Note 3 - Business Combination

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Business Combination Disclosure [Text Block]

3. Business Combination

Apex Technology Acquisition Corporation

The Apex Business Combination was accounted for as a reverse recapitalization as Legacy AvePoint was determined to be the accounting acquirer under ASC 805, Business Combination. This determination was primarily based on Legacy AvePoint comprising the ongoing operations of the combined entity, Legacy AvePoint’s senior management comprising the majority of the senior management of the combined company and the prior stockholders of Legacy AvePoint having a majority of the voting power of the combined entity. In connection with the Apex Business Combination, the outstanding shares of Legacy AvePoint’s preferred stock were redeemed for cash and shares of AvePoint’s common stock and the outstanding shares of Legacy AvePoint’s common stock were converted into AvePoint’s common stock, representing a recapitalization, and the net assets of the Company were acquired at historical cost, with no goodwill or intangible assets recorded. Operations and assets and liabilities of the Company prior to the Apex Business Combination in these financial statements are those of Legacy AvePoint. As a result, these financial statements represent the continuation of Legacy AvePoint and the historical stockholders’ deficiency. The accumulated deficit of Legacy AvePoint has been carried forward after the Apex Business Combination.

AvePoint, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The following transactions occurred in connection with the Apex Business Combination which impacted our mezzanine equity and permanent equity accounts:

■ Shares of Legacy AvePoint common stock were cancelled and converted into 103,831,523 shares of our common stock, par value $0.0001 per share.

■ $106.2 million was paid to holders of Legacy AvePoint common stock in exchange for 10,602,105 shares of common stock (as converted). 

■ Shares of Apex Class A common stock were cancelled and converted into 34,982,628 shares of our common stock.

■ Shares of Apex Class B common stock were cancelled and converted into 9,560,000 shares of our common stock.

■ Apex entered into subscription agreements with certain investors, whereby 14,000,000 shares of our common stock were sold at $10.00 per share for an aggregate purchase price of $140.0 million.

■ A portion of Legacy AvePoint preferred stock was cancelled and converted into 28,500,592 shares of our common stock. The remaining preferred stock was redeemed for $130.9 million.

■ Options to purchase Legacy AvePoint common stock (other than certain options held by certain executives and options issued to certain international employees) were cancelled and converted into an option to purchase our common stock with the same terms and conditions (including vesting and exercisability terms) applicable to the corresponding former Legacy AvePoint options.

■ Options to purchase Legacy AvePoint common stock issued to certain international employees were cancelled and converted into an option to purchase our common stock with the same terms and conditions with the exception of fully vested options which incurred an additional month of vesting following the Apex Business Combination to comply with local regulations.

■ Legacy AvePoint Officer Awards, as defined in “Note 15 — Stock-Based Compensation,” were cancelled. Refer to “Note 15 — Stock-Based Compensation” for more information.

■ Put options on Legacy AvePoint Modified Options and Modified Common Stock, as defined in “Note 15 — Stock-Based Compensation”, were cancelled. Refer to “Note 15 — Stock-Based Compensation” for more information.

■ We entered into earn-out agreements to issue additional shares if certain share price milestones are achieved. Refer to “Note 13 — Company Earn-Out and Warrant Liabilities” for more information.

■ We assumed public and private placement warrants from Apex. Refer to “Note 13 — Company Earn-Out and Warrant Liabilities” for more information.

As a result of the Apex Business Combination, we received net cash consideration of $204.5 million. Legacy AvePoint and Apex incurred costs that are considered direct and incremental costs associated with the transaction. These costs amounted to $56.2 million and were treated as a reduction of additional paid-in capital.

Cash flows provided to or paid by Legacy AvePoint or Apex in connection with the Apex Business Combination are included in our consolidated statements of cash flows as financing activities. Our purchase of shares of Apex common stock prior to the Apex Business Combination is included in our consolidated statements of cash flows as a financing cash outflow. The shares purchased are recorded as treasury stock.

AvePoint, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

I-Access Acquisition

On the I-Access Closing Date, MaivenPoint consummated its acquisition of all of the ordinary shares of I-Access. As a result, I-Access became a wholly-owned subsidiary of MaivenPoint. The acquisition was made pursuant to the Share Purchase Agreement, by and among MaivenPoint and the former I-Access shareholders. The Company, through its subsidiary MaivenPoint, completed the acquisition of I-Access to further expand its SaaS solutions for corporate learning and development. The fair value of the transaction consideration totaled approximately $7.1 million, consisting of: $1.5 million in cash, and contingent consideration measured at a fair value of $5.6 million on the I-Access Closing date. The above-mentioned contingent consideration consists of:

(i) 2.98% of MaivenPoint common shares (of those, 292,440 shares were issued on the I-Access Closing Date and 30,252 shares were held in escrow pending distribution pursuant to the Adjustment for Guaranteed Minimum Revenue (as defined below));

(ii) a put option which allows sellers to cause MaivenPoint to repurchase the shares of MaivenPoint for approximately $5.9 million, upon 24 months from Acquisition Close Date or the occurrence of certain triggering events which are in the control of the Company; and

(iii) earnout in MaivenPoint shares held in escrow at a fair value equal to revenue surplus above the agreed guaranteed minimum revenue amount, of up to approximately $0.7 million, or the return of MaivenPoint shares at a fair value equal to the revenue shortfall below the agreed guaranteed minimum revenue amount, of up to approximately $0.7 million (together, the “Adjustment for Guaranteed Minimum Revenue”). In the event of a revenue shortfall, all shares held in escrow would have been returned to MaivenPoint.

On  April 15, 2022, the Company implemented a management changeover. As a result, pursuant to the terms of the Share Purchase Agreement, the Adjustment for Guaranteed Minimum Revenue was cancelled and the 292,440 MaivenPoint shares issued as consideration on the I-Access Closing Date, the 30,252 MaivenPoint shares held in escrow, the put option on MaivenPoint shares and the earnout in MaivenPoint shares were no longer contingent and were reclassified to mezzanine equity and included in redeemable noncontrolling interest.

The acquisition-related costs totaled $0.3 million and are recognized as an expense within general and administrative in the consolidated statements of operations.

Prior to being reclassified to mezzanine equity, the contingent consideration was liability classified and was measured at fair value on the I-Access Closing Date and remeasured on the date the Adjustment for Guaranteed Minimum Revenue was cancelled. The fair value of the contingent consideration was estimated using a combination of multiple valuation methods, including discounted cash flows method, guideline public company method, and the Black-Scholes option-pricing model with the following weighted-average assumptions as of  February 18, 2022, and  April 15, 2022:

	February 18, 2022			April 15, 2022
Expected life (in years)		2.08			1.93
Expected volatility		50	%		50	%
Risk-free rate		1.23	%		1.83	%
Dividend		0	%		0	%

The contingent consideration fair value estimated on the I-Access Closing Date and the date the Adjustment for Guaranteed Minimum Revenue was cancelled was $5.6 million and $5.8 million, respectively. During the year ended  December 31, 2022, the change in the fair value of $0.2 million is included within general and administrative on the consolidated statements of operations. The financial results of I-Access have been included in our consolidated financial statements since the date of the acquisition. The I-Access business is reported within our reportable segment. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the I-Access acquisition as a result of book-to-tax differences primarily related to the technology and software intangibles and customer related assets.

AvePoint, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The following table summarizes the final fair value of assets acquired and liabilities assumed as of the acquisition date:

	Purchase Consideration Allocation
	(in thousands)
Accounts receivable, net	$	429
Prepaid expenses and other current assets		72
Property and equipment		22
Goodwill		3,950
Technology and software		2,750
Customer related assets		909
Other assets		997
Accrued expenses and other liabilities		(718	)
Current portion of deferred revenue		(230	)
Other non-current liabilities		(1,072	)
Total purchase consideration	$	7,109

The goodwill, which is generally not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the assembled workforce of the acquired business and the synergies expected to arise as a result of the acquisitions.

Intangible assets primarily relate to acquired technology and software and customer related assets. The acquired definite-lived intangible assets are being amortized over an estimated useful life of: (i) 10 years for technology and software on a straight-line basis; and (ii) 1 to 10 years for customer related assets on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the relief from royalty method which is based on the premise that the only value that a purchaser of the assets receives is the exemption from paying a royalty for its use over its remaining useful life. Some of the significant assumptions inherent in the development of such asset valuations include revenues, royalty rate, contributory asset charges, discount rate, useful life, as well as other factors.

Essential Acquisition

On  August 25, 2022, the Company acquired all of the issued and outstanding equity interest in Essential Co. Ltd., a South Korea-based software solutions provider that will advance the Company’s ability to enable organizations to accelerate data-driven digital transformation, for a total valuation of $3.0 million with most of the value allocated to goodwill. The resulting goodwill is not deductible for income tax purposes.

tyGraph Companies Acquisition 

On  September 12, 2022, the Company consummated its acquisition of all of the outstanding shares of tyGraph Incorporated (“tyGraph US”), and AvePoint Ontario Ltd. (“AvePoint Ontario”, a wholly-owned subsidiary of AvePoint) consummated its acquisition of all of the outstanding shares of tyGraph Ltd. (“tyGraph Canada” and, collectively with tyGraph US, the “tyGraph Companies”). On September 12, 2022, tyGraph Canada was merged with and into AvePoint Ontario, with AvePoint Ontario surviving. As a result, the tyGraph Companies became wholly-owned subsidiaries of AvePoint. The acquisition was made pursuant to a share purchase agreement, by and among AvePoint, AvePoint Ontario and the former tyGraph Companies shareholders. The Company completed the acquisition of the tyGraph Companies to further expand its SaaS solutions for providing robust analytics capabilities that enable organizations to uncover workplace engagement. The fair value of the transaction consideration totaled approximately $15.3 million, consisting of: $13.8 million in cash, and 324,845 of shares in the Company measured at a fair value of $1.5 million on the closing date. The above-mentioned cash consideration consisted of:

(i) the cash purchase price of $13.5 million;

(ii) the entire outstanding principal and interest of the loans made to certain tyGraph Companies shareholders which was approximately $0.2 million; and

(iii) unpaid transaction costs incurred by the tyGraph Companies as of the open of business on the closing date which was approximately $0.1 million.

AvePoint, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The acquisition-related costs incurred by the Company totaled $0.4 million and are recognized as an expense within general and administrative in the consolidated statements of operations.

The financial results of the tyGraph Companies have been included in our consolidated financial statements since the date of the acquisition. The tyGraph Companies businesses are reported within our reportable segment. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the tyGraph Companies acquisition as a result of book-to-tax differences primarily related to the technology and software intangibles and customer related assets.

The following table summarizes the final fair value of assets acquired and liabilities assumed as of the acquisition date:

	Purchase Consideration Allocation
	(in thousands)
Accounts receivable, net	$	449
Prepaid expenses and other current assets		262
Property and equipment		30
Goodwill		12,193
Customer related assets		3,868
Technology and software		2,552
Other assets		219
Accounts payable		(93	)
Accrued expenses and other liabilities		(342	)
Current portion of deferred revenue		(2,079	)
Other non-current liabilities		(1,724	)
Total purchase consideration	$	15,335

The goodwill, which is generally not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the assembled workforce of the acquired business and the synergies expected to arise as a result of the acquisition.

Intangible assets primarily relate to acquired technology and software and customer related assets. The acquired definite-lived intangible assets are being amortized over an estimated useful life of: (i) 6 years for technology and software on a straight-line basis; and (ii) 10 years for customer related assets on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the relief from royalty method which is based on the premise that the only value that a purchaser of the assets receives is the exemption from paying a royalty for its use over its remaining useful life. Some of the significant assumptions inherent in the development of such asset valuations include revenues, royalty rate, contributory asset charges, discount rate, useful life, as well as other factors.

AvePoint, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)