AvePoint, Inc. Form 10-Q Summary
Business Context and Reporting Period
This unaudited Form 10-Q covers the three and six months ended June 30, 2021. During the reporting period, the company was still operating as Apex Technology Acquisition Corporation, a blank-check company with no operating business or revenue. Its activities consisted primarily of the initial public offering, target identification, and preparation for the proposed combination with Legacy AvePoint.
The business combination with Legacy AvePoint closed on July 1, 2021. Apex subsequently changed its name to AvePoint, Inc., and Legacy AvePoint became AvePoint US, LLC. The June 30 financial statements therefore do not include Legacy AvePoint's operating results.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 |
|---|---|---|
| Operating revenue | $0 | $0 |
| General and administrative expense | $4.3 million | $6.2 million |
| Net income (loss) | $(18.3) million | $10.0 million |
| Net cash used in operating activities | Not separately presented | $(453,156) |
| Interest income | $8,482 | $40,323 |
| Change in fair value of warrant liabilities | $(13.9) million expense | $16.2 million gain |
Margins are not meaningful because the company had no operating revenue. The six-month net income was primarily attributable to a non-cash gain from the decline in warrant liability fair value; the second-quarter loss was primarily driven by a non-cash warrant remeasurement loss and higher transaction-related expenses.
| Balance Sheet Metric | June 30, 2021 | December 31, 2020 |
|---|---|---|
| Cash and cash equivalents | $205,729 | $197,628 |
| Trust account investments | $351.7 million | $351.9 million |
| Total assets | $352.3 million | $352.6 million |
| Total liabilities | $84.8 million | $95.1 million |
| Warrant liabilities | $61.2 million | $77.4 million |
| Shares subject to possible redemption | $262.5 million | $252.5 million |
The company had no conventional long-term debt or lease obligations. It had a $300,000 non-interest-bearing convertible promissory note payable to its sponsor, deferred underwriting commissions of $13.15 million, and a $15,000 monthly administrative-support obligation to a sponsor affiliate until the business combination or liquidation.
Material Changes Versus Prior Comparable Period
- Second-quarter net loss increased to $18.3 million from $14.4 million, primarily because general and administrative expense rose to $4.3 million from $213,837 and the warrant-liability loss remained significant.
- Six-month results shifted to $10.0 million of net income from a $9.3 million net loss, primarily because the warrant-liability remeasurement changed from a $9.9 million expense to a $16.2 million gain.
- Six-month interest income declined to $40,323 from $1.6 million as yields on Trust Account investments fell.
- Cash used in operating activities improved to $453,156 from $593,443, while cash outside the Trust Account increased modestly to $205,729.
- Warrant liabilities declined by $16.2 million from year-end, while shares subject to possible redemption increased by approximately $10.0 million.
Guidance, Outlook, Risks, and Unusual Items
- No operating or financial guidance was provided. Management stated that operating revenue was not expected until after completion of the initial business combination.
- On July 1, 2021, PIPE investors purchased 14 million shares for $140 million, concurrently with the business combination. This transaction is subsequent to the reporting date and is not reflected in the June 30 balance sheet.
- The Trust Account was intended to fund the business combination, less deferred underwriting commissions and permitted withdrawals for taxes. The company withdrew $161,257 of Trust Account interest during the first six months to pay franchise taxes.
- Management identified a material weakness in internal control over financial reporting related to the accounting for derivative instruments and the restatement of prior financial statements to classify warrants as liabilities. Remediation efforts were planned, but management stated that completion and effectiveness could not be assured.
- Warrant liabilities are remeasured each reporting period. Changes in market prices, volatility, and other valuation inputs can materially affect reported earnings without affecting cash.
- COVID-19 was identified as a potential risk to financial position, target-search activities, and completion of the business combination, although the specific effect was not determinable.
- Public warrants have an $11.50 exercise price and may expire worthless if the company does not complete a business combination or if applicable registration conditions are not met. Contingent consideration of up to 3 million additional shares may be issued if specified post-closing price milestones are achieved.
- The filing reports no legal proceedings and no material changes to previously disclosed risk factors.
Important Facts for Investors to Verify
- Verify the post-closing capitalization, redemption activity, PIPE proceeds, merger consideration, and acquisition accounting in the subsequent AvePoint filings.
- Assess the effect of the $61.2 million warrant liability and its recurring fair-value volatility on reported earnings and equity.
- Review the material weakness, prior restatement, remediation progress, and any subsequent auditor or management conclusions regarding internal controls.
- Reconcile Trust Account funds to the $13.15 million deferred underwriting payment and other transaction costs paid at closing.
- Evaluate dilution from public and private warrants, sponsor shares, exchanged options, contingent consideration, and the 14 million PIPE shares.
- Confirm that the company’s post-merger operating results, liquidity, debt, and cash flows are analyzed using Legacy AvePoint's consolidated business rather than the pre-merger SPAC financial statements.