $3.25 million of deferred underwriting fees, $6.1 million of the Company’s transaction expenses and $1.8 million in Target expenses). |
(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 | $ | 166,565 | $ | 89,719,915 | $ | 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 | (2,363,472 | ) | 140,325,688 | 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 | (981,297 | ) | 59,922,098 | 12,933,000 | 3,879,900 | ||||||||||||||||||||||||||||||||||
OpenCounter | 9,322,901 | 15,809,900 | - | - | - | 1,304,450 | 1,645,540 | 28,082,791 | (457,801 | ) | 23,379,492 | 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 | 938,183 | 68,624,066 | 46,546,000 | 13,963,800 | |||||||||||||||||||||||||||||||||||
Sherpa | 7,321,235 | 1,000,000 | - | - | 1,800,000 | 900,000 | - | 11,021,235 | 221,549 | 2,797,286 | 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 | $ | (2,476,273 | ) | $ | 384,768,544 | $ | 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 December 31, 2018 and have been prepared to illustrate the estimated effect of the business combination.
The Company 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, the Company 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 $6.3 million, a reduction of $8.7 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 in escrow | $ | 3,394,301 | $ | 2,100,000 | $ | 3,550,000 | $ | 1,304,450 | $ | 100,000 | $ | 900,000 | $ | 11,348,751 | ||||||||||||||
Investments | - | - | - | - | 1,398,284 | - | 1,398,284 | |||||||||||||||||||||
Accounts receivable, net | 476,963 | 1,082,844 | 1,140,999 | 182,280 | 2,679,085 | 425,675 | 5,987,846 | |||||||||||||||||||||
Prepaid expense and other current assets | 546,667 | 158,800 | 357,732 | - | 160,918 | 25,801 | 1,249,918 | |||||||||||||||||||||
Fixed assets | 119,717 | 526,267 | 54,221 | 29,493 | 392,605 | 2,064 | 1,124,367 | |||||||||||||||||||||
Loan receivable - related party | - | 176,909 | - | - | - | - | 176,909 | |||||||||||||||||||||
Other assets | 377,228 | 851,601 | 47,373 | 350 | 1,054,727 | - | 2,331,279 | |||||||||||||||||||||
Intangible assets | 15,841,000 | 18,645,000 | 12,933,000 | 7,373,000 | 46,546,000 | 11,432,000 | 112,770,000 | |||||||||||||||||||||
Goodwill | 89,719,915 | 140,325,688 | 59,922,098 | 23,379,492 | 68,624,066 | 2,797,286 | 384,768,544 | |||||||||||||||||||||
Accounts payable and accrued expenses | (445,985 | ) | (2,979,758 | ) | (519,782 | ) | (244,792 | ) | (305,198 | ) | (156,468 | ) | (4,651,983 | ) | ||||||||||||||
Contract liabilities | (726,978 | ) | (614,678 | ) | (1,155,814 | ) | (425,132 | ) | (2,004,905 | ) | - | (4,927,507 | ) | |||||||||||||||
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 | (143,394 | ) | - | (3,444 | ) | - | (1,094,522 | ) | (75,523 | ) | (1,316,883 | ) | ||||||||||||||||
Capital lease obligations - current portion | - | (138,531 | ) | - | - | - | - | (138,531 | ) | |||||||||||||||||||
Contract and other long-term liabilities | (37,654 | ) | (1,159,064 | ) | (36,026 | ) | - | (117,510 | ) | - | (1,350,253 | ) | ||||||||||||||||
Capital lease obligation, less current portion | - | (267,862 | ) | - | - | - | - | (267,862 | ) | |||||||||||||||||||
Contingent consideration | (3,394,301 | ) | (2,100,000 | ) | (4,416,556 | ) | (1,304,450 | ) | (1,325,301 | ) | (900,000 | ) | (13,440,608 | ) | ||||||||||||||
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 the Company’s ordinary shares on February 19, 2019 and the price paid by Subscribed Investors (as defined below) 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 | (1,564,333 | ) | - | 112,770,000 | 111,205,667 | |||||||||||
Goodwill | (2,518,190 | ) | - | 384,768,544 | 382,250,354 | |||||||||||
Contract liabilities | 11,732,160 | - | (4,927,507 | ) | 6,804,653 | |||||||||||
Contract and other long-term liabilities | 3,214,888 | - | (1,350,253 | ) | 1,864,635 | |||||||||||
Deferred rent | 62,120 | - | - | 62,120 | ||||||||||||
Contingent consideration | - | - | 18,610,751 | 18,610,751 | ||||||||||||
Preferred stock | 42,263,772 | - | - | 42,263,772 | ||||||||||||
Members' capital | 1,145,491 | - | - | 1,145,491 | ||||||||||||
Common Stock, $0.0001 par value | 147,901 | (7,000 | ) | - | 140,901 | |||||||||||
Stock consideration | - | - | (263,866,786 | ) | (263,866,786 | ) | ||||||||||
Additional paid in capital | 6,689,632 | 7,000 | - | 6,696,632 | ||||||||||||
Deferred tax liability | - | - | (33,831,000 | ) | (33,831,000 | ) | ||||||||||
Accumulated other comprehensive income | (174,165 | ) | - | - | (174,165 | ) | ||||||||||
Retained earnings (accumulated deficit) | $ | (57,001,900 | ) | - | - | $ | (57,001,900 | ) |
(7) | To reflect the cancellation of ordinary shares for shareholders electing cash conversion amounting to $113.9 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 approximately $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 approximately $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 — Year Ended December 31, 2018
GTY (1) | Bonfire (1) | CityBase (1) | eCivis (1) | OpenCounter (1) | Questica (1) | Sherpa (1) | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||||||||||||||||||
Total revenue | $ | - | $ | 3,196,195 | $ | 6,771,775 | $ | 4,951,269 | $ | 1,707,242 | $ | 10,096,427 | $ | 3,090,088 | $ | (3,695,630 | ) | (4) | $ | 26,117,366 | ||||||||||||||||
Cost of goods sold | - | 810,878 | 5,181,352 | 1,732,344 | 498,482 | 992,364 | 428,737 | - | 9,644,157 | |||||||||||||||||||||||||||
Gross profit | - | 2,385,317 | 1,590,423 | 3,218,925 | 1,208,760 | 9,104,063 | 2,661,351 | (3,695,630 | ) | 16,473,209 | ||||||||||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||||||||||||||
General and administrative | 6,956,573 | 2,575,924 | 6,576,089 | 1,663,370 | 1,563,170 | 7,956,987 | 1,670,885 | - | 28,962,998 | |||||||||||||||||||||||||||
Amortization of intangible assets | - | - | - | - | - | - | - | 12,001,347 | (2) | 12,001,347 | ||||||||||||||||||||||||||
Sales and marketing | - | 3,037,647 | 1,390,822 | 1,217,218 | 10,253 | - | - | - | 5,655,940 | |||||||||||||||||||||||||||
Research and development | - | 1,749,959 | 5,075,552 | 1,327,829 | - | - | - | - | 8,153,340 | |||||||||||||||||||||||||||
6,956,573 | 7,363,530 | 13,042,463 | 4,208,417 | 1,573,423 | 7,956,987 | 1,670,885 | 12,001,347 | 54,773,625 | ||||||||||||||||||||||||||||
Operating Income (loss) | (6,956,573 | ) | (4,978,213 | ) | (11,452,040 | ) | (989,492 | ) | (364,663 | ) | 1,147,076 | 990,466 | (15,696,977 | ) | (38,300,416 | ) | ||||||||||||||||||||
Other expenses (income): | ||||||||||||||||||||||||||||||||||||
Interest expense (income) | (8,753,490 | ) | (50,925 | ) | 450,705 | 5,203 | 118,886 | (14,619 | ) | (3,789 | ) | - | (8,248,029 | ) | ||||||||||||||||||||||
Grant income | - | (78,453 | ) | - | - | - | - | - | - | (78,453 | ) | |||||||||||||||||||||||||
Other expense | - | 11,664 | - | - | 807 | - | - | - | 12,471 | |||||||||||||||||||||||||||
Foreign exchange (gain) loss | - | (367,758 | ) | - | - | - | (633,199 | ) | - | - | (1,000,957 | ) | ||||||||||||||||||||||||
Acquisition costs | - | - | - | 204,686 | - | - | - | - | 204,686 | |||||||||||||||||||||||||||
Gain (loss) on sales of marketable securities | - | - | - | (2,598 | ) | - | 78,212 | - | - | 75,614 | ||||||||||||||||||||||||||
Change in fair value of contingent consideration | - | - | - | (52,000 | ) | - | - | - | - | (52,000 | ) | |||||||||||||||||||||||||
Change in fair value of notes payable | - | - | 1,386,503 | - | - | - | - | - | 1,386,503 | |||||||||||||||||||||||||||
Change in fair value of put option | - | - | (98,808 | ) | - | - | - | - | - | (98,808 | ) | |||||||||||||||||||||||||
Change in fair value of warrant liability | - | 114,149 | 69,876 | - | - | - | - | - | 184,025 | |||||||||||||||||||||||||||
Loss on extinguishment of debt | - | - | 23,191 | - | - | - | - | - | 23,191 | |||||||||||||||||||||||||||
Gain on sale of ETO buisness | - | - | - | - | - | (868,016 | ) | - | - | (868,016 | ) | |||||||||||||||||||||||||
Other income | - | - | - | (73,225 | ) | (10,000 | ) | (35,203 | ) | - | - | (118,428 | ) | |||||||||||||||||||||||
Total other expense (income), net | (8,753,490 | ) | (371,323 | ) | 1,831,467 | 82,066 | 109,693 | (1,472,825 | ) | (3,789 | ) | - | (8,578,201 | ) | ||||||||||||||||||||||
Income (loss) before income taxes | 1,796,917 | (4,606,890 | ) | (13,283,507 | ) | (1,071,558 | ) | (474,356 | ) | 2,619,901 | 994,255 | (15,696,977 | ) | (29,722,215 | ) | |||||||||||||||||||||
Income tax expense | - | - | - | - | - | (784,650 | ) | - | (248,564 | ) | (3) | (1,033,214 | ) | |||||||||||||||||||||||
Net income (loss) | 1,796,917 | (4,606,890 | ) | (13,283,507 | ) | (1,071,558 | ) | (474,356 | ) | 1,835,251 | 994,255 | (15,945,541 | ) | (30,755,429 | ) | |||||||||||||||||||||
Deemed dividend on Series Seed preferred stock | - | (330,049 | ) | - | - | - | - | - | - | (330,049 | ) | |||||||||||||||||||||||||
Cumulative preferred stock dividends | - | - | (1,421,229 | ) | - | - | - | - | - | (1,421,229 | ) | |||||||||||||||||||||||||
Redemption feature | (722,495 | ) | - | - | - | - | - | - | - | (722,495 | ) | |||||||||||||||||||||||||
Net income (loss) attributable to ordinary share | $ | 1,074,422 | $ | (4,936,939 | ) | $ | (14,704,736 | ) | $ | (1,071,558 | ) | $ | (474,356 | ) | $ | 1,835,251 | $ | 994,255 | $ | (15,945,541 | ) | $ | (33,229,202 | ) | ||||||||||||
Net income (loss) per common share: | ||||||||||||||||||||||||||||||||||||
Basic | $ | 0.07 | $ | (0.63 | ) | |||||||||||||||||||||||||||||||
Diluted | $ | 0.02 | $ | (0.63 | ) | |||||||||||||||||||||||||||||||
Weighted average common shares outstanding (4): | ||||||||||||||||||||||||||||||||||||
Basic | 15,486,142 | 33,024,886 | 48,511,028 | |||||||||||||||||||||||||||||||||
Diluted | 63,129,515 | (14,618,487 | ) | 48,511,028 |
Pro Forma Adjustments to the Unaudited Combined Statement of Operations:
(1) | Derived from audited statements of operations for the year ended December 31, 2018. The Questica and Bonfire audited statements of operations for the year ended December 31, 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 December 31, 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 year ended December 31, 2018:
Year | ||||||||||||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||||||||||||
December | ||||||||||||||||||||||||||||||||||
Economic | 31, 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 | $ | 4,764,263 | |||||||||||||||||
Trade Names / Trademarks | 1 - 13 | 2,984,000 | 6,287,000 | 2,354,000 | 998,000 | 8,990,000 | 352,000 | 21,965,000 | 1,981,751 | |||||||||||||||||||||||||
Customer Relationships | 10 | 5,174,000 | 1,317,000 | 6,009,000 | 2,511,000 | 21,566,000 | 9,583,000 | 46,160,000 | 4,616,000 | |||||||||||||||||||||||||
Non-Compete Agreements | 3 | 179,000 | 280,000 | 115,000 | 69,000 | 1,010,000 | 265,000 | 1,918,000 | 639,333 | |||||||||||||||||||||||||
$ | 15,841,000 | $ | 18,645,000 | $ | 12,933,000 | $ | 7,373,000 | $ | 46,546,000 | $ | 11,432,000 | $ | 112,770,000 | $ | 12,001,347 |
(3) | Although Sherpa is a limited liability company, we presented the income tax effect related to Sherpa’s net income of $994,255 for the year ended December 31, 2018 based on the estimated blended federal and state statutory tax rate of 25%. |
(4) | The pro forma adjustments to revenue by $3.7 million for the year ended December 31, 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: |
Year Ended December 31, 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 | % |