Apex Technology Acquisition Corporation (proposed AvePoint transaction) — FY2020 Form 10-K
Business context and reporting period
The filing is Apex Technology Acquisition Corporation’s annual report for the fiscal year ended December 31, 2020. Although the request identifies AvePoint, the registrant in this filing is Apex, a Delaware special purpose acquisition company (SPAC), not an operating AvePoint entity. Apex had no operations or operating revenue through year-end and was formed to complete a business combination, with a focus on software and internet technology companies.
On November 23, 2020, Apex entered into a business combination agreement with AvePoint; the agreement was amended on December 30, 2020. The proposed transaction had not closed as of December 31, 2020, and the filing generally does not reflect AvePoint’s operating results.
Financial performance, liquidity and capital structure
| Metric | FY2020 | FY2019 period |
|---|---|---|
| Operating revenue | $0 | $0 |
| Net income (loss) | $(4.3) million | $0.9 million |
| General and administrative expense | $5.3 million | $0.3 million |
| Franchise tax expense | $0.2 million | $0.3 million |
| Interest income from trust investments | $1.7 million | $1.8 million |
| Cash used in operating activities | $2.4 million | $0.5 million |
- Total assets were $352.6 million at December 31, 2020, including $351.9 million in the trust account and $0.2 million of cash outside the trust account.
- The trust account balance was approximately $338.7 million after giving effect to the $13.15 million deferred underwriting commission, before business-combination fees and expenses.
- Current liabilities were $4.5 million, and total liabilities were $17.6 million, including the deferred underwriting commission.
- Stockholders’ equity was approximately $5.0 million. Class A common stock subject to possible redemption was reported as temporary equity at $330.0 million for 32.997 million shares.
- Apex had no outstanding borrowings, long-term debt, capital leases or off-balance-sheet financing arrangements at year-end.
- Operating cash declined from $1.0 million at December 31, 2019 to $0.2 million at December 31, 2020. Management stated that the remaining outside-trust funds were expected to support operations through the September 19, 2021 business-combination deadline, but this was not assured.
Material changes versus the prior comparable period
- Apex moved from $0.9 million of net income in the 2019 inception period to a $4.3 million net loss in 2020, primarily because public-company, transaction and due-diligence expenses increased substantially.
- General and administrative expenses increased to $5.3 million from $0.3 million, while operating cash use increased to $2.4 million from $0.5 million.
- Interest income decreased modestly to $1.7 million from $1.8 million, despite the trust account remaining substantially funded.
- Class A shares subject to possible redemption decreased to 32.997 million from 33.422 million, while the associated temporary equity balance decreased to $330.0 million from $334.2 million.
- Accounts payable and accrued expenses increased sharply to $4.4 million from $0.2 million, reflecting accumulated transaction and operating costs.
- The principal strategic development was the signing of the AvePoint merger agreement and commitments for a $140 million PIPE financing.
Proposed AvePoint transaction, outlook and unusual items
- Consideration to AvePoint equityholders was expected to include approximately $262 million in cash and 143.261 million Apex shares, subject to transaction terms, option adjustments, expenses and redemption-related changes.
- Apex agreed to sell 14 million PIPE shares at $10.00 per share for gross proceeds of $140 million. The PIPE closing was contingent on the concurrent completion of the business combination.
- The transaction included up to 3 million additional Apex shares tied to post-closing milestones based on share-price thresholds of $12.50, $15.00 and $17.50.
- Closing conditions included stockholder and regulatory approvals, an effective registration statement, at least $5.001 million of net tangible assets after redemptions, and at least $300 million of cash and cash equivalents at closing after giving effect to the merger and PIPE.
- Public stockholders could redeem shares for approximately $10.05 per share based on the trust account balance at December 31, 2020, subject to applicable limitations and transaction conditions.
- If Apex failed to complete a business combination by September 19, 2021, it would be required to cease operations, redeem public shares and liquidate. Public warrants would expire worthless, and the filing stated that the redemption value could be below $10.00 per share because of creditor claims, taxes, trust-account losses or other liabilities.
- Management and the auditor identified substantial doubt about Apex’s ability to continue as a going concern because of the mandatory liquidation deadline if a business combination was not completed.
- COVID-19 was identified as a risk to Apex’s transaction search, financial position and ability to close the AvePoint transaction, although the specific effect was not determinable as of the financial-statement date.
- The company paid an affiliate of its sponsor $15,000 per month for office space, utilities and administrative support. It also had $13.15 million of deferred underwriting fees payable only upon completion of a business combination.
Most important facts for investors to verify
- Confirm whether the AvePoint business combination ultimately closed, the final transaction consideration, the amount of redemptions and the final post-closing share count.
- Review AvePoint’s separate financial statements and registration statement for operating revenue, profitability, cash flow, debt, customer concentration and business-specific risks; those metrics are not presented in this Apex 10-K.
- Verify the availability and closing status of the $140 million PIPE financing and the final cash balance delivered to the combined company.
- Assess dilution from the 143.261 million transaction shares, PIPE shares, founder-share conversion, exchanged options, warrants and up to 3 million contingent shares.
- Evaluate the $13.15 million deferred underwriting fee and other transaction expenses when estimating cash available to the combined company.
- Consider the going-concern disclosure and the consequences of failure to close a transaction by September 19, 2021, including potential redemption below $10.00 per share and worthless warrants.
- Review sponsor incentives, redemption waivers, lock-ups, earn-out provisions, related-party fees and potential conflicts of interest.