EDGAR 10-K Filing

Company CIK: 1704760
Filing Year: 2023
Filename: 1704760_10-K_2023_0001213900-23-028156.json

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ITEM 1. BUSINESS
Item 1. Business
Company History and Certain Recent Developments
We were incorporated, in Delaware, as Pensare Acquisition Corp, a special purpose acquisition company (“SPAC”) on April 7, 2016 for the purpose of entering into one or more mergers, share exchanges, asset acquisitions, stock purchases, recapitalizations, reorganizations or other similar business combinations with one or more target businesses.
On April 7, 2020 (the “Computex Closing Date”), we consummated a business combination transaction (the “Computex Business Combination”) in which we acquired Stratos Management Systems, Inc. (“Computex”), a private operating company that does business as Computex Technology Solutions. In connection with the closing of the Computex Business Combination, the Company changed its name to American Virtual Cloud Technologies, Inc.
On December 1, 2020 (the “Kandy Closing Date”), we acquired the Kandy Communications business (hereafter referred to as “Kandy” or “Kandy Communications”) from Ribbon Communications, Inc. and certain of its affiliates (“Ribbon”), by acquiring certain assets, assuming certain liabilities and acquiring all of the outstanding membership interests of Kandy Communications LLC.
On September 16, 2021, the Company announced that as a result of a decision by the Company’s Board of Directors to explore strategic alternatives previously announced on April 7, 2021, the Board had authorized the Company to focus its strategy on acquisitions and organic growth in its cloud technologies business as well as to explore strategic opportunities for its IT solutions business, including the divestiture of Computex. The Company believed that such changes would have allowed it to optimize resource allocation, focus on core competencies, and improve its ability to invest in areas of maximal growth potential.
On January 27, 2022, the Company announced that it had executed a definitive agreement to sell Computex, and on March 15, 2022, the sale of Computex was consummated, which completed the Company’s transition to a cloud communications company, centered on its Kandy platform. In connection with the then pending sale of Computex, Computex was classified as held for sale as of December 31, 2021 and its operations were separated and classified as discontinued operations. The discussions in this Form 10-K primarily focuses on the Company’s corporate activities and its Kandy segment. Net proceeds from the sale of Computex, after payment of closing and certain other obligations were used for working capital and general business purposes.
On August 25, 2022, the Company announced that it had retained Northland Capital Markets to advise the Company in connection with a comprehensive strategic review process that could lead to the sale of the Company or of selected assets.
During 2022, the Company continued to explore strategic opportunities, including the rationalization of resource allocation and core competencies. Further, the Company took actions that it believed resulted in significant cost savings. Such savings were generated from selective reductions in workforce and negotiated conversions of certain material vendor support costs from fixed to variable, thereby eliminating certain cost burdens related to unused capacity. In addition, the Company obtained strategic and operating restructuring support services of certain capital advisors.
Additionally, during 2022, the Company projected and announced that it would need additional capital to fund its operations including research & development and capital investment requirements until the Company scaled to a revenue level that would permit cash self-sufficiency. Such factors raised substantial doubt about the ability of the Company to continue as a going concern. The projection was based on the Company’s forecasts regarding product sales and service, cost structure, cash burn rate and other operating assumptions.
On January 11, 2023, the Debtors filed the Cases as voluntary petitions under Chapter 11 in the Court. The respective Case numbers for each of the Debtors are 23-10020, 23-10021 and 23-10022. However, the Cases are being jointly administered under Case number 23-10020. The Debtors are continuing to operate their businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the US Bankruptcy Code and orders of the Court. To ensure their ability to continue operating in the ordinary course of business, the Debtors filed various “first day” motions with the Court requesting customary relief, including the authority to pay employee wages and benefits, that have enabled the Debtors to continue to operate their business during the pendency of the Chapter 11 proceedings without material disruption to their ordinary course operations.
On February 14, 2023, the Sellers entered into the Stalking Horse APA with the Purchaser, and in connection with the Cases, and pursuant to bid procedures approved by the Court, on March 7, 2023, the Debtors held the Auction under Section 363 of the US Bankruptcy Code relating to the disposition of substantially all of the Debtors’ assets. The winning bid at the Auction was submitted by the Purchaser, who agreed to pay cash consideration of approximately $6.8 million.
On March 10, 2023, the Sellers and the Purchaser executed the Purchase Agreement, which is substantially the same as the Stalking Horse APA, except that it reflects the cash purchase price of approximately $6.8 million resulting from the Auction. Pursuant to the Purchase Agreement, the Purchaser agreed to purchase the Purchased Assets, consisting of substantially all of the assets of the Sellers. The Purchased Assets include, among other things, all rights of the Sellers under the Assumed Contracts and Assumed Leases that are defined in the Purchase Agreement, tangible personal property, intellectual property rights, books and records and any goodwill, but excludes cash, accounts receivable and certain other assets. Under the Purchase Agreement, the Purchaser is expected to acquire the Purchased Assets for a purchase price (the “Purchase Price”) consisting of (i) cash of approximately $6.8 million, subject to certain adjustments (including a reduction by the amount, if any, by which the deferred revenues of the Sellers as of the date of the closing of the Purchase Agreement exceeds the deferred revenues of the Sellers as of the date of the Purchase Agreement), and (ii) the Purchaser’s assumption of certain liabilities of the Sellers.
On March 15, 2023, the Court entered an order authorizing the Asset Sale pursuant to the terms of the Purchase Agreement. On March 24, 2023, the Asset Sale closed, thereby completing the disposition of substantially all of the Company’s assets. As identified in the Debtors’ Combined Disclosure Statement and Chapter 11 Plan of Liquidation (the “Plan”), filed with the Court on March 21, 2023, and subject to Court approval, the Company anticipates that there will be no proceeds available for distribution to the Company’s stockholders and that the Company’s outstanding securities shall be cancelled upon confirmation of the Plan. Nothing herein is intended to act as a solicitation of the Plan.
Reverse Stock Split and Stock Exchange
On September 30, 2022, the Company filed a Certificate of Amendment of the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Amendment”), which effected, upon filing on September 30, 2022 (the “Effective Stock Split Date”), a one-for-fifteen reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock. In connection with the Reverse Stock Split, the CUSIP number (Committee on Uniform Securities Identification Procedures number) for the Company’s common stock changed.
As a result of the Reverse Stock Split, each share of the Company’s common stock issued and outstanding immediately prior to the Effective Stock Split Date was automatically reclassified as and converted into one-fifteenth (1/15) of a share of the Company’s common stock. The Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder’s percentage interest in the Company’s equity, except to the extent that the Reverse Stock Split resulted in some stockholders owning a fractional share. No fractional shares were issued in connection with the Reverse Stock Split. Instead, stockholders who would otherwise have been entitled to fractional shares of the Company’s common stock became entitled to receive cash payments in lieu of such fractional shares.
On January 25, 2023, the Company’s securities ceased trading on The Nasdaq Stock Market (“Nasdaq”) as the Company did not meet the requirements for continued trading thereon. Currently, the Company’s securities trade on the Pink sheets, an over-the-counter (OTC) market.
The Business
The description of the Company’s business contained herein reflects the Company’s operation of its business prior to the completion of the Asset Sale on March 24, 2023. As a result of the Asset Sale, the Company no longer has any operations, other than those relating to the wind down of its business and completion of the Chapter 11 process.
The Kandy cloud communications platform is a cloud-based, real-time communications platform, offering proprietary unified communications as a service (“UCaaS”), communications platform as a service (“CPaaS”), Microsoft Teams Direct Routing as a Service (“DRaaS”), and SIP Trunking as a Service capabilities (“STaaS”).
As a provider of cloud-based enterprise services, Kandy deploys a global carrier grade cloud communications platform that supports the digital and cloud transformation of mid-market and enterprise customers across virtually any device, on virtually any network, in virtually any location. The Kandy platform is based on a powerful, proprietary multi-tenant, highly scalable, and secure cloud platform. Further, Kandy supports rapid service creation and multiple go to market models including white labelling, multi-tier channel distribution, enterprise direct, and self-service via its SaaS (software as a service) web portals.
Kandy’s cloud-based, real-time communications platform enables service providers, enterprises, software vendors, systems integrators, partners and developers to enrich their applications and their services with real-time contextual communications empowering the API (Application Programming Interface) economy. With Kandy’s platform, companies of various sizes and types can quickly embed real-time communications capabilities into their existing applications and business processes, thereby providing a more engaging user experience.
While the cloud communications business is focused on highly complex, medium and large enterprise deployments, the customer experience is augmented by our managed services capabilities. In addition, our strategic partnerships with companies such as AT&T, IBM/Kyndryl, and Etisalat, give us access to a marquee customer base and the ability to sell end-to-end solutions.
Computex, sold in March 2022 and classified within discontinued operations, 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.
Major customers
Kandy only
The five top customers during Fiscal 2022 accounted for 79% of total Kandy revenues. Four customers accounted for more than 10% of total revenue, accounting for $11.8 million of total Kandy revenue.
Competition
Kandy primarily competes with technology and cloud providers such as 8X8, RingCentral, Vonage, Twilio, Nice and Five 9, among others. However, Kandy differentiates itself from its competitors largely by the nature of its route to market - its platform is a proprietary white label, global cloud platform that supports a single or a multi-tier distribution via a CSP (communications service provider), VAR (value-added reseller) or ISV (independent software vendor) brand. Further, in addition to being a true multi-tenant platform, Kandy supports a BYOD (bring your own data) and BYOC (bring your own carrier) model while providing both a light weight and heavy weight OSS/BSS (Ordering/Billing) system and automation integration with its channel partners. Lastly, the Kandy platform brings a ubiquitous experience across UCaaS, CCaaS, and CPaaS versus most of the competition who play in one or two of these communications market verticals.
International Operations and Segments
During 2021, the Company operated two segments, Computex and Kandy. With the sale of Computex during the first quarter of 2022, the Company began operating as one reportable segment beginning in the second quarter of 2022. At December 31, 2022, approximately 70 associates were employed in our international operations.
Research and Development
Through Kandy, we have incurred software development costs to enhance, improve, expand and/or upgrade our proprietary software in an agile software environment with releases broken down into several iterations called sprints. These development activities have been performed by internal staff as well as by certain contractors.
Through our Kandy R&D team, our research and development efforts have been focused, in part, on building a carrier-grade communications platform with a focus on next generation software technologies and frictionless communications with multiple go-to-market strategies, including channel and direct sales models.
As of December 31, 2022, our research and development team consisted of approximately 31 associates (excluding contractors).
Sales and Marketing
We have been targeting customers of varying sizes in both the private and public sector and have developed relationships with them through direct marketing efforts as well as through strategic relationships with our technology partners.
We acquire new account relationships through face-to-face field sales, through relationships with our partners and through targeted direct marketing efforts that aim to increase awareness of our solutions.
Our sales representatives are generally compensated through a combination of fixed and variable compensation. Variable compensation or commission becomes the primary basis of compensation as sales representatives gain more experience.
Proprietary Rights
We have relied on a combination of copyrights, patents, trade secrets, trademarks, and contractual provisions to protect the proprietary rights of our products, processes and technology. In addition, we have, at times, entered into confidentiality and assignment-of-rights agreements with our employees, consultants and customers and have limited access to, and distribution of, our proprietary information. We licensed our proprietary products to our customers under license agreements that we believe contain appropriate use and other restrictions. However, despite our efforts to safeguard our proprietary rights, we can provide no assurance that we will be able to successfully deter misappropriation or unauthorized third-party use of such rights. As is the case with any software company, safeguarding unauthorized use of our software is difficult, and piracy could become a problem. In addition, if we are engaged in transactions in countries where intellectual property laws are not well developed or are not well enforced, our efforts to protect our proprietary rights may not be effective. Enforcing our proprietary rights in the U.S. and abroad and any litigation to enforce such rights, can result in significant costs and can divert resources, which could cause a material adverse effect on our business, financial condition, results of operations or cash flows.
As the number of solutions available in the marketplace increases and solution functionality continues to overlap, software companies may increasingly become subject to claims of infringement or other misappropriation of intellectual property. Third parties may assert infringement or misappropriation claims against us relating to our software, processes or technology. Following up such claims, whether or not they have merit, can be time-consuming and can result in costly litigation, cause delays in our business or have other negative consequences. Defending such claims, entering into royalty or licensing agreements, or adverse determinations in proprietary rights litigation could have a material adverse effect on our business, results of operations, cash flow and financial condition.
COVID-19
COVID-19 continues to impact local, regional, and global economies, businesses, supply chains, production and sales across a range of industries.
To protect the health and safety of our employees, our daily execution evolved into a largely virtual model. However, we found ways to continue to engage with and assist our customers and partners as they worked to navigate the changed environment.
Human Capital
Our core values - Integrity, innovation, delighting our clients, diversity and teamwork are communicated to our employees upon joining our company. We strive to maintain and demonstrate these values to our associates in the decisions we make and the actions we take. We believe one of our greatest assets is our people and believe adherence to such policies plays a key role in our company.
Integrity - We strive to earn the trust of our customers, partners, and associates through honesty, openness, and ethical, and fair behavior. We respect everyone and believe we should treat others as we expect to be treated.
Innovation - We are committed to continuous progress, never settling for yesterday’s solutions or successes.
Delighting our clients - We are committed to delighting our clients with exceptional and personalized services.
Diversity - We believe it takes people with different ideas, experiences, strengths, interests and backgrounds to succeed.
Teamwork - We understand that we achieve everything together and are accountable to each other for our results.
On December 31, 2022, our employee base stood at approximately 127 employees worldwide, of which more than 55% were employed in our international operations. We have offices in Canada, Mexico, and the United States, as well as representatives in the United Kingdom and the United Arab Emirates. None of our employees are represented by unions and we consider the relationships with our employees to be good. As of December 31, 2022, women represented 26.7% of our workforce. Due in large part to a scaling back in the Company’s operations during Fiscal 2022, the attrition rate in Fiscal 2022 was 44.6%.
As of December 31, 2022, the composition of our employee base was as follows:
Corporate Kandy Total
Sales and marketing -
Product support and R&D -
Admin
Total number of employees
We offer fair and competitive compensation and benefit packages to our employees that include base salary, incentives, adequate paid time off and various health insurance plan options.
Available Information
Our website address is http;//www.avctechnologies.com. Our common stock and public warrants are registered under the Securities Exchange Act of 1934 (the “Exchange Act”) and we have reporting obligations, including the requirement to file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual report contain financial statements that are audited and reported on by our independent registered public accountants. These filings are available to the public via the Internet on our website and at the SEC’s website located at http://www.sec.gov. You may also read and copy any document that we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. For more information, please call the SEC at 1-800-SEC-0330. You may request a copy of our filings with the SEC (excluding exhibits) at no cost by writing or telephoning us at the following address or telephone number:
American Virtual Cloud Technologies, Inc.
1720 Peachtree Street
Suite 629
Atlanta, GA 30309
Tel: (404) 239-2863
The Company’s status as an emerging growth company (“EGC”) as defined in the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), ended on December 31, 2022.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report on Form 10-K, before making a decision to invest in our common stock. If any of the following events occur, our business, financial condition and operating results may be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Bankruptcy
We have sold substantially all of our assets as part of our Chapter 11 bankruptcy process, and we anticipate that our outstanding securities will be cancelled, without any proceeds being available for distribution to our stockholders.
On March 24, 2023, we completed the Asset Sale and disposed of substantially all of our assets. As identified in the Debtors’ Combined Disclosure Statement and Chapter 11 Plan of Liquidation (the “Plan”), filed with the Court on March 21, 2023, and subject to Court approval, the Company anticipates that there will be no proceeds available for distribution to the Company’s stockholders and that the Company’s outstanding securities shall be cancelled upon confirmation of the Plan.
We may not be able to obtain confirmation of the Plan.
To complete our Chapter 11 bankruptcy process, we must meet certain statutory requirements with respect to the adequacy of disclosure with respect to the Plan, solicit and obtain the requisite acceptances of such Plan and fulfill other statutory conditions for confirmation of such Plan.
We may be subject to claims that will not be discharged in the Chapter 11 Cases.
The US Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from, among other things, substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims against us that arose prior to the filing of the Cases or before consummation of a plan of reorganization (i) would be subject to compromise and/or treatment under a plan of reorganization and/or (ii) would be discharged in accordance with the US Bankruptcy Code and the terms of a plan of reorganization. Subject to the terms of a plan of reorganization and orders of the Bankruptcy Court, any claims not ultimately discharged pursuant to a plan of reorganization could be asserted against us and may have an adverse effect on our liquidity and financial condition.
Risks Related to Our Business and Industry
While the Company remains a public company, it will continue to incur the expense of complying with public company reporting requirements even though its operations have been reduced following the sale of Computex.
We will continue to be required to comply with the applicable reporting requirements of the Securities Exchange Act of 1934, as amended, even though compliance with such reporting requirements may be economically burdensome.
General economic weakness may harm the Company’s operating results and financial condition.
The Company’s results of operations are largely dependent upon the state of the economy. Global economic weakness and uncertainty may result in decreased sales, gross margin, earnings and/or growth rates. In addition, material changes in trade agreements between the U.S. and other countries may, for example, negatively affect the Company’s ability to purchase products, its ability to import or export products, and could negatively affect pricing and product availability. Adverse economic conditions could negatively affect demand for the Company’s products and services and could impair the ability of customers to pay for such products and services.
The Company’s business could be adversely affected by COVID-19.
Even though the COVID-19 outbreak has subsided, the Company may continue to experience significant impacts to its business as a result of the global economic impact of COVID-19, including any economic downturn or recession or other long-term effects that have occurred or may occur in the future.
The Company has customer concentration, and if the Company loses one or more of its large volume customers, its earnings may be materially affected.
Following the Company’s sale of the Computex business in March 2022, it had significant concentration of customers. The five top customers of the Company’s Kandy business, which is the Company’s sole business segment following the sale of Computex, accounted for 68% of the revenues of that business segment during Fiscal 2021. There are inherent risks whenever a significant percentage of total revenues are concentrated with a limited number of customers. Revenues from our largest customers may fluctuate from time to time based on numerous factors, including market conditions, which may be outside of our control. Contracts between the Company and its customers for the provision of products and/or services are generally in the form of non-exclusive agreements that do not contain volume purchase commitments, and are terminable by either party upon 30 days’ notice. The loss of one or more of the Company’s largest customers, the failure of such customers to pay amounts due, or a material reduction in sales dollars by such customers could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.
The Company may not be able to hire and/or retain the personnel that it needs.
To increase market awareness and sales of the Company’s offerings, the Company may need to expand its marketing efforts and sales operations in the future. The Company’s products and services require a sophisticated sales effort and significant technical engineering talent. For example, its sales and engineering candidates must have highly technical hardware and software knowledge to create a customized solution for its customers’ business processes. Competition for qualified sales, marketing and engineering personnel fluctuates depending on market conditions, and the Company may not be able to hire or retain sufficient personnel to maintain and grow its business. Frequently, the Company’s competitors require their employees to agree to non-compete and non-solicitation agreements as part of their employment. This makes it more difficult for the Company to hire, and also may increase the costs of reviewing and managing non-compete restrictions. Additionally, in some cases, the Company’s relationship with a customer may be impacted by turnover in its sales or engineering team.
The Company may not adequately protect itself through its contracts, or its insurance policies may not be adequate to address potential losses or claims.
The Company’s contracts may not protect it against the risks inherent in its business including, but not limited to, warranties, limitations of liability, indemnification obligations, human resources and subcontractor-related claims, patent and product liability, regulatory and compliance obligations, and data security and privacy. Also, the Company faces pressure from its customers for competitive pricing and contract terms. The Company also is subject to audits by various vendor partners and customers relating to purchases and sales under various contracts. In addition, the Company is subject to indemnification claims under various contracts.
The Company depends on having creditworthy customers to avoid an adverse impact on its operating results and financial condition.
If the credit quality of the Company’s customer base materially decreases, or if the Company experiences a material increase in its credit losses, the Company may find it difficult to continue to obtain the required capital for its business, and its operating results and financial condition may be harmed. In addition to the impact on the Company’s ability to attract capital, a material increase in its delinquency and default experience would itself have a material adverse effect on its business, operating results, and financial condition.
The Company may be liable for misuse of its customers’ or employees’ information.
Third-parties, such as hackers, could circumvent or sabotage the security practices and products used in the Company’s product and service offerings, and/or the security practices or products used in the Company’s internal IT systems, which could result in disclosure of sensitive or personal information, unauthorized procurement, or other business interruptions that could damage the Company’s reputation and disrupt its business. Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats.
If third-parties or the Company’s employees are able to maliciously penetrate its network security or otherwise misappropriate its customers’ information or employees’ personal information, or other information for which its customers may be responsible and for which the Company agrees to be responsible in connection with service contracts into which it may enter, or if the Company gives third-parties or its employees improper access to certain information, the Company could be subject to liability. This liability could include claims related to unauthorized access to devices on its network; unauthorized access to its customers’ networks, applications, data, devices, or software; and identity theft or other similar fraud-related claims. This liability could also include claims related to other misuses of or inappropriate access to personal information. Other liability could arise from claims alleging misrepresentation of the Company’s privacy and data security practices. Any such liability for misappropriation of information could decrease the Company’s profitability. In addition, federal and state agencies have been investigating various companies to determine whether they misused or inadequately secured information. The Company could incur additional expenses when new laws or regulations regarding the use of information are enacted, or if governmental agencies require the Company to substantially modify its privacy or security practices. The Company could fail to comply with applicable data privacy laws, the violation of which may result in audits, fines, penalties, litigation, or administrative enforcement actions with associated costs.
Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the security practices the Company uses to protect sensitive customer transaction information and employee information. A party who is able to circumvent the Company’s security measures could misappropriate proprietary information or cause interruptions in the Company’s operations. Further, third-parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords, or other information or otherwise compromise the security of the Company’s internal networks and/or its customers’ information. Since techniques used to obtain unauthorized access change frequently and the size and severity of security breaches are increasing, the Company may be unable to implement adequate preventative measures or timely identify or stop security breaches while they are occurring.
The Company may be required to expend significant capital and other resources to protect against security breaches or to remediate the subsequent risks and issues caused by such breaches. The Company’s security measures are designed to protect against security breaches, but its failure to prevent such security breaches could cause it to incur significant expense to investigate and respond to a security breach and correct any problems caused by any breach, subject it to liability, damage its reputation, and diminish the value of its brand. There can be no assurance that the limitations of liability in Company contracts would be enforceable or adequate or would otherwise protect the Company from any such liabilities or damages with respect to any particular claim. The Company also cannot be sure that its existing insurance coverage for errors and omissions or security breaches will continue to be available on acceptable terms or in sufficient amounts to cover one or more large claims, or that its insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against the Company that exceeds its available insurance coverage, or changes in its insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on the Company’s business, financial condition, and results of operations.
Failure to comply with new laws or changes to existing laws may adversely impact the Company’s business.
The Company’s operations are subject to numerous laws and regulations in a number of areas including, but not limited to, laws relating to labor and employment, immigration, advertising, e-commerce, tax, imports and exports, data privacy, competition, the environment, health, and safety. Compliance with these laws and regulations may be onerous and expensive, and may not be consistent across jurisdictions, thereby further increasing the cost of compliance, the cost of doing business, and the risk of noncompliance. Though the Company has designed policies and procedures to comply with applicable laws and regulations, there can be no certainty that employees, contractors, or agents will fully comply with such policies and procedures.
We may face risks associated with our international operations that could adversely affect the Company.
The Company’s operations outside the United States include a Canadian division that was acquired as part of the Kandy acquisition. The Company also has employees in Mexico as well as representatives in the United Kingdom and the United Arab Emirates. At December 31, 2022, approximately 70 associates were employed in our international operations. Foreign operations are subject to risks that are inherent in operating within different legal, political and economic environments. Among the risks are changes in tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange. Such operations may require significant management attention and financial resources to successfully grow. In addition, international operations are subject to other inherent risks, including:
● greater reliance on local partners;
● possible difficulties collecting accounts receivable and longer collection cycles;
● difficulties and costs of staffing and managing international operations;
● compliance with international trade, customs and export control regulations;
● foreign government regulations limiting or prohibiting potential sales or increasing the cost of doing business in such markets, including adverse tax policies, tariffs, customs regulations, trade protection measures, export quotas and qualifications to transact business;
● foreign currency controls, restrictions on repatriation of cash and changes in currency exchange rates;
● a possible need to adapt and localize our products for specific countries;
● our ability to effectively price our products in competitive international markets;
● political, social and economic instability, including as a result of possible volatility of global financial markets, health pandemics or epidemics and/or acts of war or terrorism;
● exchange rate fluctuations that could negatively impact our financial results; and risks associated with our use and reliance on research and development resources in global locations.
The departure of certain of the Company’s key executives or key members of its senior management team and/or failure to successfully implement a succession plan could adversely affect the Company’s business.
The departure of certain key executives or key members of the Company’s senior management team and/or failure to successfully implement a succession plan could disrupt the Company’s business and impair the execution of its business strategies. The Company’s executive officers are at the forefront of its strategic direction and focus, and therefore believes that its success depends in part upon its ability to retain the services of certain executive officers and senior members of its management team and also depends on its ability to successfully implement a succession plan. Therefore, the departure of any of such persons without replacement by qualified successors could adversely affect the Company’s ability to effectively manage its overall operations and successfully execute current or future business strategies and could cause instability within the Company’s workforce.
Changes in accounting standards, or the misapplication of current accounting standards, may adversely affect the Company’s future financial results.
The Company prepares its financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”). These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the Public Company Accounting Oversight Board (“PCAOB”), the SEC, the American Institute of Certified Public Accountants (“AICPA”) and various other bodies formed to interpret and create appropriate accounting policies. Periodic assessments required by current or new accounting standards may result in noncash charges and/or changes in presentation or disclosure. In addition, any change in accounting standards could influence the Company’s customers’ decision to purchase from the Company or finance transactions with the Company, which could have a significant adverse effect on the Company’s financial position or results of operations.
For example, a relatively new accounting standard requires the Company to determine if it is the principal or agent in transactions with its customers. In addition, the manner in which some of the Company’s products are bundled, and the voluminous number of products and services the Company sells can add to the level of complexity. Mischaracterization of these products and services could result in misapplication of revenue recognition policies. In addition, judgements and estimates are made in the application of GAAP, such as to determine the fair value of assets acquired, and liabilities assumed in business combinations, assessments of goodwill impairment, the estimating of the allowance for doubtful accounts and the determination of the cost of professional and managed services. If the Company is unable to accurately estimate such amounts, including the time-line for completion of contracts, the profitability of its contracts and its profits overall may be materially and adversely affected.
A natural disaster or other adverse occurrence at one of the Company’s facilities could damage its business.
As of December 31, 2021, the Company has one warehouse and a distribution facility in the U.S. If such facilities were to be seriously damaged by a natural disaster or other adverse occurrence, the Company could utilize another distribution center or third-party distributors to ship products to its customers. However, this may not be sufficient to avoid interruptions in the Company’s business and may not be enough to meet the needs of all of the Company’s customers and could cause increased operating costs. In addition, the Company operates two customer facing data centers which contain its Securities Operations Center and Network Operations Center. The Company also operates certain sales offices as well as leased facilities in Ottawa, North Carolina and Mexico, along with a number of rented spaces that are used as server locations, all of which may contain business-critical data and confidential customer information. A natural disaster or other adverse occurrence at any such locations could negatively impact its business, results of operations or cash flows.
The Company faces risks of claims from third-parties for intellectual property infringement, including counterfeit products, that could harm its business.
The Company may be subject to claims if products that it resells is considered to infringe on the intellectual property rights of third-parties and/or are considered to be counterfeit products. Also, the vendors of certain products or services that the Company resells may not provide the Company with indemnification for infringement. However, the Company’s customers may seek indemnification from the Company, which could cause the Company to incur substantial costs in defending infringement claims against itself and its customers. In the event of such claims, the Company and its customers may be required to obtain one or more licenses from third-parties, and the Company may not be able to obtain such licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any such required license could significantly increase the Company’s expenses and/or adversely affect its ability to offer one or more of its services.
Risks Related to Our Securities and Recent Acquisitions
As smaller reporting company, the Company is exempt from certain public company reporting requirements.
The Company is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. The Company will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of its common stock held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter. Investors may find the Company’s common stock less attractive because of the Company’s reliance on these exemptions, which may result in a less active trading market the Company’s common stock and/or could result in the Company’s stock price being more volatile. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
Our management and their affiliates control a substantial interest in us and thus may influence certain actions requiring a stockholder vote.
As of March 31, 2023, directors and executive officers beneficially owned 7.5% of our common stock. Accordingly, these individuals have considerable influence regarding the outcome of any transaction that requires stockholder approval. Furthermore, our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. As a consequence of our “staggered board,” only a minority of our board of directors will be considered for election in any given year. In addition, our management and their affiliates, because of their ownership position, will have considerable influence regarding the outcome of such elections.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
Our Charter provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our Charter provides, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel; provided that the exclusive forum provision will not apply to (i) suits brought to enforce any liability or duty created by the Exchange Act, (ii) any other claim for which the federal courts have exclusive jurisdiction, (iii) any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (iv) any claim which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (v) any claim for which the Court of Chancery does not have subject matter jurisdiction. Furthermore, our Charter also provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such provision with respect to suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our Charter.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in our Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Sales of a substantial number of shares of our common stock in the public market, or the perception that they might occur, could have an adverse effect on the market price of our common stock.
As of December 31, 2022, we had warrants to purchase shares of our common stock. To the extent any such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to our stockholders and an increase in the number of shares of common stock eligible for resale in the public market. All of our outstanding warrants are subject to agreements requiring us to register for resale the underlying shares of common stock. Sales of substantial numbers of such shares in the public market or the fact that the warrants may be exercised, could adversely affect the market price of our common stock.
Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our common stock unless you sell your shares of common stock for a price greater than that which you paid for it.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
We currently maintain our principal executive offices at 1720 Peachtree Street, Suite 629, Atlanta, GA 30309, along with certain additional offices, all of which are leased.
As of December 31, 2022, locations leased by Kandy were as follows:
● Administrative offices located in the Brier Creek Office Parke, Wake County, North Carolina;
● A lab and related facilities in Ottawa and North Carolina;
● A facility in Mexico City; and
● Approximately 4 co-located data centers that are used as server locations.
We believe our current facilities meet the current needs of our employee base.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
There is no material litigation, arbitration, governmental proceeding or any other legal proceeding currently pending or known to be contemplated against any members of our management team in their capacity as such. From time to time, we may be involved in certain legal proceedings and claims, which arise in the ordinary course of business. Currently, we not aware of any matter or matters that, individually or in the aggregate, would have a material adverse effect on our results of operations, financial condition, or cash flow. If we should determine that an unfavorable outcome is probable on a claim and that the amount of probable loss is reasonably estimable, we will record an accrual for such claim or claims. If any such accrual is recorded, it could be material and could adversely impact our results of operations, financial condition, and cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
On January 25, 2023, the Company’s securities ceased trading on the Nasdaq as the Company did not meet the requirements for continued trading thereon. Currently, the Company’s common stock and public warrants trade on the over-the-counter markets under the symbols “AVCTQ,” and “AVCTWQ,” respectively. Each such whole warrant entitles the holder to purchase one share of common stock at an exercise price of $172.50 per share, subject to adjustment as described in our registration statement. Only whole warrants are exercisable and only whole warrants trade. Such warrants are scheduled to expire on April 7, 2025.
Holders of Record
On March 24, 2023, there were approximately 74 holders of record of our common stock and 4 holders of record of our publicly-traded warrants. Such numbers do not include beneficial owners holding our securities through nominee names.
Dividends
We have not paid any cash dividends on our common stock to date and do not anticipate declaring any dividends in the foreseeable future.
Equity Compensation Plans
The following table provides certain information regarding our equity compensation plans:
Plan Category Number of
securities
issuable upon
exercise of
outstanding
rights Weighted-
average exercise
price of
outstanding
rights Number of
securities
remaining
unissued
under equity
compensation
plans
Equity compensation plans approved by security holders 666,667 - 328,997
Equity compensation plans not approved by security holders - - -
Total 666,667 - 328,997
Additional information is included in Note 13 in the Notes to our Consolidated Financial Statements.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements (including the notes thereto) contained elsewhere in this report. Certain information contained in this discussion and analysis includes forward-looking statements that involve risk and uncertainties. You are therefore encouraged to read the section in this annual report on Form 10-K titled, “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS” and “RISK FACTORS.”
Overview and recent developments
We are a Delaware-incorporated entity. As of December 31, 2022, we had operating locations in North Carolina, Canada and Mexico.
On April 7, 2020, AVCT (formerly known as Pensare Acquisition Corp.), consummated the Computex Business Combination in which it acquired Computex, a private operating company that does business as Computex Technology Solutions. In connection with the Computex Business Combination, the Company changed its name to American Virtual Cloud Technologies, Inc.
On December 1, 2020, we acquired Kandy from Ribbon, by acquiring certain assets, assuming certain liabilities and acquiring all of the outstanding interests of Kandy Communications LLC.
Kandy, a provider of cloud-based enterprise services, globally deploys a white-label, carrier-grade cloud-based platform for UCaaS, CPaaS and CCaaS for mid-market and enterprise customers across a proprietary multi-tenant, highly scalable cloud platform. The Kandy platform provides white-labeled services to a variety of customers including communications service providers and systems integrators. With Kandy, companies can quickly embed real-time communications capabilities into their existing applications and business processes.
Computex, classified within discontinued operations, 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.
On September 16, 2021, the Company announced that as a result of a decision by the Company’s Board of Directors to explore strategic alternatives previously announced on April 7, 2021, the Board had authorized the Company to focus its strategy on acquisitions and organic growth in its cloud technologies business as well as to explore strategic opportunities for its IT solutions business, including the divestiture of Computex. The Company believed that such changes would allow it to optimize resource allocation, focus on core competencies, and improve its ability to invest in areas of maximal growth potential.
On January 27, 2022, the Company announced that it had executed a definitive agreement to sell Computex, and on March 15, 2022, the sale of Computex was consummated, which completed the Company’s transition to a cloud communications company, centered on its Kandy platform. In connection with the then pending sale of Computex, Computex was classified as held for sale as of December 31, 2021, and its operations for current and prior periods were separated and classified as discontinued operations. Accordingly, this management’s discussion and analysis of financial condition and results of operations primarily focuses on the Kandy segment and the Company’s corporate activities. Therefore, unless otherwise indicated, amounts discussed herein, exclude Computex. Net proceeds from the sale of Computex, after payment of closing and certain other obligations were used for working capital and general business purposes.
On August 25, 2022, the Company announced that it had retained Northland Capital Markets to advise the Company in connection with a comprehensive strategic review process that could lead to the sale of the Company or selected assets.
During 2022, the Company continued to explore strategic opportunities, including the rationalization of resource allocation and core competencies. Further, the Company took actions that it believed resulted in significant cost savings. Such savings were generated from selective reductions in workforce and negotiated conversions of certain material vendor support costs from fixed to variable, thereby eliminating certain cost burdens related to unused capacity. In addition, the Company obtained strategic and operating restructuring support services of certain capital advisors.
Additionally, during 2022, the Company projected and announced that it would need additional capital to fund its operations including research & development and capital investment requirements until the Company scaled to a revenue level that would permit cash self-sufficiency. Such factors raised substantial doubt about the ability of the Company to continue as a going concern. The projection was based on the Company’s forecasts regarding product sales and service, cost structure, cash burn rate and other operating assumptions. During 2022, the Company was forced to scale back operations and, as more fully discussed elsewhere in this Form 10-K, including in the Notes to the Consolidated Financial Statements, on January 11, 2023, the Company filed for Chapter 11 and, on March 10, 2023, the Sellers and the Purchaser executed the Purchase Agreement, pursuant to which the Sellers agreed to sell substantially all of the assets of the Company for a cash purchase price of $6.8 million (See Note 1 of the consolidated financial statements). On March 15, 2023, the Court entered an order authorizing the Asset Sale pursuant to the terms of the Purchase Agreement. On March 24, 2023, the Asset Sale closed, thereby completing the disposition of substantially all of the Company’s assets. As identified in the Plan filed with the Court on March 21, 2023, and subject to Court approval, the Company anticipates that there will be no proceeds available for distribution to the Company’s stockholders and that the Company’s outstanding securities shall be cancelled upon confirmation of the Plan.
The description of the Company’s business and result of operations contained herein reflects the Company’s operation of its business prior to the completion of the Asset Sale on March 24, 2023. As a result of the Asset Sale, the Company no longer has any operations, other than those relating to the wind down of its business and completion of the Chapter 11 process.
Nature of revenue categories discussed below:
Cloud subscription and software revenue include subscriptions to the Company’s cloud-based technology platform, and revenue from the Company’s on-premise software.
Professional and managed services revenue include services for deployment, configuration, system integration, optimization, customer training and education.
Financial statement presentation and results of operations
The consolidated financial statements of the Company include the accounts of AVCT and its wholly-owned subsidiaries. In the discussion below, the year ended December 31, 2022 and the year ended December 2021 will be referred to as FY 2022 and FY 2021, respectively.
FY 2022 versus FY 2021 (in thousands)
FY 2022 FY 2021
Revenues: (in thousands)
Cloud subscription and software $ 15,612 $ 16,930
Managed and professional services 1,155 3,119
Other -
Total revenues 16,811 20,049
Cost of revenue 18,372 16,181
Gross (loss) profit (1,561 ) 3,868
Goodwill impairment 10,468 28,995
Research and development 15,604 17,916
Selling, general and administrative 29,533 36,405
Loss from continuing operations (57,166 ) (79,448 )
Other income (expense)
Change in fair value of warrant liabilities 35,903 (19,608 )
Change in fair value of derivative liability -
Interest expense (1) (20,364 ) (31,705 )
Other income (93 )
Total other income (expenses) 17,191 (51,406 )
Net loss from continuing operations before income taxes (39,975 ) (130,854 )
Provision for income taxes (548 ) -
Net loss from continuing operations, net of tax (40,523 ) (130,854 )
Net income (loss) on discontinued operations, net of tax (30,532 )
Net loss $ (39,799 ) $ (161,386 )
(1) Interest expense in FY 2022 and 2021 include related party interest of $764 and $14,958, respectively
Net loss from continuing operations, net of tax
Net loss from continuing operations, net of tax, for FY 2022 was $40.5 million compared with $130.9 million in FY 2021. Discussed in the paragraphs below are the revenue and expense factors that primarily contributed to the net loss change. However, the net loss from continuing operations, net of tax, for FY 2021 was impacted by the following noncash items, relative to FY 2022:
Fiscal 2022 Fiscal 2021
Expense (income) Change
Impairment of goodwill and other intangible assets $ 10,468 $ 28,995 $ (18,527 )
Depreciation 2,029 1,275
Amortization of intangible assets - 2,752 (2,752 )
Amortization of Convertible Debenture discount - 9,253 (9,253 )
Interest on convertible debt paid-in-kind - 8,257 (8,257 )
Share-based compensation 1,763 8,629 (6,866 )
Change in fair value of warrant liabilities (35,903 ) 19,608 (55,511 )
Amortization and write-off of deferred financing costs 4,715 1,143 3,572
Noncash financing fees 4,650 5,948 (1,298 )
$ (12,278 ) $ 85,860 $ (98,138 )
Cloud subscription and software revenue
Cloud subscription and software revenue, which represents revenue from subscriptions to the Company’s cloud-based technology platform as well as revenue from the Company’s on-premise software, was $15.6 million in FY 2022 compared with $16.9 million in FY 2021. The decrease was primarily due to the termination of a reseller agreement, in August 2022, in connection with a settlement agreement entered into with Ribbon (See Note 11 of the consolidated financial statements). Such decrease was partially offset by increased UCaaS business from 4 of our customers.
Managed and professional services revenue
Managed and professional services revenue, which was also negatively impacted by the termination of the reseller agreement discussed above, was $1.2 million in FY 2022 compared with $3.1 million in FY 2021.
Total revenue, cost of revenue and gross margin
Aggregate revenue for all product lines together was $16.8 million in FY 2022 compared with $20.0 million in FY 2021.
Cost of revenue increased $2.2 million or 13.5% from $16.2 million in FY 2021 to $18.4 million in FY 2022, due primarily to a $2.7 million increase in platform software support and a $1.9 million increase in employee-related costs, partially offset by a $1.4 million decrease in amortization of intangibles and a $1.1 million decrease in certain consultant and outside services.
The gross margin in FY 2022 was negative due to a combination of decreased revenues and higher costs of revenue. Costs of revenue are primarily fixed.
Impairment of goodwill and other intangible assets
Goodwill impairment of $10.5 million was assessed early in FY 2022, primarily as a result of Kandy’s performance being significantly below forecasts.
The noncash impairment charges recorded in FY 2021 are discussed in Note 3 of the Notes to the Consolidated Financial Statements and were related to goodwill of the Kandy reporting unit and Kandy’s other intangible assets. The impairment of Kandy’s goodwill and other intangible assets resulted from a quantitative impairment analysis during the Company’s December 2021 impairment assessment, after an evaluation based on certain factors considered to be triggering events, such as changes in Kandy’s forecasts. As a result of the quantitative assessment, the Company recorded an impairment charge to goodwill and intangible assets of $13.7 million and $15.3 million, respectively.
Research and development
For FY 2022 and FY 2021, research and development expenses were $15.6 million and $17.9 million, respectively. The decrease of $2.3 million, or 12.9%, was primarily due to reductions in salaries and related costs, which reflect the impact of recent cost saving efforts.
Selling, general and administrative expenses
Selling, general and administrative expenses for FY 2022 and FY 2021 consisted of the components in the following table (in thousands):
Increase
FY 2022 FY 2021 (decrease)
Salaries, benefits, subcontracting & personnel administration costs $ 12,375 $ 23,526 $ (11,151 )
Building occupancy costs, utilities, office supplies & repairs and maintenance
Sales and marketing 1,285 2,762 (1,477 )
Professional fees 8,385 5,624 2,761
Insurance 2,769 2,166
ERP/CRM implementation costs 2,355 - 2,355
Other 1,545 1,615 (70 )
$ 29,533 $ 36,405 $ (6,872 )
(1) Refers to the enterprise resource planning/customer relationship management system
Selling, general and administrative expenses was $29.5 million and $36.4 million in FY 2022 and FY 2021, respectively, a decrease of $6.9 million or 18.9%.
The salaries and related costs component of selling, general and administrative expenses decreased due to a reduction in corporate headcount including at the executive level along with a related reduction in stock compensation expenses. Excluding stock compensation expense, corporate salaries and related costs decreased $5.9 million in FY 2022, compared with FY 2021, while such costs at the Kandy business unit increased $0.3 million. As previously indicated, the decrease in salaries was impacted by the inclusion, in FY 2021, of $3.1 million of termination expenses in connection with a reduction in headcount. The stock compensation expense component of selling, general and administrative expenses decreased $6.0 million in Fiscal 2022, compared with Fiscal 2021 due to the reduction in corporate executive headcount and lower stock prices that impacted the fair value of new awards.
The professional fees component of selling, general and administrative expenses increased $2.8 million, from $5.6 million in FY 2021 to $8.4 million in Fiscal 2022, due to a combination of i) increased financing activities that required the services of legal and other professionals as well as ii) an increase in financial advisory professional fees. As discussed previously, the Company undertook a number of financing transactions during FY 2022. Also, as previously discussed, the Company has obtained strategic and operating restructuring support services of capital advisors in support of its strategic, operating and capital restructuring initiatives, which has resulted in increased non-recurring legal and financial advisory professional expenses.
ERP/CRM implementation costs began being expensed in May 2022 as a new ERP/CRM system went live effective May 1, 2022. Prior to May 2022, such costs were deferred as the ERP/CRM system was in the development phase.
Change in fair value of warrant liabilities
The change in the fair value of warrant liabilities represent mark-to-market fair value adjustments related to certain warrants, and primarily fluctuate due to changes in and the volatility of the Company’s stock price. The fair value changes of each warrant were as follows in FY 2022 and FY 2021 (in thousands):
FY 2022 FY 2021
Income (expense)
Series A Warrants $ 8,133 $ (7,834 )
Series B Warrants - (2,296 )
Series C Warrants -
Series D Warrants 13,469 (9,688 )
Monroe Warrants 4,901 (2,394 )
February 2022 Warrants 6,676 -
2017 Private Placement and EBC Warrants 2,724 1,929
$ 35,903 $ (19,608 )
Interest expense
Interest expense for FY 2022 and FY 2021 consisted of the following (in thousands):
FY 2022 FY 2021
Interest expense and financing fees - Credit Agreement $ 6,870 $ 9,131
Amortization of deferred financing costs and issue discount - February 2022 Warrants 1,431 -
Interest and extension fee on related party promissory note 1,986
Amortization of deferred financing costs and discount - Series B Preferred Stock -
Amortization of deferred financing costs and discount - Convertible Notes 3,171 -
Amortization of debenture discount and debenture deferred fees - 9,881
Debenture interest paid-in-kind - 8,257
Financing charges due to a triggering event related to a floor price, as defined - Series B Preferred Stock 7,141 -
Hudson Bay waiver fee - 2,000
Other
$ 20,364 $ 31,705
Interest expense was $20.4 million in FY 2022 compared with $31.7 million in FY 2021, a decrease of $11.3 million. Substantially all of such charges are not expected to recur due to the following:
i) In aggregate, $11.2 million of the $20.3 million incurred during FY 2022 relate to financing charges and amortization of deferred charges relating to the Series B Preferred Stock and the Convertible Notes. All amounts outstanding and all obligations under the Series B Preferred Stock and the Convertible Notes have since been repaid
ii) An aggregate $6.9 million of the $20.3 million incurred during FY 2022 related to the Credit Agreement which was fully repaid on March 1, 2022
iii) An aggregate $1.4 million of the $20.3 million incurred during FY 2022 was attributable to the February Warrants which have been converted to common stock
iv) Debenture-related charges incurred in FY 2021 of $18.1 million, relate to Debentures which were fully converted to common stock FY 2021
v) The related party promissory note was repaid in FY 2022.
Other income (expense)
Other income of $0.9 million in FY 2022 consists of the gain of $1.7 million recorded in connection with the Ribbon Settlement Agreement (See Note 11 of Notes to the Consolidated Financial Statements), partially offset by other expenses of $0.8 million. Other income for FY 2021 was nominal.
Net income (loss) on discontinued operations, net of tax
Discontinued operations relate to Computex, which was sold in March 2022. Net income on discontinued operations, net of tax, for FY 2022 was $0.7 million compared with a net loss on discontinued operations, net of tax, in FY 2021 of $30.5 million. The loss in FY 2021 was primarily a result of a $32.1 million impairment charge recorded in Fiscal 2021 within the Computex business unit, in connection with the pending sale of Computex at that time.
Provision for income taxes
The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets. A significant component of objective negative evidence identified during management’s evaluation was the three-year cumulative loss for FY 2022 and FY 2021. Such objective negative evidence outweighed the positive evidence identified by the Company. On the basis of this evaluation, the Company maintained a full valuation allowance as of December 31, 2022 and December 31, 2021. In 2022, the Company identified uncertain tax positions relating to its domestic and foreign operations and recorded liabilities for the uncertain tax benefits
Liquidity and Capital Resources
Overview
Historically, the Company’s primary sources of liquidity have been cash and cash equivalents, cash flows from operations (when available) and cash flows from financing activities, including funding under credit agreements and the sale of equity securities. As of December 31, 2022, the Company had an aggregate cash balance of $12.6 million in its operating bank accounts and net working capital of $15.3 million. As of March 31, 2023, aggregate cash in the Company’s operating bank accounts was $13.3 million.
During 2022, the Company projected and announced that it would need additional capital to fund its operations including research & development and capital investment requirements. The Company also announced that it was pursuing strategic initiatives that could result in a sale of all or a portion of the assets of the Company. In addition, the Company continued to explore strategic opportunities, including the rationalization of resource allocation and core competencies. Further, the Company took actions that it believed resulted in significant cost savings. Such savings were generated from selective reductions in workforce and negotiated conversions of certain material vendor support costs from fixed to variable, thereby eliminating certain cost burdens related to unused capacity. Additionally, the Company obtained strategic and operating restructuring support services of certain capital advisors. On January 11, 2023, the Company filed for Chapter 11 and, in March 2023, entered into an agreement to sell substantially all of the assets of the Company. On March 15, 2023, the Court entered an order authorizing the Asset Sale pursuant to the terms of the Purchase Agreement. On March 24, 2023, the Asset Sale closed, thereby completing the disposition of substantially all of the Company’s assets.
After the consummation of the sale, the Company plans to pursue steps to facilitate an orderly winding up of its remaining operations and believes it has sufficient liquidity to achieve such. However, no assurance can be provided that such projections will be realized.
Cash balances and working capital noted above were impacted by the following recent transactions.
● The entry into and subsequent repayment of the Credit Agreement with Monroe, which was entered into on December 2, 2021, for a $27 million term loan facility, to fund working capital, general business activities and to pay off amounts owing under a prior credit agreement ($12.8 million) that the Company previously assumed when it acquired Computex. Interest on the Credit Agreement was payable monthly at the rate of 12% per annum. However, the lenders under the Credit Agreement were guaranteed a minimum return of $7.3 million. On March 1, 2022, all amounts owing under the Credit Agreement were repaid, including the unpaid amounts of the minimum return.
● The issuance and repayment of a $5.0 million subordinated promissory note (the “2021 Note”), which was entered into on September 16, 2021, which was secured by an affiliate of a shareholder that owned more than five percent of the Company’s common stock and which was repaid on March 15, 2022. The 2021 Note, which had a minimum return of 25%, became due on March 1, 2022, due to the Company’s sale of registered equity securities and the early pay-off of the Credit Agreement. However, for a waiver fee of $250,000, the lender extended the maturity date to May 1, 2022, and on March 15, 2022, the 2021 Note was paid in full using proceeds received from the sale of Computex.
● The receipt of gross proceeds of $5.0 million (before deduction of offering costs), in November 2021, from the sale to an institutional investor in a registered direct offering, of 166,666 shares of common stock at a purchase price of $2.00 per share. In addition to the 166,666 shares of the Company’s common stock, the buyer received certain warrants. In December, the Company received an additional $5.0 million in gross proceeds from the subsequent exercise of one group of the warrants.
● The repayment of a subordinated note of $0.5 million along with related accrued interest in November 2021.
● The receipt of gross proceeds of $25.0 million (before deduction of offering costs), in December 2021, from the sale of securities consisting of 522,666 shares of common stock, 12,456 units of convertible preferred stock and certain warrants.
● The receipt of gross proceeds of $15.0 million on March 1, 2022, representing the first tranche of a sale of securities in connection with a February 28, 2022 securities purchase agreement (the “February 2022 Purchase Agreement”) entered into with a buyer.
● The sale in April 2022 of additional securities, which resulted in net cash proceeds of $9.9 million.
● Cash financing charges of $2.8 million paid to the previous holders of the Series B Preferred Stock as a result of the Company’s stock price falling below a stipulated floor price, as defined in the Series B Preferred Stock agreement
● the sale of 4,515,000 shares of the Company’s common stock, in September 2022, for net proceeds of $14.3 million, after deducting commission and other offering costs
● Increased payments for legal, professional and advisory fees in 2022 and early 2023
● The consummation, on October 20, 2022, of a securities purchase agreement entered into with two institutional accredited investors, which netted cash proceeds of $9.3 million, and which related to the sale of (i) an aggregate of 5,000,000 shares of the Company’s common stock, in a registered direct offering and (ii) warrants to purchase up to an aggregate of 10,000,000 shares of the Company’s common stock, at an exercise price of $1.80 per share, in a concurrent private placement, for a combined purchase price of $2.00 per share
● Cash of $2.5 million received in connection with the Ribbon Settlement Agreement.
The Company believes that current cash balances, accounts receivable collections, funds held in escrow and proceeds from the sale of substantially all its assets will provide sufficient liquidity to fund the Company’s remaining activities through the anticipated liquidation date. However, there is no assurance that such projections will be achieved. This projection is based on the Company’s current expectations.
Cash flows
Net cash used in continuing operating activities was $64.1 million and $47.4 million in Fiscal 2022 and Fiscal 2021, respectively, and primarily consisted of cash used in Kandy’s operating activities (including its research and development activities), interest and certain financing costs, professional fees, insurance premiums and corporate support costs. Interest and financing costs included cash interest and other financing costs of $10.9 million primarily related to the Credit Agreement that was repaid in the 1st quarter of 2022 as well as $2.8 million in financing charges that were paid to the previous holders of the Series B Preferred Stock.
Investing activities
Cash provided by continuing investing activities was $1.3 million in Fiscal 2022. Cash used in investing activities was $3.9 million in Fiscal 2021. Cash provided by continuing investing activities for Fiscal 2022 consisted of proceeds from the sale of certain software rights of $2.5 million, partially offset by $0.9 million of deferred development costs on the enterprise resource planning and customer relationship management system (commonly referred to as ERP and CRM systems) and other capital spending of $0.3 million. For FY 2021, cash used in continuing investing activities consisted of $0.9 million of deferred development costs on the ERP and CRM system and $3.0 million on other capital spending.
Financing activities
Cash provided by continuing financing activities was $13.5 million in Fiscal 2022 and primarily consisted of proceeds from the issuance of securities of $48.7 million, partially offset by debt repayments of $33.9 million and payment of deferred financing fees of $1.2 million.
Cash provided by continuing financing activities was $71.9 million in Fiscal 2021 and consisted primarily of proceeds of $27.8 million from the issuance of securities, $27.0 million from issuance of debt, $24.0 million from the issuance of Debentures, $5.0 million from the issuance of a promissory note, and $5.0 million from the exercise of warrants, partially offset by $1.1 million of tax payment for withheld shares associated with vested restricted stock units issued under the Company’s equity incentive plan, payment of deferred financing fees of $1.9 million and debt repayments of $13.9 million.
Cash flows from discontinued operations
Net cash provided by discontinued operations consisted of the following:
FY 2022 FY 2021
Net cash (used in) provided by operating activities $ (5,291 ) $ 5,148
Net cash provided by (used in) investing activities 31,948 (1,012 )
Net cash provided by discontinued operations $ 26,657 $ 4,136
Off-Balance Sheet Arrangements
As of December 31, 2022, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and had not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
Critical Accounting Policies, Judgements and Estimates
This discussion of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures included elsewhere in this annual report. The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could differ materially from those estimates. Currently, we believe the accounting policies that involve the most significant judgments and estimates used in the preparation of the consolidated financial statements include those relating to revenue recognition, accounting for warrants, accounting for income taxes, the recognition and impairment evaluation relating to tangible and intangible assets, and accounting for share-based compensation. We discuss some of these policies below. The ones not discussed below are discussed in Note 3 of the Notes to the Consolidated Financial Statements.
Revenue recognition
Revenue from contracts with customers are not recorded until the Company has the approval and commitment from the parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance and collectability of the consideration is probable. The Company also evaluates the following indicators, amongst others, when determining whether it is acting as a principal in the transaction (and therefore whether to record revenue on a gross basis): (i) whether the Company is primarily responsible for fulfilling the promise to provide the specified good or service, (ii) whether the Company has the inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) whether the Company has the discretion to establish the price for the specified good or service. If the terms of a transaction do not indicate that the Company is acting as a principal in the transaction, then the Company is acting as an agent in the transaction and therefore, the associated revenue is recognized on a net basis (that is revenue net of costs).
Revenue is recognized once control passes to the customer. The following indicators are evaluated in determining when control has passed to the customer: (i) whether the Company has a right to payment for the product or service, (ii) whether the customer has legal title to the product, (iii) whether the Company has transferred physical possession of the product to the customer, (iv) whether the customer has the significant risk and rewards of ownership of the product and (v) whether the customer has accepted the product. The Company’s products can be delivered to customers in a variety of ways, including (i) physical shipment from the Company’s warehouse, (ii) via drop-shipment by the vendor or supplier or (iii) via electronic delivery of keys for software licenses. The Company’s shipping terms typically allow for the Company to recognize revenue when the product is shipped to the customer’s location.
When an arrangement contains more than one performance obligation, the Company will allocate the transaction price to each performance obligation on a relative standalone selling price basis. The Company utilizes the observable price of goods and services when they are sold separately to similar customers in order to estimate standalone selling price.
Cloud subscription and software revenue
Revenue from subscriptions to Kandy’s cloud-based technology platform is recognized on a ratable basis over the contractual subscription term beginning on the date that the platform is made available to the customer until the end of the contractual period. Payments received in advance of subscription services are recorded as deferred revenue; revenue recognized for services rendered in advance of payments received are recorded as contract assets. Usage fees, when bundled, are billed in advance and recognized on a ratable basis over the contractual subscription term, which is usually the monthly contractual billing period. Non-bundled usage fees are recognized as actual usage occurs.
The Company also recognizes revenue for term-based software licenses and has concluded that its software licenses are functional intellectual property that are distinct, as the user can benefit from the software on its own. The software license revenue is typically recognized upon transfer of control or when the software is made available for download, as this is the point at which the user of the software can direct the use of, and obtain substantially all of the remaining benefits from, the functional intellectual property.
Managed and professional services
Professional and managed services revenue include services for deployment, configuration, system integration, optimization, customer training and education. In these arrangements, the Company satisfies the performance obligations and recognizes revenue over time.
Such professional services are provided under both time and materials and fixed price contracts. When services are provided on a time and materials basis, the Company recognizes revenues at agreed-upon billing rates as services are performed. When services are provided on a fixed fee basis, the Company recognizes revenues over time in proportion to the Company’s progress towards satisfaction of the performance obligation.
In arrangements for managed services, the Company’s arrangement is typically a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company typically recognizes revenue from these services on a straight-line basis over the period services are provided, which is consistent with the timing of services rendered.
When services do not meet certain service levels of commitments, customers are entitled to receive service credits, and in certain cases, refunds, each representing a form of variable consideration. Kandy historically has not experienced any significant incidents affecting the defined levels of reliability and performance as required by its subscription contracts. Therefore, the variable consideration has been insignificant and there are no reserves for such service credits as of December 31, 2022.
Contract liabilities
Contract liabilities (or deferred or unearned revenue) are recognized when cash payments are received or due in advance of the Company’s performance obligations.
We consider revenue recognition to be a critical accounting policy and one that involves critical accounting estimates because of the materiality of this item to our financial statements and the level of judgement involved. Judgement is required in some of the factors discussed above including whether we are acting as a principal or an agent, the determination of when risk effectively passes to the customer, the determination of the price expected to be collected from the customer, the determination of whether revenue from certain software sales should be recognized as a single performance obligation or whether certain software support should be recognized as a separate performance obligation, and the assessment of whether the third-party delivered software support is critical or essential to the core functionality of the software itself.
Goodwill and intangibles impairment assessment
The Company reviews its long-lived assets for impairment whenever events or circumstances exist that indicate the carrying amount of an asset or asset group may not be recoverable. The recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset or asset group to the future undiscounted cash flows expected to be generated by that asset group. If the asset or asset group is considered to be impaired, an impairment loss is recorded to adjust the carrying amounts to the estimated fair value. During the year ended December 31, 2021, the Company recorded impairment of intangible assets of $15.3 million relating to the Kandy reporting unit based on a comparison of the reporting unit’s fair value with its carrying value. The excess of the carrying value of the reporting unit over the estimated fair value was first allocated to the intangibles and then to goodwill. Fair value was determined using the income approach.
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is reviewed for impairment at least annually, in December, or more frequently if a triggering event occurs between impairment testing dates. As of December 31, 2021, the Company had two operating segments and two reporting units for the purpose of evaluating goodwill impairment.
The Company’s impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity and Company specific events. If, based on the qualitative test, the Company determines that it is “more likely than not” that the fair value of a reporting unit is less than its carrying value, then the Company evaluates goodwill for impairment by comparing the fair value of each reporting unit to its respective carrying value, including its goodwill. If it is determined that it is “not likely” that the fair value of the reporting unit is less than its carrying value, then no further testing is required.
The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. Fair values may be determined using a combination of both income and market-based approaches.
As indicated in Note 1 of the Notes to the Consolidated Financial Statements, in connection with the planned sale of Computex, the Company recorded a noncash goodwill impairment charge of $32.1 million during the year ended December 31, 2021 which represents the excess of the carrying value of the Computex reporting unit over the expected sale proceeds less costs to sell. As indicated above, impairment of Kandy’s goodwill was also recorded during the year ended December 31, 2021. Goodwill impairment of the Kandy reporting unit was $13.7 million.
Warrants
On July 27, 2017, the Company entered into certain Warrant Purchase Agreements with each of Pensare Sponsor Group, LLC, a Delaware limited liability company (the “Sponsor”), and certain other investors (collectively, the “Purchasers”), pursuant to which the Purchasers purchased an aggregate of 700,833 warrants (including the full over-allotment amount) in connection with and simultaneously with the closing of the IPO (the “2017 Private Placement Warrants”) at a purchase price of $15.00 per Private Placement Warrant.
On or about August 1, 2017, in the IPO, the Company sold units of the Company’s equity securities, each such unit consisting of one share of Common Stock, one-half of one Public Warrant and one-tenth of one right to acquire one share of the Company’s common stock upon the closing of the initial business combination (the “Units”) and, in connection therewith, issued and delivered 1,035,000 warrants to public investors in the Offering (the “Public Warrants”). In addition, 45,000 warrants, underlying unit purchase options issued to the underwriters of the IPO and certain of their designees (the “2017 EBC Warrants”), were issuable. The 2017 EBC Warrants together with the 2017 Private Placement Warrants and the Public Warrants are collectively referred to as the “2017 Warrants.” Each whole 2017 Warrant entitles the holder thereof to purchase one share of the Company’s common stock for $172.50 per share, subject to adjustments. In addition to the 45,000 warrants, the unit purchase options, which expired in July 2022, entitled the holders to receive 99,000 shares of common stock for an exercise price of $150 per unit.
As of December 31, 2022, a total of 1,035,000 Public Warrants and 700,833 of the 2017 Private Placement Warrants remained outstanding.
The 2017 Private Placement Warrants are exercisable on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial Purchasers or their permitted transferees. Public Warrants and any 2017 Private Placement Warrants that are transferred to nonpermitted transferees are redeemable at the option of the Company and are not exercisable on a cashless basis.
The Company evaluated the 2017 Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity, and concluded that the 2017 Private Placement Warrants and the 2017 EBC Warrants did not meet the criteria to be classified in stockholders’ equity. A recent SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder and because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision precluded the 2017 Private Placement Warrants and 2017 EBC Warrants from being classified in equity and therefore the 2017 Private Placement Warrants and 2017 EBC Warrants were classified as liabilities at fair value, with subsequent changes in fair values recognized in earnings at each reporting date. The 2017 Private Placement Warrants were valued using a Black-Scholes pricing model as described in Note 3 of the Notes to the Consolidated Financial Statements. Changes in the fair value of such Warrants requires significant judgment, including the determination of the appropriate valuation model to use and the inputs to the valuation model.
Accounting for income taxes
Under the Financial Accounting Standard Board’s (“FASB”) Accounting Standard Codification (“ASC”) No. 740 (“ASC No. 740”), income tax expense is recorded for the amount of income tax payable or refundable for the current period and for the change in net deferred tax assets or liabilities resulting from events that are recorded for financial reporting purposes in a different reporting period than recorded in the tax return. We make significant assumptions, judgments, and estimates in the determination of our provision for income taxes and also our deferred tax assets and liabilities and any valuation allowances.
Our judgments, assumptions, and estimates relating to the current tax provision take into account current tax laws, our interpretation of current tax laws, allowable deductions, tax credits, and possible outcomes of current and future tax audits. We do not recognize a tax benefit unless we conclude that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, we recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is greater than a 50 percent likelihood of realization. Changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits could materially impact the amounts provided for income taxes. Our assumptions, judgments, and estimates relative to the value of our net deferred tax assets take into account predictions of the amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future years could render our current assumptions, judgments, and estimates inaccurate, thus materially impacting our financial position and results of operations.
Share-based compensation
The Company accounts for share-based compensation in accordance with ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense, based on estimated fair values, for share-based awards made to employees and directors. Based on the grant date fair value of the award, the Company recognizes compensation expense over the requisite service period or performance period on a straight-line basis, and accounts for forfeitures as they occur.
Significant judgement is required in the estimation of fair values of stock awards. For the restricted stock awards with a time-based vesting condition, the fair value is determined by reference to the Company’s stock price on the grant date. A portion of the Company’s restricted stock awards are performance-based with a market condition that must be met for the award to vest. For those restricted stock awards, the fair value is estimated using a Monte Carlo simulation model, whereby the fair value of such awards is fixed at the grant date and amortized over the shorter of the remaining performance or service period. The Monte Carlo simulation valuation model utilizes the following assumptions: expected stock price volatility, expected life of the awards and a risk-free interest rate. Significant judgment is required in estimating the expected volatility of our common stock. Due to the limited trading history of the Company’s common stock, estimated volatility was based on a peer group of public companies and took into consideration the increased short-term volatility in historical data due to COVID-19.
Recent Accounting Pronouncements Issued and Adopted
See Note 3 of the Notes to the Consolidated Financial Statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Foreign exchange risk
Our business is primarily conducted within US markets. Though there is some exposure to currency fluctuations, we do not currently consider exchange rate fluctuations to be a material factor in terms of its impact on our consolidated financial statements. International revenues in Fiscal 2022 was 30.6% of Kandy revenues.
Interest rate risk
As of December 31, 2022, the Company had no significant interest rate risk.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Reference is made to Pages through following Item 16, which comprise a portion of this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management’s Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process used to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
An internal control system over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design safeguards into the process to reduce, though not fully eliminate, risk.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Controls-Integrated Framework. Based on our management’s assessment and those criteria, our management believes that we maintained effective internal control over financial reporting as of December 31, 2022.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm on our internal control over financial reporting as the Company is exempted from the requirement.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Not applicable.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Our current directors and executive officers are as follows:
Name
Age
Position
Lawrence E. Mock, Jr.
Chairman of the Board
Kevin Keough
Chief Executive Officer
Darrell J. Mays
Executive Vice Chairman and Director
Adrian Foltz
Chief Financial Officer
Onex Evans
Chief Accounting Officer
Mark Downs
Director
U. Bertram Ellis, Jr.
Director
Carolyn Byrd
Director
Karl Krapek
Director
Dennis Lockhart
Director
Dr. Klaas Baks
Director
Kent Mathy
Director
Robert Willis
Director and Vice Chairman - Capital Markets
Charles Sweet
Director
Lawrence E. Mock, Jr., was appointed Chairman of the Board on August 22, 2022, and has been a member of the Board since April 2017. Mr. Mock is a former director of Computex and is currently Managing Partner of Navigation, which he founded in partnership with Goldman Sachs in 2006. Mr. Mock also serves as a director of Stratos Management Systems Holdings, LLC, a Delaware limited liability company (“Holdings”). From 1995 to 2006, he served as President and Chief Executive Officer of Mellon Ventures, Inc., which he founded in partnership with Mellon Financial Corporation, to make private equity and venture capital investments in operating companies. From 1983 to 1995, Mr. Mock was Chief Executive Officer of River Capital, Inc., a company he founded. He holds a Master of Science degree from Florida State University and a Bachelor of Arts degree from Harvard College.
Kevin Keough was appointed Chief Executive Officer in August 2022. Previously, he served as our President starting in July 2021 and as our Chief Transformation Officer between April 2022 to August 2022. Mr. Keough has served as Managing Director, Operations, for Navigation Capital Partners, Inc. (“Navigation”), an Atlanta-based private equity firm, since March 2021. Prior to joining Navigation, from October 2020 to March 2021, Mr. Keough was an independent management consultant, serving clients on a range of consulting engagements. From October 2017 to September 2020, he was the Managing Director and Head of Post-Acquisition for Investcorp’s North American Private Equity Group. Prior to joining Investcorp, from 2006 to September 2017, he had been with Arcapita Investment Management and its predecessor firm, Arcapita Inc., ultimately serving in the role of Managing Director and Global Head of Portfolio Management. Before his move into private equity, Mr. Keough spent seven years as a senior executive with FirstEnergy Corporation, a public energy company headquartered in Akron, Ohio. During this period, he held several corporate strategic planning and shared services roles, and served as President of the Ohio Edison Company. He had been a Management Consultant for ten years in the Cleveland Office of McKinsey & Company, Inc, serving as a partner and leader in the Firm’s North American Energy Practice. Mr. Keough holds an MBA from Stanford Graduate School of Business and a BS in Engineering Mechanics, with honors, from the United States Military Academy at West Point.
Darrell J. Mays, Executive Vice Chairman and Director, has served on our board of directors since July 2017, and was our Chief Executive Officer between July 2021 and August 2022 and also between July 2017 and September 30, 2020. He was the Founder and Chief Executive Officer of nsoro, a turnkey wireless installation services provider, from 2003 to 2008, which was acquired by MasTec in August 2008. Mr. Mays has served as an executive of MasTec since 2008, during which period the revenues and EBITDA of MasTec’s communications division, of which nsoro is a component, increased to approximately $2.3 billion and $245.0 million in 2016, respectively. Mr. Mays holds a Bachelor of Arts degree in Business from Georgia State University.
Adrian Foltz has served as our Chief Financial Officer since September 2022. Mr. Foltz previously served as Chief Financial Officer of the Company’s Kandy Communications business starting in April 2021. From September 2020 to March 2021, Mr. Foltz served as Interim Controller for Education Networks of America, later acquired by Zayo Group Holdings, Inc. (“ENA,”), and from November 2019 to September 2020, Mr. Foltz was ENA’s Finance Leader and ERP Project Manager. Mr. Foltz was a consultant for Envision Healthcare (Addison Group) from November 2018 to November 2019. Prior to that, Mr. Foltz was a consultant for ENA from August 2018 to November 2018. From June 2016 to May 2018, Mr. Foltz served as Director of Accounting at Correct Care Solutions (“CCS”), later acquired by Wellpath. From March 2015 to May 2016, Mr. Foltz was a consultant at CCS. Mr. Foltz is a licensed CPA, and holds a BS in Accounting from Missouri State University and an MBA from the University of Florida.
Onex Evans has served as our Chief Accounting Officer since September 2022. Previously, she served as Vice President, Corporate Controller & Reporting, and between June 2020 and March 2021 was Director, SEC & Financial Reporting. Prior to joining the Company, Ms. Evans was a financial reporting consultant for Inspire Brands between July 2019 and June 2020. Between June 2018 and June 2019, Ms. Evans served as SEC Financial Reporting Manager for Manhattan Associates, Inc. Ms. Evans was an SEC reporting consultant for The Home Depot, Inc. from December 2017 to June 2018. Prior to joining The Home Depot, Inc., Ms. Evans was an SEC Financial Reporting Manager at Advance Pierre Foods Holdings, Inc between November 2016 and November 2017. Ms. Evans began her career in public accounting, including audit roles with PwC and both its legacy firms. She is a licensed CPA and holds a BS and MS in Accounting from the University of the West Indies.
Mark Downs has served on our board of directors since April 2020 and is the founder of Navigation, a private equity firm where he has served as a partner since January 2007. Mr. Downs has in excess of 20 years of experience serving on for profit boards of directors as a control investor. Mr. Downs served as a director of Computex, Inc. from January 2017 to April 2020; a director of Stratos from January 2017 to April 2020; a director of Holdings from January 2017 to April 2020; a director of Michon, Inc. (d/b/a Definition6) from July 2015 to the present; a director of Brown Integrated Logistics, Inc. from January 2017 to the present; a director of Brightwell Payments, Inc. from May 2015 to Present; and a director of Five Star Food Service, Inc. from October 2016 to March 2019. Mr. Downs holds a Bachelor’s degree in Economics from the University of Pittsburgh and a Master’s of Management degree from Northwestern University.
U. Bertram Ellis, Jr. has served on our board of directors as an independent director since July 2017. He has served as the Chairman and Chief Executive Officer of Ellis Capital, a diversified investment firm, since 1984. In addition, Mr. Ellis was the Founder and Chief Executive Officer of ACT III Broadcasting from 1986 to 1991, which sold for $530 million and Ellis Communication from 1993 to 1996, which sold for $840 million. Mr. Ellis holds a Masters in Business Administration from the University of Virginia Darden Business School and a Bachelor of Arts degree from the University of Virginia.
Carolyn Byrd has served on our board of directors as an independent director since March 2021. Ms. Byrd formed GlobalTech Financial, LLC (“GlobalTech”), a private company specializing in business process outsourcing and financial consulting in 2000 and has since served as its Chairman and Chief Executive Officer. Prior to forming GlobalTech, Ms. Byrd had a long career with The Coca-Cola Company, where she was ultimately appointed Vice President, Chief of Internal Audits and Director of the Corporate Auditing Department. She served as a Senior Account Officer at Citibank, N.A. prior to joining Coca Cola. Ms. Byrd has served on the board of directors of Regions Financial Corporation (NYSE: RF) since 2010. She holds a Bachelor’s Degree in Economics and Business Administration from Fisk university and a Master’s Degree in Finance and Business Administration from the University of Chicago Graduate School of Business.
Karl Krapek has served on our board of directors as an independent director since July 2017. He has served as the Lead Director at Prudential Financial, Inc. since 2014, and a Director since 2004, and also as Director of Northrop Grumman Corporation since 2008. From 2002 to 2009, he was the President and Chief Operations Officer of United Technologies Corporation, or UTC, which has a market capitalization of approximately $90 billion. Mr. Krapek has served as an Executive Vice President of UTC since 1997 and as a Director of UTC from 1997 to 2007. Mr. Krapek holds a Master of Science from Purdue University and Bachelor of Science from Kettering University.
Dennis Lockhart has served on our board of directors as an independent director since July 2017. He served as President and Chief Executive Officer of the Federal Reserve Bank of Atlanta from 2007 to 2017. Earlier, he was a professor at Georgetown University, School of Foreign Service, from 2003 to 2007. Prior to this, he held senior positions at Heller Financial Inc. and Citicorp (now Citigroup). Mr. Lockhart holds a Master of Arts degree from Johns Hopkins University and a Bachelor of Arts from Stanford University.
Dr. Klaas Baks has served on our board of directors as an independent director since July 2017. He is the Co-Founder and Executive Director of the Emory Center for Alternative Investments, which was formed in 2008. He also serves as the Atlanta Chair of TIGER 21, which is a peer-to-peer network of high net worth wealth creators, since 2014. In addition, he has been an Associate Professor in the Practice of Finance at Emory University’s Goizueta Business School since 2002. Dr. Baks has a Doctoral degree from the Wharton School at the University of Pennsylvania and a Masters of Arts degree from Brown University.
Kent Mathy has served on our board of directors as an independent director since July 2020. He currently serves on the Board of Directors of Everbridge Inc. (Nasdaq:EVBG) and JourneyCare Hospice and formerly served as the President and CEO of Sequential Technology International, a business process outsourcer serving large enterprises. Mr. Mathy retired in 2016 as AT&T Inc.’s (NYSE:T) President of the Southeast Region. Previously, Mr. Mathy served as President of AT&T’s North Central Region. Prior to that, he was President-Business Markets Group at Cingular Wireless. Mr. Mathy joined AT&T Wireless Services in 2003 as Executive Vice President, leading the Enterprise Solutions Group. Earlier in his career, Mr. Mathy served as Chairman and CEO of Celox Networks, a telecommunications network equipment company. Before joining Celox Networks, he was with AT&T (prior to its merger with SBC Communications Inc.) for more than 18 years holding numerous management positions across the United States.
Mr. Mathy has also served on the Board of Directors of Ribbon Communications (Nasdaq:RBBN) and Rogers Wireless, a subsidiary of Rogers Communications, Inc. (NYSE:RCI). Mr. Mathy holds a Bachelor of Business Administration Degree from the University of Wisconsin-Oshkosh.
Robert Willis has served on our board of directors, including as Vice Chairman - Capital Markets, since July 2021. Dr. Willis has served as a Managing Partner of the SPAC Operations Group at Navigation since April 2020. Dr. Willis previously served as the Company’s President from April 2016 until the completion of its initial business combination with Computex in April 2021. Dr. Willis became the President of nsoro in 2007 and served in that capacity until its acquisition by MasTec in 2008 and, following its acquisition, served in an advisory role from 2010 through July 2016. From December 2013 until December 2015, Dr. Willis served as Chairman of U.S. Shale Solutions, Inc., a shale services company which he founded in 2013. Prior to nsoro, Dr. Willis served as Chief Executive Officer of Foxcode Inc., a merchant-banking firm. In July 2004, Dr. Willis founded Gaming VC, S.A., an online gaming enterprise which completed a GBP 81 million initial public offering in London in 2004, and served as a member of its board and as its Finance Director until 2007. Prior to that, Dr. Willis was the founder and Chief Executive Officer of Alpine Computer Systems, Inc., a systems integration engineering company established in the 1980s that grew rapidly and was acquired by Delphi Group plc. in 1996, at which time he became Senior Vice President and Chief Information Officer of the parent company. Dr. Willis was awarded a Doctorate in Humane Letters (Hon.) from Newbury College in Boston, MA, in May 2001.
Charles Sweet has served on our board of directors since December 15, 2022. Mr. Sweet is President of IRC Consulting, Inc., an independent advisory practice he established in 1998. He also serves on the advisory council of Cyprium Partners, a private investment firm. He has previously served as Chief Executive Officer of Bennett Marine, Inc., BMJ Medical Management, Inc., Intrepid USA, Inc., Petropac Solutions, Inc., Physician Health Corporation, Response Oncology, Inc., Sarcom, Inc. and Snelling Holdings, LLC. Mr. Sweet also currently serves on the boards of two private companies and has previously served on the boards of numerous companies.
Designated Directors
Pursuant to the Computex Business Combination agreement, until the date on which Holdings or Navigation ceases to beneficially hold an aggregate of 10% of (i) the shares of our common stock issued to Holdings as partial consideration for the Computex Business Combination and (ii) the shares of our common stock underlying the PIPE Warrants and the PIPE Debentures issued to Holdings at the Computex Closing (collectively, the “Designation Shares” and such period, the “Nomination Period”), Holdings (or if Holdings has been dissolved, Navigation) has the right to nominate up to three Holdings Designees for election to our board of directors, subject to adjustment as described below, and we are obligated to nominate each Holdings Designee for election as a director as part of the slate that is included in the proxy statement (or consent solicitation or similar document) relating to the election of directors and to support the election of each Holdings Designee.
As of the date that Computex was acquired, Holdings’ initial Holdings Designees were Messrs. Downs and Mock. During the Nomination Period, if a Holdings Designee ceases to serve as a director for any reason, Holdings (or if Holdings has been dissolved, Navigation Capital Partners, Inc.) has the right to appoint another individual to fill such vacancy. During the Nomination Period, if Holdings or Navigation Capital Partners, Inc. ceases to beneficially hold at least 50% of the Designation Shares, for the remainder of the Nomination Period, the number of Holdings Designees will be reduced to two, and if Holdings or Navigation Capital Partners, Inc. ceases to beneficially hold at least 30% of the Designation Shares, for the remainder of the Nomination Period, the number of Holdings Designees will be reduced to one.
Number and Terms of Office of Officers and Directors
Our board of directors is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the first class of directors, consisting of Messrs. Ellis, Krapek, Lockhart and Dr. Baks, will expire at the annual meeting of stockholders to be held in 2024. The term of office of the second class of directors, consisting of Ms. Byrd and Messrs. Sweet, Mays and Mock, will expire at the annual meeting of stockholders to be held in 2025. The term of office of the third class of directors, consisting of Mr. Downs, Mr. Mathy and Mr. Willis, will expire at the annual meeting of stockholders to be held in 2023.
Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our Bylaws as it deems appropriate. Our Bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary and such other officers (including, without limitation, Vice Presidents, Assistant Secretaries and a Treasurer) as may be determined by the board of directors.
Director Independence
An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which, in the opinion of the company’s board of directors, would not interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Messrs. Ellis, Krapek, Lockhart, Baks, Mathy and Sweet and Ms. Byrd are “independent directors” as defined in the Nasdaq listing standards.
Committees of the Board of Directors
Our board of directors has three standing committees: an audit committee, a nominating committee and a compensation committee.
Audit Committee
We have an audit committee comprised of Messrs. Lockhart, Baks and Ms. Byrd, each of whom is an independent director. Mr. Lockhart serves as the Chairman of the audit committee. Each member of the audit committee is financially literate, and our board of directors has determined that Mr. Lockhart qualifies as an “audit committee financial expert” as defined in applicable SEC rules because he meets the requirement for past employment experience in finance or accounting, requisite professional certification in accounting or comparable experience. The responsibilities of our audit committee, which are specified in our Audit Committee Charter, include:
● reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;
● discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
● discussing with management major risk assessment and risk management policies;
● monitoring the independence of the independent auditor;
● verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
● reviewing and approving all related-party transactions;
● inquiring and discussing with management our compliance with applicable laws and regulations;
● pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
● appointing or replacing the independent auditor;
● determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
● establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and
● approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
Nominating Committee
Our nominating committee consists of Messrs. Lockhart, Mathy and Krapek, each of whom is an independent director under Nasdaq’s listing standards. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee considers persons identified by its members, management, stockholders, investment bankers and others.
The guidelines for selecting nominees, which are specified in our Nominating Committee Charter, generally provide that persons to be nominated:
● should have demonstrated notable or significant achievements in business, education or public service;
● should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
● should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of our stockholders.
The nominating committee will consider a number of qualifications relating to management and leadership experience, background, integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.
Compensation Committee
Our compensation committee consists of Messrs. Ellis, Baks and Krapek, each of whom is an independent director under Nasdaq’s listing standards. Mr. Krapek serves as the Chairman of the compensation committee. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
● reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
● reviewing and approving the compensation of all of our other executive officers;
● reviewing our executive compensation policies and plans;
● implementing and administering our incentive compensation equity-based remuneration plans;
● assisting management in complying with our proxy statement and annual report disclosure requirements;
● approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
● if required, producing a report on executive compensation to be included in our annual proxy statement; and
● reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
Code of Ethics and Committee Charters
We have adopted a Code of Ethics applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics, our Audit Committee Charter, our Nominating Committee Charter and our Compensation Committee Charter as exhibits to our registration statement for our initial public offering. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us in writing at 1720 Peachtree Street, Suite 629, Atlanta, GA 30309 or by telephone at (404) 239-2863. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a current report on Form 8-K.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Officers, directors and ten percent stockholders are required by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on copies of such forms received, we believe that, during the fiscal year ended December 31, 2022, all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with, except that the following forms were not timely filed: a Form 3 for Mr. Sweet, a Form 4 filed by Ribbon Communications Inc. reporting the redemption of certain shares and termination of certain warrants, a Form 4 filed by Michael Tessler reporting the sale of certain shares, and a Form 4 filed by Dennis Lockhart reporting the purchase of certain shares..

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Summary compensation table
The following provides, under the scaled reporting rules applicable to smaller reporting companies, an overview of our compensation policies and programs and identifies the elements of compensation for Fiscal Year 2022 and 2021, with respect to our “named executive officers,” which term is defined by Item 402 of the SEC’s Regulation S-K to include (i) all individuals serving as our principal executive officer at any time during 2022, (ii) our two most highly compensated executive officers other than the principal executive officers who were serving as executive officers at December 31, 2022 and whose total compensation (excluding nonqualified deferred compensation earnings) exceeded $100,000, and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to the foregoing item (ii) but for the fact that the individual was not serving as an executive officer of the Company at December 31, 2022. Our named executive officers for 2022 are Kevin Keough, who has served as our Chief Executive Officer since August 2022, Darrell Mays, who served as our Chief Executive Officer from July 2021 until September 2022, Adrian Foltz, the Company’s Chief Financial Officer since September 2022, Onex Evans, the Company’s Chief Accounting Officer since September 2022 and Thomas King, the Company’s current Chief of Staff since September 2022 who was previously its Chief Financial Officer.
Name and principal
position
Title
Year
Salary
(1)
Bonus
(2)
Stock
awards that
vested in the
year
(3)
All other
Compensation
(4)
Total
$
$
$
$
$
Kevin Keough
CEO
241,667
175,000
-
45,000
461,667
Darrell Mays
previous CEO
-
-
379,750
-
379,750
-
-
379,750
-
379,750
Adrian Foltz
CFO
216,667
83,750
35,688
18,000
354,105
Onex Evans
CAO
216,867
83,750
46,688
18,000
365,305
Thomas King
Chief of Staff
420,000
-
112,500
-
532,500
(previously CFO)
420,000
420,000
112,500
-
952,500
1) Represents base salary during the year
2) Represents bonus earned during the year. The 2022 amounts are subject to Court approval
3) Represents the accounting/expense value of common stock delivered during the year upon the vesting of RSUs
4) Represents other incentive payments earned during the year and either paid during the year or paid in the subsequent year
Narrative Disclosure Regarding Summary Compensation Table
Compensation Philosophy
The Company’s executive compensation policies are designed to provide competitive levels of compensation meant to integrate salaries with the Company’s goals and objectives and the interests of shareholders, while rewarding performance and retaining qualified and experienced executives. The Compensation Committee of our board of directors is primarily responsible for implementing the Company’s philosophy with respect to executive compensation. There are three primary elements to our executive compensation programs: base salary, cash bonus and RSUs.
The compensation packages are based on the potential impact the executive may have on the Company, the executive’s skills and experience and comparisons with comparable companies.
The American Virtual Cloud Technologies, Inc. 2020 Equity Incentive Plan (the “Plan”) provides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and other share-based awards. Stock options have a maximum term of ten years from the grant date. As of December 31, 2022, 666,667 shares had been authorized for issuance under the Plan, of which 328,997 shares remained available for issuance as of December 31, 2022. The RSUs were issued to certain directors and employees and can only be settled in shares. RSUs awarded to directors are time-based. RSUs issued to nondirectors are 50% time-based and 50% performance-based. Twenty-five percent or, in some cases, one-third of the time-based awards vests on each grant date anniversary, while 25% or, in some cases, one-third of the performance-based awards vests on December 31st of each year, if the market condition (stock price target) is met. If the market condition attached to the performance-based awards is not met in any year, the eligibility is delayed until the market condition is met, except that the market condition must be met on the third anniversary or, in some cases, on the second anniversary of the stock price target date.
Employment Agreements
Thomas King
Effective April 7, 2020, the Company entered into an employment agreement with Thomas King, our CFO at that time, on an “at-will” basis. Mr. King is entitled to receive a base salary of $420,000 per year. Until August 2022, Mr. King was also entitled to an annual bonus for each full fiscal year during his employment term, with a target bonus amount equal to 100% of his annual base salary, subject to the achievement of certain performance objectives. In connection with his employment, Mr. King was also awarded 20,000 RSUs effective April 7, 2020.
Such employment agreement contains customary confidentiality provisions, which apply both during and for two years after its term, and customary non-competition and non-solicitation provisions, which apply during its term and for one year thereafter.
If Mr. King’s employment is terminated by the Company without “cause” (as defined), the Company will be obligated to pay to Mr. King, in addition to accrued but unpaid salary and benefits, (i) continued payment of base salary for six months and (ii) continued benefits, including health care and life insurance. The Company’s obligation to pay any of the foregoing severance obligations (other than salary and benefits accrued through the date of termination of employment) would be subject to Mr. King’s execution of a release of claims against the Company and Mr. King’s compliance with any surviving non-competition, non-solicitation, confidentiality and assignment of inventions obligations to the Company.
Such employment agreement contains customary confidentiality provisions, which apply both during and for two years after its term, and customary non-competition and non-solicitation provisions, which apply during its term and for one year thereafter.
Effective September 2022, Mr. King transitioned into the role of Chief of Staff.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information about RSUs held by the named executive officers (vesting schedules are discussed in the section above titled “Compensation Philosophy):”
Name Award date Shares underlying
RSUs issued Grant date
fair value $ (1) Unvested RSUs
Kevin Keough 4/24/2022 20,000 105,375 20,000
Darrell Mays 10/1/2020 23,333 1,519,000 11,667
Adrian Foltz Various (2) 10,000 180,780 9,583
Onex Evans Various (3) 10,000 262,640 8,333
Thomas King 4/7/2020 20,000 721,875 12,500
(1) The grant date fair value excludes awards which have not yet been valued as the performance targets have not yet been set.
(2) Consists of 3,333 RSUs issued on 4/1/21 and 6,667 RSUs issued on 9/8/22
(3) Consists of 3,333 RSUs issued on 6/1/20, 3,333 RSUs issued on 4/1/21 and 3,334 issued on 9/8/22
Director Compensation
Directors who are employees of the Company do not receive additional compensation for their services as directors or as members of board committees. Non-employee directors are not paid any fees in cash. Instead, non-employee directors receive RSUs on the effective dates of their appointments. Twenty five percent of such RSUs vest on the anniversary date of the respective award. The following summarizes the RSUs issued to non-employee directors as of December 31, 2022:
Name Award date Shares underlying
RSUs issued Grant date
fair value (in $) Unvested RSUs
Larry Mock 4/7/2020 23,333 70,000 11,667
Bert Ellis 4/7/2020 4,000 12,000 2,000
Karl Krapek 4/7/2020 4,000 12,000 2,000
Dennis Lockhart 4/7/2020 4,000 12,000 2,000
Carolyn Byrd 3/1/2021 4,000 28,040 3,000
Klass Baks 4/7/2020 4,000 12,000 2,000
Mark Downs 4/7/2020 4,000 12,000 2,000
Kent Mathy 8/1/2020 4,000 17,000 2,000
Robert Willis
4/24/2022
10,000
52,688
10,000
Compensation Committee Interlocks and Insider Participation
None.
Compensation Committee Report
Our compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on that review and discussion, the compensation committee recommended to the Company’s board of directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.
U. Bertram Ellis, Jr.
Dr. Klaas Baks
Karl Krapek

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information known to the Company regarding the beneficial ownership of our common stock as of March 31, 2023 by:
● each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock;
● each of our executive officers and directors; and
● all of our executive officers and directors as a group.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire securities within 60 days, including options and warrants that are currently exercisable or exercisable within 60 days. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them. The calculation of percentage of beneficial ownership is based on 33,532,473 shares of common stock outstanding as of March 31, 2023:
Name Number of
Shares
Beneficially
Owned(1) Percent of
Common
Stock
Directors and Executive Officers of the Company:
Lawrence E. Mock, Jr.(3) 1,428,266 (4)(5)(6) 4.3 %
Darrell J. Mays 986,195 (2) 2.9 %
Kevin Keough - -
Adrian Foltz 10,000 *
Onex Evans 10,000 *
Mark Downs 3,000 *
U. Bertram Ellis, Jr. 37,588 *
Karl Krapek 2,800 *
Dennis Lockhart 19,134 *
Dr. Klaas Baks 2,800 *
Kent Mathy 1,000 *
Dr. Robert Willis 10,000 *
Carolyn Byrd - -
Charles Sweet - -
All directors and executive officers as a group (14 individuals) 2,510,783 7.5 %
Five Percent or More Holders and Certain Other Holders - -
* Less than 1% of outstanding shares
(1) Unless otherwise indicated, the business address of each of the persons and entities is 1720 Peachtree Street, Suite 629, Atlanta, GA 30309.
(2) Includes 37,067 shares of Common Stock held by certain of Mr. Mays’ family members (or affiliated entities) who reside at least part-time with Mr. Mays. Mr. Mays disclaims beneficial ownership of all shares of Common Stock held by his family members. Also includes shares of Common Stock beneficially owned by Pensare Sponsor Group, LLC.
(3) Mr. Mock holds an economic interest in Pensare Sponsor Group, LLC and a pecuniary interest in the securities held by Pensare Sponsor Group, LLC. Mr. Mock disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein.
(4) Includes approximately (i) 118,869 shares of Common Stock held directly by Stratos Management Systems Holdings, LLC (“Holdings”), and (ii) 563,059 shares of Common Stock held directly by Navigation Capital Partners II, L.P., a Delaware limited partnership (“Navigation Capital”). Mr. Mock is a manager of NCP General Partner II, LLC, which is the general partner of Navigation Capital, which controls Holdings. As a result, Mr. Mock may be deemed to indirectly beneficially own the securities directly held by Navigation Capital and Holdings. Mr. Mock disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein.
(5) Includes approximately 669,314 shares of Common Stock held directly by Navigation Capital Partners SOF I, LLC (“Investment Sub”). Investment Sub is a direct wholly-owned subsidiary of SPAC Opportunity Fund I, L.P. (“New SPAC Opps”), an entity controlled by Navigation Capital Partners, Inc. (“SPAC NCP”). Mr. Mock controls SPAC NCP, and as a result, may be deemed to indirectly beneficially own the securities held by SPAC NCP, New SPAC Opps and Investment Sub. Mr. Mock disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein.
(6)
Includes approximately 77,022 shares of Common Stock held directly by Nobadeer, L.P., a Georgia limited partnership (“Nobadeer”). Mr. Mock is the general partner of Nobadeer, and as a result, may be deemed to indirectly beneficially own the securities held by Nobadeer. Mr. Mock disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The following paragraph discusses related party transactions that occurred during 2022 and 2021 and/or that are contemplated during 2023 (other than (i) compensation paid or awarded to the Company’s directors, director nominees and executive officers that is required to be discussed, or is exempt from discussion, in the other sections of the annual report on Form 10-K and (ii) equity and Debentures issued in connection with the Computex Business Combination and the Kandy Business Combination, as described elsewhere in the annual report on Form 10-K).
Services provided by Navigation Capital Partners, Inc.
Selling, general and administrative expenses for the year ended December 31, 2022 and 2021 include $150,000 and $600,000 respectively, related to consulting services provided by Navigation, a significant stockholder and an affiliate of certain of our directors. These amounts related to an agreement entered into effective October 1, 2020 whereby Navigation provided capital markets advisory and business consulting services to the Company for a fee of $50,000 per month. On April 21, 2022, the agreement with Navigation was terminated. The unpaid balance owing under the consulting agreement was $900,000, which was scheduled to be paid at the rate of $100,000 per month. Accounts payable and accrued expenses as of December 31, 2022 and 2021 include $500,000 and $750,000, respectively, in connection therewith.
Transactions with Ribbon.
Pursuant to a transition services agreement entered into with Ribbon, a previous significant stockholder, in connection with the acquisition of Kandy, accounts payable and accrued expenses as of December 31, 2021 include $799,000 due to Ribbon for professional fees provided and certain software and other support. Prepaid expenses and other current assets as of December 31, 2021 include $190,000 due from Ribbon for collections in excess of reimbursable expenses. Also, trade receivables, net as of December 31, 2021 include $2,511,000 due from Ribbon.
Included in the consolidated statement of operations are certain revenues for services provided to Ribbon, certain expenses for services provided by Ribbon and certain expenses for rental of office space from Ribbon. The expenses for services provided by Ribbon relate primarily to professional services provided by Ribbon as part of the transition services agreement and, to a lesser extent, to certain software support purchased from Ribbon. Details of such revenue and expenses are included in the Company’s consolidated financial statements included elsewhere in this Form 10-K.
Ribbon ceased being a related party in August 2022.
The 2021 Note
A subordinated Note, which was secured by a related party, is separately identified on the consolidated balance sheet as of December 31, 2021. The related interest expense of $736,000 is included in “Interest expense - related parties” in the consolidated statement of operations for the year ended December 31, 2021 and was also included in “Accounts payable and accrued expenses” on the consolidated balance sheet as of December 31, 2021. The Note was repaid in full on March 15, 2022 out of proceeds received from the sale of Computex.
Services provided by True North Advisory LLC
On January 21, 2022, the Company entered into a Services Agreement (the “Services Agreement”) with True North Advisory LLC (“True North”), a company affiliated with Michael Tessler, the previous Chairman of the Company’s board of directors. Pursuant to the Services Agreement, among other things, True North provided strategic advice with respect to the Company’s business as requested by the Company from time to time, for a fee of $25,000 per month, plus reimbursement for out-of-pocket expenses. The Services Agreement had an initial term of three months, after which it was to continue on a month-to-month basis until terminated by either party on 30 days’ prior notice. The Services Agreement contained customary mutual provisions regarding confidentiality and ownership of intellectual property. The agreement was terminated in August 2022.
Related Party Policy
Our Code of Ethics requires us to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests, except under guidelines approved by the board of directors (or the audit committee). Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or may exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant, (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our shares of common stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
Our audit committee, pursuant to the Audit Committee Charter, will be responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. The audit committee will consider all relevant factors when determining whether to approve a related party transaction, including whether the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director may participate in the approval of any transaction in which he is a related party, but that director is required to provide the audit committee with all material information concerning the transaction. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
As of March 14, 2023, the aggregate fees billed to our Company by UHY LLP for the years ended December 31, 2022 and 2021 were as follows:
Fees Billed by UHY LLP Year Ended
December 31,
Year Ended
December 31,
Audit Fees(1) $ 633,680 $ 765,473
Audit-Related Fees(2) $ 204,824 $ -
Tax Fees(3) $ 77,700 $ -
All Other Fees $ - $ -
Total $ 916,204 $ 765,473
(1) Audit Fees consist of fees incurred for the audits of our annual financial statements and for the reviews of our unaudited interim consolidated financial statements included in our quarterly reports on Form 10-Q for the applicable quarters of the fiscal year.
(2) Audit-Related Fees consist of all fees incurred related to various SEC filings, consents and proformas.
(3) Tax Fees consist of fees incurred for tax compliance, planning and advisory services and due diligence in connection with planned acquisitions.
Our audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by UHY LLP, including the fees and terms thereof (subject to the de minimus exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit). The audit committee may form and delegate authority to one or more of its members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such members to grant pre-approvals shall be presented to the audit committee at its next scheduled meeting.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this report or incorporated herein by reference:
(1) Our Financial Statements are listed on page of this Annual Report
(2) Financial Statements Schedule
None
(3) Exhibits:
The following documents are included as exhibits to this Annual Report:
Exhibit No.
Description
2.1(2)
Business Combination Agreement, dated as of July 24, 2019, by and among Pensare Acquisition Corp., Tango Merger Sub Corp., Stratos Management Systems Holdings, LLC, and Stratos Management Systems, Inc.
2.2(3)
Amendment No. 1 to the Business Combination Agreement, dated as of December 20, 2019, by and among Pensare Acquisition Corp., Tango Merger Sub Corp., Stratos Management Systems Holdings, LLC, and Stratos Management Systems, Inc.
2.3(4)
Amendment No. 2 to the Business Combination Agreement, dated as of April 3, 2019, by and among Pensare Acquisition Corp., Tango Merger Sub Corp., Stratos Management Systems Holdings, LLC, and Stratos Management Systems, Inc.
2.4(7)
Purchase Agreement, dated August 5, 2020, by and among American Virtual Cloud Technologies, Inc., Ribbon Communications Inc., Ribbon Communications Operating Company, Inc. and Ribbon Communications International Limited.
2.5(11)
Amended and Restated Purchase Agreement, dated December 1, 2020, by and among American Virtual Cloud Technologies, Inc., Ribbon Communications Inc., Ribbon Communications Operating Company, Inc. and Ribbon Communications International Limited
2.6(23)
Asset Purchase Agreement, dated January 26, 2022, among Calian Corp., Computex, Inc., Stratos Management Systems, Inc., First Byte Computers, Inc., eNetSolutions, LLC and American Virtual Cloud Technologies Inc.
2.7(37)
Amended and Restated Asset Purchase Agreement, dated as of February 14, 2023, by and among the Company, certain of the Company’s subsidiaries, and Skyvera, LLC.
3.1(5)
Amended and Restated Certificate of Incorporation.
3.2(1)
Amended and Restated Bylaws.
3.3(4)
Second Amended and Restated Certificate of Incorporation.
3.3(34)
Certificate of Amendment of Certificate of Incorporation of American Virtual Cloud Technologies, Inc., dated September 30, 2022.
4.1(1)
Warrant Agreement, dated as of July 27, 2017, between Pensare Acquisition Corp. and Continental Stock Transfer & Trust Company.
4.2(11)
Form of Debenture
4.3(11)
Form of Warrant
4.4(15)
Specimen Common Stock Certificate
4.5(14)
Form of Indenture
4.6(17)
Series A Warrant, dated November 5, 2021
4.7(17)
Series B Warrant, dated November 5, 2021
4.8(19)
Form of Monroe Warrant.
4.9(19)
Series C Warrant, dated December 2, 2021.
4.10(21)
Series D Warrant, dated December 15, 2021.
4.11(21)
Certificate of Designation of Series A Convertible Preferred Stock, filed December 13, 2021
4.12(26)
Certificate of Designation of Series B Convertible Preferred Stock
4.13(26)
Warrant Issued March 1, 2022
4.14(26)
Certificate of Elimination of Series A Convertible Preferred Stock
4.15(28)
Form of Senior Secured Convertible Note
4.16(29)
Senior Secured Convertible Note, dated April 19, 2022
4.17(36)
Form of Warrant
4.18*
Description of Securities
10.1(h)(1)
Letter Agreement, dated July 27, 2017, among Jose Mas, Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.1(i)(1)
Letter Agreement, dated July 27, 2017, among Darrell J. Mays, Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.1(j)(1)
Letter Agreement, dated July 27, 2017, among Lawrence E. Mock, Jr., Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.1(k)(1)
Letter Agreement, dated July 27, 2017, among Suzanne Shank, Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.1(l)(1)
Letter Agreement, dated July 27, 2017, among Rayford Wilkins, Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.1(m)(1)
Letter Agreement, dated July 27, 2017, among Dr. Robert Willis, Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.2(1)
Investment Management Trust Agreement, dated July 27, 2017, between Pensare Acquisition Corp. and Continental Stock Transfer & Trust Company.
10.3(1)
Stock Escrow Agreement, dated July 27, 2017 by and among Pensare Acquisition Corp., Continental Stock Transfer & Trust Company, Pensare Sponsor Group, LLC and the other parties thereto.
10.4(1)
Registration Rights Agreement, dated July 27, 2017 by and between Pensare Acquisition Corp. and the other parties thereto.
10.5(a) (1)
Warrant Purchase Agreement, dated July 27, 2017 by and between Pensare Acquisition Corp. and MasTec, Inc.
10.5(b) (1)
Warrant Purchase Agreement, dated July 27, 2017 by and between Pensare Acquisition Corp. and Pensare Sponsor Group, LLC.
10.5(c) (1)
Warrant Purchase Agreement, dated July 27, 2017 by and between Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.6(1)
Administrative Services Agreement, dated July 27, 2017 by and between Pensare Acquisition Corp. and Pensare Sponsor Group, LLC.
10.7(1)
Right Agreement, dated July 27, 2017 by and between Pensare Acquisition Corp. and Continental Stock Transfer & Trust Company.
10.8(1)
Letter Agreement, dated July 27, 2017 by and between Pensare Acquisition Corp. and EarlyBirdCapital, Inc.
10.9(1)
Form of Unit Purchase Option.
10.10(6)
Form of Indemnification Agreement for officers, directors and special advisors.
10.11(4)
Securities Purchase Agreement, dated as of April 3, 2020.
10.12(7)
Voting Agreement, dated August 5, 2020, by and among Ribbon Communications Inc., Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and Pensare Sponsor Group, LLC.
10.13(7)
Voting Agreement, dated August 5, 2020, by and among Ribbon Communications Inc., Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and Stratos Management Systems Holdings, LLC.
10.14(8)
Employment Agreement between the Company and Xavier Williams.
10.15(9)
Fifth Amendment to Credit Agreement, dated November 13, 2020.
10.16(10)
Services Agreement, dated as of March 4, 2021, between American Virtual Cloud Technologies, Inc., and Navigation Capital Partners, Inc.
10.17(11)
Employment Agreement between the Company and Michael Dennis.
10.18(11)
Employment Agreement between the Company and Thomas King.
10.19(11)
Form of Guaranty of Debentures
10.20(11)
Amended and Restated Voting Agreement, dated December 1, 2020, by and among Ribbon Communications Inc., Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and Pensare Sponsor Group, LLC.
10.21(11)
Amended and Restated Voting Agreement, dated December 1, 2020, by and among Ribbon Communications Inc., Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and Stratos Management Systems Holdings, LLC
10.22(11)
Investor Rights Agreement, dated December 1, 2020, by and among American Virtual Cloud Technologies, Inc., Ribbon Communications Inc., Pensare Sponsor Group, LLC and Stratos Management Systems Holdings, LLC
10.23(11)
Securities Purchase Agreement, dated December 1, 2020, by and between American Virtual Cloud Technologies, Inc. and SPAC Opportunity Partners Investment Sub LLC
10.24(11)
Amendment and Joinder to Registration Rights Agreement, dated December 1, 2020, by and among American Virtual Cloud Technologies, Inc. and the Holders Party thereto
10.25(11)
Sixth Amendment to Loan Documents, dated as of December 1, 2020
10.26(12)
Seventh Amendment to Loan Documents, dated as of June 24, 2021.
10.27(13)
Separation Agreement and Release between the Company and Xavier Williams.
10.29(16)
Securities Purchase Agreement, dated as of November 2, 2021
10.30(17)
Registration Rights Agreement, dated November 5, 2021
10.31(19)
Credit Agreement, dated December 2, 2021
10.32(19)
Amendment and Waiver, dated December 2, 2021
10.33(19)
Credit Agreement, dated December 2, 2021.
10.34(19)
Registration Rights Agreement, dated December 2, 2021.
10.35(19)
Amendment and Waiver, dated December 2, 2021.
10.36(19)
Form of Voting Agreement.
10.37(19)
Subscription Agreement, dated December 2, 2021.
10.38(19)
Amended and Restated Promissory Note, dated December 2, 2021.
10.39(20)
Securities Purchase Agreement, dated as of December 13, 2021
10.40(21)
Registration Rights Agreement, dated December 15, 2021.
10.41(23)
Form of Voting Agreement
10.42(24)
Services Agreement, dated February 21, 2022, between American Virtual Cloud Technologies, Inc. and True North Advisory LLC.
10.43(25)
Securities Purchase Agreement, dated as of February 28, 2022
10.44(25)
Form of Voting Agreement
10.45(27)
Restrictive Covenant Agreement, dated March 15, 2022, among Calian Corp., Computex, Inc., Stratos Management Systems, Inc., First Byte Computers, Inc. and eNetSolutions, LLC
10.46(28)
Securities Purchase Agreement, dated as of April 14, 2022
10.47(28)
Form of Security and Pledge Agreement
10.48(28)
Form of Pledge Agreement
10.49(28)
Form of Registration Rights Agreement
10.50(28)
Form of Voting Agreement
10.51(29)
Security and Pledge Agreement, dated as of April 19, 2022
10.52(29)
Guaranty, dated as of April 19, 2022
10.53(29)
Registration Rights Agreement, dated as of April 19, 2022
10.54(29)
Services Agreement, signed on April 23, 2022, between American Virtual Cloud Technologies, Inc. and SAW Holdings, LLC
10.55(29)
Termination Agreement, dated as of April 21, 2022, between American Virtual Cloud Technologies, Inc. and Navigation Capital Partners, Inc.
10.56(30)
Settlement Agreement, dated as of August 29, 2022, by and among Ribbon Communications Canada, ULC, Ribbon Communications, Inc., Ribbon Communications Operating Company, Inc., American Virtual Cloud Technologies, Inc. and AVCtechnologies USA, Inc.
10.57(30)
Wind Down Agreement, dated as of August 29, 2022, by and between Ribbon Communications Operating Company, Inc. and AVCtechnologies USA, Inc.
10.58(30)
Stock Redemption Agreement, dated as of August 29, 2022, by and between Ribbon Communications Inc. and American Virtual Cloud Technologies, Inc.
10.59(30)
Warrant Termination Agreement, dated as of August 29, 2022, by and between American Virtual Cloud Technologies, Inc. and Ribbon Communications Inc.
10.60(30)
Amended and Restated Waiver Agreement, dated as of August 31, 2022.
10.61(31)
American Virtual Cloud Technologies, Inc. Key Executive Incentive Plan.
10.62(31)
Form of Award Letter under American Virtual Cloud Technologies, Inc. Key Executive Incentive Plan.
10.63(32)
Exchange Agreement, dated as of September 11, 2022.
10.64(33)
Settlement Agreement, dated as of September 26, 2022.
10.65(36)
Securities Purchase Agreement, dated as of October 18, 2022
14(6)
Code of Ethics.
21.1*
List of subsidiaries.
23.1*
Consent of UHY, LLP.
99.1(6)
Audit Committee Charter.
99.2(6)
Compensation Committee Charter.
99.3(6)
Nominating Committee Charter.
99.4(22)
Waiver, dated December 28, 2021.
31.1*
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*
Certification of the Principal Financial and Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1**
Certification of the Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.INS***
Inline XBRL Instance Document
101.SCH***
Inline XBRL Taxonomy Extension Schema
101.CAL***
Inline XBRL Taxonomy Calculation Linkbase
101.LAB***
Inline XBRL Taxonomy Label Document
101.PRE***
Inline XBRL Definition Linkbase Document
101.DEF***
Inline XBRL Definition Linkbase Document
* Filed herewith.
** Furnished herewith.
*** XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(1) Incorporated by reference to an exhibit to the Company’s current report on Form 8-K filed with the SEC on August 2, 2017.
(2) Incorporated by reference to an exhibit to the Company’s current report on Form 8-K filed with the SEC on July 30, 2019.
(3) Incorporated by reference to an exhibit to the Company’s current report on Form 8-K filed with the SEC on December 30, 2019.
(4) Incorporated by reference to an exhibit to the Company’s current report on Form 8-K filed with the SEC on April 7, 2020.
(5) Incorporated by reference to an exhibit to the Company’s current report on Form 8-K filed with the SEC on April 30, 2019.
(6) Incorporated by reference to an exhibit to the Company’s Form S-1/A, filed with the SEC on July 24, 2017.
(7) Incorporated by reference to an exhibit to the Company’s current report on Form 8-K filed with the SEC on August 11, 2020.
(8) Incorporated by reference to an exhibit to the Company’s Form current report on Form 8-K filed with the SEC on September 16, 2020.
(9) Incorporated by reference to an exhibit to the Company’s Form 10-Q, filed with the SEC on November 16, 2020.
(10) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on March 5, 2021.
(11) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on December 7, 2020.
(12) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on June 25, 2021.
(13) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on July 22, 2021.
(14) Incorporated by reference to an exhibit to the Company’s Form S-3/A, filed with the SEC on August 25, 2021.
(15) Incorporated by reference to an exhibit to the Company’s Form S-1, filed with the SEC on April 29, 2020.
(16) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on November 3, 2021.
(17) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on November 8, 2021.
(19) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on December 3, 2021.
(20) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on December 13, 2021.
(21) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on December 16, 2021.
(22) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on December 29, 2021.
(23) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on February 1, 2022.
(24) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on February 25, 2022.
(25) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on February 28, 2022.
(26) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on March 2, 2022.
(27) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on March 16, 2022.
(28) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on April 15, 2022.
(29) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on April 25, 2022.
(30) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on September 1, 2022.
(31) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on September 8, 2022.
(32) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on September 12, 2022.
(33) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on September 26, 2022.
(34) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on September 30, 2022.
(35) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on September 30, 2022.
(36) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on October 20, 2022.
(37) Incorporated by reference to an exhibit to the Company’s Form 8-K, filed with the SEC on March 13, 2023.