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Organization and Business Operations
6 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business Operations

1. Organization and Business Operations

 

Organization

 

American Virtual Cloud Technologies, Inc. ("AVCT," the "Company," "we," "us," "our" or "Successor") was incorporated in Delaware on April 7, 2016.

 

On April 7, 2020 (the "Closing Date"), AVCT (formerly known as Pensare Acquisition Corp.) consummated a business combination transaction (the "Business Combination") in which it acquired Stratos Management Systems, Inc. ("Computex"), a private operating company that does business as Computex Technology Solutions. The Business Combination was consummated pursuant to the terms of an amended agreement originally entered into on July 25, 2019. In connection with the closing of the Business Combination, the Company changed its name to American Virtual Cloud Technologies, Inc. See Note 5 for additional information about the Business Combination.

 

In the Business Combination, the Company is considered the acquirer and Computex is considered the acquiree and the Predecessor, for accounting purposes. The Business Combination was accounted for using the acquisition method of accounting, and the Successor's financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired and liabilities assumed. In the accompanying condensed consolidated financial statements, the Company clearly distinguishes between the entity that existed before the Closing Date ("Predecessor") and the entity that existed on and after such date ("Successor"). Because the Successor's financial statements are presented on a different basis from the Predecessor's financial statements, the two entities may not be comparable in certain respects. As a result, a black line is used to separate the Successor and the Predecessor columns or sections in certain tables included in the condensed consolidated financial statements.

 

The accompanying condensed consolidated financial statements of the Company include the accounts of AVCT and its wholly owned subsidiary, Computex. The financial position, results of operations and cash flows described herein for the dates and periods prior to April 7, 2020 relate to the operations of Computex and its subsidiaries. The historical financial information of AVCT prior to the business combination (a special purpose acquisition company, or "SPAC") are not reflected in the Predecessor financial statements as it is believed that including such amounts would make those financial statements less useful to users. SPACs typically deposit the proceeds received from their initial public offerings into a separate trust account until a business combination occurs. Once the business combination occurs, such funds are then used to satisfy the consideration for the acquiree and/or to pay stockholders who elect to redeem their shares of common stock in connection with the business combination. The operations of a SPAC, until the closing of a business combination, usually consists of transaction expenses and income earned from the trust account investments.

 

Currently, the Company's primary operations are through its wholly owned subsidiary, Computex.

   

Nature of business

 

Computex is a leading multi-brand technology solutions provider to large global customers, providing a comprehensive and integrated set of technology solutions, through its extensive hardware, software and value-added service offerings. The breadth of its offerings enables Computex to offer each customer a complete technology solution. After performing an assessment of its customers' needs, Computex designs best-fit solutions, and with the help of leading vendors in the industry, helps its customers to procure products that fit their global needs.

 

With primary operating locations in Minnesota, Michigan, Florida and Texas, services offered by Computex include Unified Communications-as-a-Service ("UCaaS"), directory and messaging, enterprise networking, cybersecurity, collaboration, data center services, integration, storage, backup, virtualization, and converged infrastructures.

 

Recent Development

 

On August 5, 2020, we entered into a Purchase Agreement (the "Purchase Agreement") with Ribbon Communications, Inc. ("Ribbon"), Ribbon Communications Operating Company, Inc. ("RCOCI") and Ribbon Communications International Limited (together with RCOCI, the "Sellers"), pursuant to which AVCT has agreed to purchase the Sellers' cloud-based enterprise services business (also known as the Kandy Communications business) (the "Kandy Business") by acquiring certain of the Sellers' and their respective affiliates assets (and assuming certain of the Sellers' and their respective affiliates' liabilities) primarily associated with the Kandy Business, and acquiring all of the outstanding interests of Kandy Communications LLC. See Note 16 of the condensed consolidated financial statements for more information.

 

Covid-19

 

Commencing in December 2019, the novel strain of coronavirus ("COVID-19") began spreading throughout the world, including the first outbreak in the US in February 2020. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 has disrupted and continues to significantly disrupt local, regional, and global economies and businesses. The COVID-19 outbreak is disrupting supply chains and affecting production and sales across a range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers, employees and vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our financial condition and/or results of operations is uncertain.

 

In response to COVID-19, we have put into place certain restrictions, requirements and guidelines to protect the health of our employees and clients, including requiring that certain conditions be met before employees return to the Company's offices. Also, to protect the health and safety of our employees, our daily execution has evolved into a largely virtual model. Between April 1, 2020 and September 1, 2020, salaries of Computex's employees were reduced and there are efforts to reduce other operating expenses relative to revenue. We plan to continue to monitor the current environment and may take further actions that may be required by federal, state or local authorities or that we determine are in the interests of our employees, customers, and partners.

 

NASDAQ listing

 

On April 9, 2020, the Company was notified by the NASDAQ via a certified letter (the "Determination Letter") that it had not complied with the requirements of the NASDAQ Listing Rule IM-5101-2, which required the Company to meet the requirements for initial listing after the completion of the business combination. The Determination Letter stated that the Company's common stock did not meet the minimum $4.00 bid price and the $15 million market value requirement for publicly held shares, which are set forth in the NASDAQ Listing Rule 5505. On May 27, 2020, the NASDAQ granted the Company an extension to demonstrate compliance with the applicable requirements. During the third quarter of 2020, the Company achieved compliance and was so notified by the NASDAQ via letter dated August 26, 2020.