UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021
OR
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☐ |
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)
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Massachusetts |
001-37931 |
83-2860149 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
800 Boylston Street, 16th Floor Boston, MA 02199
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (877) 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 |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common Stock, par value $0.0001 per share |
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GTYH |
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Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
◻ |
Accelerated filer |
◻ |
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Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
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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 4, 2021, 57,571,046 shares of common stock, par value $0.0001 per share, were outstanding.
GTY TECHNOLOGY HOLDINGS INC.
Form 10-Q
For the Quarter Ended September 30, 2021
Table of Contents
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Page No. |
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3 |
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3 |
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Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss |
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4 |
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Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity |
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5 |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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9 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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25 |
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39 |
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40 |
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41 |
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41 |
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41 |
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41 |
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42 |
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GTY TECHNOLOGY HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands)
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September 30, |
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December 31, |
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2021 |
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2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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15,327 |
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$ |
22,800 |
Accounts receivable, net |
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11,068 |
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9,994 |
Prepaid expenses and other current assets |
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4,029 |
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2,583 |
Total current assets |
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30,424 |
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35,377 |
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Property and equipment, net |
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3,312 |
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3,891 |
Finance lease right of use assets |
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778 |
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1,355 |
Operating lease right of use assets |
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2,063 |
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2,610 |
Intangible assets, net |
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90,196 |
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101,107 |
Goodwill |
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284,635 |
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284,635 |
Other assets |
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3,625 |
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3,472 |
Total assets |
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$ |
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415,033 |
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$ |
432,447 |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
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4,939 |
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$ |
6,366 |
Deferred revenue - current portion |
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24,994 |
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22,304 |
Finance lease liability - current portion |
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246 |
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581 |
Operating lease liability - current portion |
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|
799 |
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1,316 |
Contingent consideration - current portion |
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317 |
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743 |
Total current liabilities |
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31,295 |
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31,310 |
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Deferred revenue - less current portion |
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1,785 |
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1,602 |
Warrant liability |
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7,063 |
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3,040 |
Deferred tax liability |
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17,307 |
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17,494 |
Contingent consideration - less current portion |
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45,730 |
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42,530 |
Term loans, net |
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24,331 |
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26,632 |
Finance lease liability - less current portion |
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3 |
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147 |
Operating lease liability - less current portion |
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2,735 |
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2,927 |
Total liabilities |
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130,249 |
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125,682 |
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Commitments and contingencies |
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Shareholders’ equity: |
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Common stock |
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6 |
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6 |
Exchangeable shares |
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50,637 |
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54,224 |
Additional paid in capital |
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398,286 |
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380,881 |
Accumulated other comprehensive income (loss) |
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(55) |
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6 |
Treasury stock |
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(8,343) |
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(5,633) |
Accumulated deficit |
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(155,747) |
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(122,719) |
Total shareholders' equity |
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284,784 |
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306,765 |
Total liabilities and shareholders’ equity |
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$ |
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415,033 |
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$ |
432,447 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
GTY TECHNOLOGY HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
(Amounts in thousands, except per share amounts)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
GTY TECHNOLOGY HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(Amounts in thousands, except share amounts)
Three Months Ended September 30, 2021
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Exchangeable Shares |
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Paid in |
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Treasury |
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Accumulated |
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Comprehensive |
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Shareholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Deficit |
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Income (Loss) |
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Equity |
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Balance - June 30, 2021 |
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57,512,747 |
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$ |
6 |
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5,614,121 |
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$ |
50,637 |
|
$ |
394,950 |
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$ |
(8,343) |
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$ |
(146,216) |
|
$ |
(663) |
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$ |
290,371 |
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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(9,531) |
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— |
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(9,531) |
Foreign currency translation gain |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
608 |
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|
608 |
Share-based compensation |
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— |
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— |
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— |
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— |
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3,336 |
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— |
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— |
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— |
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3,336 |
Share cancellations |
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(48,820) |
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— |
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— |
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— |
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— |
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— |
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|
— |
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— |
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|
— |
Vested and issued restricted stock units |
|
102,778 |
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— |
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— |
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— |
|
|
— |
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— |
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— |
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|
— |
|
|
— |
Stock option exercises |
|
4,341 |
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— |
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— |
|
|
— |
|
|
— |
|
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— |
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|
— |
|
|
— |
|
|
— |
Balance - September 30, 2021 |
|
57,571,046 |
|
$ |
6 |
|
5,614,121 |
|
$ |
50,637 |
|
$ |
398,286 |
|
$ |
(8,343) |
|
$ |
(155,747) |
|
$ |
(55) |
|
$ |
284,784 |
Nine Months Ended September 30, 2021
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Accumulated |
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Additional |
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Other |
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Total |
|||
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Common Stock |
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Exchangeable Shares |
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Paid in |
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Treasury |
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Accumulated |
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Comprehensive |
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Shareholders’ |
|||||||||||
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Deficit |
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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) |
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|
(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.
5
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
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Accumulated |
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||
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Additional |
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Other |
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Total |
|||
|
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Common Stock |
|
Exchangeable Shares |
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Paid in |
|
Treasury |
|
Accumulated |
|
Comprehensive |
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Shareholders’ |
|||||||||||
|
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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 |
Nine Months Ended September 30, 2020
|
|
|
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
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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.
6
GTY TECHNOLOGY HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(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.
7
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 |
|
||
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.
8
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
Note 1. Organization and Business Operations
GTY Technology Holdings Inc. and its subsidiaries (“GTY” or the “Company”) offers a cloud-based suite of solutions primarily for North American state and local governments. GTY’s cloud-based suite of solutions for state and local governments addresses functions in procurement, payments, grant management, budgeting and permitting.
The Company is headquartered in Boston, Massachusetts and has other offices in the United States and Canada. The following is a brief description of the Company’s primary subsidiaries and their businesses.
Bonfire, a Procurement Business
Bonfire Interactive Ltd. (“Bonfire” or “Procurement”) was incorporated on March 5, 2012 under the laws of the Province of Ontario. Bonfire is a provider of strategic sourcing and procurement software, serving customers in government, the broader public sector, and various highly regulated commercial vertical markets. Bonfire offers customers and their sourcing professionals a modern software-as-a-service (“SaaS”) application that helps find, engage, evaluate, negotiate and award vendor and supplier contracts. Bonfire delivers workflow automation, data collection and analysis, and collaboration to drive cost savings, compliance, and strategic outcomes. All of Bonfire’s applications are delivered as a SaaS offering, and Bonfire offers implementation and premium support services.
CityBase, a Payments Business
CityBase, Inc. (“CityBase” or “Payments”), a Delaware corporation headquartered in Chicago, provides dynamic content, digital services, and integrated payments via a SaaS platform that includes technological functionality accessible via web and mobile, kiosk, point-of-sale, and other channels. CityBase software integrates its platform to underlying systems of record, billing, and other source systems, and configures payments and digital services to meet the requirements of its customers, which include government agencies and utility companies.
eCivis, a Grants Management Business
eCivis, Inc. (“eCivis” or “Grants Management”), a Delaware corporation headquartered in Los Angeles, California, is a leading SaaS provider of grants management and indirect cost reimbursement solutions that enable its customers to standardize and streamline complex grant processes in a fully integrated platform. The eCivis platform consists of four core cloud-based products, including grants research, grants management, sub-recipient management, and cost allocation and recovery. To assist its customers in the implementation of its cloud-based products, eCivis offers one-time implementation services, including data integration, grants migration and change management. Additionally, eCivis provides ongoing grants management training, cost allocation plan consulting and cost recovery services.
Open Counter, a Permitting Business
Open Counter Enterprises Inc. (“Open Counter” or “Permitting”), a Delaware corporation headquartered in Boston, Massachusetts, is a developer and provider of software tools for cities to streamline permitting and licensing services for municipal governments. Open Counter provides customers with software through a hosted platform and provides professional services related to software implementation.
Questica, a Budget Business
Questica Software Inc. (“Questica” and, collectively with Sherpa, “Budget”) is an Ontario corporation organized in 1998 and headquartered in Burlington, Ontario, Canada. Questica designs and develops budgeting software that supports the unique requirements of the public sector. The Questica suite of products are part of a comprehensive web-based budgeting preparation, performance, management and data visualization solution that enables public sector and non-profit organizations to improve and shorten their budgeting cycles.
9
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
Sherpa, a Budget Business
Sherpa Government Solutions LLC (“Sherpa” and, collectively with Questica, “Budget”) is a Colorado limited liability company headquartered in Denver, Colorado, established in 2004. Sherpa is a leading provider of public sector budgeting software and consulting services that help state and local governments create and manage budgets and performance. Customers purchase Sherpa’s software and then engage its consulting services to configure the software and receive training on how to manage the software going forward. Following implementation, customers continue to use the software in exchange for maintenance or subscription fees.
Note 2. Restatement of Previously Issued Financial Statements
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission together issued a “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”), concluding that SPAC warrants may require classification as a liability rather than equity. The SEC Statement discussed “certain features of warrants issued in SPAC transactions” that “may be common across all entities”. It focused in part on provisions in warrant agreements for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and specifically whether the warrant holder is an input into the pricing of a fixed-for-fixed option on equity shares. According to the SEC Staff Statement, if the warrant holder is not an input into such pricing, these provisions would preclude the warrant from being classified in equity and thus require classification as a liability. As a result of the SEC Statement, the Company reevaluated the accounting treatment of the public warrants and private warrants issued in connection with its initial public offering and previously recorded as equity on the Company’s consolidated balance sheet. The Company’s public warrants were correctly classified as equity. Because the Company’s private warrants do not contain a provision whereby the Company can call the warrants, however, the private warrants should have been recorded at fair value as a liability in the Company’s consolidated balance sheet. The Company assessed this error and determined it was not material to previously issued financial statements. Accordingly, the Company has revised, rather than 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 the revision for the financial statement line items adjusted in the affected periods:
Condensed Consolidated Statements of Operations and Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
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) |
|
|
|
|
|
|
|
|
|
|
Note 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-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 19, 2021. Certain reclassifications have been made to conform to current period presentation.
Principles of Consolidation
The condensed consolidated financial statements include all accounts of the Company and its 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.
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 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 customers and its sales cycles, impact on its partners or employees, and impact
11
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
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:
12
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, 2021.
The following 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 contingent consideration liabilities measured at fair value from December 31, 2020 to September 30, 2021 were as follows:
On February 19, 2019, the Company consummated several acquisitions (collectively, the “Acquisition”), pursuant to which it acquired each of Bonfire, CityBase, eCivis , Open Counter, Questica and Sherpa (together with Bonfire, CityBase, eCivis, Open Counter and Questica, the “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 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.
13
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 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
Nine Months Ended |
|
Nine Months Ended |
|
||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
||||
Subscriptions, support and maintenance |
|
$ |
11,649 |
|
$ |
8,986 |
|
$ |
33,147 |
|
$ |
25,144 |
|
Professional services |
|
|
3,245 |
|
|
2,903 |
|
|
9,064 |
|
|
8,530 |
|
License |
|
|
112 |
|
|
674 |
|
|
256 |
|
|
1,300 |
|
Asset sales |
|
|
1,251 |
|
|
24 |
|
|
1,366 |
|
|
53 |
|
Total revenues |
|
$ |
16,257 |
|
$ |
12,587 |
|
$ |
43,833 |
|
$ |
35,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Subscription, support and maintenance. The Company delivers its solutions primarily as a subscription service that provides customers with access to 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, 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 recognizes revenues on a straight-line basis over the term of the agreement.
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 kiosk rentals and support or maintenance pertaining to license sales. Revenues from kiosk rentals and support are recognized on a straight-line basis over the support period.
14
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% 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, 2021 and 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 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, 2021 and 2020, respectively.
License. Revenues from distinct 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 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, 2021 and 2020, respectively.
Asset sales. Revenues from asset sales are recognized when the asset, typically a kiosk, has been received by the 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 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, 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 period of approximately 10 months. The final termination payment occurred in 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, 2021 and 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:
15
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
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, 2021 and 2020, the Company recorded a $0.1 million, $0.4 million, $0.2 million, and $2.1 million benefit from income taxes, respectively.
Recently Adopted Accounting Pronouncements
On January 1, 2020, the 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 the Company’s condensed consolidated financial statements.
On January 1, 2020, the 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 the Company’s condensed consolidated financial statements.
On January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies various aspects related to accounting for income 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 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 the Company in the first quarter of 2022 on a full or modified retrospective basis, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
16
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
Note 4. Intangible Assets
The Company recognized goodwill and certain identifiable intangible assets in connection with business combinations. Identifiable intangible assets consist of the following as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021 |
|||||||
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|||
Patents / Developed Technology |
|
$ |
60,084 |
|
$ |
(19,617) |
|
$ |
40,467 |
Trade Names / Trademarks |
|
|
16,348 |
|
|
(4,431) |
|
|
11,917 |
Customer Relationships |
|
|
51,003 |
|
|
(13,341) |
|
|
37,662 |
Non-Compete Agreements |
|
|
1,162 |
|
|
(1,012) |
|
|
150 |
Total Intangibles |
|
$ |
128,597 |
|
$ |
(38,401) |
|
$ |
90,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
|||||||
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|||
Patents / Developed Technology |
|
$ |
60,084 |
|
$ |
(14,026) |
|
$ |
46,058 |
Trade Names / Trademarks |
|
|
16,348 |
|
|
(3,227) |
|
|
13,121 |
Customer Relationships |
|
|
51,003 |
|
|
(9,514) |
|
|
41,489 |
Non-Compete Agreements |
|
|
1,162 |
|
|
(723) |
|
|
439 |
Total Intangibles |
|
$ |
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, respectively.
The estimated aggregate future amortization expense for intangible assets is as follows:
Note 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.
17
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
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, 2021, the Company had finance lease right of use assets of $0.8 million and finance lease liabilities of approximately $0.2 million.
The following summarizes quantitative information about the Company’s leases:
Three Months Ended September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
As of September 30, 2021, future minimum lease payments under non-cancellable leases are as follows:
18
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
Note 6. Term Loans
Credit Facility
On February 14, 2020, the Company entered into an unsecured term loan credit facility (“February 2020 Credit Facility”) that provided for borrowing of term loans in an aggregate principal amount of $12.0 million. The credit facility 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 bore interest from the date the term loans were first made until the last day of the fiscal month immediately following the six-month anniversary of such initial borrowing date at a rate per annum equal to twelve percent. Commencing on the first day of each fiscal month thereafter, the interest rate increased by one 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 in 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 replaced the February 2020 Credit Facility. Amounts outstanding under the November 2020 Credit Facility accrue interest at a rate of eight percent plus LIBOR and two 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 $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 February 2020 and November 2020 Credit Facilities. At September 30, 2021, the Company had accrued approximately $0.3 million of accrued cash interest and $0.5 million of PIK interest.
The Company’s term loan is summarized as follows:
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 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, families, small businesses, and preserves jobs for American industries. The Company
19
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 U.S. employees. These loans mature two years from the date of issuance and accrue interest at a rate of one percent per 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 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 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 at its sole discretion, shares of its 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 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 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 former eCivis shareholder. The former eCivis shareholder received cash consideration instead of shares as part of the Acquisition, and the Company’s previous transfer agent failed to cancel these shares.
20
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
Share Redemptions
Under the agreements with eCivis, the Company acquired eCivis for aggregate consideration of approximately $14.0 million in cash and 2,883,433 shares of Company common stock, including 703,631 shares of the Company’s 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 “Redeemable Shares”). Upon redemption of the Redeemable Shares, the Company must simultaneously redeem additional shares from the holder equal to 40% of the number of Redeemable Shares being redeemed (the “Additional Shares”) at $10 per share. If the Redeemable Shares were not redeemed by February 12, 2020 and February 12, 2021, the Company was required to issue additional shares, as calculated based on the number of outstanding Redeemable Shares. In June 2019, 178,571 Redeemable Shares and 71,428 Additional Shares were redeemed and the Company recorded a $0.8 million loss. During February 2020, the Company issued 334,254 Additional Shares and recorded a $2.1 million loss. The remaining 525,060 shares of common stock were redeemed for a total of $8.0 million and the Company recorded a $5.3 million loss during the three months ended March 31, 2021.
Preferred Shares – GTY is authorized to issue 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 no preferred shares issued or outstanding.
Warrants
At September 30, 2021 and December 31, 2020, there were a total of 27,093,334 warrants 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 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. No 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 are not callable for redemption and are marked to market and included in warrant liabilities with 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 issued 408,667 stock options to employees. The total fair value of the stock options at the grant date was $3.6 million.
21
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:
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.
22
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
Note 10. Segment Reporting
The Company conducts its business through the following five operating segments: Procurement, Payments, Grants Management, Permitting, and Budget.
The accounting policies of the operating segments are the same as those described in Note 3. The following provides operating information about the Company’s reportable segments for the periods presented:
Revenues from North America customers accounted for greater than 90% of the Company’s revenues for the periods presented.
23
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
(Amounts in tables in thousands, except share and per share amounts)
Note 11. Subsequent Events
The Company has evaluated events from September 30, 2021 through the date the financial statements were issued. There were no subsequent events that need disclosure.
24
Item 2. Management’s Discussion and Analysis of 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 February 19, 2021. Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “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 that could materially affect such forward-looking statements can be found in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 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 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
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, CityBase, eCivis, Open Counter, Questica and Sherpa. Through our operating subsidiaries, we serve some of the fastest growing segments in the government technology sector, 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 SaaS products. Our search led to the acquisition (the “Acquisition”) of Bonfire, CityBase, eCivis, Open Counter, Questica, and Sherpa on February 19, 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 using relationships with other companies that offer complementary products and services.
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 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.
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 information 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 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 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 deliver our solutions primarily as a subscription service and provide customers with access to 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. 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.
Subscription, support and maintenance revenues also includes kiosk rentals and support or maintenance pertaining to license sales. Revenues from kiosk rentals and support are recognized on a straight-line basis over the support period.
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, 2021 and 2020, respectively.
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Professional services. Our professional services contracts generate revenues on a time and materials, 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 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, 2021 and 2020, respectively.
License. Revenues from distinct licensed software are recognized upfront when 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 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, 2021 and 2020, respectively.
Asset sales. Revenues from asset sales are recognized when the asset, typically a kiosk, has been received by the 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 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, 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.
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 lower rate over time.
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Results of Operations
Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
Total revenues
Our total revenues were $16.3 million for the three months ended September 30, 2021. Excluding the $0.1 million impact of purchase accounting, our total non-GAAP revenues for the three months ended September 30, 2021 was $16.4 million compared to $12.7 million for the three months ended September 30, 2020, representing a 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):
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):
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):
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
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
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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):
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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):
Procurement
Procurement’s total cost of revenues increased by $0.4 million or 32% primarily due to a $0.3 million or 31% increase in salaries and benefits and a $0.1 million increase in amortization of internal-use software. The increase in salaries and benefits was primarily driven by a declining U.S. dollar and a 13% increase in average headcount from September 30, 2020 to September 30, 2021.
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 decrease in royalties, offset by 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 wages is primarily due to a 23% increase in average headcount from September 30, 2020 to September 30, 2021.
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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, 2021 have decreased due primarily to the restructuring plan implemented in March 2020. The change in operating expenses for each operating segment is due to the following (in thousands, except percentages):
Procurement
Procurement’s total operating expense 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 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 $0.2 million or 8% decrease in salaries and wages and a $0.2 million decrease in share-based compensation expense. The $0.2 million decrease in salaries and 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.
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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 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 benefits driven by a 22% decrease in average headcount from September 30, 2020 to September 30, 2021. The $0.1 million decrease in general and administrative costs is primarily due to a $0.1 million decrease in salaries and wages.
Budget
Budget’s total operating expenses increased by $0.8 million or 10% primarily due to a $0.5 million or 10% increase in general and administrative expenses, and a $0.3 million or 20% increase in research and development expenses. These increases are primarily due to an increase in share-based compensation expense resulting from the issuance of restricted stock units.
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 $0.4 million or 8% due primarily due to a $0.2 million increase in insurance expense and a $0.2 million or 22% increase in salaries and 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 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
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 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.
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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.
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 (“non-GAAP financial 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 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.
Non-GAAP Gross Profit and Non-GAAP Gross Margin. Non-GAAP gross profit is defined as GAAP gross profit adjusted for the impact of purchase accounting resulting from 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. Non-GAAP loss from operations is defined as GAAP loss from operations adjusted for the impact of purchase accounting to revenues resulting from 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.
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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):
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Below is a reconciliation of non-GAAP revenues to revenues by operating segment:
Liquidity and Capital Resources
As of September 30, 2021, we had a cash balance of approximately $15.3 million. From the date of the Acquisition through September 30, 2021, our liquidity needs 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 established in connection with such offering for the benefit of our shareholders, proceeds from our June 2019 registered direct offering, proceeds from our February 2020 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.
We are attempting to further expand our customer 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.
As a result of the pandemic, we saw certain new and existing customers since March 2020 halt, defer or decrease investment in infrastructure; other customers postpone the implementation of projects, thus causing delays in services revenue; and an impact on new business pipeline and large deals. Although conditions have improved, we expect that certain of our current and potential customers will continue to take actions to reduce operating expenses and moderate cash flows during the remainder of 2021, including by delaying sales and 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 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.
Historical Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated:
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Nine Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2021 |
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2020 |
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Net cash used in operating activities |
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$ |
(4,623) |
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$ |
(13,530) |
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Net cash used in investing activities |
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$ |
(203) |
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$ |
(2,850) |
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Net cash provided by (used in) financing activities |
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$ |
(2,601) |
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$ |
14,136 |
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Net Cash 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 $28.5 million and changes in operating assets and liabilities of $0.7 million, offset by net non-cash expenses of $15.6 million. The $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.
Net Cash Used In Investing Activities
Our primary investing activities have consisted of capital expenditures.
For the nine months ended September 30, 2021, cash used in investing activities was $0.2 million resulting from capital expenditures.
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.
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.
Critical Accounting Policies and Use of Estimates
See Note 3 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 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. We have no guarantees or obligations other than those which arise out of normal business operations.
Contractual Obligations and Commitments
As of September 30, 2021, there were no significant changes to our contractual obligations from those presented as of December 31, 2020 in our Annual Report on Form 10-K filed with the SEC on February 19, 2021.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
During the three and nine months ended September 30, 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 Annual Report on Form 10-K filed with the SEC on February 19, 2021 for the year ended December 31, 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.
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 three and nine months ended September 30, 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 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.
During the nine months ended September 30, 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
We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there 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
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 2020 Annual Report on Form 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.
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Item 6.Exhibits.
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Exhibit Number |
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Description |
3.1 |
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4.1 |
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4.2 |
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10.1* |
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Amended and Restated Employment Agreement dated July 1, 2021 between the Company and TJ Parass.(1) |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS* |
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Inline XBRL Instance Document |
101.SCH* |
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Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
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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 4th day of November, 2021.
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GTY TECHNOLOGY HOLDINGS INC. |
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/s/ TJ Parass |
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Name: |
TJ Parass |
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Title: |
Chief Executive Officer |
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(Principal Executive Officer) |
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/s/ John Curran |
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Name: |
John Curran |
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Title: |
Chief Financial Officer |
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(Principal Financial Officer) |
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Exhibit 10.1
GTY Technology Holdings Inc.
July 1, 2021
TJ Parass
Re:Amended and Restated Offer of Employment
Dear TJ:
On behalf of GTY Technology Holdings Inc. (together with its successors, the “Company”), I am pleased to offer you the amended and restated terms and conditions of your employment with the Company in the position of Chief Executive Officer and President of the Company, working out of principal offices of Questica Software Inc. and Questica USCDN Inc. (“Questica”) subsidiaries of the Company located in Ontario, Canada.
The terms that will apply to your continuing employment with the Company are as follows:
1. |
Term, Position and Duties. Your employment pursuant to the terms and conditions of this amended and restated offer letter (this “offer letter”) shall be effective as of July 1, 2021 (the “Effective Date”) and shall continue until the second anniversary thereof, unless terminated earlier pursuant to Section 5; provided, however, you and GTY may extend your employment on such terms and conditions by mutual agreement. |
Commencing on the Effective Date, you will be employed by the Company hereunder on a full-time basis as the Chief Executive Officer and President of the Company, reporting to the Board of Directors of the Company (the “Board”). For clarity, all of your previous service with Questica will be recognized for all purposes and benefits.
You agree to perform the duties and responsibilities of your positions, and such other duties and responsibilities as shall from time to time be mutually agreed upon between you and the Board. You agree that, while employed by the Company, you will devote your full business time and your best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its subsidiaries; provided, however, you will be permitted to (i) engage in charitable and civic activities (including serving on not more than two charitable and not-for-profit Boards of Directors); (ii) manage your personal and family financial matters; and (iii) engage in such reasonable commercial and business interests (including with respect to the oversight of the business of Total ETO Inc.) approved in advance by the Board (such approval not to be unreasonably withheld), in each case, to the extent such activities do not individually or in the aggregate interfere with your duties and responsibilities to the Company or create any actual or potential conflict of interests with the Company’s business.
2. |
Base Salary and Annual Bonus. Commencing on the Effective Date and continuing thereafter, you will receive an annual base salary of $400,000 (US) (“Base Salary”), less applicable tax and other withholdings and deductions required by law, payable in accordance |
1
with the Company’s payroll practices in effect from time to time. Your Base Salary will be subject to periodic review and potential upward adjustment by the Compensation Committee (the “Committee”) of the Board.
For each calendar year of your continuing employment, you will be eligible to receive an annual cash incentive bonus (the “Annual Bonus”). The target amount of the Annual Bonus will be equal to 50% of your Base Salary. The Annual Bonus will be subject to pro-ration for any period of employment of less than a full calendar year. The Annual Bonus will be subject to the achievement of performance goals established by the Committee. The actual amount of the Annual Bonus, if any, which may be in excess of the target amount if achievement exceeds performance goals, will be determined based on the discretion and recommendation of the Committee to the Board. You must be actually and actively employed by the Company on the day that the Annual Bonus (if any) for a calendar year is paid in order to earn and receive such Annual Bonus. For greater clarity, you will not be considered “actually and actively employed” during any period of notice of termination or when in receipt of payment in lieu of such notice of termination, unless specifically required by statute or otherwise provided in this offer letter. The Annual Bonus shall be subject to standard payroll deductions and withholdings, and paid no later than March 15th of the year following the calendar year to which the Annual Bonus relates.
The Company shall pay you a lump-sum cash signing bonus of $55,937.50 (US) within 60 days following the Effective Date.
3. |
Equity Compensation. You will, subject to the approval by the Administrator of the GTY Technology Holdings Inc. Amended and Restated 2019 Omnibus Incentive Plan (or any other incentive plan adopted or approved by the Company) (the “Incentive Plan”) and continuing employment with the Company, be granted the following equity awards pursuant to the terms and conditions of an award agreement and the Incentive Plan a (the “Equity Awards”): |
a. |
Time-Based Restricted Stock Units. |
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On or about the Effective Date, 100,000 time-based restricted stock units, vesting 75% on December 31, 2021 and 25% on December 31, 2022. |
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On or before the Effective Date, 100,000 time-based restricted stock units, vesting 75% on December 31, 2022 and 25% on December 31, 2023. |
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On or before December 31, 2021, 60,000 time-based restricted stock units, vesting in three equal installments on February 19, 2022, February 19, 2023 and February 19, 2024. |
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On or before December 31, 2022, 60,000 time-based restricted stock units vesting in three equal installments on February 19, 2023, February 19, 2024 and February 19, 2025. |
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On or before December 31, 2023 and the end of each subsequent year, time-based restricted stock units with a fair market value (as defined in the Incentive Plan, “Fair Market Value”) of $300,000 (US) on the date of grant, rounded up to avoid a grant |
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of fractional shares, vesting in three equal installments on February 19 of each subsequent year.
b. |
Performance-Based Restricted Stock Units. |
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On or before December 31, 2021, 70,000 performance-based restricted stock units, vesting in three equal installments on February 19 of each subsequent year subject to the achievement of performance goals established by the Board. |
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On or before December 31, 2022, 70,000 performance-based restricted stock units, vesting in three equal installments on February 19 of each subsequent year subject to the achievement of performance goals established by the Board. |
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On or before December 31, 2023 and the end of each subsequent year, performance-based restricted stock units with a Fair Market Value of $350,000 (US) on the date of grant, rounded up to avoid a grant of fractional shares, vesting in three equal installments on February 19 of each subsequent year subject to the achievement of performance goals established by the Board. |
c. |
Long-Term Incentive Plan. |
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On or before December 31, 2022, a grant of performance-based restricted stock units with a Fair Market Value of $3,000,000 (US) on the date of grant, rounded up to avoid a grant of fractional shares, vesting in the following installments over three years subject to the achievement of performance goals established by the Board related to revenue and shareholder value: (i) 50% in 2023 (the “2023 LTI Vesting”), (ii) 25% in 2024 and (iii) 25% in 2025 (collectively, the “2022 Long-Term Incentive Grant”). |
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On or before December 31, 2024, a grant of performance-based restricted stock units with a Fair Market Value of $2,000,000 (US) on the date of grant, rounded up to avoid a grant of fractional shares, vesting in three equal installments on February 19 of each subsequent year subject to the achievement of performance goals established by the Board related to revenue and shareholder value. |
4. |
Benefit Plans and Programs. You will be eligible to participate in the Company’s or Questica’s executive benefits and executive benefits plans and programs (including RRSP matching) in effect from time to time, subject to the terms of any and all plan documents and at the same level as your current executive benefits. The Company reserves the right, in its sole discretion, to amend, change or discontinue, in whole or in part, any and all of its benefits and/or benefit plans and programs, at any time for any reason; provided, however, any amendment, change or discontinuance shall be required to affect all similarly situated executives of the Company. The Company will reimburse you for all reasonable business expenses you incur in the performance of your duties, subject to the terms of the Company’s expense reimbursement policies in effect from time to time applicable to senior executives. You will be entitled to the benefits of GTY’s Flexible Paid Time Off Policy and, in any event, no less than six weeks’ paid vacation in accordance with the Company’s policies. Except as outlined above, you are not entitled to any other payment, benefit, perquisite, allowance or entitlement other than as specifically set out in this offer letter or as otherwise |
3
agreement to in writing by the Company.
5. |
Termination. In the event your employment with the Company terminates for any reason, the Company will pay you (i) unpaid base salary through the termination date, payable in accordance with the Company’s payroll practices, (ii) unreimbursed business expenses, payable in accordance with and subject to the terms of the Company’s expense reimbursement policies, (iii) any vested non-forfeitable amounts owing or accrued as of the termination date (or to the end of any applicable statutory notice period) under the Company’s benefit plans or programs in which you participated, (iv) any accrued but unused vacation pay owing to you up to the termination date and (v) any vested amounts or benefits owing under the Incentive Plan (collectively, the “Accrued Benefits”). In addition to the Accrued Benefits: |
a. |
In the event your employment is terminated at any time by the Company without “Cause” (as defined below) or you resign for “Good Reason” (as defined below) or your employment is not extended in accordance with Section 1 by the Company without “Cause” or by you for “Good Reason”, then the Company shall provide you the following payments and benefits (the “Severance Benefits”): (1) the greater of (a) an amount (the “Cash Severance”) equal to one-and-one-half (1.5) times the sum of your then-current Base Salary plus one-and-one-half (1.5) times your then-current target Annual Bonus, payable in substantially equal monthly installments over an 18-month period following the date of your termination (the “Severance Period”), or (b) the minimum amount of payment in lieu of notice and severance pay (if any) owed to you pursuant to Part XV of the Employment Standards Act, 2000, as it may be amended from time to time (the “ESA”), (2) continued participation in the Company’s health and welfare plans until the earlier of (a) the end of the Severance Period and (b) the date you are eligible for coverage under a subsequent employer’s health and welfare plans (provided that under no circumstances will your benefits continuation be for a period which is less than the notice period required under Part XV of the ESA), (3) vacation pay which accrues during the notice period required by Part XV of the ESA and (4) any unvested or partially vested Equity Awards shall become fully vested; provided, that, notwithstanding the foregoing, (i) the Equity Awards referenced in Section 3.c. (Long Term-Incentive Plan) shall vest only if and to the extent that they would have vested within six months following the date on which your employment is terminated by the Company without “Cause” or by you for “Good Reason” or your employment is not extended in accordance with Section 1 by the Company without “Cause” or by you for “Good Reason” and (ii) if you resign from Company without good reason within six months before the 2023 LTI Vesting, then 50% of the 2022 Long-Term Incentive Grant will vest on the date on which your employment with GTY terminates as a result of such resignation. For the avoidance of doubt, the Severance Benefits are not subject to mitigation by you. |
b. |
In the event your employment is terminated by the Company for Cause or due to your death or resignation other than for Good Reason, you will receive only the Accrued Benefits. For purposes of this offer letter, “Cause” shall mean: (i) a willful act of dishonesty by you in connection with the performance of your duties as an employee; (ii) your conviction of, indictment for, or plea of guilty to an indictable offence under the |
4
Criminal Code of Canada for any crime involving fraud, embezzlement or moral turpitude, or a material violation of federal or provincial law that the Board reasonably determines has had or is reasonably likely to have a detrimental effect on the Company’s reputation or business (other than convictions for which a pardon has been granted); (iii) your gross misconduct in the performance of your duties as an employee; (iv) your intentional or grossly negligent unauthorized use or disclosure of any Confidential Information or Intellectual Property (each as defined in the Amended and Restated Fair Competition Agreement between you and the Company dated as of the date hereof (the “Fair Competition Agreement”)); (v) your material breach of any material obligations under any written agreement between you and the Company, including, without limitation, the Fair Competition Agreement; (vi) your breach of any material Company policy communicated to you, including but not limited to those relating to insider trading or sexual harassment, which is not considered by the Board to be immaterial; (vii) your willful refusal to follow the lawful directives of the Board or the Company CEO; or (viii) any other act or omission or series of acts or omissions by you that would, pursuant to applicable employment standards legislation or at common law, permit the Company to, without notice or payment in lieu of notice, terminate your employment. Despite the above, it is understood that “Cause” shall be deemed not to be established unless, (a) the Company provides you with written notice of any of the grounds for termination allegedly relied upon above (the “Grounds for Termination”); and (b) you are then unable to cure the Grounds for Termination within 15 days of receiving such written notice. In the event that any instance of Cause is found to not amount to wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the Company, it is agreed that your entitlement will be limited to the applicable minimum notice of termination or pay in lieu thereof, severance pay (if any), and continued participation in the Company’s health and welfare benefit plans as required by Part XV of the ESA.
c. |
For purposes of this offer letter, “Good Reason” shall mean the occurrence of any of the following without your prior consent: (i) a material diminution in your base salary or target Annual Bonus opportunity; (ii) a material diminution in your duties as Chief Executive Officer of the Company; (iii) a relocation of your principal work location to a facility or location more than 30 miles from your principal work location on the Effective Date; or (iv) unless a Change in Control has occurred, a requirement that you report to any person or entity other than the Board. Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 90 days after the condition initially comes into existence, the Company fails to remedy the condition within 30 days after receiving your written notice and you actually resign your employment within 30 days following the expiration of the Company’s cure period. |
d. |
For purposes of this offer letter, “Change in Control” shall mean the occurrence of any of the following after the Effective Date: (i) one person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation; provided that, a Change in Control shall not occur if any person (or more than one person acting as a group) owns more than 50% |
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of the total fair market value or total voting power of the Company’s stock and acquires additional stock; (ii) one person (or more than one person acting as a group) acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition) ownership of the Company’s stock possessing 30% or more of the total voting power of the Company’s stock; (iii) a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or (iv) the sale of all or substantially all of the Company’s assets.
e. |
In the event that your employment is terminated as a result of your inability to substantially perform your duties on behalf of the Company for a continuous period of six months or more or for an aggregate of nine months in any consecutive 12-month period, subject at all times to the provisions of the Human Rights Code (Ontario) (“Disability”), the Company shall provide you with (i) the minimum amount of payment in lieu of notice and severance pay (if any) owed to you pursuant to Part XV of the ESA (with vacation pay calculated to the end of the statutory notice period), and (ii) continued participation in the Company’s health and welfare benefit plans for the minimum statutory notice period. |
The parties agree that the provisions of Section 5 are fair and reasonable and that the payments, benefits and entitlements referred to in Section 5 hereof are reasonable estimates of the damages which will be suffered by you in the event of the termination of this offer letter and of your employment with the Company. Except as otherwise provided in Section 5, or as set out in the Incentive Plan or other equity agreements/documents, you shall not be entitled to any further notice of termination, payment in lieu of notice of termination, severance, damages, or any additional compensation whatsoever and the amounts payable are inclusive of any statutory payments. Further, you will not be entitled to receive any payments or benefits which exceed your minimum entitlements under applicable employment standards legislation (other than the Accrued Benefits) unless, within seven (7) days following the termination date, you, or in the event of your death or Disability, your legal representatives, have executed a general release of claims (other than claims or rights you have as a selling shareholder under that certain Share Purchase Agreement by and among the Company, Questica and certain other parties thereto (the “Purchase Agreement”)) in the standard form utilized by the Company (the “Release”). The Severance Benefits which exceed your statutory minimum entitlement shall be paid or commence on the first payroll period following, the date the executed Release is received by the Company and the vesting of the Equity Awards as provided in Section 5.b shall occur on such date.
6. |
Compliance with Employment Standards Legislation. In the event that the minimum standards set out in the ESA (as may be amended from time to time) are more favourable to you in any respect than a term or provision provided for in this offer letter, you and the Company agree that the statutory provisions will apply and be your sole entitlement in respect of that term or provision. |
7. |
Fair Competition Agreement. As a material inducement for the Company to agree to enter into an employment relationship with you on the terms set forth herein, you agree to execute |
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and comply with the Fair Competition Agreement attached hereto as Exhibit A.
8. |
Company Policies and Procedures. Your employment will be subject to the Company’s standard policies and procedures (whether as currently existing or to be established in the future), as they may be amended, changed or discontinued at any time and such other rules and regulations as may be adopted or amended in the Company’s sole discretion. |
9. |
Notices. All notices or other communications required or permitted to be given under this offer letter shall be in writing and shall be deemed to have been duly given when delivered personally or one business day after being sent by a nationally recognized overnight delivery service, charges prepaid. Notices also may be given electronically via PDF and by email and shall be effective on the date transmitted if confirmed within 48 hours thereafter by a signed original sent in the manner provided in the preceding sentence. Notice to you shall be sent to your most recent residence and personal email address on file with the Company. Notice to the Company shall be sent to its physical address set forth on the first page hereto and addressed to the Board or such other person as the Company may designate at the email address provided by the Company for the Board or such person. |
10. |
Entire Agreement; Miscellaneous. This offer letter, together with the Incentive Plan, any Equity Award agreements referenced herein and the Fair Competition Agreement, constitutes the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral including, but not limited to, the original offer letter dated September 12, 2018, as amended. The terms of this offer letter may only be modified in a specific writing signed by you and an authorized representative of the Company. The invalidity or unenforceability of any provision or provisions of this offer letter will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect. Any disputes arising out of or related to this offer letter or your employment with the Company will be subject to the dispute resolution provisions in the Fair Competition Agreement, and this offer letter shall be governed by and construed in accordance with the governing law provision set forth in the Fair Competition Agreement. In the event of any conflict between any of the terms in this offer letter and the terms of any other agreement between you and the Company, the terms of this offer letter will control. By entering into this offer letter and commencing employment with the Company, you represent that you are not bound by any employment contract, restrictive covenant or other restriction that prevents you from entering into employment with or carrying out your responsibilities for the Company, or which is in any way inconsistent with this offer letter. This offer letter is binding on and may be enforced by the Company and its successors and assigns and is binding on and may be enforced by you and your heirs and legal representatives. In addition, the Company may assign this offer letter or any and all rights, duties and obligations hereunder to any subsidiary of the Company, including, without limitation, Questica; provided, that the Company hereby unconditionally guarantees full payment of any payment obligations hereunder in the event of such assignment; provided, further, that any payment made by any such assignee shall offset any payment obligation of the Company. This offer letter may be executed in any number of counterparts, all of which taken together shall constitute one instrument. Execution and delivery of this offer letter by facsimile or other electronic signature is legal, valid and |
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binding for all purposes.
11. |
Independent Legal Advice. You acknowledge that you have been advised to obtain, and that you have obtained or have been afforded the opportunity to obtain, independent legal advice with respect to this offer letter and that you understand the nature and consequences of this offer letter. |
12. |
Purchase Agreement. Nothing in this offer letter or any other written agreement (including the Fair Competition Agreement) prohibits you from enforcing any rights or remedies you may have under the Purchase Agreement. |
13. |
Conversion. Cash amounts payable hereunder are expressed in U.S. dollars. You shall be paid such amounts in Canadian dollars. The exchange rate used to convert U.S. dollars to Canadian dollars for this purpose shall be determined annually by the Committee in good faith based on the average exchange rate in the three years immediately preceding such determination and shall control absent manifest error. |
[Remainder of page intentionally left blank]
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We are very excited about your continued employment with the Company and I anticipate that you will make many more important contributions to the Company and its strategic mission. Please acknowledge your acceptance of this amended and restated offer by returning a signed copy of this offer letter.
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Very truly yours, GTY Technology Holdings Inc. |
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By: |
/s/ William D. Green |
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Name: |
William D. Green |
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Title: |
Chairman of the Board |
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Accepted and agreed: |
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/s/ TJ Parass |
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TJ Parass |
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9
Exhibit A
AMENDED AND RESTATED FAIR COMPETITION AGREEMENT
In consideration of the compensation set forth in your Offer Letter (as defined below), including, without limitation, the Equity Award (as defined in the Offer Letter), and the continuation of your employment with GTY Technology Holdings Inc. and/or any of its current or future parents, subsidiaries, affiliates, and/or successors (collectively, the “Company”), and the compensation and other benefits you will receive from the Company (your “Employment”), you agree, intending to be legally bound, as follows:
Acknowledgements and Representations
1.Supplemental Terms. You acknowledge that you have received a separate amended and restated offer letter dated July 1, 2021 (the “Offer Letter”) that sets forth the relevant terms concerning your compensation arrangements with the Company. In the event of any conflict between this Amended and Restated Fair Competition Agreement (this “Agreement”) and the Offer Letter, the terms of the Offer Letter shall govern.
2.Acceptance. You acknowledge that the Company considers the protections provided by this Agreement to be necessary to safeguard its Customer Confidences, Confidential Information, Intellectual Property, Customer relationships (each as defined in this Agreement) and other business interests and is willing to commence or continue your Employment only if you agree to accept the obligations set forth herein.
3.No Conflicting Obligations. You represent that you do not have any contractual or other obligations that would conflict with your Employment by the Company. In particular, you represent that you are not bound by any agreement, understanding or other obligation (including, without limitation, any non-competition or non-solicitation agreement) with or to any person or entity that prohibits you from accepting or continuing your Employment by the Company and fully performing all your duties for the Company, except as described on Annex A attached hereto. By executing this Agreement, you hereby acknowledge and confirm that all business activities in which you are currently participating and any boards on which you are serving are listed on Annex A attached hereto, which outside activities are subject to the conditions imposed on such activities (if any) in the Offer Letter.
4.Documents and Confidential Information Belonging to Former Employers and Other Third Parties. You also represent that you have not taken or retained, and do not have in your possession, any documents, in either electronic or hard copy form, that belong to any former employer (which, for purposes of this Agreement, shall include persons, corporations, and other entities for which you have acted as an independent contractor or consultant) and that you will not use or disclose in your work for the Company any trade secrets or confidential information belonging to any former employer or other third party. This paragraph shall not apply to any documents, trade secrets or confidential information belonging to Questica Software Inc., Questica USCDN Inc. or any of their related or affiliated companies (collectively, “Questica”).
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Resignation Notice Period
5.No Right to Employment. You acknowledge that neither the Offer Letter nor this Agreement gives you any right to continued employment with the Company. This means that you are free to resign at any time (subject to providing written notice pursuant to any applicable Notice Period as set forth below), for any or no reason, and, similarly, the Company is free to terminate your Employment at any time, for any or no reason, in accordance with the Offer Letter. Your Employment will continue in effect, however, until terminated by either the Company or you.
6.Notice Period. (a) You understand and agree that you will have access to Customer Confidences, Confidential Information, Intellectual Property and Customer relationships belonging to the Company. You recognize and agree that it is reasonable and necessary for the Company to protect such Customer Confidences, Confidential Information, Intellectual Property, and Customer relationships and to provide a smooth transition if you choose to leave the Company. Consequently, you agree to provide the Company with the following periods of prior notice (the “Notice Period”), in writing, depending on your title at the time of your resignation, of your intent to voluntarily terminate your employment with the Company: President and Executive Vice Presidents – three (3) months; Senior Vice Presidents – two (2) months; and Vice Presidents and below – one (1) month. If such notice is provided to the Company more than thirty (30) days prior to the end of the performance period set at the time of grant for any annual or long-term incentive compensation award for that year, (i) you shall not be entitled to receive any annual or long-term incentive compensation award for that year and (ii) vesting of deferred amounts not yet vested shall cease upon notice of your intent to terminate your employment.
(b)If, at the time you provide notice in accordance with this paragraph 6, you intend or contemplate alternative employment, you also agree to provide sufficient details, in writing, about such alternative employment to allow the Company to meaningfully exercise its rights under this paragraph 6.
(c)During the Notice Period, your normal terms of employment will continue and, in particular, you will: (i) perform any reasonable duties and responsibilities the Company requests; (ii) devote all of your working time, labor, skill and energies to the business and affairs of the Company; (iii) be paid your base salary; and (iv) be entitled to continue to participate in the Company’s benefit plans. After you have given notice of your voluntary resignation, the Company may, at any time during the Notice Period and in its sole and absolute discretion, (A) elect to place you on paid leave for all or any part of such Notice Period, subject to applicable law, (B) relieve you of some or all of your duties as an employee of the Company and/or exclude you from its premises or (C) shorten or eliminate the Notice Period and accelerate the date on which your resignation will be effective without, to the extent permitted by applicable law, any obligation to compensate you for the period between the date that the Company effected the acceleration of the effective date of your resignation and the date on which the Notice Period was originally due to end. For the avoidance of doubt, you agree that the taking of any action described in the preceding sentence by the Company shall not constitute an actual or constructive breach of this Agreement or your Offer Letter.
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(d)You agree that during your employment, including during the Notice Period or any period of notice provided to you by the Company upon termination of your employment, whether or not the Company requires you to work during such period, you will not provide services for any Competitor including, without limitation, engaging in, directly or indirectly, or managing or supervising personnel engaged in, any activity (i) which is similar or substantially related to any activity in which you were engaged, in whole or in part, at the Company; (ii) for which you had direct or indirect managerial or supervisory responsibility at the Company; or (iii) which calls for the application of the same or similar specialized knowledge or skills as those used by you in your activities with the Company. For purposes of this Agreement, a “Competitor” means a business enterprise that (A) engages in any activity, (B) proposes in writing to engage in any activity or (C) owns or controls a significant interest in or is a subsidiary or affiliate of any entity, which, in each case, competes with or proposes in writing to compete with any activity in which the Company is engaged, such as, without limitation, developing and licensing software for federal, state and local governments and governmental agencies.
Duties
7.Nature of Duties. Except to the extent expressly permitted in your Offer Letter, you agree to devote your full working time and efforts to the business and affairs of the Company (which may include service to its affiliates) on a full-time basis and will at all times faithfully, industriously and to the best of your ability, experience and talent, perform all duties that may be required of you. Except to the extent expressly permitted in your Offer Letter, during your Employment, you shall not engage in any other business activities without the prior written consent of the Company. In particular, during your Employment, you agree not to work for or assist, whether or not for profit or personal gain, any Competitor or engage in any business or activity that is similar to or competes directly or indirectly with the Company or is inimical to the best interests of the Company or that would interfere with your ability to work for the Company on a full-time basis.
8.Duty to Disclose Business Opportunities. During your Employment, you shall (a) promptly disclose to the Company all business opportunities that are presented to you in your capacity as an officer or employee of the Company or that are of a similar nature to the Company’s existing business or a type of business the Company is currently developing or considering and of which you are aware and (b) not usurp or take advantage of any such business opportunity personally or assist any third party in doing so without first offering such opportunity to the Company.
9.Compliance with Company’s Policies and Practices. During your Employment, you agree to observe and comply with all rules, regulations, policies and practices in effect or adopted by the Company at this time or in the future brought to your attention or about which you ought to be reasonably aware.
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Confidentiality, Non-Disclosure and Intellectual Property
10.Customer Confidences. As used in this Agreement, “Customer” means any person, corporation or other entity (a) for which the Company has, with your knowledge or assistance, performed any services or to which it has sold any products, (b) with which it has engaged in any business activity with your knowledge or assistance or (c) from which the Company has, with your knowledge or assistance, actively solicited business or discussed other business arrangements in each case in the year preceding the termination of your Employment. The Company’s Customers expect that the Company will hold all business-related information about them, including the fact that they are doing or are considering doing business with the Company and the specific matters on which they are or may be doing business (“Customer Confidences”), in the strictest confidence. You acknowledge that, during the course of your Employment, you will have access to such Customer Confidences. You also acknowledge and agree that all relationships with Customers that you initiate or develop during your Employment with the Company belong to the Company, not to you personally.
11.Confidential Information. You acknowledge that, during the course of your Employment, you will have access to information relating to the Company’s business that provides the Company with a competitive advantage, is not generally known by persons outside the Company and could not easily be determined or learned by someone outside the Company (“Confidential Information”). Such Confidential Information, whether or not explicitly designated as confidential, includes both written information and information not reduced to writing and includes but is not limited to information about Customers, trade secrets, internal corporate policies and strategies, pricing, financial and sales information, personnel information, forecasts, formulas, compilations, software programs, data, databases, directories, research, client lists and business and marketing plans, and any modifications or enhancements of any of the foregoing. You further agree that if you previously rendered services to the Company (e.g., as an independent contractor or consultant) or otherwise gained knowledge of Customer Confidences and/or Confidential Information (e.g., by executing a Non-Disclosure Agreement prior to your rendering services to the Company in any capacity), your obligations under any such agreement between you and the Company to preserve Customer Confidences and/or Confidential Information shall remain in full force and effect pursuant to the applicable terms contained therein.
12.Duty to Preserve Customer Confidences and Confidential Information. You agree not to use or disclose, without the prior written consent of the Company, both during and after your Employment with the Company, Customer Confidences and Confidential Information, except as may be necessary in the good faith performance of your duties to the Company or as permitted by paragraphs 25 and 26 hereof.
13.Company Documents. You acknowledge that all documents, in hard copy or electronic form, received, created or used by you in connection with your Employment with the Company, other than those relating solely to your personal compensation and benefits, are and will remain the property of the Company. You agree to return and/or cooperate in permanently deleting all such documents (including all copies) promptly upon the termination of your Employment and agree that, during or after your Employment, you will not, under any circumstances, without the written consent of the Company, disclose those documents to anyone outside the Company or use
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those documents for any purpose other than the advancement of the Company’s interests, or as permitted by paragraphs 25 and 26 hereof. You further understand and agree that you are prohibited from searching for, accessing, viewing, printing, transferring and/or using documents, e-mails, and any other data stored on any of the Company’s computer systems in the absence of a legitimate business need or Company objective, and any such actions or use will be considered unauthorized.
14.Obligation to Return Signed Termination Certificate Upon Termination. Upon termination of your Employment, you will be asked to participate in an exit interview and to sign and deliver a “Termination Certificate,” the form of which is attached hereto as Annex B. If you do not attend an exit interview, you are still obligated to sign and deliver the Termination Certificate. Your failure to sign the Termination Certificate, however, shall not affect any of your obligations under this Agreement.
15.Intellectual Property. (a) You agree to fully and promptly disclose to the Company, without additional compensation, all ideas, original or creative works, inventions, discoveries, computer software or programs, trading strategies, statistical and economic models, improvements, designs, formulae, processes, production methods and technological innovations, whether or not patentable or copyrightable, which, during your Employment with the Company, are made, conceived or created by you, alone or with others, during or after usual working hours, either on or off the job, and which are related to the business of the Company or which relate in any way to the work performed by you for the Company (“Intellectual Property”). You acknowledge that the Company owns all such Intellectual Property rights as works made for hire to the fullest extent of the law. For the avoidance of doubt, you hereby assign to the Company all such Intellectual Property rights in any and all media now known or hereafter developed, along with all existing causes of action, known or unknown.
(b)You agree, at any time during or after your Employment, to sign all papers and do such other acts and things, at the Company’s expense, as the Company deems necessary or desirable and may reasonably require of you to protect the Company’s rights to such Intellectual Property, including applying for, obtaining and enforcing patents or copyrights with respect to such Intellectual Property in any and all domestic and overseas jurisdictions. Furthermore, you hereby irrevocably waive any and all personal rights (including moral rights) that you may possess in and to any Intellectual Property.
Restrictive Covenants
16.Nature of the Business. You acknowledge that the Company is engaged in a highly competitive business and that the preservation of its Customer Confidences and Confidential Information is critical to the Company’s continued business success. You also acknowledge that the Company’s relationships with its Customers are extremely valuable and that, by virtue of your Employment with the Company, you have had or may have contact with those Customers and that, if so, you must always act in the best professional manner and are being compensated to develop relationships with Customers on behalf of and for the benefit of the Company. As a result, your engaging in or working for or with any business which is directly or indirectly competitive with the Company would cause the Company great and irreparable harm if
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not done in strict compliance with this Agreement.
17.Covenant Not to Compete. You acknowledge that the Company is in a highly competitive industry and that your leaving the Company to join a competing business would jeopardize the Company’s Customer Confidences, Confidential Information, Intellectual Property and Customer relationships. Accordingly, you agree that:
(a)Subject to the provisions below, during your Employment with the Company, and for the applicable Non-Compete Period (as defined below), you will not directly or indirectly work for or with, own, invest in, render any service or advice to or otherwise assist (in each case, whether or not for compensation) or act as an officer, director, employee, partner or independent contractor for any Competitor in any jurisdiction in which you work directly or within which the Company conducts any material business or in which you have material responsibility. You acknowledge that, given the nature of the Company’s business and the geographical market of the Company combined with your role and responsibilities, the geographical area described in the preceding sentence and the Non-Compete Period are both reasonable.
(b)To the extent that, at the time of the termination of your Employment, you intend to work for or provide services to a Competitor or any arguably competing business, you agree to provide the Company at the time of such termination with at least two weeks’ advance written notice of your intention to do so. You also agree that, should you consider working for any Competitor or arguably competing business at any time during the applicable Non-Compete Period, you will provide the Company with at least two weeks’ advance written notice of your intention to do so. The notices contemplated by this paragraph shall be delivered by you in writing to the attention of the General Counsel of the Company.
(c)For purposes of this Agreement, the “Non-Compete Period” means: (i) if your Employment is terminated by the Company without Cause or you resign for Good Reason (each as defined in the Offer Letter), the Severance Period (as defined in the Offer Letter) or (ii) if your Employment is terminated by for any other reason, including a resignation by you, six (6) months from the effective date of your termination.
18.Non-Solicitation of Customers. You acknowledge that, by virtue of your Employment by the Company, you have gained or will gain knowledge of the identity, characteristics and preferences of the Company’s Customers, among other Customer Confidences and Confidential Information, and that you would inevitably have to draw on such information if you were to solicit or service the Company’s Customers on behalf of a Competitor. Accordingly, you agree that during your Employment by the Company (including during any applicable Notice Period), and for twelve (12) months following the termination of that Employment for any reason, (the “Restricted Period”), you will not, on your own behalf or behalf of anyone else, directly or indirectly, solicit the business of, or direct tailored advertisements to, actual or prospective Customers of the Company. You further agree that during the Restricted Period, you will not provide services that are the same as or similar to those provided by the Company or encourage or assist any person or entity in competition with the Company to solicit, service, or direct tailored advertisements to any actual or prospective Customer of the Company covered by the previous sentence of this section, or otherwise seek to encourage or induce any such Customer to cease
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doing business with, or reduce the extent of its business dealings with, the Company. The prohibitions contained in this section shall not, however, apply to any Customers you developed without any substantial assistance from the Company. For purposes of this Agreement, a “prospective Customer” means (i) any person solicited by you on behalf of the Company for any purpose relating to the Company’s business at any time during your Employment (including, for the avoidance of doubt, the Notice Period), and in case of termination, within the twelve (12) month period immediately preceding the date of termination of your Employment for any reason and (ii) any person solicited by the Company with your knowledge for any purpose relating to the Company’s business at any time during your Employment (including, for the avoidance of doubt, the Notice Period), and in case of termination, within the twelve (12) month period immediately preceding the date of termination of your Employment for any reason.
19.Non-Solicitation of Employees. You also agree that, during the Restricted Period, you will not, directly or indirectly, solicit (whether on your own behalf or on behalf of some other person or entity) any person who is at that time (or was during the prior six (6) months), to your knowledge, an employee, consultant, independent contractor, representative or other agent of the Company. Nor will you during the Restricted Period, directly or indirectly, on your own behalf or on behalf of any other person, entity or organization, induce or encourage any employee, consultant, independent contractor, representative or other agent of the Company to terminate or reduce his or her employment or other business relationship or affiliation with the Company. Nor will you directly or indirectly assist any third party in doing what you yourself are prohibited from doing under this paragraph.
20.Non-Hire of Employees. You also agree that, during the Restricted Period, you will not hire or seek to hire (whether on your own behalf or on behalf of some other person or entity) any person who is at that time (or was during the prior six (6) months), to your knowledge, an employee, consultant, independent contractor, representative or other agent of the Company.
21.Non-Disparagement. Except as otherwise permitted by this Agreement or applicable law, you agree that during your Employment with the Company and at all times thereafter you will not publish disparaging or defamatory comments regarding the Company or its owners, members, directors, officers, employees, shareholders, agents, representatives or others with whom the Company has a business relationship as of the date of termination of your Employment or make any public statements that are intended to, or can reasonably expected to, damage the reputations of any of such entities or persons.
22.Tolling. In the event that you violate any of the preceding provisions of the Restrictive Covenants sections of this Agreement, the time periods set forth in those sections shall be extended for the period of time you remain in violation of the provisions.
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Arbitration
23.(a) It is understood and agreed between the parties hereto that any and all claims, grievances, demands, controversies, causes of action or disputes of any nature whatsoever (including, but not limited to, tort and contract claims, and claims based upon any law, statute, order, or regulation) arising out of, in connection with, or in relation to (i) the interpretation, performance or breach of this Agreement, (ii) Employee’s employment by the Company, (iii) the termination of Employee’s employment with the Company, and (iv) the arbitrability of any claims under or relating to this Agreement, shall be resolved by final and binding arbitration. This agreement to arbitrate expressly includes, but is not limited to, claims under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Americans with Disabilities Act of 1990, as amended, Section 1981 of the Civil Rights Act of 1866, the Family and Medical Leave Act, as amended, the Employee Retirement Income Security Act, as amended, the Fair Labor Standards Act, as amended, and any similar federal, state, local or municipal law, statute or regulation.
(b)The forum for any arbitration under this Agreement shall be final and binding arbitration before under the auspices of JAMS in Toronto, Canada.
(c)The arbitration shall be conducted in accordance with the then-existing JAMS Employment Rules and Procedures, except to the extent such rules conflict with the procedures set forth in this paragraph, in which case these procedures shall govern. Any such arbitration shall be before one arbitrator. The parties shall select a mutually acceptable retired judge from the panel of arbitrators serving with any of JAMS’s offices, but in the event the parties cannot agree on an arbitrator, the Administrator of JAMS shall appoint a retired judge from such panels (the arbitrator so selected or appointed, the “Arbitrator”). The Arbitrator shall render an award and a written, reasoned opinion in support thereof. The Arbitrator shall have power and authority to award any appropriate remedy (in law or equity) or judgment that could be awarded by a court of law in the Province of Ontario, and, upon good cause shown, the Arbitrator shall afford the parties adequate discovery, including deposition discovery.
(d)The dispute resolution process shall be strictly confidential. Neither party shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties, except as required by applicable law. Except as provided herein, the Arbitration Act, 1991 (S.O. 1991, c. 17, as amended from time to time) shall govern the interpretation, enforcement and all proceedings pursuant to this Agreement. The Arbitrator and/or arbitration panel shall be bound by and shall strictly enforce the terms of this paragraph 23 and may not limit, expand or otherwise modify its terms. The Arbitrator and/or arbitration panel shall make a good faith effort to apply the substantive law (and the law of remedies, if applicable) of the Province of Ontario, without reference to conflicts of laws provisions. The Arbitrator and/or arbitration panel shall be bound to honor claims of privilege recognized at law, but the Arbitrator and/or arbitration panel shall have the discretion to determine whether any such claim of privilege applies. The award rendered shall be final and binding upon the parties, and judgment upon the award may be entered in any court having jurisdiction thereof.
(e)Claims must be brought by either you or the Company in your or its
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individual capacity, not as plaintiffs or class members in any purported class or collective proceeding, and the arbitrator shall not have the power to hear the arbitration as a class or collective action. To the maximum extent permitted by law, both you and the Company waive the right to bring, maintain, participate in, or receive money from any class, collective or representative proceeding. The parties intend this arbitration provision to be valid, enforceable, irrevocable and construed as broadly as possible.
(f)Each party shall bear its own fees and expenses with respect to this dispute resolution process and any litigation related thereto and the parties shall share equally all fees and expenses, in accordance with the JAMS Employment Rules and Procedures, unless prohibited by applicable law.
Other Terms
24.In the twelve (12) months following the termination of your Employment with the Company, in the event you seek or obtain employment or another business affiliation with any person or entity other than the Company that is a Competitor, you agree to provide that person or entity with a copy of this Agreement. You also agree to notify the Company in writing, as far in advance as is reasonably practicable, of the details of such employment or business affiliation. You also agree that the Company may provide a copy of this Agreement to any such person or entity.
25.Nothing in this Agreement restricts or prohibits you from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with a self-regulatory authority or a government agency or entity, including without limitation, the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, or the Ontario Securities Commission (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of federal, state/provincial, or local law or regulation. You do not need the prior authorization of the Company to engage in conduct protected by this paragraph, and you do need to notify the Company that you have engaged in such conduct. This Agreement does not limit your right to receive an award from any Regulator that provides awards for providing information relating to a potential violation of the law.
26.Pursuant to the Defend Trade Secrets Act of 2016, to the extent applicable, non-compliance with the confidentiality provisions of this Agreement shall not subject you to criminal or civil liability under any Federal or State trade secret law for the disclosure of a Company trade secret: (i) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney in confidence solely for the purpose of reporting or investigating a suspected violation of law; (ii) in a complaint or other document filed in a lawsuit or other proceeding, provided that any complaint or document containing the trade secret is filed under seal; or (iii) to an attorney representing you in a lawsuit for retaliation by the Company for reporting a suspected violation of law or to use the trade secret information in that court proceeding, provided that any document containing the trade secret is filed under seal and you do not disclose the trade secret, except pursuant to court order.
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27.You acknowledge that the restrictions contained in this Agreement are fair, reasonable and necessary for the protection of the legitimate business interests of the Company, and that, in the event of any actual or threatened breach by you, the Company will suffer serious, irreparable and substantial harm to its business and interests, the extent of which may be difficult to determine and impossible to fully remedy by an action at law for momentary damages. You therefore consent to the entry of a restraining order, preliminary injunction or other preliminary, provisional or permanent court order to enforce this Agreement and expressly waive any security that might otherwise be required in connection with such relief, and you further agree that the dispute resolution process set forth in paragraph 23 of this Agreement in no way limits the Company’s right to obtain any preliminary, provisional or permanent relief as may be necessary to protect the Company’s rights and interests. You also agree that any request for such relief by the Company shall be in addition and without prejudice to any claim for monetary damages which the Company might elect to assert. In the event you violate any provision of this Agreement, the Company shall be entitled to recover all costs and expenses of enforcement, including reasonable attorneys’ fees.
28.You agree to defend, indemnify and hold the Company harmless from and against any and all losses, claims, causes of action, liabilities, damages, costs and expenses (including attorney’s fees) suffered or incurred by the Company as a result of any violation or threatened violation of any of your representations, warranties, covenants or undertakings set forth in this Agreement. In the event of litigation arising from or related to the terms of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other expenses.
29.If any provision of this Agreement is held to be unenforceable by a court or other decision-maker, the remaining provisions shall be enforced to the maximum extent possible. If a court or other decision-maker should determine that any portion of this Agreement is overbroad or unreasonable, such provision shall be given effect to the maximum extent possible by narrowing or enforcing in part that aspect of the provision found overbroad or unreasonable.
30.This Agreement represents the entire agreement of the parties with respect to the subject matter covered, supersedes any and all prior written or oral agreements including, but not limited to, the Fair Competition Agreement dated September 18, 2018, and cannot be modified except in a writing signed by both parties. The waiver by any party to this Agreement of a breach of any of the provisions of this Agreement shall not operate or be construed as a waiver of any subsequent or simultaneous breach. The Company agrees that the terms, conditions and restrictions set forth in this Agreement shall be no more burdensome in the aggregate than the terms, conditions and restrictions set forth in fair competition agreements entered into by the Company with similarly-situated employees of the Company, other than employees located in jurisdictions where applicable law prohibits or restricts the enforcement of any of the terms, conditions or restrictions contained herein.
31.This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns. Neither a formal assignment nor notice to you shall be required. This Agreement shall be binding upon you and your heirs, executors, administrators and legal representatives. However, your duties and obligations hereunder are personal and shall not
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be assignable or delegable by you in any manner whatsoever.
32.This Agreement shall be construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
33.Any notice required or permitted to be given under this Agreement shall be in writing and sent by both email and certified mail, return receipt requested. If the notice is from you to the Company, it shall be sent to the General Counsel of the Company. If sent by the Company to you, such notice shall be sent to your last known email and home addresses.
34.This Agreement may be executed by fax or email and/or in multiple counterparts, each of which shall be deemed an original.
35.The parties waive the right to a jury trial to the maximum extent permitted by law.
36.You acknowledge that you understand the terms and conditions set forth in this Agreement and have had adequate time to consider whether to agree to them and to consult a lawyer or other advisor of your choice if you wish to do so.
(Signature page follows)
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IN WITNESS WHEREOF, the parties have executed this Agreement as of this 1st day of
July, 2021.
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THE COMPANY |
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By: |
/s/ William D. Green |
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Printed Name: |
William D. Green |
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Title: |
Chairman of the Board |
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EMPLOYEE |
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By: |
/s/ TJ Parass |
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Printed Name: |
TJ Parass |
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ANNEX A
Description of Restrictive Agreements
Description of Current Outside Business Activities or Board Service
(Covered activities include: (1) Service on a board of directors similar body such as advisory committee, creditors committee, oversight or management body or investment board of any entity (including charitable, civic, religious, fraternal and other nonprofit organizations, etc.) whether or not compensation is received; (2) Outside securities sales activities, including involvement in private placements or offerings, are prohibited whether or not they involve compensation in any form; and (3) Outside business activities for which any compensation is received.) (Include the name of the outside entity/employer, type of business performed, type and method of compensation (if any), the estimated amount of time to be dedicated to the outside activity and any potential conflicts of interest that may arise). Note: Certain outside business activities and board service will require the approval of the Company’s Board of Directors or other individuals or committees.
ANNEX B
TERMINATION CERTIFICATE
The undersigned hereby certifies as follows:
1.When I signed the Amended and Restated Fair Competition Agreement dated as of July 1, 2021 (the “Agreement”), I read and understood the terms contained therein. I have now reviewed the Agreement again as part of my exit interview, and I fully understand the terms thereof and my continuing obligations thereunder, including my obligations (a) not to use for personal benefit or disclose to others any Confidential Information (as defined in the Agreement), and (b) to assign to the Company all rights (if any) that I may have acquired in any Intellectual Property (as defined in the Agreement).
2.I have fully complied with the terms of the Agreement, including the return of any documents and other tangible materials of any nature pertaining to my employment by GTY Technology Holdings Inc. (the “Company”).
3.I recognize that the unauthorized taking of any Confidential Information or Intellectual Property is a crime, and that any unauthorized taking of Confidential Information or Intellectual Property may also result in civil liability.
4.The Company may notify my new employer of (a) the general nature or subject matter of the Confidential Information (without actually disclosing such Confidential Information) to which I had access while employed by the Company, and (b) my continuing obligations under the Agreement to keep such Confidential Information in confidence, and not to disclose or use such Confidential Information without the Company’s prior written consent.
5.Attached hereto is a complete list of all Intellectual Property which, under the terms of the Agreement, I have assigned to the Company. If no such list is attached, I represent that during my employment I did not make, conceive, reduce to practice or develop, either alone or jointly with others, any Intellectual Property.
6.I understand and acknowledge that should I fail to comply with my obligations under the Agreement, the Company shall have, in addition to a claim for damages, the right to obtain an injunction prohibiting me from disclosing Confidential Information to a third party or using any Intellectual Property.
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Witnessed by: |
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TJ Parass |
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ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Assignment"), is by and between GTY Technology Holdings Inc. ("Assignor") and Questica Software Inc. ("Assignee"), a wholly owned subsidiary of Assignor.
RECITALS
WHEREAS, Assignor and TJ Parass are parties to an amended and restated letter agreement effective as of July 1, 2021 relating to the employment of Mr. Parass (the "Agreement");
WHEREAS, Assignor desires to transfer and assign to Assignee its rights, duties and obligations under the Agreement; and
WHEREAS, Assignee desires to accept such assignment.
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained in this Assignment, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties covenant and agree as follows:
AGREEMENT
1. |
Assignor hereby assigns, transfers, conveys and delivers to Assignee, effective as of July 1, 2021 (the "Effective Date"), all of Assignor's rights, duties and obligations under the Agreement. |
2. |
Assignee hereby accepts such assignment and agrees to assume, from and after the Effective Date, all of Assignor's rights, duties and obligations under the Agreement. |
3. |
This Assignment shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns. This Assignment may be executed electronically, and each such electronic signature shall be deemed to be an original. |
IN WITNESS WHEREOF, each party has executed this Assignment as of the Effective Date.
GYT TECHNOLOGY HOLDINGS INC. |
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QUESTICA SOFTWARE INC. |
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By: |
/s/ William D. Green |
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By: |
/s/ William D. Green |
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Name: |
William D. Green |
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Name: |
William D. Green |
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Title: |
Chairman of the Board |
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Title: |
Director |
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, TJ Parass, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 of GTY Technology Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepting accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
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Date: November 4, 2021 |
By: |
/s/ TJ Parass |
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TJ Parass |
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Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, John Curran, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 of GTY Technology Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepting accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
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Date: November 4, 2021 |
By: |
/s/ John Curran |
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John Curran |
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Chief Financial Officer (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report of GTY Technology Holdings Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, TJ Parass, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 4, 2021
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/s/ TJ Parass |
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Name: |
TJ Parass |
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Title: |
Chief Executive Officer |
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(Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report of GTY Technology Holdings Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Curran, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 4, 2021
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/s/ John Curran |
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Name: |
John Curran |
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Title: |
Chief Financial Officer |
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(Principal Financial Officer) |