Apex Technology Acquisition Corporation (SPAC) — Form 10-Q Summary
Filing period: Quarter ended September 30, 2020; filed November 13, 2020. The provided filing is for Apex Technology Acquisition Corporation, not AvePoint, Inc. Apex was a blank-check company seeking a business combination, primarily in the software and internet technology sectors. The financial statements are unaudited.
Business Context and Reporting Period
- Apex had not commenced operating activities or generated operating revenue as of September 30, 2020.
- Activities consisted primarily of organizational costs, public-company compliance, maintaining the trust account, and identifying a target business.
- The company completed its initial public offering in September 2019, issuing 35.0 million units at $10.00 per unit and raising gross proceeds of $350.0 million.
- A private placement generated an additional $8.1 million. Substantially all IPO and placement proceeds were held in trust for a future business combination or shareholder redemptions.
Financial Metrics
| Metric | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2020 | Comparable 2019 Period |
|---|---|---|---|---|
| Operating revenue | $0 | $0 | $0 | $0 |
| Interest income | $50,790 | $177,344 | $1,634,570 | $177,344 |
| General and administrative expense | $176,898 | $31,507 | $585,018 | $32,507 |
| Franchise tax expense | $50,000 | $100,000 | $150,000 | $100,000 |
| Net income (loss) | $(176,329) | $29,595 | $484,116 | $28,595 |
| Net income (loss) per non-redeemable share | $(0.02) | $0.00 | $(0.06) | $0.00 |
| Cash used in operating activities | Not separately presented | Not separately presented | $(2,087,294) | $(229,700) |
- Liquidity: Cash outside the trust account was $469,109 at September 30, 2020, compared with $994,810 at December 31, 2019.
- Trust account: $351,882,140 was held in the trust account, compared with $351,809,163 at December 31, 2019.
- Total assets: $352,955,715 at September 30, 2020.
- Liabilities: $13,252,231, including $13,150,000 of deferred underwriting commissions payable only if a business combination is completed.
- Redeemable shares: 33,470,348 Class A shares were classified as subject to possible redemption at $10.00 per share, totaling $334,703,480.
- Debt: No borrowings were outstanding. The company had no long-term debt, capital leases, or operating leases.
- Equity: Stockholders’ equity was approximately $5.0 million.
- Margins: Operating and net margins are not meaningful because the company had no operating revenue and was a pre-combination SPAC.
Material Changes Versus the Prior Comparable Period
- Third-quarter results shifted from net income of $29,595 in 2019 to a net loss of $176,329 in 2020, primarily because general and administrative expenses increased by $145,391 while trust-account interest income declined by $126,554.
- Nine-month net income increased to $484,116 from $28,595, principally because the 2020 period included a full nine months of interest income from the trust account.
- Nine-month general and administrative expense increased to $585,018 from $32,507, reflecting ongoing public-company and transaction-search costs.
- Cash outside the trust account declined by $525,701 during the first nine months of 2020, while $1,561,593 of trust-account interest was withdrawn to pay franchise and income taxes.
- Redeemable Class A shares increased modestly from 33,421,936 to 33,470,348, with the related temporary equity balance increasing from $334.2 million to $334.7 million.
Outlook, Risks, Contingencies, and Unusual Items
- The company was required to complete a business combination by September 19, 2021. If unsuccessful, it would cease operations, redeem the public shares using the trust account, and liquidate.
- Management stated that the liquidity condition and mandatory liquidation date raised substantial doubt about the company’s ability to continue as a going concern if additional funds could not be obtained and a business combination was not completed.
- Public shareholders could redeem their shares for a pro rata portion of the trust account upon a business combination or liquidation, subject to the governing documents and applicable law.
- COVID-19 could adversely affect the search for a target, negotiations, travel, due diligence, and the ability to complete a business combination. The specific financial impact was not determinable at the reporting date.
- Negative interest rates could reduce the value of the trust account and result in a redemption amount below $10.00 per public share.
- The company had a $15,000 monthly administrative-support agreement with an affiliate of the sponsor; fees incurred and paid were $45,000 for the quarter and $135,000 for the nine months.
- The company’s warrants could expire worthless if no business combination was completed. A business combination could also cause substantial dilution through new equity, debt, preferred stock, or conversion of founder shares.
- The filing reported no legal proceedings, no defaults, no unregistered equity sales, and no material changes to previously disclosed risk factors other than the added risks concerning negative interest rates and COVID-19.
Key Facts Investors Should Verify
- Confirm that the intended subject is Apex Technology Acquisition Corporation rather than AvePoint, Inc.
- Verify the status and ultimate outcome of the proposed business combination, including whether the September 19, 2021 deadline was extended or met.
- Review the amount remaining in the trust account, public-share redemptions, deferred underwriting commissions, and any subsequent liquidation or transaction filings.
- Assess the company’s limited cash outside the trust account and its dependence on sponsor or affiliate working-capital loans.
- Review dilution from founder shares, placement units, warrants, and any financing issued in connection with a business combination.
- Evaluate the going-concern disclosure and the potential effect of COVID-19, interest rates, taxes, and third-party claims on trust-account proceeds.