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As filed with the U.S. Securities and Exchange Commission on July 23, 2021.

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

AVEPOINT, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   7379   83-4461709

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

525 Washington Blvd, Suite 1400

Jersey City, NJ 07310

(201) 793-1111

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Brian Brown

Chief Operating Officer, General Counsel and Secretary

AvePoint, Inc.

525 Washington Blvd, Suite 1400

Jersey City, NJ 07310

(201) 793-1111

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

John T. McKenna

Brian F. Leaf

Katie Kazem

Cooley LLP

3175 Hanover Street

Palo Alto, CA 940304

(650) 843-5000

 

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐


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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities To Be Registered

  Amount to be
Registered(1)
 

Proposed

Maximum
Aggregate

Offering Price Per
Security

 

Proposed

Maximum

Aggregate

Offering Price

  Amount of
Registration Fee

Primary Offering

Common stock, $0.0001 par value per share

  17,905,000(2)   $ 10.01(5)   $179,139,525.00   $19,544(5)

Secondary Offering

Common stock, $0.0001 par value per share

  140,377,474(3)   $ 10.01   $1,404,476,627.37   $153,229(5)

Warrants to purchase common stock

  405,000(4)  

—  

 

—  

  (6)

Total common stock

 

158,282,474

  $ 10.01   $1,583,616,152.37   $172,773

 

 

(1)

In the event of a stock split, stock dividend or other similar transaction involving the registrant’s common stock, in order to prevent dilution, the number of shares of common stock registered hereby shall be automatically increased to cover the additional shares of common stock in accordance with Rule 416(a) under the Securities Act.

(2)

Consists of (i) 405,000 shares of common stock issuable upon the exercise of 405,000 warrants issued to Apex Technology Sponsor LLC (the “Sponsor”) in a private placement (the “Private Warrants”) and (ii) 17,500,000 shares of common stock issuable upon the exercise of 17,500,000 warrants included in the publicly sold units (the “Public Warrants”) to purchase common stock, in each case at an exercise price of $11.50 per share.

(3)

Consists of (i) 9,560,000 shares of common stock (including 2,916,700 Sponsor Earn-Out Shares (as defined below)) that were exchanged for the Class B common stock, par value $0.0001 per share (“Apex Class B Common Stock”) , (ii) 14,000,000 shares of common stock issued pursuant to subscription agreements entered into on November 23, 2020, (iii) up to 17,500,000 shares of common stock, that may be issued upon the exercise of the Public Warrants, (iv) up to 405,000 shares of common stock that may be issued upon exercise of the Private Warrants and (v) 98,912,474 shares of common stock pursuant to that certain Amended and Restated Registration Rights Agreement, dated July 1, 2021, between us and the selling securityholders granting such holders registration rights with respect to such shares.

(4)

Represents the resale of 405,000 Private Warrants.

(5)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act. The price per share and aggregate offering price are based on the average of the high and low prices of the Registrant’s common stock on July 19, 2021, as reported on the Nasdaq Global Select Market.

(6)

In accordance with Rule 457(i), the entire registration fee for the Private Warrants is allocated to the shares of common stock underlying the Private Warrants, and no separate fee is payable for the Private Warrants.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, Dated July 23, 2021

PRELIMINARY PROSPECTUS

 

LOGO

Up to 140,377,474 Shares of Common Stock

Up to 17,905,000 Shares of Common Stock Issuable Upon Exercise of Warrants

Up to 405,000 Warrants to Purchase Common Stock

 

 

This prospectus relates to the issuance by us of an aggregate of up to 17,905,000 shares of our common stock, $0.0001 par value per share (the “common stock”), which consists of (i) up to 405,000 shares of common stock that are issuable upon the exercise of 405,000 warrants (the “Private Warrants”) originally issued in a private placement to Apex Technology Sponsor LLC (the “Sponsor”) in connection with the initial public offering of Apex Technology Acquisition Corporation (“Apex”) and (ii) up to 17,500,000 shares of common stock that are issuable upon the exercise of 17,500,000 warrants (the “Public Warrants” and, together with the Private Warrants, the “Warrants”) originally issued in the initial public offering of Apex. We will receive the proceeds from any exercise of any Warrants for cash.

This prospectus also relates to the offer and sale from time to time by the selling securityholders named in this prospectus or their permitted transferees (the “selling securityholders”) of (i) up to 140,377,474 shares of common stock consisting of (a) up to 14,000,000 shares of common stock issued in a private placement pursuant to subscription agreements (the “Subscription Agreements”) entered into on November 23, 2020, as amended, (b) up to 9,560,000 shares of common stock (which includes 2,916,700 Sponsor Earn-Out Shares (as defined below)) issued in a private placement to the Sponsor and Cantor Fitzgerald & Co in connection with the initial public offering of Apex (the “Sponsor Shares”), (c) up to 405,000 shares of common stock issuable upon exercise of the Private Warrants, (d) up to 17,500,000 shares of common stock issuable upon exercise of the Public Warrants and (e) up to 98,912,474 shares of common stock pursuant to that certain Amended and Restated Registration Rights Agreement, dated July 1, 2021, between us and the selling securityholders granting such holders registration rights with respect to such shares and (ii) up to 405,000 Private Warrants. We will not receive any proceeds from the sale of shares of common stock or Warrants by the selling securityholders pursuant to this prospectus.

The selling securityholders may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of common stock or Warrants, except with respect to amounts received by us upon exercise of the Warrants. We will bear all costs, expenses and fees in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky” laws. The selling securityholders will bear all commissions and discounts, if any, attributable to their sale of shares of common stock or Warrants. See the section titled “Plan of Distribution.”

Our common stock and Warrants are listed on the Nasdaq Global Select Market under the symbols “ AVPT” and “ AVPTW,” respectively. On July 22, 2021, the last reported sales price of our common stock was $11.59 per share and the last reported sales price of our Warrants was $3.07 per warrant.

We are an “emerging growth company” as defined under U.S. federal securities laws and, as such, have elected to comply with reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.

 

 

Investing in our securities involves a high degree of risks. You should review carefully the risks and uncertainties described in the section titled “Risk Factors” beginning on page 10 of this prospectus, and under similar headings in any amendments or supplements to this prospectus.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

Prospectus dated        , 2021


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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the selling securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such selling securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of common stock issuable upon the exercise of any Warrants. We will not receive any proceeds from the sale of shares of common stock underlying the Warrants pursuant to this prospectus, except with respect to amounts received by us upon the exercise of the Warrants for cash.

Neither we nor the selling securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the selling securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the selling securityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus titled “Where You Can Find More Information.”

On July 1, 2021, Legacy AvePoint, Apex and Merger Subs (as such terms are defined below), consummated the closing of the transactions contemplated by the Business Combination Agreement (as defined below). Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy AvePoint and Apex was effected by the merger of Merger Sub 1 (as defined below) with and into Legacy AvePoint, with Legacy AvePoint surviving the First Merger (as defined below) as a wholly-owned subsidiary of Apex, and promptly following the First Merger, Legacy AvePoint was merged with and into Merger Sub 2 (as defined below), with Merger Sub 2 surviving the Second Merger (as defined below) as a wholly-owned subsidiary of Apex. Following the consummation of the Mergers on the Closing Date (as defined below), the Surviving Entity (as defined below) changed its name to AvePoint US, LLC and Apex changed its name from Apex Technology Acquisition Corporation to AvePoint, Inc.

Unless the context indicates otherwise, references in this prospectus to the “AvePoint,” “we,” “us,” “our” and similar terms refer to AvePoint, Inc. (f/k/a Apex Technology Acquisition Corporation) and its consolidated subsidiaries (including Legacy AvePoint). References to “Apex” refer to the predecessor company prior to the consummation of the Business Combination.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections titled “Prospectus Summary” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will” and “would,” or the negative of these terms or other similar expressions intended to identify statements about the future. These statements speak only as of the date of this prospectus and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements include, without limitation, statements about:

 

   

our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

 

   

costs related to the Business Combination;

 

   

our future operating or financial results;

 

   

future acquisitions, business strategy and expected capital spending;

 

   

changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

 

   

the implementation, market acceptance and success of our business model and growth strategy;

 

   

expectations and forecasts with respect to the size and growth of the cloud industry and digital transformation in general and Microsoft’s products and services in particular;

 

   

the ability of our products and services to meet customers’ compliance and regulatory needs;

 

   

our ability to compete with others in the digital transformation industry;

 

   

our ability to grow our market share;

 

   

our ability to attract and retain qualified employees and management;

 

   

our ability to adapt to changes in consumer preferences, perception and spending habits and develop and expand our product offerings and gain market acceptance of our products, including in new geographies;

 

   

developments and projections relating to our competitors and industry;

 

   

our ability to develop and maintain our brand and reputation;

 

   

developments and projections relating to our competitors and industry;

 

   

the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;

 

   

the impact of the COVID-19 pandemic on customer demands for cloud services;

 

   

our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

 

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expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

   

our future capital requirements and sources and uses of cash;

 

   

our ability to obtain funding for our operations and future growth; and

 

   

our business, expansion plans and opportunities.

The foregoing list of risks is not exhaustive. Other sections of this prospectus may include additional factors that could harm our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise, except as required by law.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, the events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. You should refer to the ‘‘Risk Factors’’ section of this prospectus for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

 

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TABLE OF CONTENTS

 

     Page  
Special Note Regarding Forward-Looking Statements      ii  
Prospectus Summary      1  
Risk Factors      10  
Market and Industry Data      50  
Use of Proceeds      51  

Dividend Policy

     53  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     54  

Business

     83  

Management

     114  

Executive Compensation

     121  

Certain Relationships and Related Party Transactions

     140  

Principal Stockholders

     146  

Selling Securityholders

     149  

Material U.S. Federal Income Tax Consequences

     155  

Description of Capital Stock

     161  

Plan of Distribution

     168  

Legal Matters

     171  

Experts

     171  

Where You Can Find More Information

     172  

Unaudited Pro Forma Condensed Combined Financial Information

     173  

Index to Financial Statements

     F-1  

 

 

You should rely only on the information contained in this prospectus, any supplement to this prospectus or in any free writing prospectus, filed with the SEC. Neither we nor the selling securityholders have authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the SEC. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The selling securityholders are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside of the United States: Neither we nor the selling securityholders, have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside the United States.

 

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FREQUENTLY USED TERMS

Apex” means Apex Technology Acquisition Corporation (which was renamed AvePoint, Inc. in connection with the Business Combination).

Apex IPO” means Apex’s initial public offering of units, consummated on September 19, 2019.

Apex Initial Stockholders” means the initial stockholders of Apex, including Apex’s officers and Apex’s directors, listed on Schedule C of the Business Combination Agreement.

Business Combination” means the transactions contemplated by the Business Combination Agreement.

Business Combination Agreement” means the Business Combination Agreement and Plan of Reorganization, dated as of November 23, 2020, as amended on December 30, 2020, March 8, 2021 and May 18, 2021, and as may be further amended from time to time, by and among Apex, AvePoint and Merger Subs.

Closing” means the consummation of the Business Combination.

Closing Date” means July 1, 2021, the date on which the Closing occurred.

Closing Price” means, for each day that the common stock is trading on the Nasdaq Global Select Market, the closing price (based on such trading day) of shares of common stock on the Nasdaq Global Select Market, as reported on Nasdaq.com.

Cantor” means Cantor Fitzgerald & Co, representative of the underwriters of the Apex IPO.

Cantor Shares” means the 152,500 units initially purchased by Cantor and certain of its designees in a private placement in connection with the Apex IPO.

First Merger” means the merger of Merger Sub I with and into Legacy AvePoint, with Legacy AvePoint surviving the First Merger as a wholly-owned subsidiary of Apex.

Initial Stockholder Shares” means the 657,500 units initially purchased by the Apex Initial Stockholders in a private placement in connection with the Apex IPO.

Legacy AvePoint” means AvePoint, Inc. a Delaware corporation, doing business as AvePoint, Inc., and, unless the context requires otherwise, its consolidated subsidiaries.

Mergers” means the First Merger and Second Merger, together.

Merger Sub 1” means Athena Technology Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Apex.

Merger Sub 2” means Athena Technology Merger Sub 2, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Apex.

Merger Subs” means Merger Sub I and Merger Sub 2, together.

Merger Sub Common Stock” means Merger Sub 1’s common stock, par value $0.00001 per share.

PIPE” means that certain private placement in the aggregate amount of $140 million, to be consummated immediately prior to the consummation of the Business Combination, pursuant to those certain Subscription Agreements with Apex, and subject to the conditions set forth therein, pursuant to which the subscribers purchased 14,000,000 shares of our common stock at a purchase price of $10.00 per share.

 

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PIPE Shares” means an aggregate of 14,000,000 shares of common stock issued to the subscribers in the PIPE.

Private Warrants” means the 405,000 warrants to purchase shares of common stock purchased in a private placement in connection with the Apex IPO.

Public Warrants” means the 17,500,000 warrants included as a component of the Apex units sold in the Apex IPO, each of which is exercisable for one share of common stock, in accordance with its terms.

Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement, dated July 1, 2021, between and among AvePoint and certain securityholders who are parties thereto.

Second Merger”means the merger of Legacy AvePoint with and into Merger Sub 2, with Merger Sub 2 surviving as a wholly-owned subsidiary of Apex.

Sponsor” means the Apex Technology Sponsor LLC.

Sponsor Earn-Out Shares” means up to 2,916,700 shares of Apex Common Stock that the Sponsor deposited into escrow subject to the following vesting provisions: a) 100% of the Sponsor Earn-Out Shares shall vest and be released to the Sponsor if at any time from and after the Closing through the seventh anniversary thereof, the Closing Price is greater than or equal to $15.00 (as adjusted for share splits, share capitalization, reorganizations, recapitalizations, and the like) over any 20 trading days within any 30 trading day period; and 100% of the remaining Sponsor Earn-Out Shares that have not previously vested under the Sponsor Support Agreement (as defined herein) shall vest and be released to the Sponsor if at any time from and after the Closing through the seventh anniversary thereof, Apex consummates a Subsequent Transaction.

Sponsor Shares” means the Initial Stockholder Shares and Cantor Shares.

Subsequent Transaction” means any transaction or series of related transactions, including any sale, merger, liquidation, exchange offer or other similar transaction, that is consummated after the effective time of the First Merger that results (a) in any person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) acquiring beneficial ownership of 50% or more of the outstanding voting securities of AvePoint (as successor to Apex), directly or indirectly, immediately following such transaction, provided that any transaction or series of related transactions which results in at least 50% of the combined voting power of the then outstanding shares of common stock (or at least 50% of the combined voting power of the then outstanding shares of AvePoint (as successor to Apex) or any parent company of AvePoint issued in exchange for common stock) immediately following the closing of such transaction (or series of related transactions) being beneficially owned, directly or indirectly, by individuals and entities who were the beneficial owners of at least 50% of the shares of common stock outstanding immediately prior to such transaction (or series of related transactions), shall not be deemed a “Subsequent Transaction” or (b) a sale or disposition of all or substantially all of the assets of AvePoint (as successor to Apex) and its subsidiaries on a consolidated basis.

Surviving Corporation” means Legacy AvePoint following the consummation of the Mergers.

Warrants” means the Private Warrants and the Public Warrants, together.

 

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unless the context otherwise requires, we use the terms “AvePoint,” “company,” “we,” “us” and “our” in this prospectus to refer to AvePoint, Inc. and our wholly owned subsidiaries.

Overview

We are a digital collaboration innovator and have been for nearly two decades. We develop products and help organizations realize the value of modern, digital collaboration that lets users work together from anywhere, thanks to the power of the cloud.

Our solutions move organizations to leading, cloud-based platforms, like Microsoft 365, and help ensure that once they are in the cloud, data is protected, and collaboration is secure.

Digital transformation is not merely a nice-to-have as businesses look to modernize their IT infrastructure; it is a strategic and tactical imperative in the new normal of COVID-19 and remote, anytime/anywhere work connectivity. Additionally, the COVID-19 pandemic has dramatically accelerated the need for organizations to shift operations to the cloud. We are uniquely positioned to provide both guidance and proprietary technology to migrate customers to the cloud, efficiently and securely.

Collaboration enables organizations to pursue and achieve their business needs. Our work, the product of collaboration, is considered valuable to the organization, and therefore must be protected and well managed. That job often falls to IT teams who are constantly asked to do more with less resources. Businesses push to support employees with modern tools for collaboration such as hosted sites, cloud file sharing, persistent chat, and multiple line of business apps. The urgency of digital transformation has accelerated with the push to enable work-from-anywhere due to the COVID-19 pandemic. For the IT teams tasked to support this shift, demand often outpaces delivery. These teams face a number of challenges including:

 

   

Migrations from legacy tools and collaboration platforms are hard and complex, especially for organizations that have empowered business users to purchase their own cloud file systems, outside of IT purview and control. Standardizing how the business works together involves moving unique business processes and files to a new platform like Microsoft 365. This involves translating data, workflows, and users with as little disruption as possible.

 

   

IT teams are being pressured to do even more with less and will need to invest in automation to ensure they can meet the demands of the business. A recent 2019/2020 IT spend benchmark report from Computer Economics/Avasant Research observed that an increase in technology spending did not historically correlate to more IT jobs, as automation facilitated scale.

 

   

New security laws like the General Data Protection Regulation (the “GDPR”), which went into effect in the European Union in 2018, and the California Consumer Protection Act (the “CCPA”), which went into effect in 2020, are forcing IT teams to maintain oversight on a diversifying line of products they support. The risks of non-compliance are increasingly expensive with new fines and damages to company reputation. The pressure to maintain control is pushing IT teams to look to automation and third-party vendors to help support their efforts.

With our solutions, organizations have the tools to enable rapid, sustainable adoption of critical applications like Microsoft Teams, which have recently been experiencing record growth in organizations large and small.


 

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Systems like Microsoft 365 can now pass security audits and give teams the control they need to have confidence in their cloud investment. Security teams no longer block progress and pursuit of “work from anywhere” initiatives. With our solutions, they can have confidence in their ability to monitor, manage and govern the rapid adoption of new cloud services. Finally, organizations can use our solutions to save time and money, and can decommission home-grown or point solutions that fail to provide key insights and flexible automation that drive business outcomes. Our flexibility, automation, and insights enable IT to meet business needs and deliver value.

The following graphic, derived from publicly available Microsoft earnings releases, shows the number of daily active users for Microsoft Teams from December 2016 to October 2020:

 

LOGO

Our primary solution is a SaaS platform that helps organizations invested in cloud-hosted collaboration systems by providing robust data management, including migration, protection, and governance. While our revenue and product lines, following the overall cloud market, are heavily Microsoft-centric today, the solutions we provide are built on proven best practices for management, governance, and compliance, no matter the platform. We have already made investments to capture multi-cloud opportunities across Salesforce clouds. We believe that our cloud agnostic approach, combined with projected overall growth in cloud usage, will lead to significant expansion of our market opportunities. As of March 31, 2021, our SaaS platform supported more than seven million cloud users. We believe it is our job to deliver value for not just service administrators and owners, but also for service champions, end users, and those charged with ensuring a return on significant investments in the cloud.

Our solutions are most commonly deployed to provide:

 

   

Migration from legacy on-premises (customer-managed) solutions to cloud services provided by Microsoft 365;

 

   

Data protection of critical cloud-based business assets to recover from data loss events (such as ransomware);


 

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Policy guidance, monitoring and enforcement for protecting regulated users and content as the organization moves from self-hosted systems to public cloud services; and

 

   

Information governance support for records managers, security teams, and IT managers overseeing the adoption of the cloud collaboration platforms.

Our company values, combined with our commitment to employee development, leadership training, inclusion, and diversity, have resulted in a workforce with goals highly aligned to company success. We believe we are uniquely able to help our customers navigate the complexities of digital transformation, across the Microsoft cloud and beyond, due to our advanced technology and our team’s combination of both deep product and industry knowledge.

Background

We were originally known as Apex Technology Acquisition Corporation. On November 23, 2020, Legacy AvePoint, Apex and Merger Subs consummated the transactions contemplated under the Business Combination Agreement. Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy AvePoint and Apex was effected by the merger of Merger Sub 1 with and into Legacy AvePoint, with Legacy AvePoint surviving the First Merger as a wholly-owned subsidiary of Apex, and promptly following the First Merger, Legacy AvePoint was merged with and into Merger Sub 2, with Merger Sub 2 surviving the Second Merger as a wholly-owned subsidiary of Apex. Following the consummation of the Mergers on the Closing Date, the Surviving Entity changed its name to AvePoint US, LLC and Apex changed its name from Apex Technology Acquisition Corporation to AvePoint, Inc.

At the effective time of the First Merger (the “Effective Time”), as a result of the First Merger, each share of Legacy AvePoint preferred stock, par value $0.001 per share (“Legacy AvePoint Preferred Stock”) that was then issued and outstanding was cancelled and converted into the right to receive the following: (x) the number of shares of common stock equal to (1) (A) (i) the aggregate amount of shares of common stock distributable to the holders of the Legacy AvePoint Preferred Stock in the First Merger multiplied by the Per Share Amount (as defined below), minus (ii) $135 million, divided by (B) $10.00, divided by (2) the aggregate number of shares Legacy AvePoint common stock, par value $0.001 per share (“Legacy AvePoint Common Stock”) issuable upon the conversion of the Legacy AvePoint Preferred Stock immediately prior to the Effective Time; (y) an amount in cash equal to (i) $135 million in cash (subject to deduction for the aggregate amount of the PIPE financing fees payable by the holders of the Legacy AvePoint Preferred Stock in the First Merger), divided by the aggregate number of shares Legacy AvePoint Common Stock issuable upon the conversion of the Legacy AvePoint Preferred Stock immediately prior to the Effective Time; and (z) the number of shares of Common Stock equal to the aggregate amount of the contingent consideration, if any, that is distributed to the holders Legacy AvePoint securities, divided by the fully diluted number of Legacy AvePoint securities.

At the Effective Time, as a result of the First Merger, each share of Legacy AvePoint Common Stock issued and outstanding immediately prior to the Effective Time (excluding any dissenting shares and shares held by certain executives of Legacy AvePoint) (such shares, the “Named Executive Shares”) was cancelled and converted into the right to receive the following: (x) an amount in cash equal to (1) the gross merger consideration divided by the number of fully diluted number of Legacy AvePoint securities (the “Per Share Amount”), multiplied by (2) the applicable percentage of cash elected to be received by the applicable holder of such shares (subject to withholding such holder’s pro rata share of the PIPE financing fees payable by such holder); (y) the number of shares of Common Stock equal to (1) (A) the Per Share Amount, multiplied by (B) the difference obtained by subtracting applicable percentage of cash elected to be received by the applicable holder of such shares from one, divided by (2) $10.00; provided that if the aggregate amount of cash elected by all such holders of Legacy AvePoint Common Stock prior to any adjustment pursuant to this proviso exceeded the


 

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aggregate amount of cash available for distribution to such holders of Legacy AvePoint Common Stock, then the cash election percentage was cut back on a proportionate basis until the amount of cash available for distribution to such holders of Legacy AvePoint Common Stock pursuant to such adjusted elections equaled the maximum amount of cash available for distribution to such holders of Legacy AvePoint Common Stock.

Immediately prior to the Effective Time, certain executives of Legacy AvePoint (the “Named Executives”) contributed the Named Executive Shares to Apex in exchange for (x) with respect to certain of the Named Executive Shares, an amount in cash equal to the Per Share Amount (subject to withholding such Named Executive’s pro rata share of the PIPE financing fees payable by such holder) and (y) with respect to remaining Named Executive Shares, a number of shares of Common Stock equal to (1) the Per Share Amount, divided by (2) $10.00; provided that if the aggregate amount of cash elected by all holders of Legacy AvePoint Common Stock other than the Named Executives prior to any adjustment pursuant to this proviso exceeded the aggregate amount of cash available for distribution to such holders of Legacy AvePoint Common Stock, then the number of Named Executive Shares contributed to Apex in exchange for cash was decreased on a proportionate basis (and the number of Named Executive Shares contributed to Apex in exchange for shares of Common Stock was increased by an equivalent amount) until the amount of cash available for distribution to such holders of Legacy AvePoint Common Stock pursuant to the adjusted elections equaled the maximum amount of cash available for distribution to such holders of Legacy AvePoint Common Stock.

At the Effective Time, as a result of the First Merger, each share of common stock, par value $0.001 per share, of Merger Sub 1 issued and outstanding immediately prior to the Effective Time was cancelled and converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of Legacy AvePoint, the surviving corporation in the First Merger.

At the Effective Time, as a result of the First Merger, each option to purchase Legacy AvePoint Common Stock that was outstanding immediately prior to the Effective Time, whether vested or unvested (other than certain options held by the Named Executives (such options, the “Named Executive Cash-Settled Options”) and options granted pursuant to a PRC stock option award to employees and other service providers in the People’s Republic of China (such options, the “PRC Options”), was cancelled and converted into an option to purchase a number of shares of Common Stock (such option, an “Exchanged Option”) equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Legacy AvePoint Common Stock subject to such Legacy AvePoint option immediately prior to the Effective Time and (y) the Per Share Amount divided by $10.00 (the “Exchange Ratio”), at an exercise price per share (rounded up to the nearest whole cent) equal to (1) the exercise price per share of such Legacy AvePoint option immediately prior to the Effective Time, divided by (2) the Exchange Ratio. Except as specifically provided in the Business Combination Agreement, following the Effective Time, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy AvePoint option immediately prior to the Effective Time. At the Effective Time, as a result of the First Merger, each PRC Option was cancelled. Each cancelled PRC Option will be replaced and substituted with the award of a new stock option to purchase a number of shares of Common Stock pursuant to the Equity Incentive Plan equal to the product of (rounded down to the nearest whole number) of (A) the number of shares of Legacy AvePoint common Stock subject to such PRC Option immediately prior to the Effective Time and (B) the Exchange Ratio, at an exercise price (rounded up to the nearest whole cent) equal to (i) the exercise price per share of such PRC Option immediately prior to the Effective Time, divided by (ii) the Exchange Ratio. The replacement stock options will be credited with vesting to the same extent as the PRC Options being replaced, and the new replacement awards will be subject to the same vesting schedule and exercisability provisions. In other respects, the such new stock options will be governed by the terms and conditions of the 2021 Equity Incentive Plan (the “2021 Plan”).

At the Effective Time, as a result of the First Merger, each Named-Executive Cash Settled-Option that was outstanding as of immediately prior to the Effective Time was cancelled and converted into the right to receive


 

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an amount of cash equal to (x) the number of shares of Legacy AvePoint Common Stock subject to such Named-Executive Cash Settled Option as of immediately prior to the Effective Time multiplied by (y) (1) the Per Share Amount, minus (2) the exercise price attributable to such Named-Executive Cash Settled Option.

Promptly following the Effective Time, upon the effective time of the Second Merger, as a result of the Second Merger, each share of common stock of Legacy AvePoint, the surviving corporation in the First Merger issued and outstanding immediately prior to the effective time of such Second Merger was cancelled and converted into one newly issued, fully paid and non-assessable common membership unit of the Surviving Entity.

On the Closing Date, a number of purchasers (each, a “Subscriber”) purchased from the Company an aggregate of 14,000,000 shares of Apex Common Stock, for a purchase price of $10.00 per share and an aggregate purchase price of $140.0 million, pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of November 23, 2020. Pursuant to the Subscription Agreements, we gave certain registration rights to the Subscribers with respect to the PIPE Shares. The sale of the PIPE Shares was consummated concurrently with the Closing of the Business Combination.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we are exempt from certain requirements related to executive compensation, including the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of our President and Chief Executive Officer to the median of the annual total compensation of all of our employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Act.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We will be an emerging growth company at least until December 31, 2021 and will take advantage of the benefits of the extended transition period emerging growth company status permits. During the extended transition period, it may be difficult or impossible to compare our financial results with the financial results of another public company that complies with public company effective dates for accounting standard updates because of the potential differences in accounting standards used.

We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2024, (b) the last date of our fiscal year in which we have a total annual gross revenue of at least $1.07 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.

Summary of Risk Factors

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under the section titled “Risk Factors” in this prospectus. The below summary is qualified in its entirety by that more


 

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complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under the section titled “Risk Factors” as part of your evaluation of an investment in our securities:

 

   

Our success depends on our technology partners. In particular, our technical advantages are highly dependent on our partnership with Microsoft and other major software providers. Should Microsoft or these other providers acquire competitors that heavily overlap with our capabilities, or develop competing features, we may lose customer acquisition momentum and fail to secure renewals or growth targets.

 

   

We have experienced strong growth in recent periods, and our recent growth rates may not be indicative of our future growth.

 

   

We face competition from established as well as emerging companies offering solutions and related applications. We may lack sufficient financial or other resources to maintain or improve our competitive position, which may harm our ability to add new customers, retain existing customers, and grow our business.

 

   

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, and changing customer needs or preferences, our products and services may become less competitive.

 

   

Our success with SMB customers depends in part on our resale and distribution partnerships. Our business would be harmed if we fail to maintain or expand partner relationships.

 

   

The estimates of market opportunity and forecasts of market growth included in this prospectus/proxy statement may prove to be inaccurate. Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

 

   

A failure to hire and integrate additional sales and marketing personnel or maintain their productivity could harm our results of operations and growth prospects.

 

   

Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products and services. If we are not able to generate traffic to our website through digital marketing, our ability to attract new customers may be impaired.

 

   

If we fail to maintain or grow our brand recognition, our ability to expand our customer base will be impaired and our financial condition may suffer.

 

   

We are expected to store personal and other confidential information of our customers, which may in turn contain third-party personal or other confidential information. If the security of this information is compromised or is otherwise accessed without authorization, our reputation may be harmed, and we may be exposed to liability and loss of business.

 

   

We may become subject to legal proceedings and litigation, including intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business. Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.

 

   

We will rely on third-party proprietary and open source software for our products and services. The inability to obtain third-party licenses for such software, obtain them on favorable terms, or adhere to the license terms for such software or any errors or failures caused by such software could harm our business, results of operations and financial condition.

 

   

If our products and services fail to perform properly, or if we fail to develop enhancements to resolve performance issues, we could lose customers, become subject to performance or warranty claims, or incur significant costs.

 

   

We will provide our products and services to businesses in highly regulated industries and to customers with elevated confidentiality, privacy or security requirements, including public sector customers, which will subject us to a number of challenges and risks.

 

   

Significant changes in the contracting or fiscal policies of the public sector, or our failure to comply with certain laws or regulations, could harm the business we do with the public sector.


 

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We intend to invest significantly in research and development, and to the extent such research and development investments do not translate into new products or material enhancements to our products, or if we do not use those investments efficiently, our business and results of operations would be harmed.

 

   

A small number of stockholders will continue to have substantial control over us after this offering, which may limit other stockholders’ ability to influence corporate matters and delay or prevent a third party from acquiring control over us.

 

   

Our management has identified material weaknesses in our internal control over financial reporting and we may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.

Corporate Information

Our principal executive offices are located at 525 Washington Blvd, Suite 1400, Jersey City, NJ 07310, and our telephone number is (201) 793-1111. Our corporate website address is www.AvePoint.com. Information contained on or accessible through our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.

“AvePoint” and our other registered and common law trade names, trademarks and service marks are property of AvePoint, Inc. This prospectus contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or symbols.


 

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The Offering

 

Issuance of common stock   
Shares of common stock offered by us    17,905,000 shares of common stock, consisting of (i) 405,000 shares of common stock that are issuable upon exercise of the Private Warrants and (ii) 17,500,000 shares of common stock that are issuable upon exercise upon the exercise of the Public Warrants.
Shares of common stock outstanding prior to the exercise of all Warrants    180,272,638 (as of July 7, 2021)
Shares of common stock outstanding assuming exercise of all Warrants    198,177,638 (based on the total shares outstanding as of July 7, 2021)
Exercise price of warrants    $11.50 per share, subject to adjustment as described herein
Use of proceeds    We will receive up to an aggregate of approximately $205.9 million from the exercise of the Warrants. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes. See “Use of Proceeds.”
Resale of common stock and Warrants   
Shares of common stock offered by the selling securityholders   

We are registering the resale by the selling securityholders named in this prospectus, or their permitted transferees, an aggregate of 140,377,474 shares of common stock, consisting of:

 

•   up to 14,000,000 PIPE Shares;

 

•   up to 9,560,000 Sponsor Shares;

 

•   up to 405,000 shares of common stock issuable upon the exercise of the Private Warrants;

 

•   up to 17,500,000 shares of common stock issuable upon the exercise of the Public Warrants; and

 

•   up to 98,912,474 shares of common stock pursuant to the Registration Rights Agreement.

Warrants offered by selling securityholders    Up to 405,000 Private Warrants
Redemption    The Public Warrants are redeemable in certain circumstances. See “Description of Our Securities – Warrants.”
Lock-Up Agreements    Certain of our securityholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See the section titled “Certain Relationships and Related Party Transactions—AvePoint Related Agreements — Lock-Up Agreements.”
Terms of the offering    The selling securityholders will determine when and how they will dispose of the securities registered for resale under this prospectus.
Use of proceeds    We will not receive any proceeds from the sale of shares of common stock or Warrants by the selling securityholders.

 

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Risk factors    Before investing in our securities, you should carefully read and consider the information set forth in “Risk Factors” beginning on page 10.

Nasdaq ticker symbols

  

“AVPT” and “AVPTW”

For additional information concerning the offering, see “Plan of Distribution” beginning on page 168.


 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our financial statements and related notes appearing at the end of this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our common stock. If any of the events or developments described below were to occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Risks Related to our Business

Our success depends on our technology partners. In particular, our technical advantages are highly dependent on our partnership with Microsoft and other major software providers. Should Microsoft or these other providers acquire competitors that heavily overlap with our capabilities, or develop competing features, we may lose customer acquisition momentum and fail to secure renewals or growth targets.

The significant majority of our customers choose to integrate their products and services with, or as an enhancement of, third-party solutions such as infrastructure, platforms or applications, in particular from Microsoft, Inc. (“Microsoft”). The functionality and popularity of our products and services depend largely on our ability to integrate our platform with third-party solutions, in particular Microsoft’s Azure, SharePoint and Office 365. We are dependent on technology partner solutions for several major categories of our offerings, including data management, migration, governance, protection and backup. As a result, our customers’ satisfaction with our products are highly dependent on their perception of, and satisfaction with, our third-party providers and their respective offerings. We will continue to depend on various third-party relationships to sustain and grow our business. Third-party providers may change the features of their solutions, alter their governing terms, or end the solutions’ availability altogether. They may restrict our ability to add, customize or integrate systems, functionality and customer experiences. Any such changes could limit or terminate our ability to use these third-party solutions and provide our customers with the full range of our products and services. Our business would be negatively impacted if we fail to retain these relationships for any reason, including due to third parties’ failure to support or secure their technology or integrations; errors, bugs, or defects in their technology; or changes in our products and services. Any such failure, as well as a prolonged disruption, a cybersecurity event or any other negative event affecting our third-party providers and leading to customer dissatisfaction, could harm our relationship with our customers, our reputation and brand, our revenue, our business, and our results of operations.

Strategic technology partners and third parties may not be successful in building integrations, co-marketing our products and services to provide significant volume and quality of lead referrals, or continue to work with us as their respective products evolve. Identifying, negotiating and documenting relationships with additional strategic technology partners require significant resources. Integrating third-party technology can be complex, costly and time-consuming. Third parties may be unwilling to build integrations. We may be required to devote additional resources to develop integrations for our own products. Strategic technology partners or providers of solutions with which we have integrations may decide to compete with us or enter into arrangements with our competitors, resulting in such partners or providers withdrawing support for our integrations. Our agreements with our partners are generally non-exclusive, meaning our partners may offer products from several different companies to their customers. Specifically, Microsoft and other major platform providers could end partnerships, cease marketing our offerings, with limited or no notice and with little or no penalty, or decide to purchase strong competition, or incorporate our capabilities into native solutions. Any of these developments would negatively impact our business.

 

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Microsoft, as well as other cloud platform providers like Salesforce, may furthermore introduce functionality that competes with our products and services, as a result of an acquisition, or their own development. Additionally, we rely heavily on our early access to preview Microsoft technology, which enables our product strategy and development teams to anticipate future opportunities as well as validate our current direction.

In the last year, Microsoft has acquired a migration vendor whose functions overlap with the AvePoint migration platform and has historically incorporated some of our capabilities into core platform offerings.

While Microsoft introduces competitive features as a premium option, some customers will choose a simpler first-party solution to their problem, even at a greater cost to them. Microsoft and other cloud providers may also choose to make it difficult for third party providers like us to continue making the necessary application programming interface (“API”) calls to provide their solutions, as illustrated by an increase in API “throttling” in recent years or API quotas provided by Salesforce.

Although we typically receive significant advance notice of new product releases from Microsoft, Microsoft does not always preview our technology with us or other partners and, as a result, it is possible that we may not receive advance notice of changes in features and functionality of new technologies with which our products will need to interoperate. If this was to happen, there could be an increased risk of product incompatibility. Any failure of our products and services to operate effectively with solutions could reduce the demand for our products and services, resulting in customer dissatisfaction and harm to our business. If we are is unable to respond to these changes or failures in a cost-effective manner, our products and services may become less marketable, less competitive, or obsolete, and the results of our operations may be negatively impacted.

We have a strategic technology partnership with Microsoft for the collaboration to co-sell and co-market our products and services to new customers. If our relationships with our strategic technology partners, such as Microsoft, are disrupted or if the co-sell and co-market program was ended for any reason, we may receive less revenue and incur costs to form other revenue-generating strategic technology partnerships. If Microsoft were to acquire a competitor of ours, it could harm our relationship with our customers, our reputation and brand, and our business and results of operations.

The COVID-19 pandemic could harm our business, financial condition and results of operations.

While we were able to deliver significant growth in 2020 despite of the COVID-19 pandemic, the measures attempting to contain and mitigate the effects of the COVID-19 pandemic, including stay-at-home, business closure, and other restrictive orders, and the resulting changes in businesses’ behaviors, have disrupted our normal operations and impacted our employees, suppliers, partners, and customers. We expect these disruptions and impacts to continue for the foreseeable future. In response to the COVID-19 pandemic, we took a number of actions that have impacted and continue to impact our business, including transitioning employees across all our offices (including our corporate headquarters) to remote work-from-home arrangements, imposing travel and related restrictions, and reducing operational expenditures significantly, including a reduction of approximately 10% of our global workforce during the first half of 2020. Given the continued spread of COVID-19 and the resulting personal, economic, and governmental reactions, we may have to take additional actions in the future that could harm our business, financial condition and results of operations. While we have a distributed workforce and our employees are accustomed to working remotely or with other remote employees, our workforce has not historically been fully remote. Prior to the COVID-19 pandemic, certain of our employees traveled frequently to establish and maintain relationships with our customers and partners. We continue to monitor the situation and may adjust our current policies as more information and guidance become available. Suspending travel and doing business in-person on a long-term basis could negatively impact our marketing efforts, our ability to enter into customer contracts in a timely manner, our international expansion efforts and our ability to recruit employees across the organization. These changes could negatively impact our sales and

 

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marketing in particular, which could have longer-term effects on our sales pipeline, or create operational or other challenges as our workforce remains predominantly remote, any of which could harm our business. In addition, our management team has spent, and will likely continue to spend, significant time, attention, and resources monitoring the COVID-19 pandemic and associated global economic uncertainty and seeking to manage its effects on our business and workforce.

The degree to which COVID-19 will affect our business and results of operations will depend on future developments that are highly uncertain and cannot currently be predicted. These developments include, but are not limited to, the duration, extent and severity of the COVID-19 pandemic, actions taken to contain the COVID-19 pandemic, the impact of the COVID-19 pandemic and related restrictions on economic activity in domestic market and international trade, and the extent of the impact of these and other factors on our employees, suppliers, partners and customers. The COVID-19 pandemic and related restrictions could limit our customers’ ability to continue to operate, such as by limiting their abilities to obtain inventory, generate sales, or make timely payments to us. It could disrupt or delay the ability of employees to work because they become sick or are required to care for those who become sick, or for dependents for whom external care is not available. It could cause delays or disruptions in services provided by key suppliers and vendors, increase the vulnerability of us and our partners and service providers to security breaches, denial of service attacks or other hacking or phishing attacks, or cause other unpredictable effects.

The COVID-19 pandemic also has caused heightened uncertainty in the global economy. If economic conditions further deteriorate, consumers and business clients may not have the financial means to make purchases from our customers and may delay or reduce discretionary purchases, negatively impacting our customers and, as a consequence, the results of our operations. Uncertainty from the pandemic may cause prospective or existing customers to defer investment in the areas covered by our products and services or to reduce the value or duration of contracts and may also require us to provide larger pricing discounts or extended payment terms. Our SMB customers may be more susceptible to general economic conditions than larger businesses, which may have greater liquidity and access to capital. Since the impact of COVID-19 is ongoing and because of our subscription-based business model, the effect of the COVID-19 pandemic and the related impact on the global economy may not be fully reflected in our results of operations until future periods. Some of our customers have experienced, and may continue to experience, financial hardships that could result in delayed or even uncollectible payments in the future.

Further, to the extent there is a sustained general economic downturn and our software and services are perceived by our existing and potential customers as costly or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in general information technology spending. Competitors, many of whom are larger and more established than us, may respond to market conditions by lowering prices and attempting to lure away our customers. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally, or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operations and financial condition could be harmed.

We have a history of operating losses and may not be able to generate sufficient revenue to achieve and sustain profitability.

We have a history of incurring operating losses. We incurred net losses of $4.9 million, $0.7 million, $17.0 million, $20.2 million and $3.9 million for the three months ended March 31, 2021 and 2020 and the years ended December 31, 2020, 2019 and 2018, respectively. As of March 31, 2021 and December 31, 2020, we had an accumulated deficit of $313.7 million and $299.8 million, respectively. While we have experienced significant revenue growth over recent years, we may not be able to sustain or increase our growth or achieve profitability in the future. We intend to continue to invest in sales and marketing efforts, research and development, and expansion into new geographies. While our revenue has grown in recent years, if our revenue declines or fails to

 

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grow at a rate faster than these increases in its operating expenses, it will not be able to achieve and maintain profitability in future periods. As a result, we may generate losses in future periods. We cannot assure investors that we will achieve profitability in the future or that, if it does become profitable, we will be able to sustain profitability. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth expectations are not met in future periods, our financial performance will be harmed.

We have experienced strong growth in recent periods, and our recent growth rates may not be indicative of our future growth.

We have experienced strong growth in recent periods. Our revenue was $151.5 million, $116.1 million and $107.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. Our revenue was $38.8 million and $32.7 million for the three months ended March 31, 2021 and 2020, respectively. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. we believe our revenue growth and our ability to manage such growth depend on several factors, including, but not limited to, our ability to do the following:

 

   

Effectively recruit, integrate, train and motivate a large number of new employees, including our sales force, technical solutions professionals, customer success managers and engineers, while retaining existing employees, maintaining the beneficial aspects of our corporate culture and effectively executing our business plan;

 

   

Attract new customers and retain and increase sales to existing customers;

 

   

Maintain and expand our relationships with our partners, including effectively managing existing channel partnerships and expand to new ones;

 

   

Successfully implement our products and services, increase our existing customers’ use of our products and services, and provide our customers with excellent customer support and the ability of our partners to do the same;

 

   

Increase the number of our partners;

 

   

Develop our existing products and services and introduce new products or new functionality to our products and services;

 

   

Expand into new market segments and internationally;

 

   

Earn revenue share and customer referrals from our partner ecosystem;

 

   

Improve our key business applications and processes to support our business needs;

 

   

Enhance information and communication systems to ensure that our employees and offices around the world are well-coordinated and can effectively communicate with each other and our growing customer base, particularly in light of the COVID-19 pandemic and the long-term effects thereof;

 

   

Enhance our internal controls to ensure timely and accurate reporting of all of our operations and financial results;

 

   

Protect and further develop our strategic assets, including our intellectual property rights; and

 

   

Make sound business decisions considering the scrutiny associated with operating as a public company.

We may not accomplish any of these objectives and, as a result, it is difficult for us to forecast our future revenue or revenue growth. If our assumptions are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. You should not rely on our revenue for any prior periods as any indication of our future revenue or revenue growth. In particular, the catalyst for our revenue growth rate

 

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acceleration during the three months ended March 31, 2021 and the year ended December 31, 2020 was SaaS and termed license and support revenue, which increased by approximately 50.0% and 66.3%, respectively, as compared to the three months ended March 31, 2020 and the year ended December 31, 2019, respectively. We may not be able to sustain such revenue growth rates in the future.

Furthermore, these activities will require significant investments and allocation of valuable management and employee resources, and our growth will continue to place significant demands on our management and our operational and financial infrastructure. There are no guarantees we will be able to grow our business in an efficient or timely manner, or at all. Moreover, if we do not effectively manage the growth of our business and operations, the quality of our software could suffer, which could negatively affect the AvePoint brand, results of operations and overall business.

Our quarterly and annual operating results may be harmed due to seasonality and a variety of other factors, which could make our future results difficult to predict.

Our revenue and other results of operations have fluctuated from quarter to quarter in the past and can continue to fluctuate in the future. Our revenue depends in part on the conversion of enterprises that have installed an evaluation license for our software into paying customers. In this regard, most of our sales are typically made during the last three weeks of every quarter. We may fail to meet market expectations for that quarter if we are unable to close the number of transactions that we expect during this short period and closings are deferred to a subsequent quarter.

In addition, our sales cycle from initial contact to delivery of and payment for the software license generally becomes longer and less predictable with respect to large transactions and often involves multiple meetings or consultations at a substantial cost and time commitment to us. Although we try to minimize the potential impact of large transactions on our quarterly results of operations, the closing of a large transaction in a particular quarter may make it more difficult for us to meet market expectations in subsequent quarters and our failure to close a large transaction may adversely impact our revenue in a particular quarter.

Furthermore, we base our current and future expense levels on our revenue forecasts and operating plans, and our expenses are relatively fixed in the short term. Accordingly, we will likely not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenue and even a relatively small decrease in revenue could disproportionately impact our financial results for such quarter.

The variability and unpredictability of these and other factors could result in us failing to meet or exceed financial expectations for a given period and could adversely impact our share price.

There are also significant seasonal factors that may cause financial statement fluctuations in some quarters compared with others. We believe this variability is largely due to our customers’ budgetary and spending patterns, as many customers spend the unused portions of their discretionary budgets prior to fiscal year ends. Historically, the fourth quarter has been typically the quarter with the largest bookings, which impacts revenue, unbilled revenue, deferred revenue, accounts receivable and amortized commissions in future periods.

Our future revenue and operating results will be harmed if we are unable to acquire new customers, expand sales to our existing customers, or develop new functionality for our products and services that achieves market acceptance.

To continue to grow our business, it is important that we continue to acquire new customers to purchase and use our products and services. Our success in adding new customers depends on numerous factors, including our ability to: (1) offer compelling products and services, (2) execute our sales and marketing strategy, (3) attract, effectively train and retain new sales, marketing, professional services, and support personnel in the markets we

 

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pursue, (4) develop or expand relationships with partners, IT consultants, systems integrators resellers and other third parties, strengthening our network, (5) expand into new geographies, including internationally, and market segments, (6) efficiently onboard new customers on to our product offerings, and (7) provide additional paid services that fulfill the needs and complement the capabilities of our customers and their partners.

Our future success also depends, in part, on our ability to sell additional products, more functionality and/or adjacent services to our current customers, and the success rate of such endeavors is difficult to predict, especially during the ongoing COVID-19 pandemic and with regard to any new products or lines of business that we may introduce from time to time. Our ability to increase sales to existing customers depends on several factors, including their experience with implementing and using our products and services, their ability to integrate our products and services with other technologies, and our pricing model. Sales to existing customers may require increasingly costly marketing and sales efforts that are targeted at senior management, and if these efforts are not successful, our business and operating results may suffer.

As the markets for our products mature, or as new competitors introduce new products or services that compete with us, we may be unable to attract new customers at the same price or based on the same pricing model as we have used historically. From time to time, we may also change our pricing structure, which could adversely impact demand for our products and services. Moreover, large customers, which are a material focus of our sales efforts, have continued, and may continue, to demand greater price concessions and delayed payment terms. Our customers may also increasingly defer purchasing decisions, demand price concessions and delayed payment terms, and request other terms and conditions if the COVID-19 pandemic worsens or is prolonged. As a result, in the future we may be required to reduce our prices or accept onerous terms and conditions, including delayed payment terms, which could harm our revenue, profitability, financial position, and cash flows in any given period.

Our ability to generate revenue may be inconsistent across our small- and medium-sized business (“SMB”), mid-market (“MM”), and large enterprise customer segments. We classify customers in these segments based on whether they have annual revenue of more or less than $2.5 billion and whether they have user seats of less than 500, between 500 and 5,000, or more than 5,000. If we experience limited or inconsistent growth in any of these customer sets, particularly our MM and large enterprise customers, our business, financial condition, and operating results could be harmed.

If we are unable to provide enhancements, new features, or keep pace with current technological developments, our business could be harmed. If our new functionality and services initiatives do not continue to achieve acceptance in the market, our competitive position may be impaired, and our potential to generate new revenue or to sustain existing revenue could be diminished. The harm to our financial results may be particularly acute because of the significant research, development, marketing, sales, and other expenses we will have incurred in connection with the new functionality and services.

In addition, as an increasing amount of our business may move to our cloud-based products and services and the use of consumption-based pricing models may represent a greater share of our revenue, our revenue may be less predictable or more variable than our historical revenue from perpetual or time period-based subscription pricing models. Moreover, a consumption-based subscription pricing model may ultimately result in lower total cost to our customers over time, or may cause our customers to limit usage in order to stay within the limits of their existing subscriptions, reducing overall revenue or making it more difficult for us to compete in our markets.

Our ability to predict the rate of customer renewals and the impact these renewals will have on our revenue or operating results is limited.

Our ability to maintain or increase revenue also depends in part on our ability to retain existing customers, in particular that our customers renew their subscriptions with us on the same or more favorable terms. Our

 

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customers have no obligation to renew their contracts for AvePoint products after the expiration of either the initial or renewed subscription period, and in the normal course of business, some customers have elected not to renew. Our customers may renew for fewer elements of our products, for shorter renewal terms or on different pricing terms, including lower-cost offerings of our products. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our pricing or our products and their ability to continue their operations and spending levels, mix of customer base, decreases in the number of users at the customers, competition, pricing increases or changes and deteriorating general economic conditions, including as a result of the COVID-19 pandemic. If our customers do not renew their subscriptions for our products on similar pricing terms, our revenue may decline and our business could suffer. In addition, over time the average term of our contracts could change based on renewal rates or for other reasons. Further, acquisitions of our customers have continued, and may continue, to lead to cancellation of our contracts with such customers or by the acquiring companies, thereby reducing the number of our existing and potential customers.

We recognize revenue from SaaS subscriptions to our products over the terms of these subscriptions. Consequently, increases or decreases in new sales may not be immediately reflected in our results of operations and may be difficult to discern.

We recognize revenue from software as a service (“SaaS”) subscriptions to our products ratably over the terms of these subscriptions. As a result, a portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to SaaS subscriptions entered into during previous quarters. Consequently, a decline in new or renewed SaaS subscriptions in any single quarter may have a small impact on the revenue that we recognize for such quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and potential changes in our pricing policies or rate of customer expansion or retention may not be fully reflected in our results of operations until future periods. In addition, a significant portion of our costs are expensed as incurred, while revenue is recognized over the term of the SaaS subscription. As a result, growth in the number of new customers and hosts has continued, and can continue, to result in our recognition of higher costs and lower revenue in the earlier periods of our SaaS subscriptions. Finally, our SaaS subscription-based revenue model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers or existing customers that increase their use of our products or upgrade to higher-priced products or product tiers must be recognized over the applicable SaaS subscription term.

Our sales cycle with MM and large enterprise customers can be long and unpredictable, and our sales efforts require considerable time and expense.

The timing of our sales with our MM and large enterprise customers and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for these customers. MM and large enterprise customers, particularly those in highly regulated industries and those requiring customized offerings, may have a lengthy sales cycle for the evaluation and implementation of our products and services. If these customers maintain work-from-home arrangements for a significant period of time, it may cause a lengthening of these sales cycles. This may cause a delay between increasing operating expenses for such sales efforts and, upon successful sales, the generation of corresponding revenue. We are often required to spend significant time and resources to better educate our potential MM and large enterprise customers and familiarize them with our products and services. The length of our sales cycle for these customers, from initial evaluation to contract execution, is generally three to nine months but can vary substantially. On occasion, some customers will negotiate their contracts to include financial terms that negatively affect our revenue, such as a trial period, delayed payment or a number of months on a promotional basis. As the purchase and launch of our products and services can be dependent upon customer initiatives, infrequently, our sales cycle can extend to up to twelve months. As a result, much of our revenue is generated from the recognition of contract liabilities from contracts entered into during previous periods. Customers often view a subscription to our products and services as a strategic decision with significant investment. As a result, customers frequently require considerable time to

 

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evaluate, test, and qualify our products and services prior to entering into or expanding a subscription. During the sales cycle, we expend significant time and money on sales and marketing and contract negotiation activities, which may not result in a sale. Additional factors that may influence the length and variability of our sales cycle include:

 

   

The effectiveness of our sales force as we hire and train our new salespeople to sell to MM and large enterprise customers;

 

   

The discretionary nature of purchasing and budget cycles and decisions;

 

   

The obstacles placed by customers’ procurement process;

 

   

Economic conditions and other factors impacting customer budgets;

 

   

Customers’ integration complexity;

 

   

Customers’ familiarity with the types of products and services we offer, in particular SaaS solutions;

 

   

Customers’ evaluation of competing products during the purchasing process; and

 

   

Evolving customer demands.

Given these factors, it is difficult to predict whether and when a sale will be completed, and when revenue from a sale will be recognized. Consequently, a shortfall in demand for our products and services or a decline in new or renewed contracts in a given period may not significantly reduce our revenue for such period but could negatively affect our revenue in future periods.

We face competition from established as well as emerging companies offering solutions and related applications. We may lack sufficient financial or other resources to maintain or improve our competitive position, which may harm our ability to add new customers, retain existing customers, and grow our business.

While there are some companies that offer certain features similar to those embedded in our products, as well as others with whom we compete in certain tactical use cases, we believe that we do not currently compete with a company that offers the same breadth of functionalities that we offer in a single integrated solution. Nevertheless, we do compete against a select group of software vendors that provide standalone solutions similar to those found in our comprehensive software suite in the specific markets in which we operate. We also face direct competition with respect to certain of our products, specifically Backup and Recovery as well as Migration Services to Office 365. In the future, as customer requirements evolve and new technologies are introduced, we may experience increased competition if established or emerging companies develop solutions that address the data management, migration and protection market. Furthermore, because we operate in a relatively new and evolving area, we anticipate that competition will increase based on customer demand for these types of products. This could harm our ability to increase sales, maintain or increase renewals, and maintain our prices.

We face competition from other legacy backup or security vendors that may offer related solutions and services. Our competitors include larger companies that have acquired solution and/or service providers in recent years. We also compete with custom software internally developed and services internally provided within companies that are potential customers. In addition, We face competition from niche companies that offer point products that attempt to address certain of the problems that our products and services solve.

Merger and acquisition activity in the technology industry could increase the likelihood that we will compete with other large technology companies. Some of our existing competitors have, and our potential competitors could have, substantial competitive advantages such as greater name recognition, longer operating histories, larger sales and marketing budgets and resources, greater customer support resources, lower labor and development costs, larger and more mature intellectual property portfolios, and substantially greater financial, technical and other resources.

 

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Some of our larger competitors also have substantially broader product lines and market focus and may therefore in some cases be less susceptible to downturns in a particular market. Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors, or continuing market consolidation.

New start-up companies that innovate and large companies that are making significant investments in research and development may invent similar or superior products and technologies that compete with our products and services.

In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with agency partners, technology, application, software and service providers in complementary categories, or other parties. Furthermore, new technological developments, up to massive and disruptive changes in areas that are covered by our products and services could reduce customer needs for our products and services. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure, a loss of market share, or a smaller addressable share of the market. It could also result in a competitor with greater financial, technical, marketing, service, and other resources, all of which could harm our ability to compete.

In addition, our current or prospective partners may establish cooperative relationships with any future competitors. These relationships may allow future competitors to rapidly gain significant market share. These developments could also limit our ability to obtain revenue from existing and new customers.

If we experience competitive pressures in our market or if the prices we charge for our products and services are unacceptable to our customers, it will need to reduce or change our pricing model to remain competitive and our operating results could be harmed.

Some of our larger competitors use broader product offerings to compete, including by selling at zero or negative margins or by bundling their product with other solutions. Potential customers may prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. Also, potential customers may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existing infrastructure with our products and services. These competitive pressures in our market, or our failure to compete effectively, may result in price reductions, fewer orders, reduced revenue and gross margins, increased net losses, and loss of market share. Any failure to meet and address these factors could harm our business, results of operations, and financial condition. Our ability to compete successfully in our market will also depend on a number of factors, including ease and speed of product deployment and use, the quality and reliability of our customer service and support, total cost of ownership, return on investment and brand recognition. Any failure by us to successfully address current or future competition in any one of these or other areas may reduce the demand for our products and harm our business, results of operations and financial condition.

Furthermore, we price our products and services based on different factors, such as order volume, number of users, data volume and feature functionality of the specific offerings. As the market for our products and services matures, or as new or existing competitors introduce new products and services that compete with us or if those competitors reduce their prices, we may experience pricing pressure and be unable to renew our agreements with existing customers or attract new customers at prices that are consistent with our current pricing model and operating budget. We also must determine the appropriate price to enable us to compete effectively internationally. MM and large enterprise customers may demand substantial price discounts as part of the negotiation of sales contracts. Pricing decisions may also impact the mix of adoption among our licensing and subscription models, and negatively impact our overall revenue. If we are, for any reason, required to reduce our prices or otherwise change our pricing model, our revenue, gross margin, profitability, operating results, financial position and cash flow may be harmed.

 

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If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, and changing customer needs or preferences, our products and services may become less competitive.

The market in which we operate is characterized by the exponential growth in data generated and managed by enterprises, rapid technological advances, changes in customer requirements, including customer requirements driven by changes to legal, regulatory and self-regulatory compliance mandates, frequent new product introductions and enhancements and evolving industry standards in computer hardware and software technology. As a result, we must continually change and improve our products in response to changes in operating systems, application software, computer and communications hardware, networking software, data center architectures, programming tools and computer language technology. Moreover, the technology in our products is especially complex because it needs to effectively identify and respond to a user’s data retention, security and governance needs, while minimizing the impact on database and file system performance. If we are unable to develop and sell new technology, features, and functionality for our products and services that satisfy our customers and that keep pace with rapid technological and industry change, our revenue and operating results could be harmed. If new technologies emerge that deliver competitive solutions at lower prices, more efficiently, more conveniently, or more securely, they could adversely impact our ability to compete.

Our products and services must also integrate with a variety of network, hardware, mobile, and software platforms and technologies. We need to continuously modify and enhance our platform to adapt to changes and innovation in these technologies. If businesses widely adopt new technologies in areas covered by our products and services, we would have to develop new functionality for our products and services to work with such new technologies. This development effort may require significant engineering, marketing and sales resources, all of which would affect our business and operating results.

Any failure of our products and services to operate effectively with future technologies could reduce the demand for our products and services. We cannot guarantee that it will be able to anticipate future market needs and opportunities, extend our technological expertise and develop new products or expand the functionality of our current products in a timely and cost-effective manner, or at all. Even if we can anticipate, develop and introduce new products and expand the functionality of our current products, there can be no assurance that enhancements or new products will achieve widespread market acceptance.

If we fail to anticipate market requirements or stay abreast of technological changes, we may be unable to successfully introduce new products, expand the functionality of our current products or convince our existing and potential customers of the value of our products in light of new technologies. Accordingly, our business, results of operations and financial condition could be harmed.

Our success with SMB customers depends in part on our resale and distribution partnerships. Our business would be harmed if we fail to maintain or expand partner relationships.

We leverage the sales and referral resources of resale and referral partners through a variety of programs and rely on distribution partners especially for our SMB market acquisition. We expect that sales to partners will account for a substantial portion of our revenue for the foreseeable future. Our ability to achieve revenue growth and expand our SMB acquisition in the future will depend in part on our success in maintaining successful relationships with our partners. Our agreements with our partners are generally non-exclusive, meaning our partners may offer customers the products of several different companies. If our partners do not effectively market and sell our software, choose to use greater efforts to market and sell their own products or those of others, or fail to meet the needs of our customers, our ability to grow our business, sell our software and maintain our reputation may be harmed. Our contracts with our partners generally allow us to terminate our agreements for any reason. The loss of a substantial number of our partners, the possible inability to replace them, the failure to recruit additional partners or the removal of our products and services from several major distribution partner’s resale platforms could harm our results of operations.

 

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If we are unable to effectively utilize, maintain and expand these relationships, our revenue growth would slow, we would need to devote additional resources to the development, sales, and marketing of our products and services, and our financial results and future growth prospects would be harmed.

Unfavorable conditions in our industry or the global economy, or reductions in IT spending, could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of changes in our industry or the global economy on it or our customers. The revenue growth and potential profitability of our business depend on our current and prospective customers’ ability and willingness to invest money in information technology services, which in turn is dependent upon their overall economic health. Current or future economic uncertainties or downturns could harm our business and results of operations. Negative conditions in the global economy or individual markets, including changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, Europe, Australia, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on IT and negatively affect our business. Continuing uncertainty in the global economy, particularly in Europe, which accounts for a significant portion of our revenue, makes it extremely difficult for us and our customers to forecast and plan future business activities accurately, and could cause our customers to reevaluate decisions to purchase our products and services or to delay their purchasing decisions, which could lengthen our sales cycles.

To the extent our products and services are perceived by our existing and potential customers as costly, or too difficult to launch or migrate to, it would negatively affect our growth. Our revenue may be disproportionately affected by delays or reductions in general IT spending. Competitors may respond to market conditions by lowering prices and attempting to lure away our customers. In addition, consolidation in certain industries may result in reduced overall spending on our products and services. We have a significant number of customers in the financial services, the public sector and the pharmaceutical and manufacturing industries. A substantial downturn in any of these industries, or a reduction in public sector spending, may cause enterprises to react to worsening conditions by reducing their capital expenditures in general or by specifically reducing their spending on information technology. Customers may delay or cancel information technology projects, choose to focus on in-house development efforts or seek to lower their costs by renegotiating maintenance and support agreements. To the extent purchases of licenses for our software are perceived by our existing and potential customers to be discretionary, our revenue may be disproportionately affected by delays or reductions in general information technology spending. We cannot predict the timing, strength, or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operations and financial condition could be harmed.

The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate. Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

The market for SaaS offerings, which includes some of our most relevant products and services is relatively new and will experience changes over time. Customer demands for our products and services, customer retention and expansion rates, the size and growth rate of the market, the entry of competitive products, or the success of existing competitive products are difficult to predict and based on assumptions and estimates that may be inaccurate. In order for us to market and sell our products and services, we must successfully demonstrate to enterprise IT and business personnel the potential value of our offerings and persuade them to devote a portion of their budgets to the different products and services that we offer to manage, migrate and protect their data. We cannot provide any assurance that enterprises will recognize the need for our products and services or, if they do, that they will decide that they need a solution that offers the range of functionalities that we offer. Software solutions focused on managing, migrating and protecting data may not yet be viewed as a necessity by

 

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enterprises or enterprises may determine that the stock functionality by existing technology providers may be sufficient, and accordingly, our sales effort is and will be focused in large part on explaining the need for, and value offered by, our offerings. The addressable market depends on a number of factors, including businesses’ desire to differentiate themselves through our products and services, partnership opportunities, changes in the competitive landscape, technological changes, data security or privacy concerns, customer budgetary constraints, changes in business practices, changes in the regulatory environment, and changes in economic conditions. Our estimates and forecasts relating to the size and expected growth of our market may prove to be inaccurate and our ability to produce accurate estimates and forecasts may be impacted by the economic uncertainty associated with the COVID-19 pandemic. Even if the market in which we compete meets the size estimates and growth forecasted in this prospectus, our business could fail to grow at similar rates, if at all.

If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and customer satisfaction or adequately address competitive challenges.

We may continue to experience rapid growth and organizational change, which may continue to place significant demands on our management and our operational and financial resources. We have also experienced growth in the number of customers, the average revenue size per customer, and the amount of data that the used hosting infrastructure supports. Our success will depend in part on our ability to manage this growth effectively. We will require significant investment expenditure and valuable management resources to grow without undermining our culture of agility, passion and teamwork, which has been central to our growth so far. If we fail to manage our anticipated growth and change in a manner that preserves our corporate culture, it could negatively affect our reputation and ability to retain and attract customers and employees.

We intend to expand our international operations in the future, including in additional countries where we have not previously had a presence, and we intend to make direct and substantial investments to continue our expansion efforts. Our expansion will continue to place a significant strain on our managerial, administrative, financial, and other resources. If we are unable to manage our growth successfully, our business and results of operations could suffer.

It is important that we maintain a high level of customer service and satisfaction as we expand our business. As our customer base continues to grow, we will need to expand our account management, customer service, solutions professionals and other personnel. Failure to manage growth could result in difficulty or delays in launching our products and services, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties. Any of these could adversely impact our business performance and results of operations.

The ability to attract, recruit and retain highly qualified employees (such as pre-sales and post sales technical solutions professionals, customer success professionals or software engineers) is critical to our success and growth.

Our future success and growth depend, in part, on our ability to continue to recruit and retain highly skilled personnel, particularly pre-sales and post-sales technical solutions professionals, customer success professionals or software engineers. Any of our employees may terminate their employment at any time and competition for highly skilled personnel is usually intense. Moreover, to some extent, when we hire personnel from certain companies, it may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information. If we are unable to attract or retain qualified employees, our ability to innovate, introduce new products and compete would be adversely impacted, and our financial condition and results of operations may suffer.

 

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A failure to hire and integrate additional sales and marketing personnel or maintain their productivity could harm our results of operations and growth prospects.

Our business requires intensive sales and marketing activities. Sales and marketing personnel are essential to attracting new customers and expanding sales to existing customers, both of which are key to our future growth. We face several challenges in successfully expanding our sales force. We must locate and hire a significant number of qualified individuals, and competition for such individuals is intense. In addition, as our expands into new markets with which it has less familiarity, we will need to recruit individuals who are multilingual or who have skills particular to a certain geography, and it may be difficult to find candidates with those qualifications. We plan to significantly increase our headcount in the short term, but may be unable to achieve our hiring or integration goals due to a number of factors, including, but not limited to, challenges in finding individuals with the correct background due to increased competition for such hires and increased attrition rates among new hires. We invest significant time and resources in training new members of our sales force and may be unable to achieve our target performance levels with new sales personnel as rapidly as we have done in the past due to larger numbers of hires or lack of experience training sales personnel to operate in new jurisdictions. Our failure to hire enough qualified individuals, or to integrate new sales force members within the time periods hawse have achieved historically, may materially impact our projected growth rate.

Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products and services. If we are not able to generate traffic to our website through digital marketing, our ability to attract new customers may be impaired.

Our ability to increase our customer base and achieve broader market acceptance of our products and services will depend on our ability to expand our marketing and sales operations. We plan to continue expanding our sales force and strategic partners, both domestically and internationally. We also have dedicated, and plans to further dedicate, significant resources to sales and marketing programs, including search engine and other online advertising. The effectiveness of our online advertising may continue to vary due to competition for key search terms, changes in search engine use, and changes in search algorithms used by major search engines and other digital marketing platforms. Another major investment is in marketing technology to better connect our systems and data among sales, product, and marketing, in order to create a more seamless user experience. Our business and operating results will be harmed if our sales and marketing efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop, and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.

If the cost of marketing our products and services over search engines or other digital marketing platforms increases, our business and operating results could be harmed. Competitors also may bid on the search terms that we use to drive traffic to our website. Such actions could increase our marketing costs and result in decreased traffic to our website. Furthermore, search engines and digital marketing platforms may change their advertising policies from time to time. If these policies delay or prevent us from advertising through these channels, it could result in reduced traffic to our website and subscriptions to our products and services. New search engines and other digital marketing platforms may develop, particularly in certain jurisdictions, that reduce traffic on existing search engines and digital marketing platforms. If we are not able to achieve prominence through advertising or otherwise, it may not achieve significant traffic to our website through these new platforms and our business and operating results could be harmed.

 

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To the extent our security measures are compromised, our products and services may be perceived as not being secure. This may result in customers curtailing or ceasing their use of our products and services, our reputation being harmed, the incurrence of significant liabilities, and harm to our results of operations and growth prospects.

Our operations may, in some cases, involve the storage, transmission and other processing of customer data or information. Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of services are expected to continue to be targeted. Threats include traditional computer “hackers”, malicious code (such as viruses and worms), phishing attacks, employee theft or misuse and denial-of-service attacks. Sophisticated nation-states and nation-state supported actors now engage in such attacks, including advanced persistent threat intrusions. While we have security measures in place designed to protect us and our customers’ confidential and sensitive information and prevent data loss, such measures cannot provide absolute security and may not be effective to prevent a security breach, including as a result of employee error, theft, misuse or malfeasance, third-party actions, unintentional events or deliberate attacks by cyber criminals, any of which may result in someone obtaining unauthorized access to our customers’ data, our data, AvePoint’s intellectual property and/or other confidential or sensitive business information. In addition, third parties may attempt to fraudulently induce employees, contractors or users to disclose information, including user names and passwords, to gain access to our customers’ data, our data or other confidential or sensitive information, and we may be the target of email scams that attempt to acquire personal information or our assets.

Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until successfully launched against a target, we may be unable to anticipate these techniques, react in a timely manner or implement adequate preventative measures. We devotes significant financial and personnel resources to implement and maintain security measures; however, such resources may not be sufficient, and as cyber-security threats develop, evolve and grow more complex over time, it may be necessary to make significant further investments to protect our data and infrastructure. If our security measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials, or otherwise, our reputation and business could be damaged and we could incur significant liability.

As we rely on third-party and public-cloud infrastructure, it depends in part on third-party security measures to protect against unauthorized access, cyberattacks, and the mishandling of customer data. A cybersecurity event could have significant costs, including regulatory enforcement actions, litigation, litigation indemnity obligations, remediation costs, network downtime, increases in insurance premiums, and reputational damage. Many companies that provide cloud-based services have reported a significant increase in cyberattack activity since the beginning of the COVID-19 pandemic.

We depend on third-party data hosting and transmission services. Increases in cost, interruptions in service, latency, or poor service from our third-party data center providers could impair the delivery of our platform. This could result in customer dissatisfaction, damage to our reputation, loss of customers, limited growth, and reduction in revenue.

We currently serve the majority of our SaaS offerings from third-party data center hosting facilities in different geographical locations that are operated by Microsoft. Our products and services, in particular SaaS offerings, are deployed to multiple data centers within these geographies, with additional geographies available for disaster recovery. Our operations depend, in part, on our third-party providers’ protection of these facilities from natural disasters, power or telecommunications failures, criminal acts, or similar events. If any third-party facility’s arrangement is terminated, or our service lapses, we could experience interruptions in our platform, latency, as well as delays and additional expenses in arranging new facilities and services.

A significant portion of our operating cost is from our third-party data hosting and transmission services. If the costs for such services increase due to vendor consolidation, regulation, contract renegotiation or otherwise,

 

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we may not be able to increase the fees for our products and services to cover the changes. As a result, our operating results may be significantly worse than forecasted. Our failure to achieve or maintain sufficient and performant data transmission capacity could significantly reduce demand for our products and services.

Seasonal or singular events may significantly increase the traffic on our own and the used third-party’s servers and the usage volume of our products. Despite precautions taken at the used data centers, spikes in usage volume, a natural disaster, an act of terrorism, vandalism or sabotage, closure of a facility without adequate notice, or other unanticipated problems (such as the COVID-19 pandemic) could result in lengthy interruptions or performance degradation of our platform. Any damage to, or failure of, the systems of our third-party providers could result in interruptions to our products and services. Even with current and planned disaster recovery arrangements, our business could be harmed. If we experience damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability, cause us to issue credits, or cause customers to terminate their subscriptions, any of which could harm our business. If we incur such losses or liabilities, we might be unable to recover significant amounts from our third-party providers (even if they were primarily or solely responsible) because of restrictive liability and indemnification terms.

Interruptions or performance problems associated with our website or support website may harm our business.

Our continued growth depends in part on the ability of our existing and potential customers to quickly access our website and support website. Access to our support website is also imperative to our daily operations and interaction with customers, as it allows customers to download our software, fixes and patches, as well as open and respond to support tickets and register license keys for evaluation or production purposes. We have experienced, and may in the future experience, website disruptions, outages and other performance problems due to a variety of factors, including natural disasters, infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our website simultaneously and denial of service or fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve the performance of our websites, especially during peak usage times and as our software becomes more complex and user traffic increases. If our websites are unavailable or if our users are unable to download our software, patches or fixes within a reasonable amount of time, or at all, we may suffer reputational harm and our business would be negatively affected.

If there are interruptions or performance problems associated with our technology or infrastructure, our existing customers may experience service outages, and our new customers may experience delays in using our products and services.

Our continued growth depends, in part, on the ability of our existing and potential customers to access our products and services 24 hours a day, seven days a week, without interruption or performance degradation. We have experienced, and may in the future experience, disruptions, outages, and other performance problems with our infrastructure. These can be due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints, denial-of-service attacks, or other security-related incidents, any of which may be recurring. As we continue to add customers, expand geographically, and enhance our products’ and/or services’ functionality, the additional scale may increase complexity and our average uptime for future periods may decrease. We may not be able to identify the cause or causes of these performance problems promptly. If our products and services are unavailable or if our customers are unable to access our products and services within a reasonable amount of time, our business would be harmed. Any outage of our products and services would impair the ability of our customers to engage in their own business operations, which would negatively impact our brand, reputation and customer satisfaction. We provide service credits to our customers for downtime they experience using our SaaS products. Any downtime or malfunction could require us to issue a significant amount of service credits to customers. Issuing a significant amount of service credits would negatively impact our financial position.

 

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We depend on services from various third parties to maintain our infrastructure and any disruptions to these services, including from causes outside our control, would significantly impact our products and services. In the future, these services may not be available to us on commercially reasonable terms, or at all. Loss of any of these services could decrease our products’ and/or services’ functionality until we develops equivalent technology or, if equivalent technology is available from another party, we identify, obtains and integrates it into our infrastructure. If we do not accurately predict our infrastructure capacity requirements, our customers could experience service shortfalls. We may also be unable to address capacity constraints, upgrade our systems, and develop our technology and network architecture to accommodate actual and anticipated technology changes.

Any of the above circumstances or events may harm our reputation, cause customers to terminate their agreements with us, impair our ability to grow our customer base, subject us to financial liabilities, and otherwise harm our business, results of operations, and financial condition.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2020, we had accumulated U.S. federal, and state and local net operating loss (“NOL”) carryforwards of $1.2 million and $12.2 million, respectively. The substantial majority of the U.S. federal NOL carryforwards expire in 2037 and the state and local NOL carryforwards begin to expire in 2027. As of December 31, 2020, we had foreign NOL carryforwards of approximately $23.2 million, which will expire beginning 2024. NOL carryforward periods vary from 6 years to an indefinite period. We recorded a valuation allowance relating to certain foreign NOLs.

Our ability to utilize NOLs and other tax attributes could be limited if we undergo an ownership change within the meaning of Section 382 of the Code. An ownership change is generally defined as a greater than 50 percentage point increase in equity ownership by 5% stockholders in any three-year period. If an ownership change occurs as a result of the sale of our common stock pursuant to the Mergers, is deemed to result from future changes in ownership of AvePoint, or results from the cumulative effect of such transactions, we may not be able to fully realize the benefits of these NOLs. Also, the cash tax benefit from our NOLs is dependent upon our ability to generate sufficient taxable income.

Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the “TCJA”), generally eliminates the ability to carry back any NOLs to prior taxable years, while allowing NOLs generated in tax periods beginning after December 31, 2017, to be carried forward indefinitely. Under the TCJA, as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the amount of NOLs that we are permitted to deduct in any taxable year beginning after December 31, 2020, is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. It is uncertain if and to what extent various states will conform to the TCJA or the CARES Act. The changes in the carryforward/carryback periods as well as the limitation on use of NOLs in the taxable years beginning after December 31, 2020 may affect our ability to fully utilize available NOLs. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Examinations by relevant tax authorities may result in material changes in reserves for tax positions taken in previously filed tax returns or may impact the valuation of certain deferred income tax assets, such as NOL carryforwards.

Based on the outcome of examinations by relevant tax authorities, or as a result of the expiration of statutes of limitations for specific jurisdictions, it is possible that the reserves for tax positions taken in previously filed tax returns will materially change from those recorded in our financial statements. In addition, the outcome of examinations may impact the valuation of certain deferred income tax assets (such as NOL carryforwards) in future periods. It is not possible to estimate the impact of such changes, if any, to such reserves for uncertain tax positions.

 

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Risks Related to our Operations

We anticipate that our operations will continue to increase in complexity as we grow, which will create management challenges.

Our business has experienced strong growth and is complex. This growth is expected to continue, and our operations will be increasingly complex. To manage this growth, we will make substantial investments to improve our operational, financial, and management controls as well as our reporting systems and procedures. We may not be able to implement and scale improvements to our systems and processes in a timely or efficient manner or in a manner that does not negatively affect our operating results. For example, we may not be able to effectively monitor certain extraordinary contract requirements or individually negotiated provisions as the number of customers continues to grow. Our systems and processes may not prevent or detect all errors, omissions, or fraud. We may have difficulty managing improvements to our systems, processes and controls or in connection with third-party software. This could impair our ability to provide our products and services to our customers, causing us to lose customers, limiting products and services to less significant updates, or increasing technical support costs. If we are unable to manage this complexity, our business, operations, operating results and financial condition may suffer.

As our customer base continues to grow, we will need to expand our services and other personnel and maintain and enhance our partnerships to provide a high level of customer service. Extended stay-at-home, business closure, and other restrictive orders may impact our ability to identify, hire, and train new personnel. We will also need to manage our sales processes as our sales personnel and partner network continue to grow and become more complex, and as we continue to expand into new geographies and market segments. If we do not effectively manage this increasing complexity, the quality of our platform and customer service could suffer, and we may not be able to adequately address competitive challenges. These factors could impair the ability to attract and retain customers and expand customers’ use of our products and services.

We will depend on the continued services of our founders, senior management team and skilled individual contributors, and the loss of one or more key employees or an inability to attract and retain highly skilled employees could harm our business.

Our success and future performance has depended largely upon the continued services of our founders and other executive officers. We have relied on our leadership team to execute on our business plan, for research and development, marketing, sales, provision, maintenance and support of our products and services, and general and administrative functions, and on mission-critical individual contributors. From time to time, our executive management team and the groups of skilled individual contributors may change from the hiring or departure of executive officers or such contributors, which could disrupt our business. The employment agreements with our executive officers and other key personnel will not require them to continue to work for us for any specified period; therefore, they could terminate their employment at any time. The loss of one or more of our executive officers or key employees (including any limitation on the performance of their duties or short-term or long-term absences as a result of COVID-19) could significantly delay or prevent the achievement of our development and strategic objectives. We maintain insurance for our directors and executive officers; however, there is no assurance that the amount of any such insurance would likely be sufficient to compensate for the impact of losing their services.

To execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for experienced software engineers and senior sales executives. If we are unable to attract such personnel in cities where our offices are located, we may need to hire in other locations, which may add to the complexity and costs of our business operations. We expect to continue to experience difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we will compete for experienced personnel have greater resources. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or that we have breached our legal obligations, resulting in a diversion of management’s time and resources. In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. If the

 

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perceived value of stock awards declines, it may harm our ability to recruit and retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be harmed, or customers may lose confidence in the knowledge and capability of our employees.

If we are unable to maintain our corporate culture as it grows, it could lose the agility, innovation, teamwork, passion and focus on execution that we believe has contributed to our success, and our business may be harmed.

Our customers have historically relied on our personnel for support related to our products, in particular SaaS products. High-quality support continues to be important for the renewal and expansion of agreements with our existing customers. The importance of high-quality support will increase as we expand our business and pursue new customers, particularly MM and large enterprise customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to sell new products and services to existing and potential customers could suffer and our reputation with existing or potential customers could be harmed.

If we fail to maintain or grow our brand recognition, our ability to expand our customer base will be impaired and our financial condition may suffer.

We believe enhancing the “AvePoint” brand and maintaining our reputation in the information technology industry will be critical for the continued acceptance of our existing and future products and services, attracting new customers to our products and services, and retaining existing customers. The importance of brand recognition will increase as competition in our market increases. Successfully maintaining our brand will depend largely on the effectiveness of our marketing efforts, the ability to provide high-quality, innovative, reliable and useful products and services to meet the needs of our customers at competitive prices, the ability to be responsive to customer concerns and provide high quality customer support, training and professional services, the ability to maintain our customers’ trust, the ability to continue to develop new functionality and products, and the ability to successfully differentiate our products and services.

Additionally, partners’ performance may affect the AvePoint brand and reputation if customers do not have a positive experience. Brand promotion activities may not generate customer awareness or yield increased revenue. Even if they do, any increased revenue may not offset the expenses incurred in building our brand. Furthermore, independent industry analysts may provide reviews of our products and services, as well as other products available in the market, and perception of our products and services in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive than reviews about other products available in the market, the Avepoint brand may be harmed. Furthermore, negative publicity relating to events or activities attributed to employees, partners or others associated with any of these parties, may tarnish our reputation and reduce the value of our brand. Damage to reputation and loss of brand equity may reduce demand for our products and harm our business, results of operations and financial condition. Any attempts to rebuild our reputation and restore the value of our brand may be costly and time consuming, and such efforts may not ultimately be successful. If we fail to successfully promote and maintain our brand, we may fail to attract enough new customers or retain existing customers to realize a sufficient return on our brand-building efforts, and our business could suffer.

If we fail to offer high quality support, our business and reputation could suffer.

Our customers have historically relied on our personnel for support related to our products, in particular SaaS products. High-quality support will continue to be important for the renewal and expansion of agreements with our existing customers. The importance of high-quality support will increase as we expand our business and pursue new customers, particularly MM and large enterprise customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to sell new products and services to existing and new customers could suffer and our reputation with existing or potential customers could be harmed.

 

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We are expected to store personal and other confidential information of our customers, which may in turn contain third-party personal or other confidential information. If the security of this information is compromised or is otherwise accessed without authorization, our reputation may be harmed, and we may be exposed to liability and loss of business.

We may in some cases transmit or store personal and other confidential information of our partners, customers, and third parties (e.g. if the customer uses our products to create backups of their information) on storage space owned or provided by us. While we have in the past taken, and intend to take, steps to protect personal information and other confidential information that we have access to, including information we may obtain through our customer support services or customer usage of our products, we will not proactively monitor (or may not even be able to access) the content that our customers upload or process otherwise or the information provided to us through the use of our products and services. Therefore, we will not control the substance of the content on our storage space owned or provided by us, which may include personal or other confidential information.

We will also use third-party service providers and sub-processors to help us deliver services to our customers. Such service providers and sub-processors may store personal information and/or other confidential information. Such information may be the target of unauthorized access or subject to security breaches as a result of third-party action, employee error, malfeasance or otherwise. Many companies that provide these services have reported a significant increase in cyberattack activity since the beginning of the COVID-19 pandemic. Any of these could result in the loss of information, litigation, indemnity obligations, damage to our reputation and other liability or harm our business, financial condition, and results of operations. Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Even if such a data breach did not arise out of our action or inaction, or if it were to affect one or more of our competitors or customers’ competitors, rather than us, the resulting concern could negatively affect our customers and our business. Concerns regarding data privacy and security may cause some customers to stop using our products and services and fail to renew their subscriptions. In addition, failures to meet our customers’ expectations with respect to security and confidentiality of their data and information could damage our reputation and affect our ability to retain customers, attract new customers, and grow our business.

Our failure to comply with legal or contractual requirements around the security of personal information could lead to significant fines and penalties, as well as claims by customers, affected data subjects, or other stakeholders. These proceedings or violations could force us to spend money in defense or settlement of these proceedings, result in the imposition of monetary liability or injunctive relief, divert management’s time and attention, increase our costs of doing business, and harm our reputation and the demand for our platform.

If credit card information is stored in our systems or transmitted, stored or otherwise processed via our products and services and our security measures fail to protect credit card information adequately, we could be liable to our partners, the payment card associations, our customers or affected credit card holders. We could be subject to fines and face regulatory or other legal action, and our customers could end their relationships with us. The limitations of liability in our contracts may not be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim.

Insurers could deny coverage as to any future claim. The successful assertion of one or more large claims against us, or changes in insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could harm our business, financial condition, and results of operations.

We will also be subject to federal, state, and foreign laws regarding cybersecurity and the protection of data. Many jurisdictions have enacted laws requiring companies to notify individuals of security breaches involving certain types of personal information. Our agreements with certain customers and partners will require us to notify them of certain security incidents. Some jurisdictions and customers require us to safeguard personal information or confidential information using specific measures. If we fail to observe these requirements, our business, operating results, and financial condition could be harmed.

 

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Evolving global internet laws, regulations and standards, privacy regulations, cross-border data transfer restrictions, and data localization requirements may limit the use and adoption of our services, expose us to liability, or otherwise harm our business.

Federal, state, or foreign governmental bodies or agencies have in the past adopted, and may in the future adopt, laws and regulations affecting the use of the internet as a commercial medium. These laws and regulations could impact taxation, internet neutrality, tariffs, content, copyrights, distribution, electronic contracts and other communications, consumer protection, and the characteristics and quality of services. Legislators and regulators may make legal and regulatory changes or apply existing laws in ways that require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. These laws and regulations and resulting increased costs could materially harm our business, results of operations, and financial condition.

Further, we have historically collected and utilized, and we will continue to collect and utilize, demographic and other information, including personally identifiable information, from and about users (such as customers, potential customers and others) as they interact with us over the internet and otherwise provide us with information whether via our website or blogs or through email or other means. Users may provide personal information to us in many contexts, including through our direct telephonic or web-based support service, newsletter or webinar sign-up, product purchase, survey registration, or when accessing online support portals or using other community or social networking features. Because we expect to continue to collect and utilize this information, we are subject to laws and regulations regarding the collection, use and disclosure of personal information.

Privacy and data information security have become a significant issue in the United States and in many other countries where we will have employees and operations and offer licenses to our products. The regulatory framework for privacy and personal information security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. The U.S. federal and various state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations regarding, the collection, distribution, use, disclosure, storage and security of personal information. For example, California recently enacted the CCPA, which went into effect on January 1, 2020, that requires, among other things, covered companies to provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information.

Internationally, virtually every jurisdiction in which we will operate has established its own data security and privacy legal framework with which we or our customers must comply. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, Internet Protocol addresses. These laws and regulations often are more restrictive than those in the United States and are rapidly evolving. For example, the European Union (the “EU”) data protection regime, the GDPR became enforceable on May 25, 2018. Additionally, the United Kingdom enacted legislation in May 2018 that substantially implements the GDPR, but the United Kingdom’s exit from the EU (which formally occurred on January 31, 2020), commonly referred to as “Brexit”, has created uncertainty with regard to the regulation of data protection in the United Kingdom. In particular, it is unclear how data transfers to and from the United Kingdom will be regulated following Brexit. Complying with the GDPR or other laws, regulations or other obligations relating to privacy, data protection or information security may cause us to incur substantial operational costs or require us to modify our data handling practices. Non-compliance could result in proceedings against us by governmental entities or others, could result in substantial fines or other liability and may otherwise adversely impact our business, financial condition and operating results.

Many of these laws and regulations contain detailed requirements regarding collecting and processing personal information, restrict the use and storage of such information, and govern the effectiveness of data subject and consumer consent. They could restrict our ability to store and process personal data (in particular, the ability to use certain data for purposes such as risk or fraud avoidance, marketing, advertising, lead generation or

 

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customer targeting), to control costs by using certain vendors or service providers, and to offer certain services in certain jurisdictions. This could reduce revenue and the general demand for our products and services.

Such laws and regulations are furthermore often inconsistent and may be subject to amendment or re-interpretation, which may cause us to incur significant costs and expend significant effort to ensure compliance. For example, the European Court of Justice recently invalidated the U.S.-EU Privacy Shield as a basis for transfers of personal data from the EU to the U.S. while upholding standard contractual clauses as a mechanism for transfers. Our response to these requirements globally may not meet the expectations of individual customers, affected data subjects, or other stakeholders, which could reduce the demand for our services. Some customers or other service providers may respond to these evolving laws and regulations by asking us to make certain privacy or data-related contractual commitments that it is unable or unwilling to make. This could lead to the loss of existing or potential customers or other business relationships.

Certain laws and regulations, like the GDPR, also include restrictions on the transfer of personal information across national borders. Because our services will be accessible worldwide, certain foreign jurisdictions may claim that we are required to comply with such laws even in jurisdictions where we have no local entity, employees or infrastructure. Some of these laws include strict localization provisions that require certain data to be stored within a particular region or jurisdiction. We will rely on a globally distributed infrastructure in order to be able to provide our services efficiently, and consequently may not be able to meet the expectations of customers who are located in or otherwise subject to such localization requirements, which may reduce the demand for our services.

Our failure to comply with these and additional laws or regulations could expose us to significant fines and penalties imposed by regulators, as well as legal claims by customers or other relevant stakeholders. Similarly, many of these laws require us to maintain an online privacy policy and terms of service that disclose our practices regarding the collection, processing, and disclosure of personal information. If these disclosures contain any information that a court or regulator finds to be inaccurate or inadequate, we could also be exposed to legal or regulatory liability. Any such proceedings or violations could force us to spend money in defense or settlement, result in the imposition of monetary liability or demanding injunctive relief, divert management’s time and attention, increase the costs of doing business, and harm our reputation.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us. We also expect that there will continue to be new proposed laws and regulations concerning privacy, data protection and information security, but cannot yet determine the impact such future laws, regulations and standards may have on our business. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual obligations and other obligations may require us to incur additional costs and restrict our business operations. Because the interpretation and application of laws and other obligations relating to privacy and data protection are still uncertain, it is possible that these laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our software. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our software, which could harm our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new features could be limited. Any inability to adequately address privacy concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability, damage our reputation, inhibit sales and harm our business.

Finally, additional requirements to pass certifications and/or to comply with local laws, especially as they relate to data storage and processing, may drastically increase cost of cloud-based operations and shrink our margins.

 

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If our products and services do not effectively interoperate with our customers’ existing or future IT infrastructures or do not operate as effectively when accessed through mobile devices, customers may not be satisfied, which could harm our business.

Our success will depend in part on the interoperability of our products and services with third-party operating systems, applications, data, web browsers and devices that hawse have not developed and does not control. Due to the continuing rapid growth of the use of mobile devices in business operations, this also includes third-party mobile devices and mobile operating systems. Any changes in such operating systems, applications, data, web browsers or devices that degrade the functionality of our products and services or give preferential treatment to competitive services could harm the adoption and usage of our products and services. We may not be successful in adapting our products and services to operate effectively with these operating systems, applications, data or devices. Effective mobile functionality is a part of our long-term development and growth strategy. If customers have difficulty accessing and using our products and services (including on mobile devices) or if our products and services cannot connect a broadening range of applications, data and devices, then customer growth and retention may be harmed and our business and operating results could be harmed.

Activities of our customers and partners could damage our brand, subject it to liability and harm our business and financial results.

Our license terms prohibit our customers from using our products in breach of any applicable laws or regulations and, in particular, to use our SaaS products in any way that is unlawful, illegal, fraudulent or harmful or in connection with any unlawful, illegal, fraudulent or harmful purpose or activity and our license terms permit it to terminate an agreement and the granted licenses for our products if we becomes aware of illegal use. Our customers or partners may nonetheless engage in prohibited or illegal activities or use our products in violation of applicable laws, which could subject it to liability. Furthermore, our brand may be negatively impacted by the actions of customers or partners that are deemed to be hostile, offensive, inappropriate, or illegal. We do not expect to proactively monitor or review the appropriateness of the content of stored by our customers or our partners’ activities. Safeguards may not be sufficient for us to avoid liability or avoid harm to the AvePoint brand. Hostile, offensive, inappropriate, or illegal use could harm our business and financial results.

In many jurisdictions, laws relating to the liability of providers of online services for activities of our customers and other third parties are being tested by actions based on defamation, invasion of privacy, unfair competition, copyright and trademark infringement, and other theories. Any court ruling or other governmental regulation or action that imposes liability on customers of online services in connection with the activities of our own clients or other third parties could harm our business. We could also be subject to liability under applicable law, which may not be fully mitigated by our license terms. Any liability attributed to us could harm our brand, reputation, ability to expand our subscriber base, and financial results.

Natural catastrophic events and man-made problems such as power disruptions, global pandemics, computer viruses, data security breaches and terrorism may disrupt our business.

We rely heavily on our and third parties’, in particular Microsoft’s, network infrastructure and IT systems for our business operations. An online attack, earthquake, fire, terrorist attack, power loss, global pandemics, such as the COVID-19 pandemic, telecommunications failure, or other similar catastrophic event could cause system interruptions, delays in accessing our service, reputational harm, and loss of critical data or customer data. Such events could prevent us from providing our products and services to our customers. A catastrophic event that results in the destruction or disruption of our or third parties’ data centers, or our network infrastructure or IT systems, including any errors, defects, or failures in third-party hardware, could affect our ability to conduct normal business operations, and harm our operating results. We may also incur significant costs for using alternative equipment or facilities or taking other actions in preparation for, or in reaction to, any such events.

Further, if a catastrophic event occurs in a region from which we derive a significant portion of our revenue, customers in such region may delay or forego purchases of our products, which may materially and adversely impact our results of operations for a particular period. In addition, acts of terrorism could cause disruptions in

 

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our business or the business of partners, customers or the economy as a whole. Given our historical concentration of sales at each quarter end, any disruption in the business of partners or customers that impacts sales at the end of each quarter could harm our quarterly results. All of the aforementioned risks may be augmented if disaster recovery plans for the or our partners prove to be inadequate. To the extent that any of the above results in delays or cancellations of customer orders, or the delay in the manufacture, deployment or shipment of products, our business, financial condition and results of operations would be harmed.

In addition, as computer malware, viruses, computer hacking, fraudulent use attempts, and phishing attacks have become more prevalent, we will face increased risk from such activities. Such activities threaten the performance, reliability, security, and availability of our products and services. Any computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks, or other data security breaches to our systems could, among other things, harm our reputation and our ability to retain existing customers and attract new customers.

We could incur substantial costs in protecting or defending our proprietary rights. Failure to adequately protect our rights could impair our competitive position, or cause us to lose valuable assets, experience reduced revenue, or incur costly litigation.

Our success is dependent, in part, upon protecting our proprietary technology. We have historically relied on a combination of trade secret laws, contractual provisions, trademarks, service marks, and copyrights in an effort to establish and protect our proprietary rights. However, the steps we have taken, and the steps we intend to take, to protect our intellectual property may be inadequate.

Any of our trademarks or other intellectual property rights may be challenged or circumvented by others or invalidated through administrative process or litigation. Others may independently develop similar products and services or adopt similar or identical brands for competing products and services. Legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and services and use information that we regards as proprietary to create products and services that compete with us. Some license provisions restricting unauthorized use, copy, transfer, and disclosure of our intellectual property may be unenforceable under the laws of jurisdictions outside the United States.

To the extent we expand our international activities, our exposure to unauthorized copying and use of our platform and proprietary information may increase. Moreover, effective trademark, copyright, and trade secret protection may not be available or commercially feasible in every country in which it conducts business. Further, intellectual property law, including statutory and case law, particularly in the United States, is constantly developing. Changes in the law could make it harder for us to enforce our rights.

We will continue to enter into confidentiality and invention assignment agreements with our employees and consultants and into confidentiality agreements with strategic and business partners, advisers and customers. However, we cannot be certain that we have entered into such agreements with all parties who may have or have had access to our confidential information, that the agreements that we entered into will be effective in controlling access to and distribution of our proprietary information or that they will provide an adequate remedy in the event of unauthorized disclosure of confidential information. These agreements also will not prevent our competitors or partners from independently developing technologies that are equivalent or superior to our products and services. In addition, former employees or contractors may start working for competitors and may use our confidential information there.

We may be required to spend significant resources to monitor, protect, and enforce our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights and protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management. Such litigation could result in the impairment or loss of portions of our intellectual property. Enforcement of our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property. An

 

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adverse determination of any litigation proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly. An adverse determination could risk the issuance or cancellation of pending trademark filings. Because of the substantial discovery required in connection with intellectual property litigation, our confidential or sensitive information could be compromised by disclosure in litigation. Litigation could result in public disclosure of results of hearings, motions, or other interim developments. If securities analysts or investors perceive these results to be negative, it could have a negative impact on the price of our common stock.

Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of management’s attention and resources, could delay further sales or the implementation of our products and services, impair the functionality of our products and services, delay introductions of new functionality to our products and services, result in the substitution of inferior or more costly technologies into our products and services, or injure our reputation. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Policing unauthorized use of our technologies, trade secrets, and intellectual property may be difficult, expensive, and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. If we fail to meaningfully protect our intellectual property and proprietary rights, our business, operating results, and financial condition could be harmed.

We may become subject to legal proceedings and litigation, including intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business. Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.

The software industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights. Companies in the software industry are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights. Our technologies or contractual and legal defenses may not be able to withstand any third-party claims or rights against the use of our technologies. These lawsuits are time-consuming and expensive to resolve, and they divert management’s time and attention. Our future success will depend in part on not infringing the intellectual property rights of others.

Many software companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Any claims or litigation could cause us to incur significant expenses and, whether or not successfully asserted, could require that we pay substantial damages, ongoing royalty or license payments, re-engineer all or a portion of our products and services, or comply with other unfavorable terms. If a third party is able to obtain an injunction preventing us from accessing third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our products and services or cease business activities covered by such intellectual property. Any such development could prevent us from competing effectively. We may be contractually obligated to indemnify our customers for third party claims of different kinds, in particular for infringement of a third party’s intellectual property rights. Responding to such claims regardless of their merit, can be time-consuming and costly to defend in litigation, and can damage our reputation and brand. We also may be required to redesign our products and services, delay product releases, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling our products and services. Requiring us to change one or more aspects of the way we deliver our products and services may harm our business.

Although we carry general liability insurance and other insurance, our insurance may not cover potential claims of this type. Insurance may not be adequate to cover us for all liability that may be imposed. We may not be able to maintain our insurance coverage. We cannot predict the outcome of lawsuits and cannot assure you that the results of any of these actions will not harm our business, operating results or financial condition.

 

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Contractual indemnity provisions could expose us to substantial liability for intellectual property infringement, data protection, and other losses.

Some of the agreements with customers and other third parties to be in effect include indemnification provisions under which we will be obligated to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, data protection breaches, confidentiality breaches, breaches of IT security obligations, damages to property or persons, or other liabilities relating to or arising from our products, services or other contractual obligations. Some of these indemnity agreements provide for uncapped liability for which we would be responsible, and some indemnity provisions survive termination or expiration of the applicable agreement. Large indemnity payments could harm our business, results of operations and financial condition. Although we will attempt to contractually limit our liability with respect to such obligations in negotiations, such negotiations may be fruitless and we may, with or without liability limitations in place, still incur substantial liability related to them and may be required to cease use of certain functions of our products and services as a result of any such claims. Any dispute with a customer with respect to such obligations could harm our relationship with such customer, other existing customers, and potential customers. Such a dispute could harm our business and results of operations.

We will rely on third-party proprietary and open source software for our products and services. The inability to obtain third-party licenses for such software, obtain them on favorable terms, or adhere to the license terms for such software or any errors or failures caused by such software could harm our business, results of operations and financial condition.

Some of our offerings will include software or other intellectual property licensed from third parties. It may be necessary in the future to renew licenses relating to various aspects of these applications or to seek new licenses for existing or new applications. Necessary licenses may not be available on acceptable terms or under open source licenses permitting redistribution in commercial offerings, if at all. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms could result in delays in product releases until equivalent technology can be identified, licensed or developed, if at all, and integrated into our products and services, which could harm our business, results of operations and financial condition. Third parties may allege that additional licenses are required for our use of their software or intellectual property, which it may be unable to obtain on commercially reasonable terms or at all. The inclusion in our offerings of software or other intellectual property licensed from third parties on a non-exclusive basis could limit our ability to differentiate our offerings from those of our competitors. Failure to properly adhere to the license terms for software or other intellectual property might have negative effects, such as revocation of the license grant, penalties, added license fees or other liabilities. To the extent that our products and services depend upon the successful operation of third-party software, any undetected errors or defects in such third-party software could impair the functionality of our products and services, delay new feature introductions, result in a failure of products and services, and injure our reputation.

A significant portion of our products will incorporate open source software, and we expect to incorporate open source software into other offerings or products in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. Little legal precedent governs the interpretation of these licenses; therefore, the potential impact of these terms on our business is unknown and may result in unanticipated obligations regarding our technologies. If a distributor of open source software were to allege that we had not complied with our license, we could be required to incur significant legal expenses. In addition, if the license terms for the open source code change we may be forced to re-engineer our software or incur additional costs. If we combine our proprietary software with open source software or utilizes open source software in a certain manner, under some open source licenses, we could be in breach of the license if we did not release the source code of our proprietary software. Releasing the source code could substantially help competitors develop products that are similar to or better than ours and could help malevolent actors detect security weaknesses to develop and deploy attacks, including malware, against our products and systems.

 

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If our products and services fail to perform properly, or if we fail to develop enhancements to resolve performance issues, we could lose customers, become subject to performance or warranty claims, or incur significant costs.

Our operations will be dependent upon our ability to prevent system interruption. The applications underlying our products and services are inherently complex and may contain material defects or errors, which may cause disruptions in availability or other performance problems. Also, our software will be installed and used in a variety of computing environments with different operating system management software, and equipment and networking configurations, which may cause errors or failures of our software or other aspects of the computing environment into which it is deployed. In addition, deployment of our software into computing environments may expose undetected errors, compatibility issues, failures or bugs in our software. While we have not historically experienced any defects, errors, disruptions in service, cyber-attacks, or other performance problems with our software that materially influenced our sales performance, there is no assurance that such defects, problems or events will not occur in the future, whether in connection with the day-to-day operation, upgrades or otherwise. Any of these occurrences could result in loss of customers, lost or delayed market acceptance and sales of our products and services, delays in payment by customers, injury to our reputation and brand, legal claims, including warranty and service claims, diversion of resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.

We may discover defects in our products and services that could result in data unavailability, unauthorized access, loss, corruption, or other harm to our customers’ data. Despite testing we may not be able to detect and correct defects or errors before release. Consequently, we or our customers may discover defects or errors after our products and services have been deployed. We expect to implement bug fixes and upgrades as part of our regularly scheduled system maintenance. If we do not complete this maintenance according to schedule or if customers are otherwise dissatisfied with the frequency and/or duration of our maintenance services and related system outages, customers could terminate their contracts, delay or withhold payment, or cause us to issue credits, make refunds, or pay penalties. The costs incurred or delays resulting from the correction of defects or errors in our software or other performance problems may be substantial and could harm our operating results. Moreover, customers could incorrectly implement or inadvertently misuse our software, which could result in customer dissatisfaction and adversely impact the perceived utility of our products as well as our brand. Any of these real or perceived errors, compatibility issues, failures or bugs in our software could result in negative publicity, reputational harm, loss of or delay in market acceptance, loss of competitive position or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.

We will provide our products and services to businesses in highly regulated industries and to customers with elevated confidentiality, privacy or security requirements, including public sector customers, which will subject us to a number of challenges and risks.

We have historically provided our products and services to customers in highly regulated industries such as pharmaceuticals, finance, insurance, healthcare and life sciences, and we may have customers in other highly regulated industries in the future. We expect that we will also provide our products and services to customers that have significantly higher than usual requirements for the confidentiality, protection of data or security of our infrastructure and operations, such as public sector customers in the defense, infrastructure management and other sectors. Providing products and services to such entities will subject us to a number of challenges and risks. Selling to such entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Customers in highly-regulated industries or in the public sector may demand shorter subscription periods or other contract terms that differ from our standard arrangements, including terms that can lead those customers to obtain broader rights in our offerings than would be standard. Such entities may have statutory, contractual, or other legal rights to terminate contracts, conduct audits or execute other measures, with us or our partners due to a default or for other reasons. Any such measure may harm our reputation, business, results of operations and financial condition.

 

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Additionally, due to the heightened regulatory environment in which they operate or their elevated confidentiality, privacy or security requirements, potential customers in these industries and sectors may encounter additional difficulties when trying to move away from legacy products to products like those we provide, in particular to those in an SaaS format, which can negatively affect our business and results of operations.

Significant changes in the contracting or fiscal policies of the public sector, or our failure to comply with certain laws or regulations, could harm the business we do with the public sector.

We have historically derived a portion of our revenue from governments and government-owned or -controlled entities (such as public health care bodies, educational institutions and utilities), which we refers to as the public sector in this prospectus, and the success and growth of our business will continue to depend in part on our successful procurement of public sector contracts. Factors that could impede the ability to maintain or increase the amount of revenue derived from public sector contracts include:

 

   

Changes in public sector fiscal or contracting policies;

 

   

Decreases in available public sector funding;

 

   

Changes in public sector programs or applicable requirements;

 

   

Adoption of new laws or regulations or changes to existing laws or regulations;

 

   

Potential delays or changes in the public sector appropriations or other funding authorization processes; and

 

   

Delays in the payment of invoices by public sector payment offices.

Furthermore, we must comply with laws and regulations relating to public sector contracting, which will affect how we and our channel partners do business in both the United States and abroad. These laws and regulations may impose added costs on our business, and failure to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for damages from channel partners, penalties, termination of contracts, and temporary suspension or permanent debarment from public sector contracting.

The occurrence of any of the foregoing could cause public sector customers to delay or refrain from purchasing licenses of software from us in the future or otherwise harm our business, operations and financial results.

Our sales to government entities will be subject to a number of challenges and risks.

We sell our products and services to U.S. federal and state and foreign governmental agency customers, often through resellers, and we may increase sales to government entities in the future. Sales to government entities are subject to a number of challenges and risks. Selling to government entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Contracts and subcontracts with government agency customers are subject to procurement laws and regulations relating to the award, administration, and performance of those contracts. Government demand and payment for our products and services will be affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays potentially diminishing public sector demand for our products and services. We may be subject to audit or investigations relating to our sales to government entities, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refunds of fees received, forfeiture of profits, suspension of payments, fines, and suspension or debarment from future government business. Government entities may have statutory, contractual or other legal rights to terminate contracts with distributors and resellers for convenience or due to a default. Any of these risks relating to our sales to governmental entities could adversely impact our future sales and operating results.

 

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Changes in tax laws or regulations that are applied adversely to us or our customers could increase the cost of our products and services and adversely impact our business.

New income, sales, use, or other tax laws, statutes, rules, regulations, or ordinances could be enacted at any time. Any new taxes could harm our domestic and international business operations and our business and financial performance. Existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified or applied adversely. These events could require us or customers using our products and services to pay additional tax amounts on a prospective or retroactive basis. They could require us or our customers to pay fines and/or penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and potential customers may elect not to continue to subscribe or elect to subscribe to our products and services in the future. Additionally, new, changed, modified, or newly interpreted or applied tax laws could increase our and our customers’ compliance, operating and other costs, as well as the costs of our products and services. Any or all of these events could adversely impact our business and financial performance.

We plan further geographic expansion, which will create a variety of operational challenges.

A significant component of our growth strategy involves the further expansion of our operations and customer base internationally. For the three months ended March 31, 2021 and the year ended December 31, 2020, our revenue generated from customers outside North America was approximately 55% and 55%, respectively, as compared to 60% and 58% for the three months ended March 31, 2020 and year ended December 31, 2019, respectively, of our total revenue. We currently have locations in the United States, Australia, China, France, Germany, Japan, the Netherlands, the Philippines, Singapore, South Africa, Sweden, Switzerland, the United Kingdom and Vietnam. We intend to continue to adapt and develop strategies to address international markets, but such efforts may not be successful. In addition, the COVID-19 pandemic and related stay-at-home, business closure, and other restrictive orders and travel restrictions may pose additional challenges for international expansion and may impact our ability to launch in new locations and further expand geographically.

As of March 31, 2021, approximately 80% of our full-time employees were located outside of the United States. We expect that our international activities will continue to grow over the foreseeable future as we continue to pursue opportunities in existing and new international markets. This will require significant management attention and financial resources. We may face difficulties, including: (1) costs associated with developing software and providing support in many languages, (2) varying seasonality patterns, (3) potential adverse movement of currency exchange rates, (4) longer payment cycles and difficulties in collecting accounts receivable, (5) tariffs and trade barriers, (6) a variety of regulatory or contractual limitations on our ability to operate, (7) adverse tax events, (8) reduced protection of intellectual property rights, (9) a geographically and culturally diverse workforce and customer base, and (10) travel restrictions associated with the COVID-19 pandemic. Failure to overcome any of these difficulties could negatively affect the results of operations.

Our international operations will involve a variety of risks, including:

 

   

Changes in a country’s or region’s political or economic conditions;

 

   

Economic uncertainty around the world and adverse effects arising from economic interdependencies across countries and regions;

 

   

The need to adapt and localize products and services for specific countries;

 

   

Greater difficulty in receiving payments from different geographies, including difficulties associated with currency fluctuations, transfer of funds, longer payment cycles and collecting accounts receivable, especially in emerging markets;

 

   

Potential changes in trade relations arising from policy initiatives implemented by the current administration or by a successor administration;

 

   

Compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations;

 

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Unexpected changes in laws, regulatory requirements, taxes, or trade laws;

 

   

More stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe;

 

   

Differing labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;

 

   

Challenges inherent in efficiently managing an increased number of employees over large geographic distances (including in a work-from-home environment), including the need to implement appropriate systems, policies, benefits, and compliance programs;

 

   

Difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems;

 

   

Increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;

 

   

Currency exchange rate fluctuations and the resulting effect on revenue and expenses, and the cost and risk of entering into hedging transactions if we elect to do so in the future;

 

   

Limitations on the ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;

 

   

Laws and business practices favoring local competitors or general preferences for local vendors;

 

   

limited or insufficient intellectual property protection or difficulties enforcing our intellectual property;

 

   

Political instability or terrorist activities;

 

   

Risks related to global health epidemics, such as the COVID-19 pandemic, including restrictions on our and our customers’ ability to travel, disruptions in customers’ ability to distribute products, and temporary closures of customers’ facilities;

 

   

Exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the UK Bribery Act of 2010, the UK Proceeds of Crime Act 2002, and similar laws and regulations in other jurisdictions;

 

   

Compliance with laws and regulations for foreign operations, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on the ability to sell our software in certain foreign markets, and the risks and costs of non-compliance;

 

   

Heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements; and

 

   

Adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.

Any of these risks could harm our international operations, reduce our revenue from outside the United States or increase our operating costs, harming our business, results of operations and financial condition and growth prospects. There can be no assurance that all of our employees, independent contractors and partners will comply with the formal policies we will implement, or applicable laws and regulations. Violations of laws or key control policies by employees, independent contractors and partners could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our software and services and could harm our business and results of operations. If we invest substantial time and resources to expand our international operations and is unable to do so successfully, our business and operating results will suffer.

 

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We will be subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we violates the controls.

Our products will be subject to U.S. export controls, including the Export Administration Regulations and economic sanctions administered by the U.S. Treasury Department’s Office of Foreign Assets Control. We will incorporate encryption technology into our products. These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations, including by license, a license exception or other appropriate government authorizations. We previously obtained the required licenses to export our products outside of the United States. If the applicable U.S. legal requirements regarding the export of encryption technology were to change or if we change the encryption means in our products, we may need to apply for new licenses. There can be no assurance that we will be able to obtain the required licenses under such circumstances. Furthermore, various other countries regulate the import of certain encryption technology, including import permitting and licensing requirements, and have enacted laws that could limit the ability to distribute our products or could limit our customers’ ability to implement our products in such countries.

Furthermore, our activities will subject us to the U.S. economic sanctions laws and regulations that prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. embargoes or sanctions. The current U.S. presidential administration has been critical of existing trade agreements and may impose more stringent export and import controls. Obtaining the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities even if the export license ultimately may be granted. While we will take precautions to prevent our products and services from being exported in violation of these laws, including obtaining authorizations for our products and services, performing geolocation IP blocking and screenings against U.S. and other lists of restricted and prohibited persons, we cannot guarantee that the precautions we intend to take will prevent violations of export control and sanctions laws. Violations of U.S. sanctions or export control laws can result in significant fines or penalties and possible incarceration for responsible employees and managers could be imposed for criminal violations of these laws.

If our customers or partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be harmed, through reputational harm as well as other negative consequences, including government investigations and penalties. We presently incorporate export control compliance requirements into our license and partner agreements; however, no assurance can be given that our licensees and partners will comply with such requirements.

Various countries regulate the import and export of certain encryption and other technology, including import and export licensing requirements. Some countries have enacted laws that could limit the ability to distribute our products and services or could limit our customers’ ability to implement our products and services in those countries. Changes in our products and services or future changes in export and import regulations may create delays in the introduction of our products and services in international markets, prevent our customers with international operations from deploying our products and services globally or, in some cases, prevent the export or import of our products and services to certain countries, governments, or persons altogether. Various governmental agencies have proposed additional regulation of encryption technology, including the escrow and government recovery of private encryption keys. Any change in export or import regulations, economic sanctions, or related legislation, or change in the countries, governments, persons, or technologies targeted by such regulations, could limit our ability to export or sell our products and services to existing or potential customers with international operations. Any decreased use of our products and services or limitation on our ability to export or sell products and services would harm our business, operating results, and prospects.

We will be exposed to fluctuations in currency exchange rates, which could negatively our revenue and earnings.

We conduct a significant number of transactions and holds cash in currencies other than the U.S. Dollar. Changes in the values of major foreign currencies, particularly the Euro, Japanese Yen, British Pound, Singapore

 

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Dollar and Chinese Yuan, relative to the U.S. Dollar, will significantly affect our total assets, revenue, operating results and cash flows, which will be reported in U.S. Dollars. In particular, the economic uncertainties relating to Brexit, and European sovereign and other debt obligations may cause the value of the British Pound and Euro to fluctuate relative to the U.S. Dollar. Fluctuations in foreign currency rates, including the strengthening of the U.S. Dollar against the Euro and most other major international currencies, could harm our revenue growth in terms of the amounts that will be reported in U.S. Dollars after converting our foreign currency results into U.S. Dollars. In addition, reported assets will generally be negatively impacted when the dollar strengthens relative to other currencies as a portion of our cash and bank deposits, among other assets, will be held in foreign currencies and reported in U.S. Dollars.

We will incur expenses for employee compensation and other operating expenses at our non-U.S. locations in local currencies. The weakening of the U.S. dollar against such currencies would cause the U.S. dollar equivalent of such expenses to increase, which could have a negative impact on our reported results of operations. If we are not able to successfully hedge against the risks associated with currency fluctuations, our operating results could be harmed.

We will be subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the UK Bribery Act of 2010, the UK Proceeds of Crime Act 2002, and other anti-bribery and anti-money laundering laws in the countries in which it conducts activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years. These laws are interpreted broadly to prohibit companies and their employees and third-party intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. As we seek to increase our international sales and business and sales to the private and public sector, we may engage with partners and third-party intermediaries to market our services and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities in other countries, which also include countries known to experience corruption, particularly certain emerging countries in Africa, East Asia, Eastern Europe, South America and the Middle East. Activities in such countries create the risk of unauthorized payments or offers of payments by one of our employees, consultants, partners or third-party intermediaries that could be in violation of various anti-corruption laws, even though these parties may not be under our control. While we will have policies and controls intended to prevent these practices by our employees, consultants, partners and third-party intermediaries, existing safeguards and any future improvements may prove to be less than effective, and we could be held liable for corrupt or other illegal activities of such third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. While we will have policies and procedures to address compliance with such laws, our employees and agents could violate these policies and applicable law, for which we may be ultimately held responsible. As we seek to increase our international sales and business, our risks under these laws may increase. Noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially harmed. Responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations, and financial condition.

 

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Changes in subjective assumptions, estimates and judgments by management related to complex accounting matters or changes in accounting principles generally accepted in the United States could significantly affect our financial condition and results of operations.

GAAP and related pronouncements, implementation guidelines, and interpretations apply to a wide range of matters that will be relevant to our business, including revenue recognition, stock-based compensation, deferred commissions and business combinations. These matters are complex and will involve subjective assumptions, estimates, and judgments by management. Changes in GAAP, these accounting pronouncements or their interpretation or changes in underlying assumptions, estimates, or judgments by management, the Financial Accounting Standards Board (“FASB”), the SEC and others could significantly change our reported or expected financial performance, which could impact the market price for our common stock.

We may acquire or invest in companies, which may divert management’s attention and result in additional dilution to stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions.

We may evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products, and other assets in the future. An acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel, or operations of the acquired companies. Key personnel of the acquired companies may choose not to work for us, their software may not be easily adapted, or we may have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise. We may also experience difficulties integrating personnel of the acquired company into our business and culture. Acquisitions may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our existing business. The anticipated benefits of any acquisition, investment, or business relationship may not be realized or we may be exposed to unknown risks or liabilities.

Negotiating these transactions can be time-consuming, difficult, and expensive, and the ability to close these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close. For one or more of those transactions, we may:

 

   

issue additional equity securities that would dilute our stockholders;

 

   

use cash that we may need in the future to operate our business;

 

   

incur debt on terms unfavorable to us or that we are unable to repay;

 

   

incur large charges or substantial liabilities;

 

   

encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and

 

   

become subject to adverse tax consequences, substantial depreciation, or deferred compensation charges.

We intend to invest significantly in research and development, and to the extent such research and development investments do not translate into new products or material enhancements to our products, or if we do not use those investments efficiently, our business and results of operations would be harmed.

A key element of our strategy will be to invest significantly in our research and development efforts to develop new products and enhance our existing products to address additional applications and markets. If we do not spend our research and development budget efficiently or effectively on compelling innovation and technologies, our business may be harmed and we may not realize the expected benefits of our strategy. Moreover, research and development projects can be technically challenging and expensive. The nature of these

 

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research and development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we are able to offer compelling products and generate revenue, if any, from such investment. Additionally, anticipated customer demand for a product or service being developed could decrease after the development cycle has commenced, and we would nonetheless be unable to avoid substantial costs associated with the development of any such product or service. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or improvement of products that are competitive in our current or future markets, it would harm our business and results of operations.

Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could our results.

We will be subject to income taxation in the United States and numerous other jurisdictions. Determining our provision for income taxes will require significant management judgment. In addition, the provision for income taxes could be negatively impacted by many factors, including, among other things, changes to our operating structure, changes in the amounts of earnings in jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws. We are subject to ongoing tax examinations in various jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. While we regularly evaluate the likely outcomes of these examinations to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes of such examinations will not have a material impact on our results of operations and cash flows. In addition, we may be audited in various jurisdictions, and such jurisdictions may assess additional taxes against us. The final determination of any tax audits or litigation could be materially different from historical tax provisions and accruals, which could harm our results of operations or cash flows in the period or periods for which a determination is made.

Significant judgment is required to determine the recognition and measurement attributes prescribed in Accounting Standards Codification (“ASC”) 740-10-25. In addition, ASC 740-10-25 applies to all income tax positions, which if settled unfavorably could adversely impact our provision for income taxes.

Our international operations may subject us to potential adverse tax consequences.

We have been expanding our international operations and personnel to better support our growth into international markets. Our corporate structure and associated transfer pricing policies contemplate future growth into the international markets, taking into account the functions, risks, and assets of the various entities involved in the intercompany transactions. After the Mergers, the amount of taxes we will pay in different jurisdictions may depend on: (1) the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, (2) changes in tax rates, (3) new or revised tax laws or interpretations of existing tax laws and policies, and (4) our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. Taxing authorities may challenge the transfer pricing methodologies of our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties. This could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency.

Risks Related to an Investment in our Securities

There may not be an active trading market for our common stock, which may make it difficult to sell shares of our common stock.

It is possible that an active trading market will not develop or, if developed, that any market will not be sustained. This would make it difficult for you to sell shares of our common stock at an attractive price or at all.

 

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The market price of shares of our common stock may be volatile, which could cause the value of your investment to decline.

Even if an active trading market develops, the market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. The securities markets have experienced significant volatility as a result of the COVID-19 pandemic. Market volatility, as well as general economic, market, or political conditions, could reduce the market price of shares of our common stock regardless of our operating performance. Our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including: (1) variations in quarterly operating results or dividends, if any, to stockholders, (2) additions or departures of key management personnel, (3) publication of research reports about our industry, (4) litigation and government investigations, (5) changes or proposed changes in laws or regulations or differing interpretations or enforcement of laws or regulations affecting our business, (6) adverse market reaction to any indebtedness incurred or securities issued in the future, (7) changes in market valuations of similar companies, (8) adverse publicity or speculation in the press or investment community, (9) announcements by competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, or capital commitments and (10) the impact of the COVID-19 pandemic on our management, employees, partners, customers, and operating results. In response, the market price of shares of our common stock could decrease significantly. You may be unable to resell your shares of our common stock at or above your purchase price. Following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against such company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources.

Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all. The failure to raise capital when needed could harm our business, operating results and financial condition. Debt or equity issued to raise additional capital may reduce the value of our common stock.

We cannot be certain when or if the operations of our business will generate sufficient cash to fund our ongoing operations or the growth of our business. We intend to make investments to support our current business and may require additional funds to respond to business challenges, including the need to develop new features or enhance our software, improve our operating infrastructure or acquire complementary businesses and technologies. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results and financial condition. If we incur debt, the debt holders could have rights senior to holders of our common stock to make claims on our assets. The terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because the decision to issue securities in the future offering will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future issuances of debt or equity securities. As a result, stockholders will bear the risk of future issuances of debt or equity securities reducing the value of their common stock and diluting their interest.

A small number of stockholders will continue to have substantial control over us after this offering, which may limit other stockholders’ ability to influence corporate matters and delay or prevent a third party from acquiring control over us.

Our directors and executive officers of, and beneficial owners own 5% or more of our voting securities and their respective affiliates beneficially own, in the aggregate, approximately 54.9% of our outstanding common stock. This significant concentration of ownership may have a negative impact on the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. In addition, these stockholders will be able to exercise influence over all matters requiring stockholder approval, including the election of directors and approval of corporate transactions, such as a merger

 

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or other sale of us or our assets. This concentration of ownership could limit stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change in control would benefit the other stockholders.

There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.

If Nasdaq delists our securities from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant negative consequences including:

 

   

Limited availability of market quotations for our securities;

 

   

A determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules,

 

   

Possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our common stock;

 

   

A limited amount of analyst coverage; and

 

   

A decreased ability to issue additional securities or obtain additional financing in the future.

If our operating and financial performance in any given period does not meet the guidance provided to the public or the expectations of investment analysts, the market price of our common stock may decline.

We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will consist of forward-looking statements, subject to the risks and uncertainties described in this prospectus and in our other public filings and public statements. The ability to provide this public guidance, and the ability to accurately forecast our results of operations, may be impacted by the COVID-19 pandemic. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty, such as the current global economic uncertainty being experienced as a result of the COVID-19 pandemic. If, in the future, our operating or financial results for a particular period do not meet any guidance provided or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our common stock may decline as well. Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future.

We will incur significant increased expenses and administrative burdens as a public company, which could negatively impact our business, financial condition and results of operations.

We will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require us to carry out activities we have not done previously. For example, we have created new board committees and adopted new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if we identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could harm our reputation or investor perceptions of us. It may also be more expensive to obtain director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on our board of directors or as executive officers. The additional reporting and other

 

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obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require the us to divert a significant amount of money that could otherwise be used to expand our business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of financial reports, and the market price of our common stock may decline.

We are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. In addition, we are required to furnish a report by management in our annual report on Form 10-K on the effectiveness of our internal control over financial reporting, pursuant to Section 404 of Sarbanes-Oxley. The process of designing, implementing, and testing the internal control over financial reporting required to comply with this obligation is time-consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of Sarbanes-Oxley in a timely manner, or if we are unable to assert that our internal control over financial reporting are effective, we will be unable to certify that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decline. We could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.

Our management has identified material weaknesses in our internal control over financial reporting and we may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. We were a private company with limited accounting and financial reporting personnel and other resources with which to address our internal controls and procedures. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We determined that we had material weaknesses in internal control because we did not maintain effective controls related to: (i) the completeness and accuracy of financial accounting, reporting and disclosures, (ii) the identification, review and accounting for nonroutine transactions and/or events and (iii) segregation of duties with respect to the processing of financial transactions. With the oversight of senior management and our audit committee, we implemented actions under a remediation plan which include (i) the hiring of personnel with technical accounting and financial reporting experience to further bolster our ability to assess judgmental areas of accounting and provide an appropriate level of oversight of activities related to internal control over financial reporting and (ii) the engagement of external consultants in the assistance of the evaluation of complex accounting matters. We are implementing additional actions under a remediation plan which include (i) the implementation of improved accounting and financial reporting procedures and controls to improve the completeness and accuracy of our financial accounting, reporting and disclosures and (ii) the establishment of formalized internal controls to review and maintain segregation of duties between control operators. We have continued the implementation of this plan and believe the measures described above will remediate the material weaknesses identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures.

 

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While we continue to implement our plan to remediate the material weaknesses described above, we cannot predict the success of such plan or the outcome of our assessment of these plans at this time. If our steps are insufficient to remediate the material weaknesses successfully and otherwise establish and maintain an effective system of internal control over financial reporting, the reliability of our financial reporting, investor confidence in us, and the value of our common stock could be materially and adversely affected. We can give no assurance that the implementation of this plan will remediate these deficiencies in internal control or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements, causing us to fail to meet our reporting obligations.

We qualify as an “emerging growth company.” The reduced public company reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We qualify as an “emerging growth company” under SEC rules. As an emerging growth company, we will be permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These provisions include: (1) presenting only two years of audited financial statements, (2) presenting only two years of related selected financial data and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure, (3) an exemption from compliance with the auditor attestation requirement in the assessment of internal control over financial reporting pursuant to Section 404 of Sarbanes-Oxley, (4) not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, (5) reduced disclosure obligations regarding executive compensation arrangements in periodic reports, registration statements, and proxy statements, and (6) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide will be different than the information that is available with respect to other public companies that are not emerging growth companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and the market price of our common stock may be more volatile. We will remain an emerging growth company until the earliest of: (1) December 31, 2024, (2) the last day of the fiscal year in which it has gross revenue exceeding $1.07 billion, (3) the date on which it has, during the immediately preceding three-year period, issued more than $1.0 billion in non-convertible debt securities, and (4) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year.

Our management has limited experience in operating a public company.

Our executive officers have limited experience in the management of a publicly traded company. Our management team may not successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to our management and growth. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.

 

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If securities or industry analysts do not publish research or reports about our business or publish negative reports, the market price of our common stock could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If regular publication of research reports ceases, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume of our common stock to decline. Moreover, if one or more of the analysts who cover us downgrade our common stock or if reporting results do not meet their expectations, the market price of our common stock could decline.

If our security holders exercise their registration rights, it may negatively impact the market price of our common stock.

In connection with the Closing, we amended our existing registration rights agreement to: (i) provide that we will file a registration statement within 15 business days following the Closing to register for resale (A) the shares of our common stock held by the Apex Initial Stockholders and shares of our common stock issuable upon exercise of the Private Warrants held by the Apex Initial Stockholders and (B) the shares of our common stock issued to the AvePoint stockholders in the Business Combination held by certain AvePoint stockholders party thereto; (ii) provide the AvePoint stockholders with three demand registration rights; (iii) provide the AvePoint stockholders party thereto and the Apex Initial Stockholders customary underwritten takedown rights (subject to customary priorities, minimums, frequency, and quantity limits, cutbacks, deferrals and other terms); and (iv) afford each of the AvePoint stockholders party thereto and the Apex Initial Stockholders, on a pari passu basis, “piggy back” registration rights with respect to any underwritten offerings by the other stockholders and by us. The sale or possibility of sale of these additional securities trading in the public market may negatively impact the market price of our securities.

We have no current plans to pay cash dividends on our common stock; as a result, stockholders may not receive any return on investment unless they sell their common stock for a price greater than the purchase price.

We have no current plans to pay dividends on our common stock. Any future determination to pay dividends will be made at the discretion of our board of directors, subject to applicable laws. It will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual, legal, tax and regulatory restrictions, general business conditions, and other factors that the board of directors may deem relevant. In addition, the ability to pay cash dividends may be restricted by the terms of debt financing arrangements, as any future debt financing arrangement likely will contain terms restricting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, stockholders may not receive any return on an investment in our common stock unless they sell their shares for a price greater than that which they paid for them.

We may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of our common stock.

We have warrants outstanding to purchase an aggregate of 17,905,000 shares of common stock. Pursuant to the 2021 Plan, we may issue an aggregate of up to 30,273,164 shares of common stock, which amount may be subject to increase from time to time. We may also issue additional shares of common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.

The issuance of additional shares or other equity securities of equal or senior rank would have the following effects:

 

   

Existing stockholders’ proportionate ownership interest in us will decrease;

 

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The amount of cash available per share, including for payment of dividends in the future, may decrease;

 

   

The relative voting strength of each previously outstanding common stock may be diminished; and

 

   

The market price of our common stock may decline.

Provisions in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent an acquisition by a third party that could otherwise be in the interests of stockholders.

Our certificate of incorporation and amended and restated bylaws contain several provisions that may make it more difficult or expensive for a third party to acquire control of us without the approval of the board of directors. These provisions, which may delay, prevent or deter a merger, acquisition, tender offer, proxy contest, or other transaction that stockholders may consider favorable, include the following:

 

   

The division of the board of directors into three classes and the election of each class for three-year terms;

 

   

Advance notice requirements for stockholder proposals and director nominations;

 

   

Provisions limiting stockholders’ ability to call special meetings of stockholders, to require special meetings of stockholders to be called, and to take action by written consent;

 

   

Restrictions on business combinations with interested stockholders;

 

   

In certain cases, the approval of holders representing at least 66 2/3% of the total voting power of the shares entitled to vote generally in the election of directors will be required for stockholders to adopt, amend or repeal the bylaws, or amend or repeal certain provisions of the certificate of incorporation;

 

   

No cumulative voting;

 

   

The required approval of holders representing at least 66 2/3% of the total voting power of the shares entitled to vote at an election of the directors to remove directors; and

 

   

The ability of the board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions.

These provisions of our certificate of incorporation and amended and restated bylaws could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our common stock in the future, which could reduce the market price of our common stock.

The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware and the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against directors and officers.

Our certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: (1) any derivative action or proceeding brought on behalf of us, (2) any action asserting a claim of breach of fiduciary duty owed by any director, officer, agent or other employee or stockholder to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, (4) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the amended and restated bylaws or (5) any action asserting a claim governed by the internal affairs doctrine, in each case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. It further provides that, unless we

 

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consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolutions of any complaint asserting a cause of action arising under the Securities Act. The exclusive forum clauses described above shall not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. Although these provisions are expected to benefit us by providing increased consistency in the application of applicable law in the types of lawsuits to which they apply, the provisions may have the effect of discouraging lawsuits against directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings and there is uncertainty as to whether a court would enforce such provisions. In addition, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. It is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in the our certificate of incorporation to be inapplicable or unenforceable in such action. If so, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition or results of operations.

 

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MARKET AND INDUSTRY DATA

Certain industry data and market data included in this prospectus were obtained from independent third-party surveys, market research, publicly available information, reports of governmental agencies and industry publications and surveys. All of management’s estimates presented herein are based upon management’s review of independent third-party surveys and industry publications prepared by a number of sources and other publicly available information. All of the market data used in this prospectus involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We believe that the information from these industry publications and surveys included in this prospectus is reliable. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

 

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USE OF PROCEEDS

All of the shares of common stock and Warrants offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from these sales.

We will receive up to an aggregate of approximately $205.9 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes, including to fund potential future investments and acquisitions of companies that we believe are complementary to our business and consistent with our growth strategy. We will have broad discretion over the use of proceeds from the exercise of the Warrants. There is no assurance that the holders of the Warrants will elect to exercise any or all of such Warrants. To the extent that the Warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the Warrants will decrease.

 

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DETERMINATION OF OFFERING PRICE

The offering price of the shares of common stock underlying the Warrants offered hereby is determined by reference to the exercise price of the Warrants of $11.50 per share. The Public Warrants are listed on Nasdaq under the symbol “AVPTW.”

We cannot currently determine the price or prices at which shares of common stock or Warrants may be sold by the selling securityholders under this prospectus.

 

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MARKET INFORMATION FOR SECURITIES AND DIVIDEND POLICY

Market Information

Our common stock and Public Warrants are currently listed on Nasdaq under the symbols “AVPT” and “AVPTW,” respectively. Prior to the consummation of the Business Combination, our common stock and our Public Warrants were listed on Nasdaq under the symbols “APXT” and “APXTW,” respectively. As of July 1, 2021, following the completion of the Business Combination, there were 98 holders of record of the common stock and three holders of record of our Warrants. We currently do not intend to list the Private Warrants offered hereby on any stock exchange or stock market.

Dividend Policy

We have never declared or paid any dividends on shares of our common stock. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section titled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Please also see the section titled “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We are a Microsoft Gold Certified Partner in Application Development, Cloud Platform, Cloud Productivity, and Collaboration and Content. We are a top Global Independent Software Vendor (GISV) partner, ranking in the top 5 in Microsoft’s IP-Co-Sell program out of 3,000 participating partners. Our main product platform is the AvePoint Cloud, delivered as AvePoint Online Services, or AOS. Our software-as-a-service, or SaaS, platform focuses on data protection, governance, and compliance management extensions for Microsoft 365 (“M365”). We have expanded our coverage of SharePoint infrastructure to cover Microsoft’s Teams, Exchange, Skype for Business (previously Lync), and Yammer, and other workloads in the M365 platform. We offer more than 30 products.

Our primary on-premises product is the DocAve Software Platform, which gives enterprise systems administrators the tools to migrate, manage, and govern SharePoint deployments from individual items to entire data farms. Our additional on-premises products Governance Automation and Compliance Guardian Platform deliver SharePoint-as-a-Service, helping organizations build in governance and controls to common IT requests, and data classification, audit, and protection, or DCAP. Our SaaS and on-premises platform features include Data Backup, Archiving, Disaster Recovery, Migration, Records Management, Auditing/Reporting, Governance, Risk Assessment, and Data Analytics. We also provide training, installation, configuration, AvePoint Client Services, Technical Account Management, and AvePoint Partner Services, in support of our products.

We have expanded beyond our original SharePoint infrastructure management business into a global infrastructure management software company. Our current strategy is focused on the cloud. We have made significant investments into cloud storage and cloud-based computing products to support our growing SaaS business, since its initial release of DocAve Online, the pre-cursor to AvePoint Online Services, in 2013. We have added Governance Automation, Compliance Guardian, and Records platforms to extend availability of our solutions to other key stakeholders involved in securing organizational collaboration.

In 2019, we expanded the distribution channels for our products through third parties. This sales channel utilizes managed service providers, or MSPs, to sell our products to end users through online marketplaces. This sales channel differs from our traditional business, in that contracts are monthly, and the typical end-customer spends less than $100 a month on the product due to small license counts required.

Our SaaS and termed license and support revenue sources are typically sold as multi-year contracts. As of March 31, 2021, our subscription contracts had an average duration of approximately 2 to 2.5 years.

Services are typically sold in conjunction with product sales. Services revenue includes revenue derived primarily from the implementation of software, training, consulting and migrations. We also offer license customization and managed service offerings.

 

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The Business Combination

We entered into the Business Combination Agreement with Apex on November 23, 2020. Pursuant to the Business Combination Agreement, Merger Sub, a wholly owned subsidiary of Apex, merged with and into AvePoint, with AvePoint surviving the merger as a wholly-owned subsidiary of Apex. Promptly following the first merger, the surviving company merged with and into Merger Sub 2, with Merger Sub 2 as the surviving company and a wholly owned subsidiary of Apex. The surviving company was renamed AvePoint, Inc.

The Business Combination is accounted for as a reverse recapitalization. We are the accounting predecessor and we are the successor SEC registrant, meaning that our financial statements for previous periods will be disclosed in our future periodic reports filed with the SEC. Under this method of accounting, Apex is treated as the acquired company for financial statement reporting purposes. The most significant change in the successor’s future reported financial position and results are expected to be an estimated net increase in cash (as compared to our consolidated balance sheet at March 31, 2021) of between approximately $40.3 million, assuming maximum shareholder redemptions permitted under the Business Combination Agreement, and $184.8 million, assuming minimum shareholder redemptions, and in each case including $140 million in gross proceeds from the PIPE by Apex. Total transaction costs are estimated at approximately $52.5 million. See the section titled “Unaudited Pro Forma Condensed Combined Financial Information” for additional information.

As a result of the Business Combination, we are the successor to an SEC-registered and Nasdaq-listed company, which requires us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.

Impact of COVID-19 on our Business

In December 2019, COVID-19 was first reported. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic has created global economic uncertainty, adversely impacted the business of our customers and partners, impacted our business and results of operations and could further impact our results of operations and cash flows in the future.

We have not experienced any material negative impacts to our operational, cloud or product availability, or customer support, as a result of our own shift to remote work. Instead, our teams continue to display our values of agility, passion, and teamwork on a daily basis to ensure we are able to support our customers for the long haul, with new product releases, customer experiences, and excellent support.

We excelled at helping our customers face their own transformations during COVID-19. For example, in 2019 we were first engaged with METC, the regional policy-making body, planning agency, and provider of essential services for the metropolitan region of Minneapolis / St. Paul, Minnesota. METC rolled out Microsoft Teams following our migration from SharePoint 2010 to Microsoft 365’s SharePoint Online service. Our product, Cloud Governance was rolled out to remote workers on Sunday March 15, 2020, to enable automated and compliant self-service Teams creation. Our solution helped METC cope with the rapid influx of approximately 2,000 remote workers, due to the government-issued Work From Home order. The week after the AvePoint solution roll-out, the number of Teams created increased 400%, driving the total number of Teams up 20% over the period. With increased pressure to transform how their organizations worked, we were able to help customers who had planned longer rollouts of Microsoft Teams to accomplish those rollouts within a weekend and ensure ongoing sustainability of the service. These accelerated timelines are a direct result of the pressure COVID-19 put on organizations to speed up their work from anywhere initiatives, as echoed by Microsoft executives.

 

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In addition to meeting immediate customer needs, we released exclusive offers, aimed at helping our customers cope with this rapid transition, to provide greatly improved customer experiences. Teams responsible for enabling a remote workforce were supported by AvePoint software to enable visibility on remote workers, security, and governance for newly adopted cloud services, and automated backups for a rapidly expanding digital footprint.

Our product development teams worked to respond to customer needs as well, recognizing the pressure of regulated customers during this rapid digital transformation. During the COVID-19 crisis, we have been able to pivot to provide tactical, immediate value in the form of a new product (Policies and Insights), developed and released in the midst of the pandemic, which mitigates risks such as over-exposed sensitive information and over-privileged external users, potentially direct results of the rush to work-from-home.

Despite global headwinds and market volatility, during the three months ending March 31, 2021 and the year ending December 31, 2020 we experienced a 19% and 31% increase in revenue, respectively. We believe that market volatility has only accelerated organizations to do more with less, which requires advanced technology solutions, preferably fewer vendors, and ample automation to support these new organizational realities.

Key Business Metrics

Our management reviews the following key business metrics to measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. However, increases or decreases in our key business metrics may not correspond with increases or decreases in our revenue.

The chart below illustrates certain key business metrics, each described in more detail below, as of the end of or for the periods presented.

 

     Three Months Ended March 31,     Years Ended December 31,  
     2021     2020     2020     2019     2018  

Total ARR ($ in mil)

   $ 129.2     $ 97.0     $ 118.7     $ 91.8     $ 72.9  

Accounts above $100,000 in ARR

     270       200       247       184       136  

Average Core ARR per account ($ actual)

   $ 34,551     $ 26,741     $ 32,872     $ 25,669     $ 20,410  

Core TTM dollar-based net retention rate

     110     105     107     104     103

Annual Recurring Revenue

We calculate our annual recurring revenue (“ARR”) at the end of a particular period as the annualized sum of: (1) contractually obligated Annual Contract Value (“ACV”) from SaaS and termed license, support and maintenance revenue sources from all customers with a contract duration exceeding three months (“Core ARR”), and (2) the product of the current month’s monthly recurring revenue (“MRR”) multiplied by twelve (to prospectively annualize SaaS and termed license and support revenue). MRR is attributable to our Channel business. As of March 31, 2021 and December 31, 2020, our Channel business was transacting the equivalent of $5.5 million and $4.2 million in annual recurring revenue, respectively, calculated as March’s and December’s MRR, multiplied by twelve months. Customer contracts used in calculating MRR may or may not be extended or renewed by our customers. ARR also includes some recurring professional services revenue, such as recurring technical account management services. Growth in ARR is driven by both new business and the retention of existing business. We believe ARR is indicative of growth in recurring revenue streams, leading to higher revenue growth in future periods. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with, or to replace, either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers (the same is true for those contracts used in calculating MRR, which may or may not be extended or renewed by the customer).

 

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Accounts Above $100,000 ARR

We track the total number of accounts with ARR greater than $100,000 as of the end of each quarter. We believe our ability to enter into larger contracts is indicative of broader adoption of our solutions by larger organizations. These organizations are typically more resilient to changes in macro-economic conditions leading to more dependable relationships with such customers. It also reflects our ability to expand the revenue from our existing customer base. Growth in this metric is due to larger initial contract values, as well as expansion of existing customer relationships.

Average Core ARR per Account

We calculate average ARR per account (“ARRPA”) for accounts included in our Core ARR calculation in order to evaluate the amount of ACV obligated revenue provided by customers at a given point in time. Factors influencing this metric include our ability to sell for higher prices and/or more volume, as well as our ability to cross-sell additional products that are part of our platform. We do not include MRR-contributing customers1 in this calculation. Growth in this metric is reflective of both larger initial contract values with new customers and expansion of contract values with current customers, demonstrating value provided to our customers.

Core TTM Dollar-Based Net Retention Rate

We use TTM dollar-based net retention rate to evaluate our ability to maintain and expand our revenue with our customer base over time. This metric is calculated as a percentage, the numerator of which is the sum of (i) Core ARR at the beginning of the period plus (ii) Upsell Core ARR during the period plus (iii) Churn Core ARR during the period plus (iv) Downsell Core ARR during the period, and the denominator of which is Core ARR at the beginning of the period. For these purposes, Upsell Core ARR is defined as the increase in Core ARR from the active, existing customers within the stipulated period, Churn Core ARR is defined as the amount of lost Core ARR when customers no longer provide us with Core ARR and Downsell Core ARR is defined as the decrease in Core ARR from active, existing customers within a stipulated period. A net retention rate greater than 100% implies positive net revenue retention. We primarily focus on these metrics for a trailing twelve-month, or TTM, period. This methodology includes Core ARR added to or subtracted from the account’s existing Core ARR during the previous twelve months. Net new accounts added after the previous one-year period are excluded in our net retention calculations. We believe this metric is indicative of our ability to grow our relationships with existing customers, and further grow ARR and revenue. Improvement in this metric is driven by improvement in both customer retention, as well as cross-sell and up-sell capabilities.

Key Factors Affecting our Performance

Retention and Growth of our Existing Customers

Our long-term revenue growth is correlated with our ability to retain customers and expand revenue from our existing customers. Contracts have terms ranging from 12 to 36 months, with an average duration of approximately 2.0 to 2.5 years, and do not include the ability to terminate for convenience. We collaborate with customers to identify additional cross-sell and up-sell opportunities. We believe that our land and expand business model will allow us to efficiently increase revenue from our existing customer base. The breadth of our platform has resulted in a dollar-based net retention rate exceeding 100%, as described above.

 

1 

MRR-contributing customer is classified as a customer with a contract duration of 3 months or less. Most typically exists within our channel business.

 

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Growth in Channel Business

Our ability to grow our Channel business, with a specific focus on Managed Services Providers (“MSPs”) through our distribution partner network, is predicated upon our ability to attract and retain a number of managed service providers. We continually evaluate prospective and existing partners’ abilities to attract new customers to our platform. We add new partners and expand existing partner relationships to enhance the utility of our platform, while creating new opportunities to expand our revenue share provided by our Channel business.

Successful Rollout of New Geographies

We have sought to enter new markets to both increase our sales footprint but also to mitigate risk and reduce expense. Recently, we opened a research and development site in Vietnam. In addition to our current international operations, we intend to open new sales offices in Indonesia and Taiwan. We believe that diversifying our operations and research will help mitigate the potential for concentration risk in a single geopolitical area, as well as allow for continued 24x7 operations.

Realizing Operating Leverage from our Investments

We have made significant investments in our SaaS platform, our Channel business, our global infrastructure and our sales and customer success organizations, which we believe will yield future operating leverage and profit margin expansion. Research and development represents a primary operating expense and has been partially offset through development of customized service solutions. We continue to look for opportunities to seek quality development teams with efficient cost structures. In addition, we believe we can achieve operating leverage in marketing by continuing to emphasize lower-cost inbound techniques and growth in customer referrals from our technology and agency partners. We believe we will be able to run our business more efficiently as we continue to grow our revenue and gain further operating scale.

Components of Results of Operations

Revenue

We generate revenue from four primary sources: SaaS, termed license and support, services, and maintenance across a variety of products.

Our revenue was comprised of the following types for the periods presented:

 

     % of Total Revenue  
     Three Months Ended March 31,     Year Ended December 31,  
     2021     2020     2020     2019     2018  

Revenue:

          

SaaS

     48     32     34     24     15

Termed license and support

     22     24     26     23     20

Services

     15     23     23     23     25

Maintenance and OEM

     14     18     15     25     34

Perpetual license

     1     3     2     5     6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     100     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recurring revenue(1)

     83     73     75     71     65
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Total recurring revenue consists of revenue from SaaS, termed license and support and maintenance revenue offerings

SaaS and termed license and support revenue sources are primarily billed annually, apart from our Channel business. SaaS and termed license and support are generally sold per user license or based upon the amount of data protected.

 

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Services revenue includes revenue generated from implementation, training, consulting, migration, license customization and managed services. Services revenue from implementation, training, consulting, migration, and license customization are recognized by applying a measure of progress, such as labor hours to determine the percentage of completion of each contract. Services revenue from managed services are recognized ratably or on a straight-line basis over the contract term.

Maintenance revenue is a result of selling on-going support for perpetual licenses. It also includes recurring professional services such as technical account management (TAM). Maintenance revenue is recognized ratably over the term of the maintenance agreement, which is typically one year.

The fundamental shift by our customers to the cloud has accelerated the adoption of our SaaS offerings. This increased adoption rate is evidenced by the shift in bookings from perpetual license to SaaS and termed license and support bookings and the shift within these bookings to SaaS bookings. Beginning in 2016, we shifted our focus from a perpetual license model to a subscription pricing model. Over the last several years, we have experienced a gradual decline in sales of perpetual licenses, followed by a corresponding decline in maintenance revenue. In contrast, we have experienced a rapid increase in SaaS and termed license and support sales and corresponding revenue in 2018, 2019, 2020 and for the three months ended March 31, 2021.

Over time, we expect SaaS revenue will increase as a percentage of total revenue and more closely reflect our bookings mix as we continue to focus on increasing SaaS and termed license and support revenue as a key strategic priority.

Cost of Revenue

Cost of SaaS and cost of termed license and support consists of all direct costs to deliver and support our SaaS and termed license and support products, including salaries, benefits and related expenses, allocated overhead, and third-party hosting fees related to our cloud services. We recognize these expenses as they are incurred. We expect that these costs will increase in absolute dollars but may fluctuate as a percentage of SaaS and termed license and support revenue from period to period.

Cost of maintenance consists of all direct costs to support our perpetual license products, including salaries, benefits and related expenses and allocated overhead. We recognize these expenses as they are incurred. We expect that cost of maintenance revenue will decrease in absolute dollars as maintenance revenue declines but may fluctuate as a percentage of maintenance revenue.

Cost of services consists of salaries, benefits, stock-based compensation and related expenses for our services organization, allocated overhead and IT necessary to provide services for our customers. We recognize these expenses as they are incurred. We expect moderate fluctuations in both the percentage of services revenue and in absolute dollars relative to the extent of growth of our business.

Gross Profit and Gross Margin

Gross profit is revenue less cost of revenue, and gross margin is gross profit as a percentage of revenue. Gross profit has been and will continue to be affected by various factors, including the mix of our revenue, the costs associated with third-party cloud-based hosting services for our cloud-based subscriptions, and the extent to which we expand our customer support and services organizations. We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors but should increase in the long term as our product mix continues to shift in favor of SaaS and termed license and support revenue.

Sales and Marketing

Sales and marketing expenses consist primarily of: personnel-related expenses for sales, marketing and customer success personnel, stock-based compensation expense, sales commissions, marketing programs, travel-

 

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related expenses, and allocated overhead costs. We focus our sales and marketing efforts on creating sales leads and establishing and promoting our brand. Incremental sales commissions for new customer contracts are deferred and amortized ratably over the estimated period of our relationship with such customers. We plan to increase our investment in sales and marketing by hiring additional sales and marketing personnel, executing our go-to-market strategy globally, and building our brand awareness. We expect our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense for the foreseeable future but will decrease as a percentage of total revenue over time. However, we anticipates that sales and marketing expense levels as a percentage of revenue will increase in the short-term as travel restrictions associated with the COVID-19 pandemic are lifted and we hire for continued growth.

Research and Development

Research and development expenses consist primarily of personnel-related expenses incurred for our engineering, product and design teams, stock-based compensation expense and allocated overhead costs. We have research and development presence in the United States, China and Vietnam, which provide a strategic advantage allowing us to invest in increasing our product capabilities in an efficient manner. We believe delivering and expanding product functionality is critical to enhancing the success of existing customers while new product development further reinforces our breadth of solutions. We expect to continue to make substantial investments in research and development. We expect our research and development expenses to increase in absolute dollars and as a percentage of total revenue over time.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for finance, legal and compliance, human resources, and IT, stock-based compensation expense, external professional services, allocated overhead costs and other administrative functions. We expect that our general and administrative expenses will increase as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations, and professional services. As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue from period to period.

Other Income (Expense), net

Other income (expense), net consists primarily of foreign currency fluctuations partially offset by interest income on corporate funds invested in money market instruments and highly liquid short-term investments.

Income Tax Expense (Benefit)

Income tax expense (benefit) consists primarily of income taxes related to certain foreign and state jurisdictions in which we conduct business. For U.S. federal income tax purposes and in certain foreign and state jurisdictions, we have NOL carryforwards. The foreign jurisdictions in which we operate have different statutory tax rates than those of the United States. Additionally, certain of our foreign earnings may also be currently taxable in the United States. Accordingly, our effective tax rate will vary depending on the relative proportion of foreign to domestic income, use of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, and changes in tax laws in jurisdictions in which we operate.

 

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Results of Operations

The following table summarizes our historical consolidated statement of operations data. The period-to-period comparison of operating results is not necessarily indicative of results for future periods.

 

     Three Months Ended March 31,     Year Ended December 31,  
     2021     2020     2020     2019     2018  
    

(in thousands)

 

Total revenue

     $38,800       $32,661     $ 151,533     $ 116,099     $ 107,314  

Total cost of revenue(1)

     10,778       10,367       40,290       36,399       30,797  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     28,022       22,294       111,243       79,700       76,517  

Operating expenses:

          

Sales and marketing(1)

     19,301       14,041       76,545       61,901       50,269  

General and administrative(1)

     10,292       5,158       36,872       24,614       19,102  

Research and development(1)

     4,102       2,894       12,204       11,148       8,244  

Depreciation and amortization

     258       273       1,059       1,049       1,209  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     33,953       22,366       126,680       98,712       78,824  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (5,931     (72     (15,437     (19,012     (2,307

Other income (expense), net

     (50     (824     (470     (548     289  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax loss

     (5,981     (896     (15,907     (19,560 )       (2,018

Income tax expense (benefit)

     (1,039     (167     1,062       614       1,930  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (4,942   $ (729   $ (16,969     (20,174   $ (3,948
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Stock-based compensation for the periods was included in the following line items:

 

     Three Months Ended March 31,      Year Ended December 31,  
     2021      2020      2020      2019      2018  
    

(in thousands)

 

Cost of revenue

   $ 90      $ (88)      $ 592      $ 415      $ 157  

Sales and marketing

     1,111        (200)        19,973        8,166        384  

General and administrative

     1,991        288        12,916        5,034        1,036  

Research and development

     97        75        286        278        143  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

   $ 3,289      $ 75      $ 33,767      $ 13,893      $ 1,720  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comparison of Three Months Ended March 31, 2021 and March 31, 2020

Revenue

The components of our revenue during the three months ended March 31, 2021 and 2020 were as follows:

 

     Three Months Ended
March 31,
     Change  
     2021      2020      $      %  
     (dollars in thousands)  

Revenue:

           

SaaS

   $ 18,259      $ 10,243      $ 8,016        78.3

Termed license and support

     8,727        7,744        983        12.7

Service

     5,916        7,579        (1,663      (21.9 %) 

Maintenance and OEM

     5,409        6,005        (596      (9.9 %) 

Perpetual license

     489        1,090        (601      (55.1 %) 
  

 

 

    

 

 

    

 

 

    

Total revenue

   $ 38,800      $ 32,661      $ 6,139        18.8
  

 

 

    

 

 

    

 

 

    

 

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Revenue increased $6.1 million, or 18.8%, from $32.7 million for the three months ended March 31, 2020 to $38.8 million for the three months ended March 31, 2021, primarily as a result of an increase in SaaS revenue. Our SaaS offerings increased $8.0 million, or 78.3%, from $10.2 million for the three months ended March 31, 2020 to $18.3 million for the three months ended March 31, 2021. In addition, our termed license and support revenue increased $1.0 million, or 12.7%, from $7.7 million for the three months ended March 31, 2020 to $8.7 million for the three months ended March 31, 2021.

The increases attributable to SaaS and termed license and support revenue were offset by a decrease in service revenue, which decreased $1.7 million, or 21.9%, from $7.6 million for the three months ended March 31, 2020 to $5.9 million for the three months ended March 31, 2021, a decrease in maintenance and OEM revenue, which decreased $0.6 million, or 9.9%, from $6.0 million for the three months ended March 31, 2020 to $5.4 million for the three months ended March 31, 2021, and a decrease in license revenue, which decreased $0.6 million, or 55.1%, from $1.1 million for the three months ended March 31, 2020 to $0.5 million for the three months ended March 31, 2021. Our revenue from license, maintenance and OEM revenue is expected to continue to trend downward period over period. This is driven from multiple strategic decisions to shift away from the sale of perpetual licenses and towards SaaS and termed licenses. Without material perpetual license sales, there will be limited opportunities to sell maintenance contracts to new customers. Existing customers have and will continue to transition to SaaS and termed licenses, which will continue the decline in maintenance revenue.

The increase in SaaS revenue of $8.0 million was driven by $6.4 million from existing customers and $1.6 million from new customers. The increase in termed license and support revenue of $1.0 million was driven by $3.2 million from new customers, offset by a decrease of $2.2 million from existing customers reducing purchases of termed license and support offerings. The decrease in maintenance and OEM revenue of $0.6 million was primarily driven by a decrease of $0.6 million from existing maintenance customers. This decline was driven in large part due to our focus on SaaS and termed license and support revenue streams and away from the sales of new perpetual licenses.

Termed license and support revenue for the three months ended March 31, 2021 and 2020 includes $5.7 million and $5.2 million of revenue recognized at a point of time, respectively.

Revenue by geographic region for the three months ended March 31, 2021 and 2020 was as follows:

 

     Three Months Ended
March 31,
     Change  
     2021      2020      $      %  
     (dollars in thousands)         

North America

   $ 17,633      $ 13,073      $ 4,560        34.9

EMEA

     11,191        10,215        976        9.6

APAC

     9,976        9,373        603        6.4
  

 

 

    

 

 

    

 

 

    

Total

   $ 38,800      $ 32,661      $ 6,139        18.8
  

 

 

    

 

 

    

 

 

    

From the three months ended March 31, 2020 to the three months ended March 31, 2021, North America experienced a $4.6 million increase in revenue driven by a $5.6 million increase in SaaS and termed license and support revenue, partially offset by a $0.7 million decrease in license, maintenance and OEM revenue and a $0.3 million decrease in service revenue. EMEA experienced a $1.0 million increase in revenue driven by a $2.0 million increase in SaaS and termed license and support revenue, partially offset by a $0.8 million decrease in service revenue and a $0.2 million decrease in license, maintenance and OEM revenue. APAC experienced a $0.6 million increase in revenue driven by a $1.3 million increase in SaaS and termed license and support revenue, partially offset by a $0.5 million decrease in service revenue and a $0.2 million decrease in license, maintenance and OEM revenue. The overall decrease in service, license, maintenance, and OEM revenue is due to our continued shift towards SaaS and termed license and support offerings.

 

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Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue, gross profit, and gross margin during the three months ended March 31, 2021 and 2020 were as follows:

 

     Three Months Ended
March 31,
    Change  
     2021     2020     Amount      %  
     (dollars in thousands)         

Cost of revenue:

         

SaaS

   $ 4,440     $ 2,514     $ 1,926        76.6

Termed license and support

     273       472       (199      (42.2 %) 

Service

     5,585       7,012       (1,427      (20.4 %) 

Maintenance and OEM

     480       369       111        (30.1 %) 
  

 

 

   

 

 

   

 

 

    

Total cost of revenue

   $ 10,778     $ 10,367     $ 411        4.0

Gross profit

     28,022       22,294       5,728        25.7

Gross margin

     72.2     68.3     —          —    

Cost of revenue increased $0.4 million, or 4.0%, from $10.4 million for the three months ended March 31, 2020 to $10.8 million for the three months ended March 31, 2021, primarily as a result of higher hosting costs resulting from increased SaaS revenue, partially offset by decreases in service-related costs which correspond with the decrease in services revenue. Despite the increase in cost of revenue, gross margin on SaaS revenue increased for the three months ended March 31, 2021 to 75.7%, up from 75.5% for the three months ended March 31, 2020. Total gross margin increased to 72.2% for the three months ended March 31, 2021 from 68.3% for the three months ended March 31, 2020.

Operating Expenses

Sales and Marketing

Sales and marketing expenses during the three months ended March 31, 2021 and 2020 were as follows:

 

     Three Months Ended
March 31,
    Change  
     2021     2020     Amount      %  
     (dollars in thousands)  

Sales and marketing

   $ 19,301     $ 14,041     $ 5,260        37.5

Percentage of revenue

     49.7     43.0     —          —    

Sales and marketing expenses increased $5.3 million, or 37.5%, from $14.0 million for the three months ended March 31, 2020 to $19.3 million for the three months ended March 31, 2021. The drivers of this change were higher personnel, stock-based compensation, marketing, and commission costs, offset by lower costs associated with travel. The increase in personnel costs was driven by higher headcount required as we continue to expand. The increase in stock-based compensation was driven by favorable mark-to-market adjustments on liability classified awards in the first quarter of 2020 as a result of a lower price of the underlying shares as compared to ongoing stock-based compensation expenses without significant mark-to-market adjustments in the first quarter of 2021. The increase in marketing costs was driven by expanded marketing campaigns in the first quarter of 2021. The increase in commissions were a result of increased bookings in the first quarter of 2021. The decrease in costs associated with travel is a result of continued reductions in travel due to restrictions created by the COVID-19 pandemic. As a percentage of revenue, sales and marketing expenses increased to 49.7% during the three months ended March 31, 2021 from 43.0% during the three months ended March 31, 2020, primarily due to increased headcount. We anticipate that our expense levels as a percentage of revenue will continue to increase as travel restrictions are lifted and we hire for continued growth.

 

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Research and Development

Research and development expenses during the three months ended March 31, 2021 and 2020 were as follows:

 

     Three Months Ended
March 31,
    Change  
     2021     2020     Amount      %  
     (dollars in thousands)         

Research and development

   $ 4,102     $ 2,894     $ 1,208        41.7

Percentage of revenue

     10.6     8.9     —          —    

Research and development expenses increased $1.2 million, or 41.7%, from $2.9 million for the three months ended March 31, 2020 to $4.1 million for the three months ended March 31, 2021. The increase was primarily due to higher compensation costs for research and development personnel. Research and development expenses as a percentage of revenue increased to 10.6% for the three months ended March 31, 2021 from 8.9% for the three months ended March 31, 2020.

General and Administrative

General and administrative expenses during the three months ended March 31, 2021 and 2020 were as follows:

 

     Three Months Ended
March 31,
    Change  
     2021     2020     Amount      %  
     (dollars in thousands)         

General and administrative

   $ 10,292     $ 5,158     $ 5,134        99.5

Percentage of revenue

     26.5     15.8     —          —    

General and administrative expenses increased $5.1 million, or 99.5%, from $5.2 million for the three months ended March 31, 2020 to $10.3 million for the three months ended March 31, 2021. The drivers of this change were stock-based compensation and personnel costs. The increase in stock-based compensation was driven by favorable mark-to-market adjustments on liability classified awards in the first quarter of 2020 as a result of a lower price of the underlying shares as compared to ongoing stock-based compensation expenses in the first quarter of 2021. The increase in personnel costs was driven by higher headcount required as we continue to expand. The increase in general and administrative expenses was also driven by a legal settlement reserve for approximately $1 million. As a percentage of revenue, general and administrative expenses increased to 26.5% for the three months ended March 31, 2021 from 15.8% during the three months ended March 31, 2020.

Income Tax Expense (Benefit)

Income tax expense (benefit) during the three months ended March 31, 2021 and 2020 were as follows:

 

     Three Months Ended
March 31,
     Change  
         2021              2020          Amount      %  
     (dollars in thousands)  

Income tax benefit

   $ (1,039    $ (167    $ (872      (522.2 %) 

Our income tax benefit increased by approximately $0.8 million resulting in a $1.0 million benefit for the three months ended March 31, 2021 compared to a $0.2 million benefit for the three months ended March 31, 2020. This was attributable to the effects of our effective tax rate applied to pre-tax loss incurred during the first quarter of 2021. The effective tax rate was 17.4% for the three months ended March 31, 2021 compared to 18.7% for the three months ended March 31, 2020. The change in effective tax rate was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates and changes in the valuation allowance for tax losses in certain foreign jurisdictions for which no benefit can be taken.

 

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Comparison of Years Ended December 31, 2020 and December 31, 2019

Revenue

The components of our revenue during the Years Ended December 31, 2020 and 2019 were as follows:

 

     Years Ended
December 31,
     Change  
     2020      2019      $      %  
     (dollars in thousands)  

Revenue:

           

SaaS

   $ 52,074      $ 27,744      $ 24,330        87.7

Termed license and support

     38,949        26,985        11,964        44.3

Services

     34,140        26,662        7,478        28.0

Maintenance and OEM

     23,462        29,122        (5,660      (19.4 %) 

Perpetual license

     2,908        5,586        (2,678      (47.9 %) 
  

 

 

    

 

 

    

 

 

    

Total revenue

   $ 151,533      $ 116,099      $ 35,434        30.5
  

 

 

    

 

 

    

 

 

    

Revenue increased $35.4 million, or 30.5%, from $116.1 million in 2019 to $151.5 million in 2020, primarily as a result of an increase in SaaS and termed license and support revenue. Our SaaS offerings increased $24.3 million, or 87.7%, from $27.7 million in 2019 to $52.1 million in 2020. In addition, our termed license and support offerings increased $12.0 million, or 44.3%, from $27.0 million in 2019 to $39.0 million in 2020.

The overall increase in revenue was also driven by increases in services revenue which increased $7.5 million, or 28.0%, from $26.7 million in 2019 to $34.1 million in 2020. Services revenue derived from service offerings, which can be offered for software implementation, training, migration, customized solutions and managed services. These offerings are not inherently recurring in nature and as such are subject to more period-to-period volatility than other elements of our business.

The increases attributable to SaaS, termed license and support and services revenue were offset by a decrease in maintenance and OEM revenue, which decreased $5.7 million, or 19.4%, from $29.1 million in 2019 to $23.5 million in 2020, and a decrease in license revenue, which decreased $2.7 million, or 47.9%, from $5.6 million in 2019 to $2.9 million in 2020. Our revenue from license, maintenance and OEM revenue is expected to continue to trend downward period over period. This is driven from multiple strategic decisions to shift away from the sale of perpetual licenses and towards SaaS and termed licenses. Without material perpetual license sales, there will be limited opportunities to sell maintenance contracts to new customers. Existing customers have and will continue to transition to SaaS and termed licenses, which will continue the decline in maintenance revenue.

The increase in SaaS revenue of $24.3 million was driven by $18.6 million from existing customers and $5.7 million from new customers. The increase in termed license and support revenue of $12.0 million was driven by $10.1 million from existing customers and $1.9 million from new customers. The decrease in maintenance and OEM revenue of $5.7 million was primarily driven by a decrease of $3.7 million from existing maintenance customers and a $1.1 million decline from new maintenance customers. This decline was driven in large part due to our focus on SaaS and termed license and support revenue streams and away from the sales of new perpetual licenses.

Termed license and support revenue for 2020 and 2019 includes $29.5 million and $20.8 million of revenue recognized at a point of time, respectively.

 

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Revenue by geographic region for the years ended December 31, 2020 and 2019 was as follows:

 

     Years Ended
December 31,
     Change  
     2020      2019      $      %  
     (dollars in thousands)         

North America

   $ 67,823      $ 48,614      $ 19,209        39.5

EMEA

     42,441        33,661        8,780        26.1

APAC

     41,269        33,824        7,445        22.0
  

 

 

    

 

 

    

 

 

    

Total

   $ 151,533      $ 116,099      $ 35,434        30.5
  

 

 

    

 

 

    

 

 

    

From 2019 to 2020, North America experienced a $19.2 million increase in revenue driven by a $20.6 million increase in SaaS and termed license and support revenue and a $4.4 million increase in service revenue. This was partially offset by a $5.8 million decrease in license, maintenance, and OEM revenue. EMEA experienced a $8.8 million increase in revenue driven by a $9.9 million increase in SaaS and termed license and support revenue and a $1.1 million increase in service revenue. This was partially offset by a $2.2 million decrease in license, maintenance, and OEM revenue. APAC experienced a $7.4 million increase in revenue driven by a $5.8 million increase in SaaS and termed license and support revenue and a $2.0 million increase in service revenue. This was partially offset by a $0.3 million decrease in license, maintenance, and OEM revenue. The overall decrease in license, maintenance, and OEM revenue is due to AvePoint’s continued shift towards SaaS and termed license and support offerings.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue, gross profit, and gross margin during the years ended December 31, 2020 and 2019 were as follows:

 

     Years Ended
December 31,
    Change  
     2020     2019     Amount      %  
     (dollars in thousands)         

Cost of revenue:

         

SaaS

   $ 11,050     $ 7,500     $ 3,550        47.3

Termed license and support

     1,930       1,897       33        1.7

Services

     26,089       24,727       1,362        5.5

Maintenance and OEM

     1,221       2,275       (1,054      (46.3 %) 

Total cost of revenue

   $ 40,290     $ 36,399     $ 3,891        10.7

Gross profit

     111,243       79,700       31,543        39.6

Gross margin

     73.4     68.6     —          —    

Cost of revenue increased $3.9 million, or 10.7%, from $36.4 million in 2019 to $40.3 million in 2020, primarily as a result of higher hosting costs resulting from increased SaaS revenue and increases in service-related costs which correspond with an increase in services revenue, offset by decreases in costs associated with revenue from licenses, maintenance, and OEM as the business continues its shift to provide more SaaS-based solutions. Despite the increase in cost of revenue, gross margin on SaaS revenue increased in 2020 to 78.8%, up from 73.0% in 2019. Total gross margin increased to 73.4% in 2020 from 68.6% in 2019.

Operating Expenses

Sales and Marketing

Sales and marketing expenses during the years ended December 31, 2020 and 2019 were as follows:

 

     Years Ended
December 31,
    Change  
     2020     2019     Amount      %  
     (dollars in thousands)  

Sales and marketing

   $ 76,545     $ 61,901     $ 14,644        23.7

Percentage of revenue

     50.5     53.3     —          —    

 

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Sales and marketing expenses increased $14.6 million, or 23.7%, from $61.9 million in 2019 to $76.5 million in 2020 but declined as a percentage of revenue. The primary driver of the increase relates to increased stock-based compensation of $11.8 million allocated to sales and marketing. The increase in stock-based compensation was driven by an increase in the price of the underlying shares. Additionally, the increase in sales and marketing was driven by higher personnel costs, offset partially by reductions in travel. As a percentage of revenue, sales and marketing expenses decreased to 50.5% during the year ended December 31, 2020 from 53.3% during the year ended December 31, 2019, primarily due to increased operating leverage from revenue growth and continued improvement in sales efficiency. We anticipate that our expense levels as a percentage of revenue will increase as travel restrictions are lifted and we hire for continued growth.

Research and Development

Research and development expenses during the years ended December 31, 2020 and 2019 were as follows:

 

     Years Ended
December 31,
    Change  
     2020     2019     Amount      %  
     (dollars in thousands)         

Research and development

   $ 12,204     $ 11,148     $ 1,056        9.5

Percentage of revenue

     8.1     9.6     —          —    

Research and development expenses increased $1.1 million, or 9.5%, from $11.1 million in 2019 to $12.2 million in 2020 but declined as a percentage of revenue. The increase was primarily due to higher compensation costs for research and development personnel. Research and development expenses as a percentage of revenue also decreased to 8.1% in 2020 from 9.6% in 2019, primarily due to increased operating leverage from revenue growth.

General and Administrative

General and administrative expenses during the years ended December 31, 2020 and 2019 were as follows:

 

     Years Ended
December 31,
    Change  
     2020     2019     Amount      %  
     (dollars in thousands)         

General and administrative

   $ 36,872     $ 24,614     $ 12,258        49.8

Percentage of revenue

     24.3     21.2     —          —    

General and administrative expenses increased $12.3 million, or 49.8%, from $24.6 million in 2019 to $36.9 million in 2020 and increased as a percentage of revenue, from 21.2% in 2019 to 24.3% in 2020. The increase was primarily due to an increase in stock-based compensation and higher compensation costs during the year ended December 31, 2020.

Income Tax Expense (Benefit)

Income tax expense (benefit) during the years ended December 31, 2020 and 2019 were as follows:

 

     Years Ended
December 31,
     Change  
         2020              2019          Amount      %  
     (dollars in thousands)  

Income tax expense

   $ 1,062      $ 614      $ 448        72.9

Our income tax expense increased by $0.4 million from the year ended December 31, 2019 to the year ended December 31, 2020. This was largely attributable to a decrease in deferred tax benefits incurred by our foreign entities, offset by an increase in deferred tax benefits incurred by our domestic subsidiaries.

 

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Comparison of Years Ended December 31, 2019 and December 31, 2018

Revenue

The components of our revenue during the years ended December 31, 2019 and 2018 were as follows:

 

     Year Ended December 31,      Variance  
     2019      2018      $      %  
     (dollars in thousands)         

Revenue:

           

SaaS

   $ 27,744      $ 15,558      $ 12,186        78.3

Termed license and support

     26,985        21,802        5,183        23.8

Service

     26,662        27,228        (566      (2.1 %) 

Maintenance and OEM

     29,122        36,161        (7,039      (19.5 %) 

Perpetual license

     5,586        6,565        (979      (14.9 %) 
  

 

 

    

 

 

    

 

 

    

Total revenue

   $ 116,099      $ 107,314      $ 8,785        8.2
  

 

 

    

 

 

    

 

 

    

Revenue increased $8.8 million, or 8.2%, from $107.3 million in 2018 to $116.1 million in 2019, primarily due to an increase in SaaS and termed license and support revenue. Our SaaS offerings increased $12.2 million, or 78.3%, from $15.6 million in 2018 to $27.8 million in 2019. In addition, our termed license and support offerings increased $5.2 million, or 23.8%, from $21.8 million in 2018 to $27.0 million in 2019.

The increase attributable to SaaS and termed license and support revenue was offset by a decrease in services revenue which decreased $0.5 million, or 2.1%, from $27.2 million for the year ended December 31, 2018 to $26.6 million for the year ended December 31, 2019. Services revenue derived from service offerings, which can be offered for software implementation, training, migration, customized solutions and managed services. These offerings are not inherently recurring in nature and as such are subject to more period-to-period volatility than other elements of our business.

The increase attributable to SaaS and termed license and support revenue was also offset by a decrease in license revenue, which decreased $1.0 million, or 14.9%, from $6.6 million in 2018 to $5.6 million in 2019, and a decrease in maintenance and OEM revenue, which decreased $7.0 million, or 19.5%, from $36.2 million in 2018 to $29.1 million in 2019. Our revenue from license, maintenance and OEM is expected to continue to trend downward period over period. This is driven from multiple strategic decisions to terminate our largest OEM relationship in 2017 and a shift away from the sale of perpetual licenses and towards SaaS and termed licenses. Without material perpetual license sales, there will be limited opportunities to sell maintenance contracts to new customers. Existing customers have and will continue to transition to SaaS and termed licenses, which will continue the decline in maintenance revenue.

The increase in SaaS revenue of $12.2 million was driven by an increase of $10.8 million from existing customers and $1.4 million from new customers. The increase in termed license and support revenue of $5.2 million was driven by an increase of $1.0 million from existing customers and $4.2 million from new customers. The driver for the change in new customers was largely affected by our adoption of ASC 606 in 2019. The decrease in maintenance revenue of $7.0 million was primarily driven by a decrease of $4.7 million from existing maintenance customers and a $0.1 million decline from new maintenance customers. This decline was driven in large part due to our focus on SaaS and termed license and support revenue streams.

Termed license and support revenue for 2019 and 2018 includes $20.8 million and $0 of revenue recognized at a point of time, respectively.

 

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Revenue by geographic region for the years ended December 31, 2019 and 2018 was as follows:

 

     Year Ended December 31,      Change  
     2019      2018      Amount      %  
     (dollars in thousands)         

North America

   $ 48,614      $ 48,612      $ 2        —  

EMEA

     33,661        26,097        7,564        29.0

APAC

     33,824        32,605        1,219        3.7
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 116,099      $ 107,314      $ 8,785        8.2
  

 

 

    

 

 

    

 

 

    

 

 

 

From 2018 to 2019, North America revenue remained flat driven by a $7.8 million increase in SaaS and termed license and support revenue offset by a $1.6 million decrease in service revenue and a $6.2 million decrease in license, maintenance and OEM revenue. EMEA experienced a $7.6 million increase in revenue driven by a $7.4 million increase in SaaS and termed license and support revenue and a $2.6 million increase in service revenue. This was partially offset by a $2.4 million decrease in license, maintenance, and OEM revenue. APAC experienced a $1.2 million increase in revenue driven by a $2.2 million increase in SaaS and termed license and support revenue and a $0.6 million increase in license, maintenance, and OEM revenue. This was partially offset by a $1.5 million decrease in service revenue.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue, gross profit, and gross margin during the years ended December 31, 2019 and 2018 were as follows:

 

     Year Ended December 31,     Change  
         2019             2018         Amount      %  
     (dollars in thousands)         

Cost of revenue:

         

SaaS

   $ 7,500     $ 4,194     $  3,306        78.8

Termed license and support

     1,897       1,794       103        5.7

Service

     24,727       21,724       3,003        13.8

Maintenance and OEM

     2,275       3,085       (810      (26.3 %) 

Total cost of revenue

     36,399       30,797       5,602        18.2

Gross profit

     79,700       76,517       3,183        4.2

Gross margin

     68.6     71.3     —          —    

Cost of revenue increased $5.6 million, or 18.2%, from $30.8 million in 2018 to $36.4 million in 2019, primarily as a result of higher hosting costs resulting from higher SaaS revenue and increases in service delivery costs, offset by decreases in costs associated with revenue from licenses, maintenance, and OEM as the business shifts to provide more SaaS-based solutions. Gross margin on SaaS revenue remained unchanged at 73.0% for both periods. Gross margin decreased to 68.6% in 2019 from 71.3% in 2018.

Operating Expenses

Sales and Marketing

Sales and marketing expenses during the years ended December 31, 2019 and 2018 were as follows:

 

     Year Ended
December 31,
    Change  
     2019     2018     Amount      %  
     (dollars in thousands)         

Sales and marketing

   $ 61,901     $ 50,269     $ 11,632        23.1

Percentage of revenue

     53.3     46.8     —          —    

Sales and marketing expenses increased $11.6 million, or 23.1%, from $50.3 million in 2018 to $61.9 million in 2019. The primary driver of the increase relates to increased stock-based compensation of

 

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$7.8 million allocated to sales and marketing. The increase in stock-based compensation was driven by an increase in the price of the underlying shares. The increase in sales and marketing was also driven by an increase in personnel-related costs and an increase in marketing program spend to continue the promotion of our products.

As a percentage of total revenue, sales and marketing expenses decreased as a percentage of revenue, to 53.3% during 2019 from 46.8% during 2018, due to additional scale and more efficient sales operations.

Research and Development

Research and development expenses during the years ended December 31, 2019 and 2018 were as follows:

 

     Year Ended
December 31,
    Change  
     2019     2018     Amount      %  
     (dollars in thousands)  

Research and development

   $ 11,148     $ 8,244     $ 2,904        35.2

Percentage of revenue

     9.6     7.7     —          —    

Research and development expenses increased $2.9 million, or 35.2%, from $8.2 million in 2018 to $11.1 million in 2019. This increase was largely due to increased investment for product development and refinement. Research and development expenses as a percentage of revenue also increased from 7.7% in 2018 to 9.6% in 2019.

General and Administrative

General and administrative expenses during the years ended December 31, 2019 and 2018 were as follows:

 

     Year Ended
December 31,
    Change  
     2019     2018     Amount      %  
     (dollars in thousands)  

General and administrative

   $ 24,614     $ 19,102     $ 5,512        28.9

Percentage of revenue

     21.2     17.8     —          —    

General and administrative expenses increased $5.5 million, or 28.9%, from $19.1 million in 2018 to $24.6 million in 2019. The increase was primarily due to an increase of $4.0 million due to an increase in stock- based compensation for 2019 as compared to 2018. The increase in stock-based compensation was driven by an increase in the price of the underlying shares. The increase was also driven by an increase in personnel-related costs.

Income Tax Expense (Benefit)

Income tax expense (benefit) during the years ended December 31, 2019 and 2018 were as follows:

 

     Year Ended
December 31,
     Change  
     2019      2018      Amount      %  
     (dollars in thousands)         

Income tax expense (benefit)

   $ 614      $ 1,930      $ (1,316      (68.2 %) 

Our income tax expense decreased by $1.3 million from 2018 to 2019. This was largely attributable to an increase in deferred tax benefits realized by our foreign subsidiaries, partially offset by current tax expenses incurred by our foreign subsidiaries.

Seasonality

Due to seasonality in our business, our quarterly revenue does not necessarily grow sequentially. Historically, our third and fourth quarters have been our highest revenue quarters due to sales resulting from our customers’ fiscal year ends.

 

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Our operating expenses have generally increased sequentially due to increases in personnel in connection with the expansion of our business.

With uncertainties related to the global COVID-19 pandemic, we reduced our global headcount by approximately 10% in the first half of 2020 and reduced our expenses related to travel and marketing primarily.

Certain Non-GAAP Financial Measures

We believe that, in addition to our financial results determined in accordance with GAAP, non-GAAP operating income and non-GAAP operating margin are useful in evaluating our business, results of operations, and financial condition.

 

     Three Months Ended
March 31,
    Year Ended December 31,  
     2021     2020     2020     2019     2018  
    

(dollars in thousands)

 

Non-GAAP operating income (loss)

     $(2,642)     $ 3     $ 18,330     $ (5,119   $ (587

Non-GAAP operating margin

     (6.8 %)      0.0     12.1     (4.4 %)      (0.5 %) 

Non-GAAP operating income (loss) and non-GAAP operating margin should not be considered as an alternative to operating income, operating margin or any other performance measures derived in accordance with GAAP as measures of performance. Non-GAAP operating income and non-GAAP operating margin should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

Non-GAAP Operating Income and Non-GAAP Operating Margin

Non-GAAP operating income and non-GAAP operating margin are non-GAAP financial measures that our management uses to assess our overall performance. We define non-GAAP operating income (loss) as GAAP operating loss plus stock-based compensation. We define non-GAAP operating margin as non-GAAP operating income (loss) divided by revenue. GAAP operating margin for the years ended December 31, 2020, 2019 and 2018 was (12.3)%, (16.4)% and (2.1)%, respectively. GAAP operating margin for the three months ended March 31, 2021 and 2020 was (15.3)% and (0.2)%. We believe non-GAAP operating income and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics eliminate the effects of stock-based compensation. The following table presents a reconciliation of non-GAAP operating income from the most comparable GAAP measure, operating income, for the periods presented:

 

     Three Months Ended March 31,     Year Ended December 31,  
     2021     2020     2020     2019     2018  
                 (in thousands)  

Loss from operations

   $ (5,931   $ (72   $ (15,437   $ (19,012   $ (2,307

Add:

          

Stock-based compensation

     3,289       75       33,767       13,893       1,720  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income (loss)

   $ (2,642   $ 3     $ 18,330     $ (5,119   $ (587
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating margin

     (6.8 %)      0.0     12.1     (4.4 %)      (0.5 %) 

Liquidity and Capital Resources

We have incurred losses since our inception. We have from time to time financed our operations with proceeds from the sale of preferred stock and other equity instruments. As of December 31, 2020, we had an accumulated deficit of $299.8 million, $69.1 million in cash and cash equivalents and $1.0 million in short-term investments. As of March 31, 2021, we had an accumulated deficit of $313.7 million, $64.6 million in cash and cash equivalents and $1.3 million in short-term investments. On a pro forma basis, assuming the shareholder approval and consummation of the Business Combination, our cash, cash equivalents and short-term investments would have amounted to between approximately $249.4 million and $104.8 million at March 31, 2021, depending on the extent of redemptions by Apex’s stockholders.

 

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Our short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation. Prior to 2020, we generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and consolidated statements of cash flows. We may continue to incur operating losses and negative cash flows from operations in the future and may require additional capital resources to execute strategic initiatives to grow our business. Our future capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, the timing of new product introductions, and the impact of the COVID-19 pandemic on the global economy and our business, financial condition, and results of operations. As the impact of the COVID-19 pandemic on the global economy and our operations evolve, we will continue to assess our liquidity needs.

We believe that our existing cash and cash equivalents, our cash flows from operating activities, and our borrowing capacity under our credit facility, described below, will be sufficient to meet our working capital and capital expenditure needs and debt service obligations for at least the next twelve months. In the future, we may attempt to raise additional capital through the sale of additional equity or debt financing. The sale of additional equity would be dilutive to our stockholders. Additional debt financing could result in increased debt service obligations and more restrictive financial and operational covenants. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

Cash Flows

The following table sets forth a summary of our cash flows for the periods indicated.

 

     Three Months Ended March 31,      Year Ended December 31,  
     2021      2020      2020      2019      2018  
                   (in thousands)  

Net cash provided by (used in) operating activities

   $ (4,265    $ (2,257    $ 19,120      $ (2,051    $ (3,209

Net cash provided by (used in) investing activities

     (534      598        1,368        (1,481      26  

Net cash provided by (used in) financing activities

     617        (16      35,559        (94      17  

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2021 was $4.3 million, reflecting our net loss of $4.9 million, adjusted for non-cash items of $3.1 million and net cash outflows of $2.5 million from changes in our operating assets and liabilities. The primary driver for non-cash items was stock-based compensation which reflects ongoing compensation charges for the entity’s equity- and liability-classified awards. The drivers of changes in operating assets and liabilities related to decreases in accounts payable and accrued expenses primarily as a result of bonus and commission payments. These decreases were partially offset by a decrease in accounts receivable due primarily to timing of payments from customers.

Net cash used in operating activities for the three months ended March 31, 2020 was $2.3 million, reflecting our net loss of $0.7 million, adjusted for non-cash items of $1.5 million and net cash outflows of $3.1 million provided by changes in our operating assets and liabilities. The primary drivers for non-cash items were provisions for doubtful accounts and depreciation and amortization, which both represented ongoing activity within the accounts. The drivers of changes in operating assets and liabilities related to decreases in accounts payable and accrued expenses primarily as a result of bonus and commission payments and decreases in deferred revenue as a result of revenue recognized related to cash received in prior periods. These decreases were partially offset by a decrease in accounts receivable due primarily to timing of payments from customers.

Net cash provided by operating activities for 2020 was $19.1 million, reflecting our net loss of $17.0 million, adjusted for non-cash items of $34.8 million and net cash inflows of $1.3 million provided by changes in

 

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our operating assets and liabilities. The primary driver for non-cash items was stock-based compensation which increased in 2020 as a result of an increase in the price of the underlying shares. The primary drivers of changes in operating assets and liabilities related to increases in deferred revenue due to continued increases in sales of our SaaS offerings which result in increased up-front payments, as well as benefits from operational efficiencies such as decreased employee expenditures and travel-related costs resulting from the COVID-19 pandemic. These increases were offset by an increase in accounts receivable due primarily to timing of payments from customers and an increase in other assets due primarily to capitalized commissions as a result of deals signed in the last quarter of the year.

Net cash used in operating activities for 2019 was $2.1 million, reflecting a net loss of $20.2 million, adjusted for non-cash items of $14.0 million and net cash inflows of $4.1 million provided by changes in our operating assets and liabilities. The primary driver for non-cash items was stock-based compensation which increased in 2019 as a result of an increase in the price of the underlying shares. The primary drivers of changes in operating assets and liabilities related to an increase in deferred revenue due to continued increases in sales of our SaaS offerings which result in increased up-front payments, as well as timings of payments related to payables and accrued expenses which increased due to commissions, tax, and other operating payables not paid until after year-end. These increases were offset by increases in accounts receivable due primarily to timing of payment from customers and an increase in other assets due primarily to capitalized commissions as a result of deals signed in the last quarter of the year.

Net cash used in operating activities for 2018 was $3.2 million, reflecting a net loss of $3.9 million, adjusted for non-cash items of $2.9 million and net cash outflows of $2.2 million from changes in our operating assets and liabilities. The primary drivers for non-cash items were stock-based compensation and depreciation and amortization which primarily consist of ongoing expense for options provided to our employees and depreciation of our property and equipment, respectively. The primary drivers of changes in operating assets and liabilities related to a decrease in deferred revenue due to the timing of payments from customers in relation to the revenue recognized, offset by a decrease in other assets related to the amortization of capitalized expenses related to service projects.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2021 was $0.5 million. It consisted of $0.3 million in purchases of short-term investments and $0.2 million of purchases of property and equipment.

Net cash provided by investing activities for the three months ended March 31, 2020 was $0.6 million. It consisted of $0.7 million in maturities of short-term investments and $0.1 million of purchases of property and equipment.

Net cash provided by investing activities during the year ended December 31, 2020 was $1.4 million. It consisted of $2.4 million in maturities of short-term investments and $1.0 million of purchases of property and equipment.

Net cash used in investing activities during the year ended December 31, 2019 was $1.5 million. It consisted of purchases of property and equipment of $1.1 million and purchases of marketable securities of $0.4 million.

Net cash provided by investing activities during the year ended December 31, 2018 was immaterial.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2021 was $0.6 million. It consisted primarily of proceeds from stock option exercises, which have increased due to the Business Combination, and proceeds from the issuance of shares of our subsidiary, EduTech, to a non-controlling interest, partially offset by payments of transaction costs related to the Business Combination.

 

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Net cash used in financing activities for the three months ended March 31, 2020 was immaterial.

Net cash provided by (used in) financing activities has been immaterial in most periods, consisting of payments of capital leases partially offset by proceeds from stock option exercises.

Net cash provided by financing activities during the year ended December 31, 2020 included proceeds from the issuance of common stock of $58.8 million, proceeds from issuance of shares of our subsidiary, EduTech, to a non-controlling interest of $7.5 million, proceeds from the collection of promissory notes of $4.9 million, and proceeds from stock option exercises of $0.6 million, partially offset by payments for redemption of Series B preferred stock of $33.7 million, payments for debt issuance costs of $0.3 million, payments of transaction fees of $2.1 million and payments for common stock issuance costs of $0.1 million.

Net cash used in financing activities during the year ended December 31, 2019 consisted of payments for redemption of Series A and Series B preferred stock of $179.0 million and payments for preferred stock issuance costs of $4.8 million, partially offset by proceeds from issuance of Series C preferred stock of $150.0 million and proceeds from issuance of common stock of $33.7 million.

Indebtedness

Credit Facility

In April 2020, Legacy AvePoint entered into a loan and security agreement (the “Loan Agreement”) with HSBC Ventures Bank USA Inc. (“HSBC”), a commercial bank.

On July 1, 2021, Legacy AvePoint effected an assignment of its existing rights and obligations under the Loan Agreement to AvePoint US, LLC, a wholly-owned subsidiary of the Company, through entry into a limited consent and first amendment to the Loan Agreement (the “Amended Loan Agreement”) and an assignment and assumption agreement (the “Assignment and Assumption Agreement”). In addition, the Company’s board of directors approved the Company’s entry into a pledge agreement (the “Pledge Agreement”) and limited guaranty (the “Limited Guaranty”) in favor of HSBC, pursuant to which the Company pledged 100% of the AvePoint US, LLC equity held by it (the “Pledged Equity”) as collateral in support of the borrower’s obligations under the Amended Loan Agreement and further provided a payment guarantee to HSBC on behalf of AvePoint US, LLC equal to the value of the Pledged Equity and capped at the amount actually borrowed under the Amended Loan Agreement.

The Amended Loan Agreement’s substantive economic terms were not amended from the original Loan Agreement, as described as follows: a revolving line of credit of up to $30.0 million, with an additional $20.0 million accordion feature for additional capital AvePoint US, LLC may draw at its request. Borrowings under the line bear interest at a rate equal to LIBOR plus 3.5%. The line carries an unused fee of 0.5% per year. The proceeds of borrowings under the Amended Loan Agreement will be used for general corporate purposes.

AvePoint US, LLC, on a consolidated basis with its subsidiaries, is required to maintain a specified adjusted quick ratio, tested by the bank each quarter. Pursuant to the Amended Loan Agreement, AvePoint US, LLC pledged, assigned, and granted HSBC a security interest in all shares of its subsidiaries, future proceeds, and assets as security for its obligations under the Amended Loan Agreement. The line will mature on April 7, 2023.

To date, AvePoint US, LLC is in compliance with all covenants under the Amended Loan Agreement and has not borrowed under the Amended Loan Agreement.

Leasing Obligations

We are obligated under various non-cancelable operating leases for office space. The initial terms of the leases expire on various dates through 2027.

 

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During the three months ended March 31, 2021 and 2020, total rent expense for facilities amounted to $1.5 million, and $1.4 million, respectively. As of March 31, 2021, letters of credit have been issued in the amount of $0.5 million as security for operating leases. The letters of credit are secured by certificates of deposit.

During the years ended December 31, 2020, 2019 and 2018, total rent expense for facilities amounted to $5.6 million, $5.4 million and $5.5 million, respectively. As of December 31, 2020, letters of credit have been issued in the amount of $0.5 million as security for operating leases. The letters of credit are secured by certificates of deposit.

Contractual Obligations

The following table and the information that follows summarizes our contractual obligations as of March 31, 2021.

 

     Total      Less than
1 Year
     1 – 3 Years      3 – 5 Years      More than
5 Years
 
     (dollars in thousands)  

Operating lease obligations

   $ 12,990        4,396        5,911        2,072        611  

Other commitments

     19,895        10,519        6,487        2,889         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     32,885        14,915        12,398        4,961        611  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

(1)

Includes future minimum payments for operating leases of corporate office facilities.

(2)

Includes capital leases and contractual commitments to purchase services from Microsoft, including the use of Azure and Office365.

The following table and the information that follows summarizes our contractual obligations as of December 31, 2020.

 

     Total      Less than
1 Year
     1 – 3 Years      3 – 5 Years      More than
5 Years
 
     (dollars in thousands)  

Operating lease obligations

   $ 13,068        5,288        5,126        2,044        610  

Other commitments

     19,709        731        18,975        3        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     32,777        6,019        24,101        2,047        610  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

(1)

Includes future minimum payments for operating leases of corporate office facilities.

(2)

Includes capital leases and contractual commitments to purchase services from Microsoft, including the use of Azure and Office365.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during any of the periods presented.

Critical Accounting Policies and Estimates

Our consolidated financial statements included in this prospectus have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and include the consolidated accounts of AvePoint, Inc. and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make

 

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estimates and assumptions on the reported revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this prospectus, we believe the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Revenue Recognition After the Adoption of ASC 606

In the year ended December 31, 2019, we adopted the Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) and subsequent amendments to the initial guidance: ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-10, ASU 2017-13 and ASU 2017-14 (collectively, ASC 606), on a modified retrospective basis through a cumulative-effect adjustment that resulted in a $48.0 million decrease in accumulated deficit. During the adoption, we measured contracts with customers and applied the accounting standard, with a focus on contracts that were open as of December 31, 2018. Refer to the “Revenue Recognition” and “Deferred Sales Commissions” sections below for accounting policy updates upon the adoption of ASC 606.

The impact of adopting ASC 606 for select consolidated balance sheet line items was as follows:

 

     January 1, 2019      December 31, 2019  
     Unadjusted
(ASC 605)
     Adjustments     Adjusted
(ASC
606)
     Unadjusted
(ASC 605)
     Adjustments     Adjusted
(ASC
606)
 
     (dollars in thousands)  

Accounts receivable, net

     20,240        7,600       27,840        34,811        5,123       39,934  

Deferred contract costs

     —          21,281       21,281        —          28,351       28,351  

Long-term unbilled receivables

     —          2,740       2,740        —          3,685       3,685  

Other assets

     10,193        (3,795     6,398        9,221        (4,423     4,798  

Deferred revenue

     66,623        20,390       46,233        84,074        23,474       60,600  

Accounts receivable, net increased as a result of increases in unbilled receivables. Deferred contracts costs increased as a result of capitalized commissions. Other assets decreased as a result of the adoption’s impact to deferred taxes. Deferred revenue decreased as a result of recognition of revenue related to on-premises termed license offerings, which under ASC 605 were generally recognized over the life of the related customer agreements, but under ASC 606 are recognized at a point in time upon delivery of an on-premises termed license. In addition, deferred revenue decreased as a result of recognition of revenue related to certain service offerings, which under ASC 605 were generally recognized under the completed contract method, but under ASC 606 are recognized based on a measure of progress, such as labor hours, to determine the percentage of completion of the projects. Revenue for the year ended December 31, 2019 in accordance with the previous revenue recognition policy was $114.5 million compared to $116.1 million recorded under ASC 606. The adoption of ASC 606 decreased the Commission expense, which included in Sales and Marketing on the Statement of Operations, from $13.9 million to $11.0 million.

Services revenue includes revenue derived primarily from the implementation of software, training, consulting and migrations. We also offer license customization and managed services. Services revenue from implementation, training, consulting, migration, and license customization is recognized by applying a measure of progress, such as labor hours to determine the percentage of completion of each contract. Services revenue from managed services is recognized ratably on a straight-line basis over the contract term.

License revenue includes software licenses that typically provide for a perpetual right to use AvePoint software and are sold on a per-copy basis. We recognize software revenue through direct sales channels at a point in time when the software is made available to the customer to download and use.

 

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Maintenance revenue includes customer support, which includes software updates and upgrades on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or patches. Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year.

ASC 606 is a single standard for revenue recognition that applies to all of our SaaS, termed license and support, services, perpetual license and maintenance arrangements and generally requires revenue to be recognized upon the transfer of control of promised goods or services provided to our customers, reflecting the amount of consideration we expect to receive for those goods or services. Pursuant to ASC 606, revenue is recognized upon the application of the following steps:

 

   

Identification of the contract, or contracts, with a customer;

 

   

Identification of the performance obligations in the contract;

 

   

Determination of the transaction price;

 

   

Allocation of the transaction price to the performance obligations in the contract; and

 

   

Recognition of revenue when, or as, the contractual performance obligations are satisfied.

The timing of revenue recognition may differ from the timing of invoicing to our customers. We record an unbilled receivable, which is included within accounts receivable on our consolidated balance sheets, when revenue is recognized prior to invoicing. We record deferred revenue on our consolidated balance sheets when cash is collected or invoiced before revenue is earned. Our standard payment terms are generally net 30 days but may vary. Invoices for SaaS, termed license and support and maintenance are generally issued annually in advance or when the license is made available for customer use. Invoices for license contracts are generally issued when the license is available for the customer for download. Services are generally invoiced in advance or as the services are performed.

Our revenue arrangements generally include standard warranty or service level provisions that our arrangements will perform and operate in all material respects as defined in the respective agreements, the financial impacts of which have historically been and are expected to continue to be insignificant. Our arrangements generally do not include a general right of return relative to the delivered products or services. We recognize revenue net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

Many of our contracts include multiple performance obligations. Judgment is required in determining whether each performance obligation is distinct. Our products and services generally do not require a significant amount of integration or interdependency; therefore, our products and services are generally not combined. We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“SSP”) for each performance obligation within each contract.

We use judgment in determining the SSP for products and services. For substantially all performance obligations except on-premises perpetual and termed licenses, we are able to establish the SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. We typically establish an SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. Our on-premises perpetual and termed licenses have not historically been sold on a standalone basis, as the vast majority of all customers elect to purchase license support contracts at the time of an on-premises perpetual or termed license purchase. License support contracts are generally priced as a percentage of the net fees paid by the customer to access the license. We are unable to establish the SSP for on-premises licenses based on observable prices given the same products are sold for a broad range of amounts (that is, the selling price is highly variable) and a representative SSP is not discernible from past transactions or other observable evidence. As a result, the SSP for an on-premises perpetual and termed license included in a contract with multiple performance obligations is determined by applying a residual approach whereby all other performance obligations within a contract are first allocated a portion of the transaction price based upon their

 

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respective SSPs, with any residual amount of transaction price allocated to on-premises perpetual licenses revenue. On-premises termed licenses are sold bundled with maintenance. We focus on entity-specific and market factors when estimating SSP of both the license and the maintenance such as internal pricing strategies and practices. Based on our established pricing practices, we concluded that we have established a value relationship between a software product and the maintenance that is helpful in determining stand-alone selling price.

We utilize indirect sales channels which utilize channel partners. These deals are executed in one of two ways. In the first form of these arrangements, the channel partner purchases the products from AvePoint at a discounted price and resells the products to end users at a price determined by the channel partner. In this scenario, the channel partner is the entity that has contracted with AvePoint and therefore is determined to be the customer of AvePoint. In the second form, AvePoint bills the end user and the channel partner receives a commission. Upon analysis of deals executed through the second form of these channels, the Company determined that the end user represents the customer of AvePoint due to the fact that the end user purchased goods and/or services that are outputs of our ordinary activities. Consequently, channel partners utilized in deals executed through this second model are deemed to be agents of the transaction.

We recognize revenue when control of the goods and/or services are transferred to the customer. In the first form of these arrangements, this occurs upon transfer to the reseller or to the end user at the reseller’s direction. In the second form of these arrangements, this occurs upon transfer to the end user.

Revenue recognition prior to the adoption of ASC 606

During the year ended December 31, 2018, revenue from long-term contracts was recognized primarily using ASC 605-35,Revenue Recognition—Construction-Type and Production-Type Contracts”, according to which revenue was recognized on the completed-contract method. When an arrangement included an acceptance clause, revenue for such an arrangement was deferred and recognized upon acceptance. Revenue was $7,575,726 for the year ended December 31, 2018, from the completed-contract method. Upon adoption of ASC 606, we reversed the capitalized expenses related to contracts accounted for under this method through an adjustment to retained earnings. Beginning January 1, 2019, the company began recognizing these contracts by applying a measure of progress, such as labor hours to determine the percentage of completion of each contract.

Under ASC 605-35, we recognized software revenue through direct sales channels upon delivery and when all other basic revenue recognition criteria are met as described below.

For sales arrangements involving multiple elements, we recognize revenue in accordance with the following policy:

A software multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met:

 

   

The functionality of the delivered elements is not dependent on the undelivered elements.

 

   

There is VSOE of fair value of the undelivered elements. VSOE of fair value is based on the price charged when the deliverable is sold separately by us on a regular basis and not as part of the multiple-element arrangement.

 

   

Delivery of the delivered elements represents the culmination of the earnings process for that element.

If these criteria are met, we recognize revenue using the residual method for delivered elements. Under the residual method, we allocate and defer revenue for the undelivered elements based on our fair values and recognize the difference between the total arrangement fee and the amount deferred for the undelivered elements as revenue. The determination of fair value of the undelivered elements in multiple element arrangements is based on the price charged when such elements are sold separately, which is commonly referred to as VSOE.

 

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To determine the price for the customer support element when sold separately, we primarily use the bell-shaped curve approach which is based on historical renewal rates for our entire population of stand-alone customer support renewals over the past twelve months. Under the Bell-Shaped Curve Approach, VSOE of fair value of post-contract customer support (“PCS”) exists when a substantial majority of a company’s actual customer support renewals are within a narrow range of pricing. Renewal rates are supported by performing an analysis in which we segregate our customer support renewal contracts into different classes based on specific criteria including, but not limited to, the level of customer support being provided and the geographic location of the sale. As a result of this analysis, we have concluded that we have established VSOE for the different classes of customer support when the support is sold as part of a multiple-element sales arrangement.

Revenue from software sold through original equipment manufacturer (OEM) partners is recognized upon receipt of a royalty report from the OEM partner and over a period equal to the contractual obligation for customer support or the estimated useful life of the software. These sales are treated as a separate customer class for purposes of establishing vendor-specific objective evidence (VSOE). Due to terms of the contracts with our OEM partners, we determined that VSOE had not been established for customer support. As a result, OEM revenue is recognized on a straight-line basis over a period equal to the contractual obligation for customer support or the estimated useful life of the software.

We have analyzed all of the undelivered elements included in our multiple-element arrangements and determined that, with the exception of revenue sold through OEM partners, VSOE of fair value exists to allocate revenue to maintenance and services. Accordingly, assuming all basic revenue recognition criteria are met, software revenue is recognized upon delivery of the software license using the residual method in accordance with Accounting Standards Codification (ASC) 985-605,Software Revenue Recognition”.

If the criteria for separating a multi-element arrangement into more than one unit of accounting are not met, the arrangement is accounted for as a single unit of accounting which would result in revenue being recognized on a straight-line basis until the last element is delivered or being deferred until the earlier of when such criteria are met or when the last undelivered elements are delivered.

We consider the four basic revenue recognition criteria for each of the elements as follows:

 

   

Persuasive Evidence of an Arrangement with the Customer Exists: Our customary practice is to require a purchase order or a signed quote and, in some cases, a written contract signed by both the customer and us, or other persuasive evidence that an arrangement exists prior to recognizing revenue on an arrangement.

 

   

Delivery or Performance has Occurred: Our software applications are usually delivered to customers through an email download. Software and/or software license keys for add-on orders or software updates are typically delivered via email. If products that are essential to the functionality of the delivered software in an arrangement have not been delivered, we do not consider delivery to have occurred. Services are considered delivered over the life of the related agreements with customers as we provide the requested services. Such delivery is measured either ratably over the term of the agreement or by applying a measure of progress, such as labor hours to determine the percentage of completion of each contract. Maintenance is considered delivered ratably over the term of the maintenance agreement, which is typically one year or three years.

 

   

Vendor’s Fee is Fixed or Determinable: The fee customers pay for software applications, maintenance and other professional services is negotiated at the outset of an arrangement. The fees are therefore considered to be fixed or determinable at the inception of the arrangement.

 

   

Collection is Probable: Each new customer undergoes a credit review process to evaluate its financial position and ability to pay. We rely on the review we perform and a historically low non-payment rate to conclude that collection is probable. If we determine from the outset of an arrangement that collection is not probable based upon the review process or other factors, revenue is recognized on a cash-collected basis, assuming all of the other basic revenue recognition criteria are met.

 

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Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to difference between financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled.

We recognize liabilities for uncertain tax positions taken or expected to be taken in income tax returns. Accrued interest and penalties related to unrecognized tax benefits are recognized as part of the provision for income taxes. Judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and unrecognize tax benefits. In determining the need for a valuation allowance, the historical and projected financial performance of the operation that is recording a net deferred tax asset is considered along with any other pertinent information.

We file income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The tax years 2016 through 2019 are open and subject to audit by US federal, state and local authorities. The tax years 2010 through 2019 are open and subject to audit by major foreign tax jurisdictions.

Deferred Sales Commissions

We defer sales commissions earned by our sales force that are considered incremental and recoverable costs of obtaining SaaS, termed license and support service, license and maintenance contracts. Initial sales commissions for the majority of these aforementioned contracts are generally deferred and amortized on a straight-line basis over a period of benefit estimated to be 5.4 years. Sales commissions for renewal contracts relating to SaaS, termed license and support, and maintenance arrangements are generally deferred and then amortized on a straight-line basis over a period of benefit estimated to be 1.7 years.

Equity-Based Compensation

Stock-based compensation represents the cost related to stock-based awards granted to employees of the United States parent company, AvePoint, Inc., and its foreign affiliates. To date, we have issued both stock options and restricted stock. With respect to equity-classified awards, we measure stock-based compensation cost at the grant date based on the estimated fair value of the award and recognizes the cost as expense ratably (net of estimated forfeitures) over the requisite service period. With respect to liability-classified awards, we measure stock-based compensation cost at the grant date and at each reporting period based on the estimated fair value of the award and recognizes the cost as an expense ratably (net of estimated forfeitures) over the requisite service period. We estimate the fair value of stock options using a Black-Scholes valuation model. Our option-pricing model requires the input of highly subjective assumptions, including: (1) the fair value of the underlying shares, (2) the expected term of the awards, (3) the expected volatility of the price of our shares, (4) risk-free interest rates, and (5) the expected dividend yield of our shares. These estimates involve inherent uncertainties and the application of judgment.

The assumptions are based on the following:

 

   

Expected Volatility. Expected volatility is based on historical volatility of a group of peer entities.

 

   

Risk-Free Interest Rate. Risk-free interest rates are based on the implied yields currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life.

 

   

Dividend Yield. We used an expected dividend yield of zero. We have never declared or paid any cash dividends on our common stock and does not plan to pay cash dividends on our common stock in the foreseeable future.

 

   

Expected Life. To estimate the expected life of stock options, we considered contractual terms of the options, including the vesting and expiration periods, as well as historical option exercise data and current market conditions to determine an estimated expected life.

 

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Fair Value of Common Stock. Given the historical absence of an active market for our shares of common stock, we obtained a valuation from a third-party appraisal firm as discussed below.

 

   

Forfeitures. We estimate the expected forfeiture rate and only recognize expense for those shares of common stock expected to vest. We estimate the forfeiture rate based on historical experience. To the extent our actual forfeiture rate is different from our estimate, stock-based compensation expense is adjusted accordingly.

If any assumptions used in the Black-Scholes option-pricing model change significantly, stock option compensation expense for future awards may differ materially compared with the expense for awards granted previously.

Common Stock Valuations

The fair value of the shares of common stock underlying our stock options has been determined by our board of directors, with the assistance of valuations prepared by a third-party valuation firm. Our board of directors intend for all options to be exercisable at the fair value of our shares of common stock on the grant date. Such estimates will not be necessary following the consummation of the Business Combination.

Valuations of our shares of common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The assumptions used in the valuation models were based on future expectations and management judgment, including input from management on the following factors:

 

   

Contemporaneous valuations performed at periodic intervals by independent, third-party specialists;

 

   

Actual operating results and financial performance of our company;

 

   

The prices, preferences, and privileges of shares of AvePoint convertible preferred stock relative to shares of AvePoint common stock;

 

   

Current business conditions and projections;

 

   

Stage of development;

 

   

Likelihood of achieving a liquidity event, such as an initial public offering or a sale of AvePoint, given prevailing market conditions and the nature and history of our business;

 

   

Market multiples of comparable companies in our industry;

 

   

Industry information such as market size and growth;

 

   

Secondary sales of AvePoint shares in arm’s length transactions;

 

   

Adjustments, if any, necessary to recognize a lack of marketability for AvePoint shares; and

 

   

Macroeconomic conditions.

Emerging Growth Company Accounting Election

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. Apex previously elected to avail itself of the extended transition period, and following the consummation of the Business Combination we will be an emerging growth company at least until December 31, 2021 (and for the period described in the immediately succeeding paragraph) and will take advantage of the benefits of the extended transition period emerging growth company status permits. During the extended transition period, it may be difficult or impossible to compare our financial results with the financial results of another public

 

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company that complies with public company effective dates for accounting standard updates because of the potential differences in accounting standards used.

We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2024, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our audited Consolidated Financial Statements included elsewhere in this prospectus.

Quantitative and Qualitative Disclosures About Market Risks

Interest Rate Risk

We had cash and cash equivalents, marketable securities and short-term deposits of $70.1 million as of December 31, 2020. We hold our cash and cash equivalents, marketable securities and short-term deposits for working capital purposes. Our cash and cash equivalents are held in cash deposits and money market funds. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio due to changes in interest rates. Declines in interest rates, however, would reduce our future interest income. The effect of a hypothetical 10% change in interest rates would not have a material impact on our consolidated financial statements. As of December 31, 2020, we had no outstanding obligations under our line of credit. To the extent we enter into other long-term debt arrangements in the future, we would be subject to fluctuations in interest rates which could have a material impact on our future financial condition and results of operation.

Foreign Currency Exchange Risk

Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. Dollars. In particular, the amount of cash, cash equivalents and marketable securities that we report in U.S. Dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period, the offset to which is substantially recorded to accumulated other comprehensive income on our consolidated balance sheets and is also presented as a line item in our consolidated statements of comprehensive income.

As the U.S. Dollar fluctuated against certain international currencies as of December 31, 2020, the balances that we reported in U.S. Dollars for foreign subsidiaries that hold international currencies as of December 31, 2020 increased relative to what it would have reported using a constant currency rate from December 31, 2019. As reported in our consolidated statements of cash flows, the estimated effects of exchange rate changes on our reported cash and cash equivalents balances in U.S. Dollars was an increase of $0.9 million for the year ended December 31, 2020 and a decrease of $0.6 million for the year ended December 31, 2019. If overall foreign currency exchange rates in comparison to the U.S. Dollar uniformly would have been weaker by 10% as of December 31, 2020 and December 31, 2019, the amount of cash, cash equivalents and marketable securities we would have reported in U.S. Dollars would have decreased by approximately $0.1 million for both periods, assuming constant foreign currency cash, cash equivalents and marketable securities balances.

Concentration of Credit Risk

We deposit our cash with financial institutions, and, at times, such balances may exceed federally insured limits. No customer accounted for more than 10% of billings for the years ended December 31, 2020, 2019 and 2018 and no customer was more than 10% of accounts receivable as of December 31, 2020 and 2019.

 

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BUSINESS

Overview

We are a digital collaboration innovator and have been for nearly two decades. We develop products and help organizations realize the value of modern, digital collaboration that lets users work together from anywhere, thanks to the power of the cloud.

Our solutions move organizations to leading, cloud-based platforms, like Microsoft 365, and help ensure that once they are in the cloud, data is protected, and collaboration is secure.

Digital transformation is not merely a nice-to-have as businesses look to modernize their IT infrastructure; it is a strategic and tactical imperative in the new normal of COVID-19 and remote, anytime/anywhere work connectivity. Additionally, the COVID-19 pandemic has dramatically accelerated the need for organizations to shift operations to the cloud. We are uniquely positioned to provide both guidance and proprietary technology to migrate customers to the cloud, efficiently and securely.

Collaboration enables organizations to pursue and achieve their business needs. Our work, the product of collaboration, is considered valuable to the organization, and therefore must be protected and well managed. That job often falls to IT teams who are constantly asked to do more with less resources. Businesses push to support employees with modern tools for collaboration such as hosted sites, cloud file sharing, persistent chat, and multiple line of business apps. The urgency of digital transformation has accelerated with the push to enable work-from-anywhere due to the COVID-19 pandemic. For the IT teams tasked to support this shift, demand often outpaces delivery. These teams face a number of challenges including:

 

   

Migrations from legacy tools and collaboration platforms are hard and complex, especially for organizations that have empowered business users to purchase their own cloud file systems, outside of IT purview and control. Standardizing how the business works together involves moving unique business processes and files to a new platform like Microsoft 365. This involves translating data, workflows, and users with as little disruption as possible.

 

   

IT teams are being pressured to do even more with less and will need to invest in automation to ensure they can meet the demands of the business. A recent 2019/2020 IT spend benchmark report from Computer Economics/Avasant Research observed that an increase in technology spending did not historically correlate to more IT jobs, as automation facilitated scale.

 

   

New security laws like GDPR, which went into effect in the European Union in 2018, and CCPA, which went into effect in 2020, are forcing IT teams to maintain oversight on a diversifying line of products they support. The risks of non-compliance are increasingly expensive with new fines and damages to company reputation. The pressure to maintain control is pushing IT teams to look to automation and third-party vendors to help support their efforts.

With our solutions, organizations have the tools to enable rapid, sustainable adoption of critical applications like Microsoft Teams, which have recently been experiencing record growth in organizations large and small. Systems like Microsoft 365 can now pass security audits and give teams the control they need to have confidence in their cloud investment. Security teams no longer block progress and pursuit of “work from anywhere” initiatives. With our solutions, they can have confidence in their ability to monitor, manage and govern the rapid adoption of new cloud services. Finally, organizations can use solutions to save time and money, and can decommission home-grown or point solutions that fail to provide key insights and flexible automation that drive business outcomes. The flexibility, automation, and insights of our solutions enable IT to meet business needs and deliver value.

 

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The following graphic, derived from publicly available Microsoft earnings releases, shows the number of daily active users for Microsoft Teams from December 2016 to October 2020:

 

 

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Our primary solution is our SaaS platform that helps organizations invested in cloud-hosted collaboration systems by providing robust data management, including migration, protection, and governance. While our revenue and product lines, following the overall cloud market, are heavily Microsoft-centric today, the solutions we provides are built on proven best practices for management, governance, and compliance, no matter the platform. We have already made investments to capture multi-cloud opportunities across Salesforce clouds. We believe that our cloud agnostic approach, combined with projected overall growth in cloud usage, will lead to significant expansion of market opportunities. As of March 31, 2021, Our SaaS platform supported more than seven million cloud users. We believe it is our job to deliver value for not just service administrators and owners, but also for service champions, end users, and those charged with ensuring a return on significant investments in the cloud.

Our solutions are most commonly deployed to provide:

 

   

Migration from legacy on-premises (customer-managed) solutions to cloud services provided by Microsoft 365;

 

   

Data protection of critical cloud-based business assets to recover from data loss events (such as ransomware);

 

   

Policy guidance, monitoring and enforcement for protecting regulated users and content as the organization moves from self-hosted systems to public cloud services; and

 

   

Information governance support for records managers, security teams, and IT managers overseeing the adoption of the cloud collaboration platforms.

Our company values, combined with our commitment to employee development, leadership training, inclusion, and diversity, have resulted in a workforce with goals highly aligned to company success. We believe

 

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we are uniquely able to help our customers navigate the complexities of digital transformation, across the Microsoft cloud and beyond, due to our advanced technology and our team’s combination of both deep product and industry knowledge.

Impact of COVID-19

Since the COVID-19 outbreak in March 2020, our product framework and approach allowed us to rapidly respond to the sudden impacts of COVID-19, providing organizations with solutions to support urgent shifts toward remote work due to new government guidelines and regulations. We believe we have taken a highly conservative fiscal approach to prepare for the as-yet-unknown economic impact of COVID-19. In response to the pandemic, we reduced our operational expenditures, including termination of approximately 10% of our global workforce.

We have not experienced any material negative impact to our operational, cloud or product availability, or customer support, as a result of our own shift to remote work. Instead, our teams continue to display our values of agility, passion, and teamwork on a daily basis to ensure we are able to support our customers for the long haul, with new product releases, customer experiences, and excellent support.

We helped our customers face their own transformations during COVID-19. For example, in 2019 we first engaged with Minnesota Metropolitan Council (“METC”), the regional policy-making body, planning agency, and provider of essential services for the metropolitan region of Minneapolis / St. Paul, Minnesota. METC rolled out Microsoft Teams following its migration from SharePoint 2010 to Microsoft 365’s SharePoint Online service. Our product, Cloud Governance was rolled out to remote workers on Sunday, March 15, 2020, to enable automated and compliant self-service Teams creation. Our solution helped METC cope with the rapid influx of approximately 2,000 remote workers, due to the government-issued Work From Home order. The week after the AvePoint solution roll-out, the number of Teams channel conversations created increased 400%, driving the total number of Teams up 20% in the first week. With increased pressure to transform how their organizations worked, we were able to help customers who had planned longer rollouts of Microsoft Teams to accomplish those rollouts within a weekend and ensure ongoing sustainability of the service. These accelerated timelines are a direct result of the pressure COVID-19 put on organizations to speed up their work from anywhere initiatives, as echoed by Microsoft executives.

In addition to meeting immediate customer needs, we released exclusive offers, aimed at helping our customers cope with this rapid transition, to provide greatly improved customer experiences. Teams responsible for enabling a remote workforce were supported by AvePoint software which enabled visibility on remote workers, security, and governance for newly adopted cloud services, and automated backups for a rapidly expanding digital footprint.

Our product development teams worked to respond to customer needs as well, recognizing the pressure of regulated customers during this rapid digital transformation. During the COVID-19 crisis, we provided tactical, immediate value in the form of a new product (Policies and Insights), developed and released in the midst of the pandemic, which mitigates risks such as over-exposed sensitive information and over-privileged external users, potentially direct results of the rush to work-from-home.

Despite global headwinds and market volatility, during three months ended March 31, 2021 and the year ended December 31, 2020 we experienced a 57% and 36% year-over-year growth in new annual contracts and a 19% and 31% increase in revenue, respectively. We believe that market volatility has only accelerated the need for organizations to do more with less, which requires advanced technology solutions, preferably fewer vendors, and ample automation to support these new organizational realities.

 

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Industry Background

Digital Transformation Is a Top Priority in Global IT Spending

Digital transformation is expected to soon outrank all other IT priorities among business investments. In 2019, International Data Corporation (“IDC”), a market research firm, predicted that by 2023, digital transformation and innovation will account for more than 50% of all IT spending, as compared to 36% of IT spending in 2018. Traditionally, business IT priorities have been determined by IT departments. Increasingly, business line owners, such as CMOs or HR executives, control the purchase decisions for digital transformation spending. Business line owners are ultimately seeking to invest in initiatives that drive revenue growth, operational efficiency, and competitive advantage. This is precisely why, given our technology, industry experience and executive team, we believe our growth opportunities and differentiated vision are so significant.

Digital Transformation Has Side Effects

Technology spending is on the rise, and IT departments control less of that spend with regard to productivity solutions compared to business functions like sales and marketing. However, most IT professionals have lost none of their responsibility to maintain those platforms, protect the assets created, and help businesses adopt this technology. COVID-19 only further accelerated the need to transform and enable remote work. In 2018, a Forcepoint study predicted that 70% of IT spend would go towards cloud services by 2020. Through its research, Forcepoint concluded that by 2020, up to 40% of cloud spending would go towards unsanctioned apps (also called shadow IT services). An earlier study in 2017 by McAfee found the following concerning the use of overlapping services:

 

   

The average employee was actively using 36 cloud services at work. Of these, nine were collaboration services, six were file-sharing services, and five were for content sharing.

 

   

The average enterprise had 210 different cloud-based collaboration services in use across its employees.

 

   

The average enterprise had 76 different cloud-based file-sharing services in use.

The following graphic illustrates how rapid shifts to remote work and deployment of point solutions for various collaboration services, including e-mail, file sharing, chat, and project management, create challenges with security concerns, dispersed resources, disjointed collaboration, and file sharing. The increased frequency and pain of these work from home, digital transformation side effects illustrates the growing need for our solutions.

 

 

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The Rush to Solve Modern, Digital Collaboration Challenges

To offer companies a better, more consolidated solution, industry leaders like Microsoft are making waves with the introduction of Microsoft Teams as the foundation for the new modern workplace, building on their already prevalent Microsoft 365 (formerly Office 365) services. The aim is to bring together all forms of people-centric collaboration, across content, calendars, mail, and sites, into one experience. As of October 2020, following the rapid transition to remote work, Microsoft Teams usage increased to 115 million daily active users. This growth rate reflects a fundamental shift in the way work gets done. Organizations are modernizing technology to optimize individual and team productivity and the modern workplace experience at-large.

Why is IT not consolidating collaboration services, as quickly as their users would like? Whether organizations are looking to transform from on-premises to the cloud, or consolidate cloud platforms, they must do it in an environment of increased scrutiny, security and privacy concerns, and regulatory oversight. And in an increasingly competitive business landscape, with threats to operations and markets like COVID-19, the pressure to cut costs and do more with less remains a top priority. What this means for us is clear: increased interest in solutions that make digital collaboration more effective and efficient.

Our customers typically identify needs for:

 

   

Aggregate & Digitize Collaboration. With the increasing technology sprawl and existence of shadow IT, many organizations do not know where to start to begin their move to a modern workspace, such as Microsoft Teams. An inventory of existing mail, users, and content often requires expertise to interpret and identify what needs to be consolidated, transformed, or discarded. Migrations can be time consuming and expensive projects. While COVID-19 has accelerated the need to transform and support a mobile and remote workforce, as a result of government-issued work from home orders, many organizations are still lagging in their cloud or modern collaboration adoption.

 

   

Information Protection. Companies suffering from data loss, whether by ransomware attacks, malicious behavior, or simply carelessness with the information they own, not only are at risk of large fines, but also risk losing the trust of their own customers, not to mention significant market and/or brand value. According to Verizon, 30% of all data breaches in 2019 were caused by internal users and IBM estimates that the average cost of a data breach was $3.9 million. As such, security teams need to keep IT services that house business data under intense scrutiny. Any solution promising open and pervasive sharing and collaboration, or work from anywhere, can strike fear into the hearts of security and privacy teams. Organizations may stall a cloud migration until the security team gives its approval, ensuring a move to the cloud will not negatively impact the current security posture. Companies are often looking for a bridge to map written controls into security standards in the cloud solutions they deploy.

 

   

Automation. IT teams regularly spend too much time on routine operational tasks and are often reactive in their efforts to drive business value with solutions. While partially due to a lack of insights on where and how to focus, IT is also required to do more with less in response to increasing pressure to cut costs. A recent survey of IT professionals conducted by the Association for Information and Image Management, and commissioned in part by AvePoint, found that 63% of respondents spent four or more hours per week doing routine governance tasks for collaborative workspaces per week, such as provisioning, changing permissions, and changing site settings. With this effort-intensive, manual approach to managing collaboration, IT operations teams struggle with being able to service the unique productivity and governance needs of different teams, departments, or divisions within their organizations. For example, METC leverages our Cloud Governance capability to provide five different provisioning processes for the five different councils of which it is comprised. Those organizations that have found their way through these challenges know that the urgent need is automation.

 

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The Market Opportunity

To achieve the promise of modern, digital transformation, solution providers like Microsoft and Salesforce rely on their partner ecosystems to move data and offer extended protection, as well as fill the automation gaps for IT teams charged with managing these systems. They focus on delivering positive experiences for business users, while they rely on partners to help make sure that systems can continue to provide value for the long term.

Microsoft estimated that it has sold more than 250 million seats to use Microsoft 365 as of April 2020. Much of this growth has been thanks to the SMB market segment, which we define as companies with 500 users or less. Microsoft estimates that SMB users account for 60% of the global workforce. This figure is still far greater than the 115 million daily active users that Microsoft has reported for Microsoft Teams in October 2020. Microsoft has stated that for its three months ended December 31, 2020, its Office 365 Commercial revenue increased by 21% compared to the prior year period. We believe this means that, in order for technology spend to not go to waste, there are still approximately 143 million seats not deployed, or under deployed out of Microsoft’s existing customer base, a significant additional market opportunity for AvePoint. Based on our calculated average of approximately 3,000 seats per cloud customer, this lagging Teams adoption represents an additional approximately 47,000 potential AvePoint Cloud customers in Microsoft’s existing customer base.

This problem is not unique to Microsoft. The need to support under-staffed IT teams is the case regardless of the cloud platform adopted.

Ample partner opportunities exist for product development. For those on the Microsoft cloud, Forrester published a paper promoting the need for Cloud Backup solutions, echoing Microsoft’s own recommendation to our customers, captured in the image below.

 

 

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Image: Microsoft United States Service Level Agreement, section 6b. Captured August 2020.

Salesforce announced the end-of-life of its own Data Recovery Service in July 2020, directing its customer base of over 150,000 organizations to seek protection from third parties. Although Salesforce reinstated its Data Recovery Service in March 2021, as reinstated it only provides a disaster recovery service intended for use in the event of an emergency, which provides only limited metadata restore options. With Salesforce’s revenue growing approximately 20% on a year-over-year basis, as indicated by their publicly announced third quarter of fiscal year 2021 revenue, the backup opportunity is clear. However, backup alone is not sufficient to drive the level of cloud service adoption Microsoft and Salesforce require to achieve their growth and adoption targets. These services will not meet all of the needs of organizations and managed service providers (“MSPs”).

In addition to multi-cloud backup, individual organizations and MSPs need migration, security, and management solutions that will help them differentiate their own services and drive recurring revenue, all while securing collaboration. Organizations currently have far more cloud applications than they realize, and will need to ensure they remain protected, or find ways to consolidate them to simplify IT operations and user experiences. Many research reports highlight the fact that organizations are using multiple cloud services; for example:

 

   

In a 2019 report, Forcepoint found that a typical enterprise company was using 600 to 1,000 software-as-a-service applications.

 

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In its 2019 report on cloud adoption, McAfee found that most organizations believe they use only 30 cloud services, but on average actually use over 1,900 cloud services.

Security and privacy remain top of mind with the evolving regulatory landscape. GDPR, followed by CCPA, requires corporations to protect user data, or be at risk of significant fines and penalties of up to 4% of their annual earnings. The potential negative impact on shareholder value as a result of lost consumer and customer confidence also weighs on companies. There is a tension between the need to satisfy digital transformation and support a digital workforce while also complying with regulations and protection of the company’s best interests. IT will not be able to manage this change without implementing technology to both assist in deploying these best practices as well as maintaining them through automation.

Existing Solutions Are Missing the Mark

Many organizations look to Microsoft, their own IT teams, or legacy data management and data security vendors to solve their needs. Newer players are also entering the market. However, these solutions fail to meet the needs of many customers due limitations in one or more of the following areas:

 

   

Breadth. Microsoft has acquired numerous companies that have overlapping technical capabilities with other third-party products, but these are often point solutions. For example, Microsoft’s recent acquisition of a cloud-to-cloud migration solution only migrates file data, but lacks support for e-mail or other popular collaboration solutions. In addition, Microsoft has made these kinds of acquisitions part of their premium enterprise offerings, which require customers to increase their subscription costs significantly. These vendor-bundled capabilities remain available only to the minority of customers able to commit to long term investments in premium subscription SKUs.

 

   

Depth of Expertise. Large, legacy players with longer time-in-market may offer “Microsoft 365 backup”, or “Microsoft 365 tagging and classification”, for example, as part of their broad backup or classification product offerings. These vendors approach new cloud services as “just another source” to support. The result is limited support for “lowest common denominator” features that are common to their other, already supported systems. They lack the research and development investment to properly support the nuances of Microsoft 365. This is often exemplified in their support for things like Microsoft 365 Teams that are first only approached as a new way to store files and e-mails, ignoring the complexity of chats, conversations, tasks, memberships, and other forms of collaboration. This deficiency leaves customer organizations exposed when these solutions fail to keep up with the latest Microsoft development or simply do not sufficiently recover critical data in the event of a loss.

 

   

Agility. One size does not fit all. “Doesn’t Microsoft do that?” is a common question we encounter. The reality is that even though Microsoft native capabilities are powerful, they often lack flexibility that business owners demand. All-or-nothing controls held by IT are not sufficient to exploit new collaboration capabilities. This limitation leads to further shadow IT and “workaround” solutions that ultimately increase collaboration risk. Alternative home-grown solutions that companies create to automate common IT functions, such as workspace provisioning, lack flexibility and robustness, and are expensive to maintain.

 

   

Security. Newer to market SaaS solutions are not yet proven in the enterprise, and have yet to undergo rigorous security certifications, such as ISO 27001:2013 that we hold. These solutions often are testing the market and do not yet have an investment in a global infrastructure or network of data centers that would provide data sovereignty to global customers.

 

   

Scalability. Traditional data management solutions were not born in the cloud and are not ready for the modern cloud-based enterprise. As a result, their SaaS platforms and products have been released more recently, or still require significant configuration and hosting by organizations or their MSPs. Small, developer-led organizations without the backing of a larger, well established parent company often lack experience in the enterprise and are unpredictably costly to maintain. Initial SaaS solutions may only

 

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have presences in one or two global datacenters and fail to efficiently scale to support tens of thousands of sites and workspaces.

 

   

Support. Newer players lack the experience with the Microsoft stack, and deep relationships throughout the Microsoft organization. New players deliver products that are point solutions, which not only lack flexibility, but are often under-supported, lacking a global customer success team or R&D investment.

 

   

Total Cost of Ownership. Organizations that choose to pursue home-grown solutions or solutions without their own SaaS platforms often incur overall higher total costs of ownership in the long run compared to fully integrated and third-party-supported SaaS solutions like AvePoint due to the time, complexity, and skill sets required to implement and operate software and code.

Our Evolution

We were founded in 2001 with the aim to deliver backup and restore for enterprises for a new Microsoft product, SharePoint, that offered sites, or workspaces, for internal and team-based collaboration. Our product line quickly evolved to include migration to support customer upgrades to later SharePoint versions, replication across multiple SharePoint instances, archiving to comply with records management, and reporting capabilities built on the DocAve Software Platform (“DocAve”), our flagship software platform. DocAve has allowed us to gain brand awareness in the enterprise market since its launch in 2002. The target for the original platform was administrators who were called on to manage popular SharePoint deployments running on corporate networks. Our early growth was closely aligned with the rapid adoption of SharePoint over the years. We introduced additional on-premises products, such as Governance Automation, Compliance Guardian Platform, and Records which extended the availability of our solutions to other key stakeholders involved in securing organizational collaboration. These products helped overwhelmed IT teams manage SharePoint-as-a-Service, with built in governance controls to common IT requests; data classification, audit, and protection; and information lifecycle management. As our customers and Microsoft transitioned to the cloud, so did we. As enterprise collaboration became more about comprehensive collaboration capabilities beyond what SharePoint sites offered, we expanded our offerings accordingly. We have since evolved into a global data management software company that supports organizations where they work. While our primary customer base is still largely Microsoft-centric, our cloud backup and migration capabilities are designed to capture multi-cloud opportunities across Salesforce as well.

The following graphics illustrate our historical achievements and the evolution of our strategy and product offerings:

 

 

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We have made significant investments into developing cloud storage and cloud-based computing products to support our growing SaaS business since its first release of DocAve Online, the pre-cursor to AvePoint Online Services, in 2013. Today, we take a cloud-first approach to partner and customer acquisition, as our SaaS platform began to overtake on-premises in terms of platform popularity with the introduction of Office 365 (now Microsoft 365) and advanced collaborative services such as Microsoft Teams. Our SaaS platform offers backup, insights, records management, governance, compliance, and productivity extensions for Microsoft 365.

Our SaaS and on-premises platform features include automation of Administration, Data Backup, Archiving, Disaster Recovery, Migration, Records Management, Auditing/Reporting, Governance, Risk Assessment, Data Analytics, and Business User Productivity. As we continues to expand our product offerings, we are leading with a cloud-first technology architecture and a focus on providing capabilities designed for the employee experience in the context of their work.

In addition, our services team, which provides services on a per-project basis, together with our global Customer Success program, seek to achieve high customer retention and to identify expansion opportunities within accounts. We project that our involvement in accounts will help drive high rates of adoption of our technology to retain customers for future years. We also provide training, installation, configuration, Technical Account Management, and AvePoint Partner Services, in support of our products.

We believe that our recent performance in growing SMB market acquisition is indicative of our accelerating market potential. To help capture additional SMB market share, we established a global distribution strategy in 2019. This channel targets MSPs, who support and host IT for multiple small business clients. Transactions occur in online marketplaces hosted by our distribution partners. This new sales channel differs from our traditional business, in that contracts are monthly, and the typical end-customer spends less than $100 a month on the product due to the small number of license counts required. This is a high-velocity, low-touch, volume-driven business. As of March 31, 2021 and December 31, 2020, our Channel business was transacting the equivalent of $5.5 million and $4.2 million in annual recurring revenue, calculated as March’s and December’s MRR, multiplied by twelve months. We believe that our accelerating success in the SMB market is indicative of our ability to identify, invest, and execute in new markets.

 

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Competitive Advantages of our Business

We believe we have the following strengths that drive value to our customers and provides sustainable advantages:

 

   

Approximately Half of Our Workforce Are Developers. Growth through technology excellence, driven by our obsessive need to get to the root of, and solve, its customers’ needs, is our top investment priority. We have the ability to quickly pivot, and respond to customer requests, market shifts, and technology changes, including the latest Microsoft 365 services and SharePoint capabilities.

 

   

Lower Total Cost of Ownership through our SaaS Platform. Unlike home-grown development, stitched-together point solutions, or non-SaaS enabled solutions, adoption of AvePoint Cloud requires no investment from the customer’s own hardware teams and no additional overhead to operations teams to install, maintain, roll out upgrades, and enhancements automatically. We estimate that our average 5000-seat Cloud Backup customer can save as much as $2 per $1 spend, when compared with self-hosted backup solutions, based on benchmark storage costs and admin expenses. Similarly, we estimate that our average Cloud Governance customer, of approximately 12,000 seats, can save up to $5.40 per $1 of spend in reduced overhead and administration versus home grown or out of the box solutions, based on industry benchmark employee salaries. Our solutions help IT teams scale to meet growing business demands on technology and can be trialed on the cloud instantly.

 

   

Enterprise Scale, Strength, and Value. Our offerings benefit both SMB and MM, larger multi-national organizations, and organizations with isolated cloud requirements. Our solutions scale up automatically to match the size of organizations. In addition, our solutions scale out across public clouds and isolated cloud instances such as those for data sovereignty or certification by the Federal Risk and Authorization Management Program (“FedRAMP”), and are priced competitively.

 

   

Global Marketplace Presence for Rapid Go-to-Market of New Products and Flexible Monthly Billing for MSPs. Our products are available in over 100 global marketplaces that align to various countries and currencies, backed by more than 12 distributors, for rapid go-to-market of new products and flexible monthly billing for MSPs. The ability to purchase through these established marketplaces simplifies the transaction mechanism and broadens our reach into the SMB market. Marketplace transactions can be billed to MSPs or reseller partners monthly, decreasing upfront costs and adding to our monthly recurring revenue.

 

   

Microsoft and Industry Relationships and Expertise. We believe that our early access to technology adoption programs provide it with a significant advantage. Several members of our staff have been designated as Microsoft Most Valued Professionals and Regional Directors by Microsoft. We are also relying on professional memberships and experience to aid in developing customer solutions, including the consultation of former records managers and members of the International Association of Privacy Professionals on staff.

 

   

High Velocity Sales and Marketing Team. Our products are supported by a direct enterprise sales force, a hybrid direct and channel-backed mid-market team, and a rapidly scaling channel team to work with global distributors and MSPs.

 

   

Global Support. With 24x7, live support, our customers and partners can call any time they need, for help with their purchase or trial license and get help from our Microsoft certified technicians.

 

   

Dedicated Customer Success Team. Our team exists to delight customers at every stage of engagement. Customer success helps identify opportunities to expand our implementation, accounting for additional use cases as they are identified, resulting in quick account expansion and reduced churn. High risk accounts are targeted based on telemetry to identify slow adoption or stalled deployments.

 

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Our Strategy

Our mission is to help organizations collaborate with confidence. We help transform data and collaboration so users can be more productive with the latest cloud services, and drive efficiency in delivery and management of those services with automation.

We expect to continue to invest in sales and marketing teams to expand our market reach and accelerate customer acquisition. Our customer success team aims to reduce churn and delight customers. Our product and development teams will continue to work to gain expertise on core platforms, like Microsoft 365, SharePoint, and Salesforce, to ensure support for the latest features and releases in near-real-time. In addition, we expect that our continued investment in research and development will broaden our expertise on key cloud platforms, to deliver depth and breadth for our customers.

Growth Drivers

The size of the Microsoft 365 market is approximately 250 million licensed users. Our executives believe that this number could grow to 500 million, if Microsoft continues its approximately 20% growth rate that it has reported in recent earnings calls. We believe this presents a massive addressable market to pursue, leading with our SaaS data management solutions for Microsoft 365. Specifically, we are relying on the following growth drivers to help increase market share.

 

   

Continue Aggressive Product Development. We will seek to introduce adjacent products to extend its current cloud data management story, to expand within accounts, and thereby increase each customer’s lifetime value potential. Focusing on the customer experience will ensure our technology drives value, not just to the business but to individual users. We also intend to continue to invest in multi-cloud development beyond Microsoft services.

 

   

Pursue Insights. We will continue technology innovation by expanding our current product telemetry capabilities (vital in its current ability to auto-identify active versus inactive customer engagements), adopting new approaches to data gathering, automated decisioning, and delivery of business applications which can create personalized, contextualized, dynamic experiences for individual customers. These data-driven experiences can inspire deep emotional connections to products and the brand, which in turn can drive loyalty and business growth.

 

   

Increase Customer Retention and Lifetime Value with Customer Success. We plan to significantly expand our customer success program to decrease churn, decrease time to value, increase customer satisfaction, and set up successful land and expand opportunities. As of March 31, 2021 and December 31, 2020 our trailing twelve-month dollar-based net retention rate was approximately 110% and 107%, respectively, and we seeks to increase this metric. To drive results, we will be hiring additional customer success staff, as well as investing in technology to automate customer engagement, follow-up, and identification of at-risk accounts that should be prioritized for action.

 

   

Acquire SMB Market Share through Channel. We believe that building strategic relationships and channel cultivation will enable us to penetrate markets in which we previously lacked presence before 2018. We expect to continue to invest heavily in our global distribution network as well as original equipment manufacturer (“OEM”) partnerships with organizations that are deeply embedded and trusted among MSPs and their SMB customers. Microsoft estimates that SMB users account for 60% of the global workforce, and our executives estimate that this could make up as much as 50% of the Microsoft 365 market in seat count. SMB is our fastest revenue and seat acquisition growth segment, scaled up in selling through our distribution network and partners. Given our position as a SaaS data management provider with enterprise-quality data management capabilities, including security, delegated administration, and global support, we expect significant growth in our Channel business.

 

   

Expand MM Market Share through Channel. The MM segment is already a very strong segment for us, representing nearly 36% and 29% of our total sales as of March 31, 2021 and December 31, 2020,

 

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respectively. We define the MM segment as companies with greater than 500 user seats and up to 5,000 user seats, with an annual revenue of $2.5 billion or less. Our MM segment is covered by our inside sales organization, which today is the highest performing organization with short sales cycles, averaging one to three months, predictable deal volumes, high sales quota achievement, and scalable new hire ramp up times. We plan to continue to expand our MM customer segment by expanding our inside sales organization, aided by our business development tele-sales teams, and scaled up by selling with Channel partners.

 

   

Make Channel and Direct Sales Investments to Achieve Geographic Expansion. We are continuing to invest in key partnerships and Channel to reach new geographies more easily, especially in markets like Southern and Eastern Europe, Middle East, Africa, and LATAM territories.

 

   

Sell Premium Value Added Services Plus Products in the Large Enterprise Segment. We plan to offer expert services in the enterprise segment where we have a strong footprint today, to deepen our large enterprise relationships, grow customer opportunities, ensure successful roll-out, and identify further expansion opportunities within accounts. Our enterprise segment is defined as companies with greater than 5,000 user seats or greater than $2.5 billion in annual revenue. This segment comprised approximately 59% and 67% of our overall sales as of March 31, 2021 and December 31, 2020, respectively.

Our Solutions

We believe that it we are well positioned to help global organizations take advantage of the promise of the modern digital workplace. Our solutions help organizations migrate, manage, and protect our data to overcome digital transformation challenges and accelerate cloud adoption. Key value highlights of our data management solutions include:

 

   

Migration and Integration from Other Clouds and Legacy Systems. With our solutions, customers can inventory and move mail, files, and collaboration content to the Microsoft 365 cloud. This can be a direct move or a hybrid model that leaves partial data on customer-owned servers during the upgrade (such as a newer version of Microsoft SharePoint Server). In 2019, AvePoint software completed hundreds of migrations from systems like Slack, G-Suite, SharePoint, file systems, and LiveLink to Office 365. We have helped organizations significantly shorten their timelines in response to technology or market shifts, such as our customer Hydro, which transformed into Office 365 after Microsoft announced the end-of-life of SharePoint 2010, which the customer indicated reduced costs associated with redundant, obsolete, and trivial data by archiving and expiring 46% of legacy SharePoint sites during their digital transformation.

 

   

Data and Information Protection:

 

   

Our solutions directly target regulated industries with security management, records management, and compliance-reporting capabilities. Customers use us to manage guest-access governance, data classification, records management file plans, audit activity history, and manage permissions to data hosted in the Microsoft 365 cloud. Our compliance solutions are helping critical Microsoft services such as OneDrive for Business and Microsoft Teams pass internal security audits that were serving as blockers to cloud adoption, while enabling collaboration with external users.

 

   

Our data protection solutions protect more than 50 petabytes of information worldwide, providing long-term recovery and legal retention for data stored in the Microsoft 365 and Salesforce clouds. For multi-national clients who have globally-distributed businesses, our data protection solutions help prevent accidental deletions, and facilitate compliance with regulations and audits. We helped customers this year recover from ransomware attacks within a business day and roll back permissions errors that had resulted in over-exposed sensitive data.

 

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Automation. Our governance solutions are intended to save our customers significant time on common tasks, like workspace provisioning, recertification, or change requests in the Microsoft 365 cloud. Our workflow-based system creates a catalog of digital assets in Microsoft 365 and uses these to map governance and lifecycle policies (such as whether external users are allowed to collaborate on sensitive information). Customers like Thermo Fisher have been able to reduce IT tickets by 50% or more by automating many common tasks in managing Microsoft 365. This frees up IT teams to deliver compelling business solutions, instead of rote IT tasks for permissions management, recertifying workspaces, and cleaning up stale or out of date content and workspaces. Our customer Intrepid Travel drastically reduced workspace provisioning time saving an estimated three months of work per year. Our solutions are built with the entire content lifecycle in mind, allowing customers to know that once information is no longer useful, it is removed from the systems to ensure users keep a clean experience in their digital workspace. For example, the Metropolitan Council, a regional policy making organization in the Twin Cities area of the United States, leverages Cloud Governance’s capability to provide five different provisioning processes for the five different councils of which it is comprised. This was a critical part of their response to the COVID-19 Work From Home order.

Technology Differentiators

 

   

Cloud First, Hybrid Enabled. We support customers wherever they are on their cloud journey. Even if customers are committed to a fully on-premises or hybrid (partly on-premises, partly in cloud) deployment, they have the same robust migration, management, and protection solutions available to our cloud customers.

 

   

Depth of Expertise. Our team has deep experience in the Microsoft technology stack, allowing us to offer a range of solutions, and the most comprehensive support for the Microsoft 365 cloud. Our developers have been working with Microsoft technology since 2001 and were among the first to offer SaaS solutions for Microsoft 365. Our SaaS solutions have offered multi-cloud backup since 2014.

 

   

Breadth of Technology and Cloud Support. We meet customers where they are (whether spread across clouds, or still on-premises or private clouds).

 

   

New Technology Adoption. Our SaaS solutions, built on latest technologies, optimize deployments. Our cloud leverages the latest cloud-services from Microsoft Azure to deploy, secure, and scale to meet customer demand, leveraging Virtual Machine Scale Sets, Azure Kubernetes Service, Machine Learning, and other technologies.

 

   

Built to Scale. The AvePoint Cloud is spread across 12 global data centers and supports organizations with hundreds of thousands of users, and more than seven million cloud users. Our multi-tenant architecture is designed to allow customers to get the latest technology enhancements as they are available.

 

   

Security. We are ISO 27001:2013 certified and the AvePoint Online Services for the U.S. government cloud platform received authority to operate (“ATO”) under FedRAMP on March 31, 2021. Our products support role-based access controls, delegated administration, and have undergone numerous rigorous security certifications intended to give our customers peace of mind.

 

   

Insights Everywhere. Our prioritized insights help our customers know where to focus. We make suggestions based on best practices, including Microsoft recommendations. Our insights drive efficiency and take the guesswork out of prioritization.

 

   

Automation Everywhere. We allow customers to “set it and forget it”, or to keep human review in their process. When we find what is wrong, for example external users that have been added to internal or confidential workspaces, we can fix it automatically by removing the permissions. Even backups will run automatically with a few simple clicks.

 

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Our Software Platforms

The AvePoint Cloud is a SaaS platform, hosted in Microsoft Azure datacenters. AvePoint Cloud offers modules to protect data, secure collaboration, provide valuable insights, proactively enforce governance policies, and enable data and application lifecycle management for Microsoft 365. In addition, we have expanded to support multi-cloud backup across Dynamics 365, Salesforce, and Google Workspace. Our technology has been selected as a preferred partner by global distributors, such as Ingram Micro, and as the preferred solution from other backup vendors, that chose our Cloud Backup technology to complement their existing end-point backup technology instead of building their own. This distribution partners operate primarily in the small and mid-size business market segments.

Organizations with hybrid or on-premises collaboration platforms and data spread across File Shares, SharePoint, and more, benefit from our product platforms that have evolved over the last 20 years.

Our platforms support requirements for:

 

   

Infrastructure management;

 

   

Security, risk, and compliance controls;

 

   

Operational governance; and

 

   

Information governance.

These requirements can be met with our capabilities for:

 

   

Data protection;

 

   

Storage optimization;

 

   

Reporting;

 

   

Administration;

 

   

Data classification;

 

   

Audit;

 

   

End-user experience and productivity;

 

   

Records management;

 

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The following graphic illustrates the roles within an organization that are supported by our technology:

 

 

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Figure: AvePoint Technology Platforms

 

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Recent Product Innovation

 

   

MyHub for Microsoft 365: Simplifying the Microsoft 365 experience to drive adoption, productivity. MyHub offers persona-driven experiences to help drive end user adoption and collaboration across all Microsoft 365 services, helping organizations get the most from their investment in the service. The latest MyHub release proved critical in helping align Microsoft 365 services with the way users and groups work together, especially when they are spread out and work was previously isolated in one service. The image below shows the MyHub home screen, and zooms in on the ability to create a Hub based on metadata or other workspace properties for faster access:

 

 

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AvePoint Online Services (“AOS”) for Microsoft 365, Dynamics 365, Salesforce, and Google Workspace. AOS offers a single pane of glass for IT teams to configure and manage their AvePoint Cloud services. Delegated administration enables security trimmed, role-based access to specific functions or cloud collaboration scopes. Sub-group administrators, records managers, or other key business stakeholders only get access to what they need to do their jobs. Shared services offer insights that can be consumed across AvePoint services. The image below shows the AOS home screen, with several cloud services that can be launched from this experience:

 

 

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Policies & Insights (“PI”) for Microsoft 365: PI secures collaboration across internal and external users and highlights and proactively prevents oversharing of sensitive content for collaborative workspaces. It enforces security and access controls to keep workspaces secure. Released in the midst of the global COVID-19 pandemic, PI’s zero configuration model and rapid value framework helped address immediate concerns our customers were facing in COVID-19, as they transitioned to remote work but were still challenged to keep their corporate IP and collaboration secure. Over-privileged users and over-exposed sensitive information is revealed in near real-time, helping IT teams focus their resources to deliver the most impact. Then, our automation helps keep IT teams one step ahead of security issues, as it reverts unauthorized changes or access in real time. The image below shows PI’s dashboard insights, including trends for instances of external users and anonymous links, and summarizes items contributing to collaboration risk that can be addressed with PI:

 

 

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Multi-Cloud Support for Data Protection. Business continuity of an expanding set of business-critical assets establishes trust in the cloud as customers grow their footprint. We help ensure organizations can easily meet their data retention requirements, in their sovereignty of choice, with ease. Delegated access controls are designed to ensure administrators, power users, MSPs, or end users can only access the content they own during recovery. This is displayed through a single-pane-of-glass for IT teams to manage multiple cloud assets. The images below show the Cloud Backup experience after navigating from the AOS home screen. The Cloud Backup home screen shows backup progress for the Microsoft 365 services AvePoint protects:

 

 

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Migration and Hybrid Integration Platform to Enable Digital Transformation. Our technology builds in best practices, enabling a three-phased approach for migration, to analyze, migrate and monitor progress throughout a customer’s transformation. We enable fast migration of cloud or on-premises mail, files, and collaboration data using Microsoft’s High Speed Migration APIs where available. Alternatively, if an organization’s transformation is happening over an extended period, hybrid integration enables platform co-existence. When it is time to move, organizations can bring what they need and leave what they do not with automated filters and granular scope selection. We help analyze an organization’s data to help its teams know the difference, and transform the organization’s data, permissions, and more. The image below shows the resulting analysis, or pre-migration report, of an on-premises scope, as well as the option to change the source type to switch between supported sources:

 

 

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Our Technology

Designed for the Cloud

Traditional software requires an investment from customers in hardware and supporting software to provide solutions for collaboration. We built our solution on cloud computing: a highly dynamic platform that makes sure businesses do not need to worry about how many users can fit on a single hardware application without causing major slowdowns during peak hours. As we grow and add customers, or as customers grow and add users, our platform leverages the cloud to dynamically add more computing power. Resources can be freely allocated to and from other compute resources by the software, enabling maximum utilization and helping to prevent service outages. Our multi-cloud instance computing also reduces the downtime associated with releasing new versions of the software, allowing for real-time updates and continuous integration of new solutions to the cloud service platform. Furthermore, multi-instance model/architecture provides us the ability to tailor/design our application requirements in various business models, helping to ensure security, streamline the development cycle, and ensure the efficient and high-quality utilization of resources. Today, we offer different flavors of the Cloud Services platform, commercial cloud, sovereign cloud, and FedRAMP cloud. This provides us with a unique opportunity to adhere to the ever-changing regulatory environment of many industries.

 

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Build Automation and Continuous Delivery

We focus on building platform-based SaaS that allows us to quickly expand and add products to a common set of features. Essential tools for monitoring and managing our software is provided to the customer through a single pane of glass. This enables us to:

 

   

quickly patch and deploy new features to our cloud without disrupting core customer use cases;

 

   

keep up with the latest Microsoft releases by shipping features to customers with non-disruptive upgrades every two months;

 

   

pivot existing customers to new technologies on adjacent workloads without requiring new configurations or setup; and

 

   

share core services to optimize how often customer environments are accessed, including re-usable audit logs, change logs, and other key metadata needed by multiple products.

This is supported by both agile development teams as well as automation through our cloud operations teams to aid in deploying and monitoring regular updates to our technology. In addition, no human intervention is needed to quickly start trials for our software since there is no technology to install, reducing friction in the sales cycle.

Scalable and Resilient

We have been developing technology to support customers running SharePoint Server since 2001, with the ability to scale our windows-server based technology to support large and geographically dispersed environments. The ability to scale Migration, Backup, and Protection services but maintain a single pane of glass has been an essential tenet of our platform since the beginning. This included redundancy of services to protect against outages, maintain high availability, and protect customers from service disruption.

Learning from years of deploying and maintaining these environments, our cloud service is built to scale to serve our rapidly growing customer base. Our service is currently hosted in 12 of Microsoft’s Azure data centers and can scale to new regions without needing additional local resources from AvePoint. Our service is built using the latest cloud services to eliminate the need to constantly maintain patching of compute or database resources, and makes ample use of native-cloud functionality such as container services, business intelligence, and machine learning.

In addition, we dynamically grow our multi-tenant instance as customers are added and as they grow, ensuring performance and scale are matched to customer size based on data size or user count. As customers increase in size, we will dynamically adjust based on their predicted behavior. Since our technology does not rely on patching or maintaining servers, Our products are able to scale almost indefinitely. Our platform is able to commit to performance service level agreements and uptime because of the reliability of the service it is built on and the ability to dynamically scale on demand.

We use only supported APIs and recommended technology and practices, ensuring the supportability of our customers. In addition, many of our services are accessible via API for consumption in larger enterprise IT or managed service provider portals, such as ServiceNow.

Secure

Our solutions are built based on security and privacy best practices and are certified against the International Organizations for Standardization’s (“ISO”) 27001:2013 standards. Our ISO Certification covers the management, operation and maintenance of the people and information assets, information systems and the associated processes that enable corporate operations, and the development and deployment of products and

 

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services provided to our customers and employees. We follow the latest security practices, incorporating security and privacy by design and by default. Our Information Security Management System policies and procedures are reviewed least annually. Our software development lifecycle follows industry security standards (NIST 800-64 and OWASP) and are verified through automated code quality and vulnerability checks against industry standard vulnerabilities. Additionally, internal audits are conducted annually, and we are subject to annual third-party surveillance audits to prove ongoing compliance. Data is encrypted by default, ensuring only customers have access to critical backup, archive, or record data created by our solutions. Single-sign-on is standard for customers on our platform, ensuring they are subject to all security standards set forth by their company. In addition, a strong role-based access control is designed to ensure that users can be delegated or authorized to work only across smaller parts of the organization, minimizing cross-border data transfer or violations of ethical walls.

The AvePoint Online Services for U.S. government cloud platform received ATO under FedRAMP on March 31, 2021. Our Cloud Services are a FedRAMP (Moderate) Authorized SaaS solution for use across all U.S. government agencies. Our ATO was sponsored by the U.S. Department of Energy. FedRAMP is a government-wide program that promotes the adoption of secure cloud services by providing a standardized approach to security assessment, authorization, and continuous monitoring for cloud products and services. As a FedRAMP (Moderate) Authorized SaaS solution provider, We provide federal agencies the ability to use our cloud deployments and services models at low, moderate, and high risk impact levels. FedRAMP ATO validates the security and operational processes for many aspects of our application and SaaS service delivery including software development and lifecycle processes, vulnerability assessments and remediation, access controls and role separation, auditing, logging and reporting.

Our Services

We offer a range of professional services and support structures to complement our product line. Our goal is first to drive adoption. Through direct customer engagement, we also determine investments for new and existing product innovation. These are often used as low-risk ways to customize and enhance solutions for industry verticals to supply demands for document management, education, end-user engagement, and delegated administration, as examples.

Core Services

We leverage customer interactions and services as a means to enhance and innovate our products and technologies. We provide the following services:

 

   

Real-Time Support. Our global support staff supports our customers, 24x7x365. Our engineers are certified on Microsoft and AvePoint technology.

 

   

Training. Our Microsoft-certified technicians are available to help organizations extract even more value from our solutions, from the commencement of their relationship with us.

 

   

Customer Success. Our global Customer Success organization aims to enable successful technology adoption and decrease time to value, and is compensated in part on the basis of customer renewals and in-account expansion.

 

   

Cloud Operations. Our team manages our globally distributed cloud platform to ensure optimal availability and reliability.

Consulting and Implementation

 

   

Assessment and Design. We help our customers conduct thorough reviews and make recommendations on how to align information architecture, including information classification, as well as IT process to business needs.

 

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Migration. Our white glove migration services have enabled large enterprises to transition to the cloud. Our services have migrated customers with 50 terabytes of content in a single project, while satisfying strict regulatory and operational requirements.

 

   

Implementation and Post-Deployment. From configuration to intranet design, and Document Management or Case Management Systems that stitch together our software platforms to deliver Industry-specific solutions, our technical expertise is backed by consulting experience shared among AvePoint teams.

 

   

Security and Compliance Health Checks. Our technology enables a range of Cybersecurity Services opportunities. Most common are “Cloud Readiness Assessments” and “Compliance Health Checks.” These are used to help customers understand their as-is state and provide recommendations for approaches to cloud consolidation, migration, automating application and data governance, as well as tagging and classification strategies.

AvePoint Customers

As of March 31, 2021, our solutions have been deployed across approximately 19,000 customers and host more than seven million cloud users.

Our solutions reach horizontally across many industry verticals. However, we often see that most value is realized in organizations subject to intense legal, regulatory, or security requirements. Below is a sampling of customers across key industries, representing a variety of markets.

Representative Customers

 

Manufacturing    Public Sector    Health Services
Renesas transformed legacy LiveLink data into Microsoft 365 and streamlines SharePoint Online permissions and Group management with AvePoint within five months.   

Airways New Zealand required robust records management and governance and is now a leader in PRA compliance for Office 365.

 

Oakridge National Laboratory executed a compliant migration of 2.7 terabytes worth of data from SharePoint 2010 to Office 365 comprising approximately 43,000 lists and 3.6 million objects ahead of the project schedule.

 

Centers for Medicare & Medicaid Services needed to secure PHI and PII, quickly migrate content, and automate operational controls. As a result, SharePoint usage has increased 50% and they are able to monitor PHI compliance in near real-time.

   Sysmex needed to enable secure external collaboration, enable granular content recovery, and automate its governance. By automating routine yet time-intensive tasks they have, “dramatically reduced the burden on our IT department”.

 

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Retail    Financial Services    Technology
Laser Clinics Australia needed an Office 365 backup tool that would be GDPR compliant and low maintenance. They have achieved both objectives with the multi-geo feature allowing them to choose where their backup data lives. This safety net has allowed them to boost their Microsoft Teams adoption.    AuditOne gained better control over Microsoft 365 data protection and generates Audit Reports 88% faster with AvePoint Online Services.   

Ictivity required multi-tenant SaaS backup for their clients.

 

Cambridge Consultants were able to achieve 94% Teams adoption while reducing technology sprawl and securing team collaboration.

Customers Across Diversified Industries

 

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Sales, Marketing and Customer Success

Sales

We employ both a direct and indirect sales force as part of our global Go-To-Market strategy. Our sales force is organized by both customer size and vertical segmentation within designated geographies. Within geographies, our sales force is segmented into SMB, and enterprise sales teams based on customer size. Our SMB segment is defined as organizations with 500 user seats or less, and the SMB Sales Team primarily engages this customer segmentation indirectly through distribution channels and partner networks. This reinforces our strategy of low-touch, high volume, transactional business coverage of the SMB segment. The MM segment is covered by our inside sales team, which today is the highest performing team in the company with less than six-month sales cycles, predictable deal volumes, high sales quota achievement, and scalable new hire ramp up times. The MM sales team engages customers directly in majority of the cases, with some regional geographical teams such as Germany leveraging local partners to assist in reaching a wider audience with local-language support. The enterprise sales team is primarily an outside sales organization who engages customers directly, with sales representatives spread regionally to cover their respective customer geographies.

The MM and enterprise sales teams are supported by our Business Development Representatives (“BDR”) team, an outbound tele-sales team for lead generation and opportunity qualification. The BDR team is centrally

 

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consolidated into two call centers, one in each hemisphere, to ensure continuous coverage supporting our global sales teams and aims to respond to all inbound sales requests within 48 hours.

Marketing

Our global marketing organization consists of a centralized corporate team that focuses on brand building, thought leadership, capturing customer stories, communications, product marketing, marketing operations, and digital marketing. Regionally, field teams align local efforts with market needs, and execute on all direct and Channel activities. Our marketing activities often combine high-touch in-person activities with highly automated digital awareness, capture, conversion, and nurture via digital advertising, social media, email marketing, and online learning. COVID-19 has shifted the majority of all formerly in-person and high-touch activities online, including our annual ShiftHappens Conference – a global industry conference showcasing how customers navigate their digital transformation journey, and many deep-dive customer workshops. Our tactics also include community building and participation, and our company leaders frequently present as subject matter experts or hosts of market-leading events like Microsoft Inspire and Ignite.

Customer Success

Our CS team is a global customer service organization that sits at the intersection of Sales, Engineering, and Support organizations, directly responsible for client after sales care. Our CS team employs a proactive relationship-focused client management approach designed to ensure that our valued customers get the care they need to rapidly deploy, and receive value from, their technology investment in us. CS is responsible for securing our client base’s contracts renewal and maintain ARR through ensuring increased adoption and continuous utilization of our software. Our CS teams are imbedded deep into customer organizations and are therefore able to identify cross-sell or expand opportunities. This includes identifying at-risk clients, as well as proactively address support or other concerns before they become critical issues.

Our CS strategy is rolled out to align with Sales Team segmentation, which includes tiered level coverage across our enterprise, MM, and SMB customer segments.

Strategic Relationships

Our software is designed with and distributed through key strategic relationships below:

 

   

Microsoft. Microsoft is our most important strategic partner. We are a Microsoft Gold Certified Partner in Application Development, Cloud Platform, Cloud Productivity, and Collaboration and Content, and are a Microsoft Managed, Independent Software Vendor (“ISV”) partner. We believe that our participation in Microsoft’s Technology Adoption Programs, Vendor or Third-Party Councils, and invite-only MVP and RD programs, as well as our five Partner of the Year awards in the last six years, illustrate not only the level of commitment from both parties, but the depth of the current relationship that gives us a competitive advantage. Microsoft not only encourages partner development to meet customer requirements beyond the scope of its services, they help fund our development of apps and experiences critical to their customer success. We leverage and rely on Microsoft’s Azure infrastructure to host and make available our SaaS offerings.

 

   

OEM. Our solutions are currently being sold branded by other vendors across global marketplaces. We believe that the selection of our technology to provide cloud-to-cloud backup by a global backup provider speaks to the strength of our solutions.

 

   

Global Distribution Network. More than 100 global marketplaces carry our products, across distributors like Ingram Micro and Tech Data Corporation, to scale SMB market acquisition through MSPs.

 

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Competition

Unlike traditional vendors focused on data management, we approach the full spectrum of adoption for the Microsoft cloud, from migration through protection of their information. While some vendors are interested in data governance, we believe in supporting user adoption as well giving us the advantage of protecting the full lifecycle of users in the cloud.

More generally, our competition can be categorized in one of three ways: (1) large, legacy backup or security vendor, (2) new startups focused on a few key workloads, or (3) home grown solutions from customer IT teams combined with native controls in Microsoft 365.

We have summarized below what we believe to be our advantages over these types of solutions:

 

   

Legacy Vendors. Our depth and expertise on Microsoft 365, as well as SharePoint and even Salesforce backup, mean our solutions are better able to handle stringent requirements. Our SaaS backup solution has been commercially available since 2013 and has undergone rigorous security certifications. Some of our legacy competitors have only released their SaaS backup solutions for Microsoft 365 in 2020. Our historical focus on Microsoft has allowed us to be faster to market, which we believe is critical for organizations that cannot wait on vendor support before transitioning to their cloud investments. We know backup, security, and migration data management capabilities are more than a checkbox. We rely on the sophistication of our solution approach to win business against these competitors.

 

   

Start-Ups. Smaller competitors often lack the necessary support, flexibility, security, and reliability to support enterprise customers. The complexity required to support advanced IT use cases often consumes development resources, and over-taxed regionally-based support teams have difficulty providing 24x7 support.

 

   

Home-Grown / Native Solutions. We offer what we believe to be the most flexible, secure, and operationally efficient solutions in the market, in our segment. Home-grown or even heavily custom code-based solutions are increasingly costly to maintain. IT staff rotate through roles, move on to other organizations, or simply lose the capacity to be able to keep up-to-date with the ever increasing Microsoft 365, Salesforce, or G-Suite ecosystem. Providing automated product upgrades as often as every two months with no cost of servers or maintenance is often a simple value proposition to prospective customers that we believe our competitors are not able to provide.

We believe that we compete favorably with our competitors, which include Veeam Software, Varonis Systems and Spanning Backup, on the basis of our technology and the other advantages of our solutions described in this prospectus.

Research and Development

Our research and development team consists of our user experience, product strategy, engineering teams, and technical operations. These groups are responsible for the design, development, testing, and delivery of new technologies and features for our platform. They are also responsible for scaling our platform and maintaining our cloud infrastructure. We invest substantial resources in research and development to drive core technology innovation and bring new products to market. We are an early adopter and thought leader in agile development, DevOps culture, and site reliability engineering, empowering our engineers with full-service ownership of their code in production, leading to high-quality software. Our distributed research and development efforts enable us to attract talent across our multiple locations, primarily in the United States and supported by China and the Philippines.

Intellectual Property

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confidentiality agreements, and technical measures. We pursue the registration of domain names, trademarks, and service marks in the United States and in various jurisdictions outside the United States. We control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners, and our software is protected by U.S. and international intellectual property laws. We require our employees, consultants, and other third parties to enter into confidentiality and proprietary rights agreements and control access to software, documentation, and other proprietary information. Our policy is to require employees and independent contractors to sign agreements assigning to us any inventions, trade secrets, works of authorship, developments, and other processes generated by them on our behalf and agreeing to protect our confidential information. In addition, we generally enter into confidentiality agreements with our vendors and customers.

Although we rely on intellectual property rights, including trade secrets, copyrights, and trademarks, as well as contractual protections to establish and protect our proprietary rights, we believe it is our team’s ability to execute – by developing new products, and our efficiency at new market acquisition, that will maintain our market leadership position.

Facilities

Our principal executive offices are located in Jersey City, New Jersey and consist of approximately 11,804 square feet under a lease that expires in November 2024. We maintain additional offices in multiple locations in the United States and internationally in Europe and the Asia-Pacific region. We believe that our current facilities are adequate to meet our ongoing needs and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.

Employees and Human Capital Resources

As of March 31, 2021, we had 1,511 employees across our 30 global offices. None of our employees are represented by a labor union with respect their employment. We have not experienced any work stoppages and we consider our relations with our employees to be good.

We value agility, passion and teamwork, and are building an environment for lifelong learners to go to the next level, sharpen their skillsets and develop professionally and personally. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of the company by motivating such individuals to perform to the best of their abilities and achieve our objectives. We are committed to providing a competitive and comprehensive benefits package to our employees. Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees.

Regulatory Considerations

The legal environment of internet-based businesses, both in the United States and internationally, is evolving rapidly and is often unclear. For example, we occasionally cannot be certain which laws will be deemed applicable to us given the global nature of its business. This ambiguity includes topics such as data privacy and security, pricing, advertising, taxation, content regulation, and intellectual property ownership and infringement. See the section titled “Risk Factors – Risks related to Our business and industry – Evolving global internet laws, regulations and standards, privacy regulations, cross-border data transfer restrictions, and data localization requirements, may limit the use and adoption of our services, expose us to liability, or otherwise harm our business.”

 

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Data Protection and Privacy

Our platform and the customer data it uses, collects, and processes to run our business are an integral part of our business model. As a result, our compliance with laws dealing with the use, collection, and processing of personal data is core to our strategy. Regulators around the world have adopted or proposed requirements regarding the collection, use, transfer, security, storage, destruction, and other processing of personal data. These laws are increasing in number, enforcement, and fines and other penalties. All states have adopted laws requiring notice to consumers of a security breach involving their personal information. In the event of a security breach, these laws may subject us to incident response, notice and remediation costs. Failure to safeguard data adequately or to destroy data securely could subject us to regulatory investigations or enforcement actions under federal or state data security, unfair practices, or consumer protection laws. The scope and interpretation of these laws could change, may be contradictory and unclear, and the associated burdens and compliance costs could increase in the future. Two such governmental regulations that have significant implications for our platform are the GDPR and the CCPA.

The GDPR became effective in May 2018, implementing more stringent requirements in relation to the use of personal data relating to European Union individuals. Personal data includes any type of information that can identify a living individual, including name, identification number, email address, location, internet protocol addresses, and cookie identifiers. Among other requirements, the GDPR mandates notice of and a lawful basis for data processing activities, data protection impact assessments, a right to “erasure” of personal data, and data breach reporting.

In the United States, California adopted the CCPA, which became effective in January 2020. The CCPA establishes a privacy framework for covered businesses, including an expansive definition of personal information and data privacy rights for California residents. Among other requirements, the CCPA mandates new disclosure to consumers and allows consumers to opt out of sales of personal information. The CCPA includes a framework with potentially severe statutory damages and private rights of action.

We have a commitment from our board of directors down through our Executive Committee, Steering Committee, Chief Legal Officer, Chief Information Security Officer (the “CISO”) and Privacy, Security and Risk Team, to ensure that each executive and senior leader has a clear and consistent vision, role and responsibilities with regards to their risks, risk mitigation strategies, documented clearly in their enterprise information security policy. Our CISO reports directly to our CEO. We have implemented a cross functional security and privacy team through which we engage senior management on issues, align policies, procedures and technical controls to demonstrate our process and our commitment to our customers and users, and train each of our employees on all privacy and security expectations. The team is comprised of representatives from Privacy, Security and Risk, IT, Product, and Legal. Under the leadership of our CISO, we have implemented a methodology through which we are regularly (i) assessing existing risks to sensitive information; (ii) developing procedures and ways to manage and control such risks; (iii) monitoring outsourcing arrangements to third parties to ensure compliance with our procedures; (iv) evaluating and suggesting adjustments to our security program, as appropriate, in light of relevant changes in technology, threats to sensitive information, and other circumstances affecting us; and (v) briefing our managers at least annually (or as often as the managers may request) on the procedures involved with the security program, risk assessment, service provider arrangements, testing, security breaches and recommendations for changes.

The Legal Team is responsible for changes necessary to respond to new risks and changes in the law or regulations; (ii) working with the Information Security Team to coordinate changes in policy with changes in procedure to ensure compliance between both policy and procedure of information security; and (iii) conducting an annual risk assessment to assess the adherence of the procedures. The CISO and the Legal Team, or a qualified person designated by them, trains all Company personnel to explain our information security, privacy and data protection compliance efforts, policies and procedures. The Risk Assessment program is approved by management, communicated to appropriate constituents and the CISO is the designated owner responsible for

 

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reviewing and maintaining the program in conformance with a documented information security policy that has been approved by management, communicated to appropriate stakeholders and is managed also by the CISO. The CISO has also pointed an internal auditor, who performs a standards-based audit of the company against our security program, through an annual audit and risk assessment. The Internal Audit Report must be sent to the CISO and must include possible corrective actions that will be documented in a corrective action form and tracked by the project manager. Management regularly reviews the compliance of information processing within their area of responsibility with the appropriate security policies, standards, and any other security requirements.

Further, we have has been certified for ISO’s 27001:2013 framework. ISO is an independent, non-governmental international organization with a membership of 161 national standard bodies. ISO is credited for publishing more than 2,100 international standards covering almost every industry from technology to food safety. Our ISO certification covers the management, operation and maintenance of the people and information assets, information systems and the associated processes that enable corporate operations as well as the development and deployment of products and services provided to our customers and employees. Internal audits are conducted annually, and we are subject to annual third-party surveillance audits to maintain ongoing compliance.

The implementation of such compliance-driven programs is not new to us, and we remain fully committed to approaching this initiative diligently with the utmost focus on securing and maintaining customer trust. Our ISO certification represents a steadfast commitment to continually improving our information security and privacy programs. This certification illustrates the maturity and robustness of our on-premises software solutions and our SaaS-based platform.

Our CISO also serves as our Chief Privacy Officer and together with the Privacy, Security and Risk Team and the Legal Team holds responsibility for the privacy program. This group identifies privacy risks and associated mitigation plans formally documented and reviewed by management. We have implemented a formal privacy awareness training for employees, contractors, and third-party users to ensure confidentiality and privacy of personal or protected information and should allocate reasonable resources (in time and money) allocated to mitigating identified privacy risks and controls to ensure that the collection and usage of personal information is limited and in compliance with applicable law. We work hard to ensure our privacy and security programs meet the highest standards of data protection.

We are committed to developing, implementing, and maintaining appropriate administrative, technical, and physical safeguards within the products and services we provide and within our own systems, building on the foundation and discipline necessary to develop and support some of the leading privacy and security products in the world.

Anti-corruption and sanctions

We are subject to the FCPA. The FCPA prohibits corporations and individuals from engaging in improper activities to obtain or retain business or to influence a person working in an official capacity. It prohibits, among other things, providing, directly or indirectly, anything of value to any foreign government official, or any political party or official thereof, or candidate for political influence to improperly influence such person. Similar laws exist in other countries, such as the UK, that restrict improper payments to persons in the public or private sector. Many countries have laws prohibiting these types of payments within the respective country. Historically, technology companies have been the target of FCPA and other anti-corruption investigations and penalties.

In addition, we are subject to U.S. and foreign laws and regulations that restrict our activities in certain countries and with certain persons. These include the economic sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control and the export control laws administered by the U.S. Commerce Department’s Bureau of Industry.

 

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Legal Proceedings

From time to time, we are involved in various legal proceedings arising in the normal course of business activities. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition.

 

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MANAGEMENT

Directors and Executive Officers

Our directors and executive officers and their ages as of July 1, 2021 are as follows:

 

Name

   Age     

Position

Executive Officers

     

Xunkai Gong

     58      Executive Chairman

Tianyi Jiang

     47      Chief Executive Officer and Director

Brian Brown

     49      Chief Operating Officer and Director

Sophia Wu

     45      Chief Financial Officer

Andy Yong

     54      Chief Investment Officer

Non-Employee Directors

     

Stephen CuUnjieng(1)(2)(3)

     62      Director

Jeff Teper(1)(2)

     57      Director

John Ho(1)(3)

     44      Director

Jeff Epstein(2)(3)

     64      Director

 

(1)

Member the Audit Committee.

(2)

Member of the Compensation Committee.

(3)

Member of the Nominating and Corporate Governance Committee.

Executive Officers

Xunkai Gong has served as our Chairman and Chief Executive Officer since Legacy AvePoint’s incorporation in 2001. Mr. Gong holds a master’s degree in computer engineering from University of Chinese Academy of Sciences, a master’s degree in computer science from Southern University and Agricultural and Mechanical College at Baton Rouge, and a bachelor’s degree in electrical and electronics engineering from Dalian University of Technology. We believe Mr. Gong is qualified to serve as a member of our board of directors due to technical experience and leadership of AvePoint for the last twenty years.

Tianyi Jiang has served as our Co-Chief Executive Officer since 2008 and as a director since 2005. Dr. Jiang holds doctorate and master’s degrees in Data Mining from New York University in addition to a bachelor’s degree and master’s degree in Electrical and Computer Engineering from Cornell University. We believe Dr. Jiang is qualified to serve as a member of our board of directors because of his executive leadership experience and extensive experience in the fields of cloud computing and SaaS.

Brian Brown has served as our Chief Operating Officer, General Counsel and a director since 2004. Mr. Brown holds a bachelor’s degree from the University of Michigan and a Juris Doctor from Michigan State University. We believe Mr. Brown is qualified to serve as a member of our board of directors because of his executive leadership experience, extensive legal background, familiarity with SaaS company operations and acumen with respect to international entity formation and operations.

Sophia Wu has served as our Chief Financial Officer since August 2020. Ms. Wu served as our SVP of Finance from April 2018 through August 2020. From December 2015 to March 2018, Ms. Wu traveled and pursued opportunities outside her finance career. Ms. Wu holds a master’s degree in Accounting from the State University of New York at Albany and a bachelor’s degree in international business administration from Shanghai University of Finance and Economics. She has been a Certified Public Accountant in the State of New York since 2004.

Andy Yong has served as our Chief Investment Officer since February 2020. Mr. Yong was the head of private wealth management for HL Bank Singapore from December 2017 to November 2019 and the head of

 

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private clients (Asia) for Hawksford Trust Pte Limited from April 2017 to November 2017. Mr. Yong was the senior advisor for Fairfield Advisory, Inc. from September 2015 to December 2017. Mr. Yong holds an MBA from Southern Illinois University, a bachelor‘s degree in Accountancy from the University of Idaho and a bachelor’s degree in Finance from Northern Illinois University.

Non-Employee Directors

Jeff Epstein, Apex’s Co-Chief Executive Officer, Chief Financial Officer and Secretary since inception, has since 2011 been an operating partner with Bessemer Venture Partners, a venture capital firm, where he primarily works with chief executive and financial officers to create substantial operational improvements. From 2008 to 2011, Mr. Epstein was executive vice president and chief financial officer of Oracle Corporation, a global technology company. Prior to joining Oracle, he served as chief financial officer of several public and private companies, including DoubleClick (sold to Google), King World Productions (sold to CBS) and Nielsen’s Media Measurement and Information Group. Earlier in his career, he was an investment banker at The First Boston Corporation. Today Mr. Epstein leads the CFO Advisory Board at Bessemer where more than 100 portfolio company CFOs meet in person and online to help each other improve their effectiveness. Mr. Epstein specializes in marketplaces and B2B software companies and co-teaches the Lean Launchpad class at Stanford University’s Graduate School of Engineering. Within the last five years he has served on the boards of directors of Kaiser Permanente, a non-profit healthcare company, Okta, Inc., an identity and access management company, Booking Holdings, an online provider of travel services, Twilio, a cloud communications platform, Shutterstock, a stock photography and stock footage provider, and several private companies. Mr. Epstein holds an MBA from the Stanford University Graduate School of Business, and a BA from Yale College. We believe Mr. Epstein is qualified to serve as a member of the board of directors because of his extensive industry and finance experience.

Stephen CuUnjieng has served as a member of our board of directors since February 2020. Mr. CuUnjieng served as Chairman of Evercore Asia Limited, an investment firm, from 2011 to 2020. Mr. CuUnjieng currently serves as an independent director of First Philippine Holdings Corporation, a position he has held since May 2018, and previously served as an independent director at Aboitiz Equity Ventures from 2010 to May 2018. From 2008 to 2017, Mr. CuUnjieng served as an Adviser to the Board of SM Investments Corporation. Mr. CuUnjieng earned an MBA from the University of Pennsylvania and a bachelor’s degree as well as a bachelor of laws degree from Ateneo de Manila University. We believe Mr. CuUnjieng is qualified to serve as a member of our board of directors because of his experience in finance and capital raising.

John Ho has served as a member of our Board since the consummation of the Business Combination. Since 2009, Mr. Ho has served as founder and chief industrialist investor of Janchor Partners. Mr. Ho has served as a non-executive director for Vocus Group Limited, a telecommunications company listed on the ASX, since January 2018. From April 2017 to December 2019, he served as chairman of the board of directors of Bellamy’s Organic, an organic infant milk formula and baby food company listed on the ASX. From July 2014 to July 2019, he served on the listing committee for the Hong Kong Exchanges and Clearing Limited, including as deputy chairman. Mr. Ho received a bachelor of science degree in mathematics and a bachelor of commerce degree in finance from The University of New South Wales in Sydney, Australia. We believe Mr. Ho is qualified to serve as a member of our board of directors because of his experience in finance and as a director of public companies.

Jeff Teper has served as a member of our board of directors since December 2014. Mr. Teper has worked at Microsoft Corporation since March 1992 and currently holds the title Corporate Vice President. Mr. Teper holds an MBA from Harvard Business School. He also holds a bachelor’s degree from New York University. We believe Mr. Teper is qualified to serve as a member of our board of directors because of his executive leadership experience and extensive experience in the Microsoft ecosystem and his familiarity with the industry.

Family Relationships

There are no family relationships among any of our directors or executive officers.

 

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Board Composition

Our business and affairs are organized under the direction of our board of directors which meets on a regular basis and additionally as required. In accordance with our amended and restated bylaws, the board of directors may establish the authorized number of directors from time to time by resolution. The board of directors consists of seven members. The board of directors is divided into three classes with staggered three-year terms. At each annual general meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election, subject to his or her office being vacated sooner pursuant to our amended and restated bylaws. and each member serves a one-year term expiring at our next annual meeting of stockholders, subject to his or her office being vacated sooner pursuant to our amended and restated bylaws.

Our initial directors will be divided among the three classes as follows:

 

   

the Class I directors will be Tianyi Jiang and Stephen CuUnjieng, and their terms will expire at the annual meeting of stockholders to be held in 2022;

 

   

the Class II directors will be Brian Brown, Jeff Epstein and John Ho and their terms will expire at the annual meeting of stockholders to be held in 2023; and

 

   

the Class III directors will be Xunkai Gong and Jeff Teper and their terms will expire at the annual meeting of stockholders to be held in 2024.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

The initial division of the board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Board Leadership Structure

The board of directors is chaired by Xunkai Gong, our Executive Chairman.

Director Independence

The board of directors has reviewed the independence of each director. Based on information provided by each director concerning her or his background, employment and affiliations, the board of directors determined that none of the directors, other than Xunkai Gong, Tianyi Jiang and Brian Brown, has any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of the directors, other than Messrs. Gong, Jiang and Brown, is “independent” as that term is defined under the Nasdaq listing standards. In making these determinations, the board of directors considered the current and prior relationships that each non-employee director has with AvePoint and all other facts and circumstances the board of directors deems relevant in determining their independence including the beneficial ownership of securities of AvePoint by each non-employee director and the transactions described in the section titled “Certain Relationships and Related Party Transactions.”

Role of the Board in Risk Oversight/Risk Committee

One of the key functions of the board of directors is the informed oversight of our risk management process. The board of directors does not have a standing risk management committee, but rather administers this oversight function directly through the board of directors as a whole, as well as through various standing committees of the board that address risks inherent in their respective areas of oversight. In particular, the board is responsible for monitoring and assessing strategic risk exposure and the audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management will take to monitor and control such

 

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exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee will also monitor compliance with legal and regulatory requirements. The compensation committee assesses and monitors whether our compensation plans, policies and programs comply with applicable legal and regulatory requirements.

Board Committees

Upon the consummation of the Business Combination, the board of directors reconstituted our audit committee, compensation committee, and nominating and corporate governance committee and adopted a new charter for each of these committees, which comply with the applicable requirements of current SEC and Nasdaq rules. We intend to comply with future requirements to the extent applicable. Copies of the charters for each committee are available on the investor relations portion of our website at www.AvePoint.com.

Audit Committee

The audit committee consists of John Ho, Stephen CuUnjieng and Jeff Teper, each of whom the board of directors has determined satisfies the independence requirements under Nasdaq listing standards and Rule 10A- 3(b)(1) of the Exchange Act. The chair of the audit committee is John Ho. Mr. Ho is an “audit committee financial expert” within the meaning of SEC regulations. Each member of the audit committee can read and understand fundamental financial statements in accordance with applicable requiremen