1、 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2022 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 Comm
2、ission file number:001-38167 AMERICAN VIRTUAL CLOUD TECHNOLOGIES,INC.Delaware 81-2402421(State or other jurisdiction of(I.R.S.Employer incorporation or organization)Identification Number)1720 Peachtree Street,Suite 629Atlanta,GA 30309(404)239-2863(Address,including zip code,and telephone number,incl
3、uding area code,of registrants principal executive offices)Securities registered pursuant to Section 12(b)of the Act:None Securities registered pursuant to Section 12(g)of the Act:Title of each class Trading Symbol(s)Name of each exchange on whichregisteredCommon Stock,par value$0.0001 pershare AVCT
4、Q N/AWarrants,each whole Warrant entitlingthe holder to purchase one share ofCommon Stock at an exercise price of$172.50 AVCWQ N/A Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No.Indicate by check mark if the registrant is
5、not required to file reports pursuant to Section 13 or Section 15(d)of the Exchange Act.Yes No .Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Act of 1934 during the preceding 12 months(or for such shorter pe
6、riod that the registrant was required to file suchreports),and(2)has been subject to such filing requirements for the past 90 days.Yes No .Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submittedpursuant to Rule 405 of Regulation
7、 S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period thatthe registrant was required to submit such files).Yes No .Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smallerreporting company,or a
8、n emerging growth company.See definition of“large accelerated filer,”“accelerated filer,”“smallerreporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.2025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archiv
9、es/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm1/99 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 trans
10、ition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of theeffectiveness of its internal control over fi
11、nancial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)bythe registered public accounting firm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of theregistrant i
12、ncluded in the filing reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-basedcompensation received by any of the registrants executive officers dur
13、ing the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No.The aggregate market value of the voting common stock held by non-affiliates of the registrant on June 30,2022(the last busi
14、nessday of the registrants most recently completed second fiscal quarter),as reported on the NASDAQ Capital Market,wasapproximately$12,954,060.For purposes of this computation,all officers,directors and 10%beneficial owners of the registrant aredeemed to be affiliates.Such determination should not b
15、e deemed to be an admission that such officers,directors or 10%beneficialowners are,in fact,affiliates of the registrant.APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS:Indicate by check mark whether the registrant has filed all documents and reports
16、required to be filed by Section 12,13 or 15(d)ofthe Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.Yes No .As of March 24,2023,33,532,473 shares of the Companys common stock,par value$0.0001 per share,were outstanding.2025/1/17 20:10sec
17、.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm2/99 AMERICAN VIRTUAL CLOUD TECHNOLOGIES,INC.AND SUBSIDIARIESAnnual Report on Form 10-KFor the Fiscal Year ended December 31,2
18、022Table of Contents CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTSiii PART I Item 1.Business1Item 1A.Risk Factors6Item 1B.Unresolved Staff Comments14Item 2.Properties14Item 3.Legal Proceedings14Item 4.Mine Safety Disclosures14 PART II Item 5.Market For Registrants Common Equity,Related Stoc
19、kholder Matters and Issuer Purchases of EquitySecurities15Item 6.Reserved15Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations16Item 7A.Quantitative and Qualitative Disclosures About Market Risk28Item 8.Financial Statements and Supplementary Data28Item 9.Chang
20、es in and Disagreements with Accountants on Accounting and Financial Disclosure28Item 9A.Controls and Procedures28Item 9B.Other Information29Item 9CDisclosure Regarding Foreign Jurisdictions that Prevent Inspections.29 PART III Item 10.Directors,Executive Officers and Corporate Governance30Item 11.E
21、xecutive Compensation36Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters38Item 13.Certain Relationships and Related Transactions,and Director Independence39Item 14.Principal Accountant Fees and Services41 PART IV Item 15.Exhibits and Financial Sta
22、tement Schedules42Item 16.Form 10-K Summary47ExhibitIndex Signatures 48 i2025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm3/99 References to“we,”“us,”“our”or
23、“the Company”refer to American Virtual Cloud Technologies,Inc.and its consolidatedsubsidiaries,unless otherwise expressly stated or the context otherwise requires.When we refer to“AVCT,”we mean AmericanVirtual Cloud Technologies,Inc.INTRODUCTORY NOTE As previously disclosed,on January 11,2023,the Co
24、mpany and two of its subsidiaries(collectively,the“Debtors”)filed voluntarypetitions under Chapter 11 of the US Bankruptcy Code(“Chapter 11”)in the United States Bankruptcy Court for the District ofDelaware(such court,the“Court”,and such cases,the“Cases”).Also as previously disclosed,on February 14,
25、2023,the Companyand certain of its subsidiaries(collectively,the“Sellers”)entered into a“stalking horse”Asset Purchase Agreement(assubsequently modified,the“Stalking Horse APA”)with Skyvera,LLC(the“Purchaser”),and in connection with the Cases,andpursuant to bid procedures approved by the Court,on Ma
26、rch 7,2023,the Debtors held an auction(the“Auction”)under Section363 of the US Bankruptcy Code relating to the disposition of substantially all of the Debtors assets.The winning bid at the Auctionwas submitted by the Purchaser,which agreed to pay cash consideration in the amount of$6,780,062.On Marc
27、h 10,2023,theSellers and the Purchaser executed an amended and restated Asset Purchase Agreement(the“Purchase Agreement”),reflecting thecash purchase price of$6,780,062 resulting from the Auction.Pursuant to the Purchase Agreement,the Purchaser agreed topurchase substantially all of the assets of th
28、e Sellers(such assets,the“Purchased Assets,”and such transaction,the“Asset Sale”).The Purchased Assets include,among other things,all rights of the Sellers under the Assumed Contracts and Assumed Leases(assuch terms are defined in the Purchase Agreement),tangible personal property,intellectual prope
29、rty rights,books and records andgoodwill,but excludes all Excluded Assets(as such term is defined in the Purchase Agreement),including all cash.On March 15,2023,the Court entered an order authorizing the Asset Sale pursuant to the terms of the Purchase Agreement.OnMarch 24,2023,the Asset Sale closed
30、,thereby completing the disposition of substantially all of the Companys assets.Asidentified in the Debtors Combined Disclosure Statement and Chapter 11 Plan of Liquidation(the“Plan”),filed with the Court onMarch 21,2023,and subject to Court approval,the Company anticipates that there will be no pro
31、ceeds available for distribution tothe Companys stockholders and that the Companys outstanding securities shall be cancelled upon confirmation of the Plan.Nothing herein is intended to act as a solicitation of the Plan.Except as otherwise specifically stated herein,the description and disclosures pr
32、esented elsewhere in this Form 10-K reflect theCompanys business as of December 31,2022,prior to the consummation of the Asset Sale.As a result of the Asset Sale,theCompany no longer has any operations,other than those relating to the wind down of its business and completion of the Chapter 11process
33、.CAUTIONARY INFORMATION REGARDING TRADING IN THE COMPANYS SECURITIES Holders of the Companys equity securities will likely be entitled to no recovery on their investment following the Cases,andrecoveries to other stakeholders cannot be determined at this time.The Company cautions that trading in the
34、 Companys securitiesgiven the pendency of the Cases is highly speculative and poses substantial risks.Trading prices for the Companys securities maybear little or no relationship to the actual value realized,if any,by holders of the Companys securities in the Cases.Accordingly,the Company urges extr
35、eme caution with respect to existing and future investments in its securities.ii2025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm4/99 CAUTIONARY NOTE REGARDI
36、NG FORWARD-LOOKING STATEMENTS Certain statements contained in this annual report on Form 10-K and in certain documents incorporated by reference constitute“forward-looking statements”for purposes of federal securities laws.Our forward-looking statements include,but are not limitedto,statements regar
37、ding managements expectations,hopes,beliefs,intentions or strategies regarding the future.In addition,anystatements that refer to projections,forecasts or other characterizations of future events or circumstances,including any underlyingassumptions,are forward-looking statements.The words“anticipate
38、,”“believe,”“continue,”“could,”“estimate,”“expect,”“intend,”“may,”“might,”“plan,”“possible,”“potential,”“predict,”“project,”“should,”“would”and similar expressions mayidentify forward-looking statements,but the absence of these words does not mean that a statement is not forward-looking.Forward-look
39、ing statements in this report may include,for example,statements about:The Chapter 11 process;the Cases;and the outcome of any known and unknown litigation and regulatory proceedings.The forward-looking statements contained in this report are based on our current expectations and beliefs concerning
40、futuredevelopments and their potential effects on us.Future developments affecting us may not be those that we have anticipated.Theseforward-looking statements involve a number of risks,uncertainties(some of which are beyond our control)or other assumptionsthat may cause actual results or performanc
41、e to be materially different from those expressed or implied by these forward-lookingstatements.These risks and uncertainties include,but are not limited to,those factors described under the heading“Risk Factors”elsewhere in this report.Should one or more of these risks or uncertainties materialize,
42、or should any of our assumptions proveincorrect,actual results may vary in material respects from those projected in forward-looking statements.We undertake noobligation to update or revise any forward-looking statements,whether as a result of new information,future events or otherwise,except as may
43、 be required under applicable securities laws.As a result of a number of known and unknown risks and uncertainties,our actual results or performance may be materiallydifferent from those expressed or implied by forward-looking statements.Some factors that could cause actual results to differ fromtho
44、se expressed or implied by forward-looking statements include:Risks and uncertainties associated with the Cases;Potential delays in the Cases;Potential claims that may not be discharged in the Cases;other risks and uncertainties including those set forth in the“Risk Factors”section of this Form 10-K
45、,which begin onpage 6.iii2025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm5/99 PART I Item 1.Business Company History and Certain Recent Developments We were
46、 incorporated,in Delaware,as Pensare Acquisition Corp,a special purpose acquisition company(“SPAC”)on April 7,2016 for the purpose of entering into one or more mergers,share exchanges,asset acquisitions,stock purchases,recapitalizations,reorganizations or other similar business combinations with one
47、 or more target businesses.On April 7,2020(the“Computex Closing Date”),we consummated a business combination transaction(the“Computex BusinessCombination”)in which we acquired Stratos Management Systems,Inc.(“Computex”),a private operating company that doesbusiness as Computex Technology Solutions.I
48、n connection with the closing of the Computex Business Combination,the Companychanged its name to American Virtual Cloud Technologies,Inc.On December 1,2020(the“Kandy Closing Date”),we acquired the Kandy Communications business(hereafter referred to as“Kandy”or“Kandy Communications”)from Ribbon Comm
49、unications,Inc.and certain of its affiliates(“Ribbon”),by acquiringcertain assets,assuming certain liabilities and acquiring all of the outstanding membership interests of Kandy CommunicationsLLC.On September 16,2021,the Company announced that as a result of a decision by the Companys Board of Direc
50、tors to explorestrategic alternatives previously announced on April 7,2021,the Board had authorized the Company to focus its strategy onacquisitions and organic growth in its cloud technologies business as well as to explore strategic opportunities for its IT solutionsbusiness,including the divestit
51、ure of Computex.The Company believed that such changes would have allowed it to optimizeresource allocation,focus on core competencies,and improve its ability to invest in areas of maximal growth potential.On January 27,2022,the Company announced that it had executed a definitive agreement to sell C
52、omputex,and on March 15,2022,the sale of Computex was consummated,which completed the Companys transition to a cloud communications company,centered on its Kandy platform.In connection with the then pending sale of Computex,Computex was classified as held for sale asof December 31,2021 and its opera
53、tions were separated and classified as discontinued operations.The discussions in this Form 10-K primarily focuses on the Companys corporate activities and its Kandy segment.Net proceeds from the sale of Computex,afterpayment of closing and certain other obligations were used for working capital and
54、 general business purposes.On August 25,2022,the Company announced that it had retained Northland Capital Markets to advise the Company in connectionwith a comprehensive strategic review process that could lead to the sale of the Company or of selected assets.During 2022,the Company continued to exp
55、lore strategic opportunities,including the rationalization of resource allocation andcore competencies.Further,the Company took actions that it believed resulted in significant cost savings.Such savings weregenerated from selective reductions in workforce and negotiated conversions of certain materi
56、al vendor support costs from fixed tovariable,thereby eliminating certain cost burdens related to unused capacity.In addition,the Company obtained strategic andoperating restructuring support services of certain capital advisors.Additionally,during 2022,the Company projected and announced that it wo
57、uld need additional capital to fund its operationsincluding research&development and capital investment requirements until the Company scaled to a revenue level that wouldpermit cash self-sufficiency.Such factors raised substantial doubt about the ability of the Company to continue as a going concer
58、n.The projection was based on the Companys forecasts regarding product sales and service,cost structure,cash burn rate and otheroperating assumptions.On January 11,2023,the Debtors filed the Cases as voluntary petitions under Chapter 11 in the Court.The respective Casenumbers for each of the Debtors
59、 are 23-10020,23-10021 and 23-10022.However,the Cases are being jointly administered underCase number 23-10020.The Debtors are continuing to operate their businesses as“debtors-in-possession”under the jurisdiction ofthe Court and in accordance with the applicable provisions of the US Bankruptcy Code
60、 and orders of the Court.To ensure theirability to continue operating in the ordinary course of business,the Debtors filed various“first day”motions with the Courtrequesting customary relief,including the authority to pay employee wages and benefits,that have enabled the Debtors to continueto operat
61、e their business during the pendency of the Chapter 11 proceedings without material disruption to their ordinary courseoperations.12025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2
62、022_americanvirtual.htm6/99 On February 14,2023,the Sellers entered into the Stalking Horse APA with the Purchaser,and in connection with the Cases,andpursuant to bid procedures approved by the Court,on March 7,2023,the Debtors held the Auction under Section 363 of the USBankruptcy Code relating to
63、the disposition of substantially all of the Debtors assets.The winning bid at the Auction wassubmitted by the Purchaser,who agreed to pay cash consideration of approximately$6.8 million.On March 10,2023,the Sellers and the Purchaser executed the Purchase Agreement,which is substantially the same as
64、the StalkingHorse APA,except that it reflects the cash purchase price of approximately$6.8 million resulting from the Auction.Pursuant to thePurchase Agreement,the Purchaser agreed to purchase the Purchased Assets,consisting of substantially all of the assets of theSellers.The Purchased Assets inclu
65、de,among other things,all rights of the Sellers under the Assumed Contracts and AssumedLeases that are defined in the Purchase Agreement,tangible personal property,intellectual property rights,books and records andany goodwill,but excludes cash,accounts receivable and certain other assets.Under the
66、Purchase Agreement,the Purchaser isexpected to acquire the Purchased Assets for a purchase price(the“Purchase Price”)consisting of(i)cash of approximately$6.8million,subject to certain adjustments(including a reduction by the amount,if any,by which the deferred revenues of the Sellers asof the date
67、of the closing of the Purchase Agreement exceeds the deferred revenues of the Sellers as of the date of the PurchaseAgreement),and(ii)the Purchasers assumption of certain liabilities of the Sellers.On March 15,2023,the Court entered an order authorizing the Asset Sale pursuant to the terms of the Pu
68、rchase Agreement.OnMarch 24,2023,the Asset Sale closed,thereby completing the disposition of substantially all of the Companys assets.Asidentified in the Debtors Combined Disclosure Statement and Chapter 11 Plan of Liquidation(the“Plan”),filed with the Court onMarch 21,2023,and subject to Court appr
69、oval,the Company anticipates that there will be no proceeds available for distribution tothe Companys stockholders and that the Companys outstanding securities shall be cancelled upon confirmation of the Plan.Nothing herein is intended to act as a solicitation of the Plan.Reverse Stock Split and Sto
70、ck Exchange On September 30,2022,the Company filed a Certificate of Amendment of the Companys Amended and Restated Certificate ofIncorporation with the Secretary of State of the State of Delaware(the“Certificate of Amendment”),which effected,upon filing onSeptember 30,2022(the“Effective Stock Split
71、Date”),a one-for-fifteen reverse stock split(the“Reverse Stock Split”)of theCompanys issued and outstanding shares of common stock.In connection with the Reverse Stock Split,the CUSIP number(Committee on Uniform Securities Identification Procedures number)for the Companys common stock changed.As a r
72、esult of the Reverse Stock Split,each share of the Companys common stock issued and outstanding immediately prior to theEffective Stock Split Date was automatically reclassified as and converted into one-fifteenth(1/15)of a share of the Companyscommon stock.The Reverse Stock Split affected all stock
73、holders uniformly and did not alter any stockholders percentage interestin the Companys equity,except to the extent that the Reverse Stock Split resulted in some stockholders owning a fractional share.No fractional shares were issued in connection with the Reverse Stock Split.Instead,stockholders wh
74、o would otherwise have beenentitled to fractional shares of the Companys common stock became entitled to receive cash payments in lieu of such fractionalshares.On January 25,2023,the Companys securities ceased trading on The Nasdaq Stock Market(“Nasdaq”)as the Company did notmeet the requirements fo
75、r continued trading thereon.Currently,the Companys securities trade on the Pink sheets,an over-the-counter(OTC)market.The Business The description of the Companys business contained herein reflects the Companys operation of its business prior to thecompletion of the Asset Sale on March 24,2023.As a
76、result of the Asset Sale,the Company no longer has any operations,otherthan those relating to the wind down of its business and completion of the Chapter 11 process.The Kandy cloud communications platform is a cloud-based,real-time communications platform,offering proprietary unifiedcommunications a
77、s a service(“UCaaS”),communications platform as a service(“CPaaS”),Microsoft Teams Direct Routing as aService(“DRaaS”),and SIP Trunking as a Service capabilities(“STaaS”).As a provider of cloud-based enterprise services,Kandy deploys a global carrier grade cloud communications platform thatsupports
78、the digital and cloud transformation of mid-market and enterprise customers across virtually any device,on virtually anynetwork,in virtually any location.The Kandy platform is based on a powerful,proprietary multi-tenant,highly scalable,and securecloud platform.Further,Kandy supports rapid service c
79、reation and multiple go to market models including white labelling,multi-tier channel distribution,enterprise direct,and self-service via its SaaS(software as a service)web portals.22025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/A
80、rchives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm7/99 Kandys cloud-based,real-time communications platform enables service providers,enterprises,software vendors,systemsintegrators,partners and developers to enrich their applications and their services with real-time context
81、ual communicationsempowering the API(Application Programming Interface)economy.With Kandys platform,companies of various sizes and typescan quickly embed real-time communications capabilities into their existing applications and business processes,thereby providinga more engaging user experience.Whi
82、le the cloud communications business is focused on highly complex,medium and large enterprise deployments,the customerexperience is augmented by our managed services capabilities.In addition,our strategic partnerships with companies such asAT&T,IBM/Kyndryl,and Etisalat,give us access to a marquee cu
83、stomer base and the ability to sell end-to-end solutions.Computex,sold in March 2022 and classified within discontinued operations,is a leading multi-brand technology solutionsprovider to large global customers,providing a comprehensive and integrated set of technology solutions,through its extensiv
84、ehardware,software and value-added service offerings.Major customers Kandy only The five top customers during Fiscal 2022 accounted for 79%of total Kandy revenues.Four customers accounted for more than10%of total revenue,accounting for$11.8 million of total Kandy revenue.Competition Kandy primarily
85、competes with technology and cloud providers such as 8X8,RingCentral,Vonage,Twilio,Nice and Five 9,amongothers.However,Kandy differentiates itself from its competitors largely by the nature of its route to market-its platform is aproprietary white label,global cloud platform that supports a single o
86、r a multi-tier distribution via a CSP(communications serviceprovider),VAR(value-added reseller)or ISV(independent software vendor)brand.Further,in addition to being a true multi-tenant platform,Kandy supports a BYOD(bring your own data)and BYOC(bring your own carrier)model while providing both aligh
87、t weight and heavy weight OSS/BSS(Ordering/Billing)system and automation integration with its channel partners.Lastly,the Kandy platform brings a ubiquitous experience across UCaaS,CCaaS,and CPaaS versus most of the competition who play inone or two of these communications market verticals.Internati
88、onal Operations and Segments During 2021,the Company operated two segments,Computex and Kandy.With the sale of Computex during the first quarter of2022,the Company began operating as one reportable segment beginning in the second quarter of 2022.At December 31,2022,approximately 70 associates were e
89、mployed in our international operations.Research and Development Through Kandy,we have incurred software development costs to enhance,improve,expand and/or upgrade our proprietarysoftware in an agile software environment with releases broken down into several iterations called sprints.These developm
90、entactivities have been performed by internal staff as well as by certain contractors.Through our Kandy R&D team,our research and development efforts have been focused,in part,on building a carrier-gradecommunications platform with a focus on next generation software technologies and frictionless co
91、mmunications with multiple go-to-market strategies,including channel and direct sales models.As of December 31,2022,our research and development team consisted of approximately 31 associates(excluding contractors).32025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americ
92、anvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm8/99 Sales and Marketing We have been targeting customers of varying sizes in both the private and public sector and have developed relationships with themthrough direct marketing efforts as we
93、ll as through strategic relationships with our technology partners.We acquire new account relationships through face-to-face field sales,through relationships with our partners and through targeteddirect marketing efforts that aim to increase awareness of our solutions.Our sales representatives are
94、generally compensated through a combination of fixed and variable compensation.Variablecompensation or commission becomes the primary basis of compensation as sales representatives gain more experience.Proprietary Rights We have relied on a combination of copyrights,patents,trade secrets,trademarks,
95、and contractual provisions to protect theproprietary rights of our products,processes and technology.In addition,we have,at times,entered into confidentiality andassignment-of-rights agreements with our employees,consultants and customers and have limited access to,and distribution of,ourproprietary
96、 information.We licensed our proprietary products to our customers under license agreements that we believe containappropriate use and other restrictions.However,despite our efforts to safeguard our proprietary rights,we can provide no assurancethat we will be able to successfully deter misappropria
97、tion or unauthorized third-party use of such rights.As is the case with anysoftware company,safeguarding unauthorized use of our software is difficult,and piracy could become a problem.In addition,ifwe are engaged in transactions in countries where intellectual property laws are not well developed o
98、r are not well enforced,ourefforts to protect our proprietary rights may not be effective.Enforcing our proprietary rights in the U.S.and abroad and anylitigation to enforce such rights,can result in significant costs and can divert resources,which could cause a material adverse effecton our busines
99、s,financial condition,results of operations or cash flows.As the number of solutions available in the marketplace increases and solution functionality continues to overlap,softwarecompanies may increasingly become subject to claims of infringement or other misappropriation of intellectual property.T
100、hirdparties may assert infringement or misappropriation claims against us relating to our software,processes or technology.Followingup such claims,whether or not they have merit,can be time-consuming and can result in costly litigation,cause delays in ourbusiness or have other negative consequences.
101、Defending such claims,entering into royalty or licensing agreements,or adversedeterminations in proprietary rights litigation could have a material adverse effect on our business,results of operations,cash flowand financial condition.COVID-19 COVID-19 continues to impact local,regional,and global ec
102、onomies,businesses,supply chains,production and sales across arange of industries.To protect the health and safety of our employees,our daily execution evolved into a largely virtual model.However,we foundways to continue to engage with and assist our customers and partners as they worked to navigat
103、e the changed environment.Human Capital Our core values Integrity,innovation,delighting our clients,diversity and teamwork are communicated to our employees uponjoining our company.We strive to maintain and demonstrate these values to our associates in the decisions we make and the actionswe take.We
104、 believe one of our greatest assets is our people and believe adherence to such policies plays a key role in our company.Integrity We strive to earn the trust of our customers,partners,and associates through honesty,openness,and ethical,and fairbehavior.We respect everyone and believe we should trea
105、t others as we expect to be treated.42025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm9/99 Innovation-We are committed to continuous progress,never settling
106、for yesterdays solutions or successes.Delighting our clients We are committed to delighting our clients with exceptional and personalized services.Diversity We believe it takes people with different ideas,experiences,strengths,interests and backgrounds to succeed.Teamwork We understand that we achie
107、ve everything together and are accountable to each other for our results.On December 31,2022,our employee base stood at approximately 127 employees worldwide,of which more than 55%wereemployed in our international operations.We have offices in Canada,Mexico,and the United States,as well as represent
108、atives inthe United Kingdom and the United Arab Emirates.None of our employees are represented by unions and we consider therelationships with our employees to be good.As of December 31,2022,women represented 26.7%of our workforce.Due in largepart to a scaling back in the Companys operations during
109、Fiscal 2022,the attrition rate in Fiscal 2022 was 44.6%.As of December 31,2022,the composition of our employee base was as follows:Corporate Kandy Total Sales and marketing -17 17 Product support and R&D -94 94 Admin 6 10 16 Total number of employees 6 121 127 We offer fair and competitive compensat
110、ion and benefit packages to our employees that include base salary,incentives,adequatepaid time off and various health insurance plan options.Available Information Our website address is http;/.Our common stock and public warrants are registered under the SecuritiesExchange Act of 1934(the“Exchange
111、Act”)and we have reporting obligations,including the requirement to file annual,quarterlyand current reports with the SEC.In accordance with the requirements of the Exchange Act,our annual report contain financialstatements that are audited and reported on by our independent registered public accoun
112、tants.These filings are available to thepublic via the Internet on our website and at the SECs website located at http:/www.sec.gov.You may also read and copy anydocument that we file with the SEC at the SECs public reference room located at 100 F Street,N.E.,Washington,D.C.20549.Formore information
113、,please call the SEC at 1-800-SEC-0330.You may request a copy of our filings with the SEC(excludingexhibits)at no cost by writing or telephoning us at the following address or telephone number:American Virtual Cloud Technologies,Inc.1720 Peachtree StreetSuite 629Atlanta,GA 30309Tel:(404)239-2863 The
114、 Companys status as an emerging growth company(“EGC”)as defined in the Jumpstart our Business Startups Act of 2012,(the“JOBS Act”),ended on December 31,2022.52025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/17047
115、60/000121390023028156/f10k2022_americanvirtual.htm10/99 Item 1A.Risk Factors An investment in our common stock involves a high degree of risk.You should consider carefully all of the risks described below,together with the other information contained in this Annual Report on Form 10-K,before making
116、a decision to invest in ourcommon stock.If any of the following events occur,our business,financial condition and operating results may be materially andadversely affected.In that event,the trading price of our common stock could decline,and you could lose all or part of yourinvestment.Risks Related
117、 to Our Bankruptcy We have sold substantially all of our assets as part of our Chapter 11 bankruptcy process,and we anticipate that ouroutstanding securities will be cancelled,without any proceeds being available for distribution to our stockholders.On March 24,2023,we completed the Asset Sale and d
118、isposed of substantially all of our assets.As identified in the DebtorsCombined Disclosure Statement and Chapter 11 Plan of Liquidation(the“Plan”),filed with the Court on March 21,2023,andsubject to Court approval,the Company anticipates that there will be no proceeds available for distribution to t
119、he Companysstockholders and that the Companys outstanding securities shall be cancelled upon confirmation of the Plan.We may not be able to obtain confirmation of the Plan.To complete our Chapter 11 bankruptcy process,we must meet certain statutory requirements with respect to the adequacy ofdisclos
120、ure with respect to the Plan,solicit and obtain the requisite acceptances of such Plan and fulfill other statutory conditions forconfirmation of such Plan.We may be subject to claims that will not be discharged in the Chapter 11 Cases.The US Bankruptcy Code provides that the confirmation of a plan o
121、f reorganization discharges a debtor from,among other things,substantially all debts arising prior to consummation of a plan of reorganization.With few exceptions,all claims against us thatarose prior to the filing of the Cases or before consummation of a plan of reorganization(i)would be subject to
122、 compromise and/ortreatment under a plan of reorganization and/or(ii)would be discharged in accordance with the US Bankruptcy Code and the termsof a plan of reorganization.Subject to the terms of a plan of reorganization and orders of the Bankruptcy Court,any claims notultimately discharged pursuant
123、 to a plan of reorganization could be asserted against us and may have an adverse effect on ourliquidity and financial condition.Risks Related to Our Business and Industry While the Company remains a public company,it will continue to incur the expense of complying with public companyreporting requi
124、rements even though its operations have been reduced following the sale of Computex.We will continue to be required to comply with the applicable reporting requirements of the Securities Exchange Act of 1934,asamended,even though compliance with such reporting requirements may be economically burden
125、some.General economic weakness may harm the Companys operating results and financial condition.The Companys results of operations are largely dependent upon the state of the economy.Global economic weakness anduncertainty may result in decreased sales,gross margin,earnings and/or growth rates.In add
126、ition,material changes in tradeagreements between the U.S.and other countries may,for example,negatively affect the Companys ability to purchase products,its ability to import or export products,and could negatively affect pricing and product availability.Adverse economic conditionscould negatively
127、affect demand for the Companys products and services and could impair the ability of customers to pay for suchproducts and services.62025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10
128、k2022_americanvirtual.htm11/99 The Companys business could be adversely affected by COVID-19.Even though the COVID-19 outbreak has subsided,the Company may continue to experience significant impacts to its business asa result of the global economic impact of COVID-19,including any economic downturn
129、or recession or other long-term effects thathave occurred or may occur in the future.The Company has customer concentration,and if the Company loses one or more of its large volume customers,its earningsmay be materially affected.Following the Companys sale of the Computex business in March 2022,it
130、had significant concentration of customers.The five topcustomers of the Companys Kandy business,which is the Companys sole business segment following the sale of Computex,accounted for 68%of the revenues of that business segment during Fiscal 2021.There are inherent risks whenever a significantperce
131、ntage of total revenues are concentrated with a limited number of customers.Revenues from our largest customers mayfluctuate from time to time based on numerous factors,including market conditions,which may be outside of ourcontrol.Contracts between the Company and its customers for the provision of
132、 products and/or services are generally in the form ofnon-exclusive agreements that do not contain volume purchase commitments,and are terminable by either party upon 30 daysnotice.The loss of one or more of the Companys largest customers,the failure of such customers to pay amounts due,or a materia
133、lreduction in sales dollars by such customers could have a material adverse effect on the Companys business,financial position,results of operations and cash flows.72025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/dat
134、a/1704760/000121390023028156/f10k2022_americanvirtual.htm12/99 The Company may not be able to hire and/or retain the personnel that it needs.To increase market awareness and sales of the Companys offerings,the Company may need to expand its marketing efforts andsales operations in the future.The Com
135、panys products and services require a sophisticated sales effort and significant technicalengineering talent.For example,its sales and engineering candidates must have highly technical hardware and software knowledgeto create a customized solution for its customers business processes.Competition for
136、 qualified sales,marketing and engineeringpersonnel fluctuates depending on market conditions,and the Company may not be able to hire or retain sufficient personnel tomaintain and grow its business.Frequently,the Companys competitors require their employees to agree to non-compete and non-solicitati
137、on agreements as part of their employment.This makes it more difficult for the Company to hire,and also may increasethe costs of reviewing and managing non-compete restrictions.Additionally,in some cases,the Companys relationship with acustomer may be impacted by turnover in its sales or engineering
138、 team.The Company may not adequately protect itself through its contracts,or its insurance policies may not be adequate to addresspotential losses or claims.The Companys contracts may not protect it against the risks inherent in its business including,but not limited to,warranties,limitations of lia
139、bility,indemnification obligations,human resources and subcontractor-related claims,patent and product liability,regulatory and compliance obligations,and data security and privacy.Also,the Company faces pressure from its customers forcompetitive pricing and contract terms.The Company also is subjec
140、t to audits by various vendor partners and customers relating topurchases and sales under various contracts.In addition,the Company is subject to indemnification claims under various contracts.The Company depends on having creditworthy customers to avoid an adverse impact on its operating results an
141、d financialcondition.If the credit quality of the Companys customer base materially decreases,or if the Company experiences a material increase in itscredit losses,the Company may find it difficult to continue to obtain the required capital for its business,and its operating resultsand financial con
142、dition may be harmed.In addition to the impact on the Companys ability to attract capital,a material increase inits delinquency and default experience would itself have a material adverse effect on its business,operating results,and financialcondition.82025/1/17 20:10sec.gov/Archives/edgar/data/1704
143、760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm13/99 The Company may be liable for misuse of its customers or employees information.Third-parties,such as hackers,could circumvent or sabotage the securit
144、y practices and products used in the Companys product andservice offerings,and/or the security practices or products used in the Companys internal IT systems,which could result indisclosure of sensitive or personal information,unauthorized procurement,or other business interruptions that could damag
145、e theCompanys reputation and disrupt its business.Attacks may range from random attempts to coordinated and targeted attacks,including sophisticated computer crime and advanced persistent threats.If third-parties or the Companys employees are able to maliciously penetrate its network security or oth
146、erwise misappropriate itscustomers information or employees personal information,or other information for which its customers may be responsible andfor which the Company agrees to be responsible in connection with service contracts into which it may enter,or if the Companygives third-parties or its
147、employees improper access to certain information,the Company could be subject to liability.This liabilitycould include claims related to unauthorized access to devices on its network;unauthorized access to its customers networks,applications,data,devices,or software;and identity theft or other simil
148、ar fraud-related claims.This liability could also includeclaims related to other misuses of or inappropriate access to personal information.Other liability could arise from claims allegingmisrepresentation of the Companys privacy and data security practices.Any such liability for misappropriation of
149、 informationcould decrease the Companys profitability.In addition,federal and state agencies have been investigating various companies todetermine whether they misused or inadequately secured information.The Company could incur additional expenses when newlaws or regulations regarding the use of inf
150、ormation are enacted,or if governmental agencies require the Company to substantiallymodify its privacy or security practices.The Company could fail to comply with applicable data privacy laws,the violation ofwhich may result in audits,fines,penalties,litigation,or administrative enforcement actions
151、 with associated costs.Advances in computer capabilities,new discoveries in the field of cryptography,or other events or developments may result in acompromise or breach of the security practices the Company uses to protect sensitive customer transaction information andemployee information.A party w
152、ho is able to circumvent the Companys security measures could misappropriate proprietaryinformation or cause interruptions in the Companys operations.Further,third-parties may attempt to fraudulently induceemployees or customers into disclosing sensitive information such as user names,passwords,or o
153、ther information or otherwisecompromise the security of the Companys internal networks and/or its customers information.Since techniques used to obtainunauthorized access change frequently and the size and severity of security breaches are increasing,the Company may be unable toimplement adequate pr
154、eventative measures or timely identify or stop security breaches while they are occurring.The Company may be required to expend significant capital and other resources to protect against security breaches or to remediatethe subsequent risks and issues caused by such breaches.The Companys security me
155、asures are designed to protect against securitybreaches,but its failure to prevent such security breaches could cause it to incur significant expense to investigate and respond to asecurity breach and correct any problems caused by any breach,subject it to liability,damage its reputation,and diminis
156、h the valueof its brand.There can be no assurance that the limitations of liability in Company contracts would be enforceable or adequate orwould otherwise protect the Company from any such liabilities or damages with respect to any particular claim.The Company alsocannot be sure that its existing i
157、nsurance coverage for errors and omissions or security breaches will continue to be available onacceptable terms or in sufficient amounts to cover one or more large claims,or that its insurers will not deny coverage as to anyfuture claim.The successful assertion of one or more large claims against t
158、he Company that exceeds its available insurancecoverage,or changes in its insurance policies,including premium increases or the imposition of large deductible or co-insurancerequirements,could have an adverse effect on the Companys business,financial condition,and results of operations.92025/1/17 20
159、:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm14/99 Failure to comply with new laws or changes to existing laws may adversely impact the Companys business.The Company
160、s operations are subject to numerous laws and regulations in a number of areas including,but not limited to,lawsrelating to labor and employment,immigration,advertising,e-commerce,tax,imports and exports,data privacy,competition,theenvironment,health,and safety.Compliance with these laws and regulat
161、ions may be onerous and expensive,and may not beconsistent across jurisdictions,thereby further increasing the cost of compliance,the cost of doing business,and the risk ofnoncompliance.Though the Company has designed policies and procedures to comply with applicable laws and regulations,therecan be
162、 no certainty that employees,contractors,or agents will fully comply with such policies and procedures.We may face risks associated with our international operations that could adversely affect the Company.The Companys operations outside the United States include a Canadian division that was acquire
163、d as part of the Kandyacquisition.The Company also has employees in Mexico as well as representatives in the United Kingdom and the United ArabEmirates.At December 31,2022,approximately 70 associates were employed in our international operations.Foreign operationsare subject to risks that are inhere
164、nt in operating within different legal,political and economic environments.Among the risks arechanges in tax laws,possible limitations on foreign investment and income repatriation,government price or foreign exchangecontrols,and restrictions on currency exchange.Such operations may require signific
165、ant management attention and financialresources to successfully grow.In addition,international operations are subject to other inherent risks,including:greater reliance on local partners;possible difficulties collecting accounts receivable and longer collection cycles;difficulties and costs of staff
166、ing and managing international operations;compliance with international trade,customs and export control regulations;foreign government regulations limiting or prohibiting potential sales or increasing the cost of doing business in suchmarkets,including adverse tax policies,tariffs,customs regulatio
167、ns,trade protection measures,export quotas andqualifications to transact business;foreign currency controls,restrictions on repatriation of cash and changes in currency exchange rates;a possible need to adapt and localize our products for specific countries;our ability to effectively price our produ
168、cts in competitive international markets;political,social and economic instability,including as a result of possible volatility of global financial markets,healthpandemics or epidemics and/or acts of war or terrorism;exchange rate fluctuations that could negatively impact our financial results;and r
169、isks associated with our use and relianceon research and development resources in global locations.102025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm15/99 T
170、he departure of certain of the Companys key executives or key members of its senior management team and/or failure tosuccessfully implement a succession plan could adversely affect the Companys business.The departure of certain key executives or key members of the Companys senior management team and
171、/or failure to successfullyimplement a succession plan could disrupt the Companys business and impair the execution of its business strategies.TheCompanys executive officers are at the forefront of its strategic direction and focus,and therefore believes that its success dependsin part upon its abil
172、ity to retain the services of certain executive officers and senior members of its management team and alsodepends on its ability to successfully implement a succession plan.Therefore,the departure of any of such persons withoutreplacement by qualified successors could adversely affect the Companys
173、ability to effectively manage its overall operations andsuccessfully execute current or future business strategies and could cause instability within the Companys workforce.Changes in accounting standards,or the misapplication of current accounting standards,may adversely affect the Companysfuture f
174、inancial results.The Company prepares its financial statements in conformity with U.S.Generally Accepted Accounting Principles(“GAAP”).These accounting principles are subject to interpretation by the Financial Accounting Standards Board,the Public CompanyAccounting Oversight Board(“PCAOB”),the SEC,t
175、he American Institute of Certified Public Accountants(“AICPA”)and variousother bodies formed to interpret and create appropriate accounting policies.Periodic assessments required by current or newaccounting standards may result in noncash charges and/or changes in presentation or disclosure.In addit
176、ion,any change inaccounting standards could influence the Companys customers decision to purchase from the Company or finance transactionswith the Company,which could have a significant adverse effect on the Companys financial position or results of operations.For example,a relatively new accounting
177、 standard requires the Company to determine if it is the principal or agent in transactionswith its customers.In addition,the manner in which some of the Companys products are bundled,and the voluminous number ofproducts and services the Company sells can add to the level of complexity.Mischaracteri
178、zation of these products and servicescould result in misapplication of revenue recognition policies.In addition,judgements and estimates are made in the application ofGAAP,such as to determine the fair value of assets acquired,and liabilities assumed in business combinations,assessments ofgoodwill i
179、mpairment,the estimating of the allowance for doubtful accounts and the determination of the cost of professional andmanaged services.If the Company is unable to accurately estimate such amounts,including the time-line for completion ofcontracts,the profitability of its contracts and its profits ove
180、rall may be materially and adversely affected.A natural disaster or other adverse occurrence at one of the Companys facilities could damage its business.As of December 31,2021,the Company has one warehouse and a distribution facility in the U.S.If such facilities were to beseriously damaged by a nat
181、ural disaster or other adverse occurrence,the Company could utilize another distribution center or third-party distributors to ship products to its customers.However,this may not be sufficient to avoid interruptions in the Companysbusiness and may not be enough to meet the needs of all of the Compan
182、ys customers and could cause increased operating costs.Inaddition,the Company operates two customer facing data centers which contain its Securities Operations Center and NetworkOperations Center.The Company also operates certain sales offices as well as leased facilities in Ottawa,North Carolina an
183、dMexico,along with a number of rented spaces that are used as server locations,all of which may contain business-critical data andconfidential customer information.A natural disaster or other adverse occurrence at any such locations could negatively impact itsbusiness,results of operations or cash f
184、lows.The Company faces risks of claims from third-parties for intellectual property infringement,including counterfeit products,thatcould harm its business.The Company may be subject to claims if products that it resells is considered to infringe on the intellectual property rights ofthird-parties a
185、nd/or are considered to be counterfeit products.Also,the vendors of certain products or services that the Companyresells may not provide the Company with indemnification for infringement.However,the Companys customers may seekindemnification from the Company,which could cause the Company to incur su
186、bstantial costs in defending infringement claimsagainst itself and its customers.In the event of such claims,the Company and its customers may be required to obtain one or morelicenses from third-parties,and the Company may not be able to obtain such licenses at a reasonable cost,if at all.Defense o
187、f anylawsuit or failure to obtain any such required license could significantly increase the Companys expenses and/or adversely affectits ability to offer one or more of its services.112025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.go
188、v/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm16/99 Risks Related to Our Securities and Recent Acquisitions As smaller reporting company,the Company is exempt from certain public company reporting requirements.The Company is a“smaller reporting company”as defined in It
189、em 10(f)(1)of Regulation S-K.Smaller reporting companies maytake advantage of certain reduced disclosure obligations,including,among other things,providing only two years of auditedfinancial statements.The Company will remain a smaller reporting company until the last day of the fiscal year in which
190、(1)themarket value of our common stock held by non-affiliates exceeds$250 million as of the end of that years second fiscal quarter,or(2)our annual revenues exceeded$100 million during such completed fiscal year and the market value of its common stock heldby non-affiliates exceeds$700 million as of
191、 the end of that years second fiscal quarter.Investors may find the Companys commonstock less attractive because of the Companys reliance on these exemptions,which may result in a less active trading market theCompanys common stock and/or could result in the Companys stock price being more volatile.
192、To the extent we take advantageof such reduced disclosure obligations,it may also make comparison of our financial statements with other public companiesdifficult or impossible.Our management and their affiliates control a substantial interest in us and thus may influence certain actions requiring a
193、stockholder vote.As of March 31,2023,directors and executive officers beneficially owned 7.5%of our common stock.Accordingly,theseindividuals have considerable influence regarding the outcome of any transaction that requires stockholder approval.Furthermore,our board of directors is divided into thr
194、ee classes,each of which will generally serve for a term of three years with only one classof directors being elected in each year.As a consequence of our“staggered board,”only a minority of our board of directors will beconsidered for election in any given year.In addition,our management and their
195、affiliates,because of their ownership position,willhave considerable influence regarding the outcome of such elections.Changes in laws or regulations,or a failure to comply with any laws and regulations,may adversely affect our business,investments and results of operations.We are subject to laws an
196、d regulations enacted by national,regional and local governments.In particular,we are required tocomply with certain SEC and other legal requirements.Compliance with,and monitoring of,applicable laws and regulations maybe difficult,time consuming and costly.Those laws and regulations and their inter
197、pretation and application may also change fromtime to time and those changes could have a material adverse effect on our business,investments and results of operations.Inaddition,a failure to comply with applicable laws or regulations,as interpreted and applied,could have a material adverse effect o
198、nour business and results of operations.122025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm17/99 Our Charter provides,subject to limited exceptions,that the
199、Court of Chancery of the State of Delaware will be the sole andexclusive forum for certain stockholder litigation matters,which could limit our stockholders ability to obtain a favorablejudicial forum for disputes with us or our directors,officers,employees or stockholders.Our Charter provides,to th
200、e fullest extent permitted by law,that derivative actions brought in our name,actions against directors,officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in theState of Delaware and,if brought outside of Delaware,the stockholde
201、r bringing the suit will be deemed to have consented toservice of process on such stockholders counsel;provided that the exclusive forum provision will not apply to(i)suits brought toenforce any liability or duty created by the Exchange Act,(ii)any other claim for which the federal courts have exclu
202、sivejurisdiction,(iii)any claim as to which the Court of Chancery determines that there is an indispensable party not subject to thejurisdiction of the Court of Chancery(and the indispensable party does not consent to the personal jurisdiction of the Court ofChancery within ten days following such d
203、etermination),(iv)any claim which is vested in the exclusive jurisdiction of a court orforum other than the Court of Chancery,or(v)any claim for which the Court of Chancery does not have subject matter jurisdiction.Furthermore,our Charter also provides that unless we consent in writing to the select
204、ion of an alternative forum,the federal districtcourts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising underthe Securities Act.Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over
205、all suits broughtto enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.Accordingly,there isuncertainty as to whether a court would enforce such provision with respect to suits brought to enforce any duty or liability createdby the Securities Act or th
206、e rules and regulations thereunder.Stockholders will not be deemed to have waived our compliance withthe federal securities laws and the rules and regulations thereunder.Any person or entity purchasing or otherwise acquiring anyinterest in shares of our capital stock shall be deemed to have notice o
207、f and consented to the forum provisions in our Charter.This choice of forum provision may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable fordisputes with us or any of our directors,officers,other employees or stockholders,which may discourage lawsuits with
208、respect tosuch claims,although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rulesand regulations thereunder.Alternatively,if a court were to find the choice of forum provision contained in our Charter to beinapplicable or unenforceable in an
209、action,we may incur additional costs associated with resolving such action in otherjurisdictions,which could harm our business,operating results and financial condition.Sales of a substantial number of shares of our common stock in the public market,or the perception that they might occur,could have
210、 an adverse effect on the market price of our common stock.As of December 31,2022,we had warrants to purchase shares of our common stock.To the extent any such warrants are exercised,additional shares of common stock will be issued,which will result in dilution to our stockholders and an increase in
211、 the number ofshares of common stock eligible for resale in the public market.All of our outstanding warrants are subject to agreements requiringus to register for resale the underlying shares of common stock.Sales of substantial numbers of such shares in the public market orthe fact that the warran
212、ts may be exercised,could adversely affect the market price of our common stock.Because we have no current plans to pay cash dividends on our common stock for the foreseeable future,you may not receiveany return on investment unless you sell your common stock for a price greater than that which you
213、paid for it.We may retain future earnings,if any,for future operations,expansion and debt repayment and have no current plans to pay anycash dividends for the foreseeable future.Any decision to declare and pay dividends as a public company in the future will be madeat the discretion of our board of
214、directors and will depend on,among other things,our results of operations,financial condition,cash requirements,contractual restrictions and other factors that our board of directors may deem relevant.In addition,our abilityto pay dividends may be limited by covenants of any existing and future outs
215、tanding indebtedness we or our subsidiaries incur.Asa result,you may not receive any return on an investment in our common stock unless you sell your shares of common stock for aprice greater than that which you paid for it.132025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k
216、2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm18/99 Item 1B.Unresolved Staff Comments Not applicable.Item 2.Properties We currently maintain our principal executive offices at 1720 Peachtree Street,Suite 629,Atlanta,GA 30309,alo
217、ng with certainadditional offices,all of which are leased.As of December 31,2022,locations leased by Kandy were as follows:Administrative offices located in the Brier Creek Office Parke,Wake County,North Carolina;A lab and related facilities in Ottawa and North Carolina;A facility in Mexico City;and
218、 Approximately 4 co-located data centers that are used as server locations.We believe our current facilities meet the current needs of our employee base.Item 3.Legal Proceedings There is no material litigation,arbitration,governmental proceeding or any other legal proceeding currently pending or kno
219、wn tobe contemplated against any members of our management team in their capacity as such.From time to time,we may be involved incertain legal proceedings and claims,which arise in the ordinary course of business.Currently,we not aware of any matter ormatters that,individually or in the aggregate,wo
220、uld have a material adverse effect on our results of operations,financial condition,or cash flow.If we should determine that an unfavorable outcome is probable on a claim and that the amount of probable loss isreasonably estimable,we will record an accrual for such claim or claims.If any such accrua
221、l is recorded,it could be material andcould adversely impact our results of operations,financial condition,and cash flows.Item 4.Mine Safety Disclosures Not applicable.142025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edga
222、r/data/1704760/000121390023028156/f10k2022_americanvirtual.htm19/99 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters,and Issuer Purchases of Equity Securities On January 25,2023,the Companys securities ceased trading on the Nasdaq as the Company did not meet the requir
223、ements forcontinued trading thereon.Currently,the Companys common stock and public warrants trade on the over-the-counter marketsunder the symbols“AVCTQ,”and“AVCTWQ,”respectively.Each such whole warrant entitles the holder to purchase one share ofcommon stock at an exercise price of$172.50 per share
224、,subject to adjustment as described in our registration statement.Onlywhole warrants are exercisable and only whole warrants trade.Such warrants are scheduled to expire on April 7,2025.Holders of Record On March 24,2023,there were approximately 74 holders of record of our common stock and 4 holders
225、of record of our publicly-traded warrants.Such numbers do not include beneficial owners holding our securities through nominee names.Dividends We have not paid any cash dividends on our common stock to date and do not anticipate declaring any dividends in the foreseeablefuture.Equity Compensation Pl
226、ans The following table provides certain information regarding our equity compensation plans:Plan Category Number ofsecuritiesissuableuponexercise ofoutstandingrights Weighted-averageexerciseprice ofoutstandingrights Number ofsecuritiesremainingunissuedunder equitycompensationplans Equity compensati
227、on plans approved by security holders 666,667 -328,997 Equity compensation plans not approved by security holders -Total 666,667 -328,997 Additional information is included in Note 13 in the Notes to our Consolidated Financial Statements.Item 6.Reserved 152025/1/17 20:10sec.gov/Archives/edgar/data/1
228、704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm20/99 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial
229、 condition and results of operations should be read in conjunction with theconsolidated financial statements(including the notes thereto)contained elsewhere in this report.Certain information contained inthis discussion and analysis includes forward-looking statements that involve risk and uncertain
230、ties.You are therefore encouragedto read the section in this annual report on Form 10-K titled,“CAUTIONARY NOTE REGARDING FORWARD-LOOKINGSTATEMENTS”and“RISK FACTORS.”Overview and recent developments We are a Delaware-incorporated entity.As of December 31,2022,we had operating locations in North Caro
231、lina,Canada andMexico.On April 7,2020,AVCT(formerly known as Pensare Acquisition Corp.),consummated the Computex Business Combination inwhich it acquired Computex,a private operating company that does business as Computex Technology Solutions.In connectionwith the Computex Business Combination,the C
232、ompany changed its name to American Virtual Cloud Technologies,Inc.On December 1,2020,we acquired Kandy from Ribbon,by acquiring certain assets,assuming certain liabilities and acquiring allof the outstanding interests of Kandy Communications LLC.Kandy,a provider of cloud-based enterprise services,g
233、lobally deploys a white-label,carrier-grade cloud-based platform forUCaaS,CPaaS and CCaaS for mid-market and enterprise customers across a proprietary multi-tenant,highly scalable cloudplatform.The Kandy platform provides white-labeled services to a variety of customers including communications serv
234、iceproviders and systems integrators.With Kandy,companies can quickly embed real-time communications capabilities into theirexisting applications and business processes.Computex,classified within discontinued operations,is a leading multi-brand technology solutions provider to large globalcustomers,
235、providing a comprehensive and integrated set of technology solutions,through its extensive hardware,software andvalue-added service offerings.On September 16,2021,the Company announced that as a result of a decision by the Companys Board of Directors to explorestrategic alternatives previously annou
236、nced on April 7,2021,the Board had authorized the Company to focus its strategy onacquisitions and organic growth in its cloud technologies business as well as to explore strategic opportunities for its IT solutionsbusiness,including the divestiture of Computex.The Company believed that such changes
237、 would allow it to optimize resourceallocation,focus on core competencies,and improve its ability to invest in areas of maximal growth potential.On January 27,2022,the Company announced that it had executed a definitive agreement to sell Computex,and on March 15,2022,the sale of Computex was consumm
238、ated,which completed the Companys transition to a cloud communications company,centered on its Kandy platform.In connection with the then pending sale of Computex,Computex was classified as held for sale asof December 31,2021,and its operations for current and prior periods were separated and classi
239、fied as discontinued operations.Accordingly,this managements discussion and analysis of financial condition and results of operations primarily focuses on theKandy segment and the Companys corporate activities.Therefore,unless otherwise indicated,amounts discussed herein,excludeComputex.Net proceeds
240、 from the sale of Computex,after payment of closing and certain other obligations were used for workingcapital and general business purposes.162025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023
241、028156/f10k2022_americanvirtual.htm21/99 On August 25,2022,the Company announced that it had retained Northland Capital Markets to advise the Company in connectionwith a comprehensive strategic review process that could lead to the sale of the Company or selected assets.During 2022,the Company conti
242、nued to explore strategic opportunities,including the rationalization of resource allocation andcore competencies.Further,the Company took actions that it believed resulted in significant cost savings.Such savings weregenerated from selective reductions in workforce and negotiated conversions of cer
243、tain material vendor support costs from fixed tovariable,thereby eliminating certain cost burdens related to unused capacity.In addition,the Company obtained strategic andoperating restructuring support services of certain capital advisors.Additionally,during 2022,the Company projected and announced
244、 that it would need additional capital to fund its operationsincluding research&development and capital investment requirements until the Company scaled to a revenue level that wouldpermit cash self-sufficiency.Such factors raised substantial doubt about the ability of the Company to continue as a g
245、oing concern.The projection was based on the Companys forecasts regarding product sales and service,cost structure,cash burn rate and otheroperating assumptions.During 2022,the Company was forced to scale back operations and,as more fully discussed elsewhere inthis Form 10-K,including in the Notes t
246、o the Consolidated Financial Statements,on January 11,2023,the Company filed forChapter 11 and,on March 10,2023,the Sellers and the Purchaser executed the Purchase Agreement,pursuant to which the Sellersagreed to sell substantially all of the assets of the Company for a cash purchase price of$6.8 mi
247、llion(See Note 1 of theconsolidated financial statements).On March 15,2023,the Court entered an order authorizing the Asset Sale pursuant to the termsof the Purchase Agreement.On March 24,2023,the Asset Sale closed,thereby completing the disposition of substantially all of theCompanys assets.As iden
248、tified in the Plan filed with the Court on March 21,2023,and subject to Court approval,the Companyanticipates that there will be no proceeds available for distribution to the Companys stockholders and that the Companysoutstanding securities shall be cancelled upon confirmation of the Plan.The descri
249、ption of the Companys business and result of operations contained herein reflects the Companys operation of itsbusiness prior to the completion of the Asset Sale on March 24,2023.As a result of the Asset Sale,the Company no longer has anyoperations,other than those relating to the wind down of its b
250、usiness and completion of the Chapter 11 process.Nature of revenue categories discussed below:Cloud subscription and software revenue include subscriptions to the Companys cloud-based technology platform,and revenuefrom the Companys on-premise software.Professional and managed services revenue inclu
251、de services for deployment,configuration,system integration,optimization,customer training and education.Financial statement presentation and results of operations The consolidated financial statements of the Company include the accounts of AVCT and its wholly-owned subsidiaries.In thediscussion bel
252、ow,the year ended December 31,2022 and the year ended December 2021 will be referred to as FY 2022 and FY2021,respectively.172025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_am
253、ericanvirtual.htm22/99 FY 2022 versus FY 2021(in thousands)FY 2022 FY 2021 Revenues:(in thousands)Cloud subscription and software$15,612$16,930 Managed and professional services 1,155 3,119 Other 44 -Total revenues 16,811 20,049 Cost of revenue 18,372 16,181 Gross(loss)profit (1,561)3,868 Goodwill i
254、mpairment 10,468 28,995 Research and development 15,604 17,916 Selling,general and administrative 29,533 36,405 Loss from continuing operations (57,166)(79,448)Other income(expense)Change in fair value of warrant liabilities 35,903 (19,608)Change in fair value of derivative liability 721 -Interest e
255、xpense(1)(20,364)(31,705)Other income 931 (93)Total other income(expenses)17,191 (51,406)Net loss from continuing operations before income taxes (39,975)(130,854)Provision for income taxes (548)-Net loss from continuing operations,net of tax (40,523)(130,854)Net income(loss)on discontinued operation
256、s,net of tax 724 (30,532)Net loss$(39,799)$(161,386)(1)Interest expense in FY 2022 and 2021 include related party interest of$764 and$14,958,respectively Net loss from continuing operations,net of tax Net loss from continuing operations,net of tax,for FY 2022 was$40.5 million compared with$130.9 mil
257、lion in FY 2021.Discussed in the paragraphs below are the revenue and expense factors that primarily contributed to the net loss change.However,the net loss from continuing operations,net of tax,for FY 2021 was impacted by the following noncash items,relative to FY 2022:Fiscal 2022 Fiscal 2021 Expen
258、se(income)Change Impairment of goodwill and other intangible assets$10,468$28,995$(18,527)Depreciation 2,029 1,275 754 Amortization of intangible assets -2,752 (2,752)Amortization of Convertible Debenture discount -9,253 (9,253)Interest on convertible debt paid-in-kind -8,257 (8,257)Share-based comp
259、ensation 1,763 8,629 (6,866)Change in fair value of warrant liabilities (35,903)19,608 (55,511)Amortization and write-off of deferred financing costs 4,715 1,143 3,572 Noncash financing fees 4,650 5,948 (1,298)$(12,278)$85,860$(98,138)182025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023
260、028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm23/99 Cloud subscription and software revenue Cloud subscription and software revenue,which represents revenue from subscriptions to the Companys cloud-based technologypla
261、tform as well as revenue from the Companys on-premise software,was$15.6 million in FY 2022 compared with$16.9 millionin FY 2021.The decrease was primarily due to the termination of a reseller agreement,in August 2022,in connection with asettlement agreement entered into with Ribbon(See Note 11 of th
262、e consolidated financial statements).Such decrease was partiallyoffset by increased UCaaS business from 4 of our customers.Managed and professional services revenue Managed and professional services revenue,which was also negatively impacted by the termination of the reseller agreementdiscussed abov
263、e,was$1.2 million in FY 2022 compared with$3.1 million in FY 2021.Total revenue,cost of revenue and gross margin Aggregate revenue for all product lines together was$16.8 million in FY 2022 compared with$20.0 million in FY 2021.Cost of revenue increased$2.2 million or 13.5%from$16.2 million in FY 20
264、21 to$18.4 million in FY 2022,due primarily to a$2.7 million increase in platform software support and a$1.9 million increase in employee-related costs,partially offset by a$1.4million decrease in amortization of intangibles and a$1.1 million decrease in certain consultant and outside services.The g
265、ross margin in FY 2022 was negative due to a combination of decreased revenues and higher costs of revenue.Costs ofrevenue are primarily fixed.Impairment of goodwill and other intangible assets Goodwill impairment of$10.5 million was assessed early in FY 2022,primarily as a result of Kandys performa
266、nce beingsignificantly below forecasts.The noncash impairment charges recorded in FY 2021 are discussed in Note 3 of the Notes to the Consolidated FinancialStatements and were related to goodwill of the Kandy reporting unit and Kandys other intangible assets.The impairment ofKandys goodwill and othe
267、r intangible assets resulted from a quantitative impairment analysis during the Companys December2021 impairment assessment,after an evaluation based on certain factors considered to be triggering events,such as changes inKandys forecasts.As a result of the quantitative assessment,the Company record
268、ed an impairment charge to goodwill andintangible assets of$13.7 million and$15.3 million,respectively.Research and development For FY 2022 and FY 2021,research and development expenses were$15.6 million and$17.9 million,respectively.The decrease of$2.3 million,or 12.9%,was primarily due to reductio
269、ns in salaries and related costs,which reflect the impact of recent cost savingefforts.192025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm24/99 Selling,gener
270、al and administrative expenses Selling,general and administrative expenses for FY 2022 and FY 2021 consisted of the components in the following table(inthousands):Increase FY 2022 FY 2021 (decrease)Salaries,benefits,subcontracting&personnel administration costs$12,375$23,526$(11,151)Building occupan
271、cy costs,utilities,office supplies&repairs and maintenance 819 712 107 Sales and marketing 1,285 2,762 (1,477)Professional fees 8,385 5,624 2,761 Insurance 2,769 2,166 603 ERP/CRM implementation costs 2,355 -2,355 Other 1,545 1,615 (70)$29,533$36,405$(6,872)(1)Refers to the enterprise resource plann
272、ing/customer relationship management system Selling,general and administrative expenses was$29.5 million and$36.4 million in FY 2022 and FY 2021,respectively,a decreaseof$6.9 million or 18.9%.The salaries and related costs component of selling,general and administrative expenses decreased due to a r
273、eduction in corporateheadcount including at the executive level along with a related reduction in stock compensation expenses.Excluding stockcompensation expense,corporate salaries and related costs decreased$5.9 million in FY 2022,compared with FY 2021,while suchcosts at the Kandy business unit inc
274、reased$0.3 million.As previously indicated,the decrease in salaries was impacted by theinclusion,in FY 2021,of$3.1 million of termination expenses in connection with a reduction in headcount.The stockcompensation expense component of selling,general and administrative expenses decreased$6.0 million
275、in Fiscal 2022,comparedwith Fiscal 2021 due to the reduction in corporate executive headcount and lower stock prices that impacted the fair value of newawards.The professional fees component of selling,general and administrative expenses increased$2.8 million,from$5.6 million in FY2021 to$8.4 millio
276、n in Fiscal 2022,due to a combination of i)increased financing activities that required the services of legal andother professionals as well as ii)an increase in financial advisory professional fees.As discussed previously,the Companyundertook a number of financing transactions during FY 2022.Also,a
277、s previously discussed,the Company has obtained strategicand operating restructuring support services of capital advisors in support of its strategic,operating and capital restructuringinitiatives,which has resulted in increased non-recurring legal and financial advisory professional expenses.ERP/CR
278、M implementation costs began being expensed in May 2022 as a new ERP/CRM system went live effective May 1,2022.Prior to May 2022,such costs were deferred as the ERP/CRM system was in the development phase.Change in fair value of warrant liabilities The change in the fair value of warrant liabilities
279、 represent mark-to-market fair value adjustments related to certain warrants,andprimarily fluctuate due to changes in and the volatility of the Companys stock price.The fair value changes of each warrant wereas follows in FY 2022 and FY 2021(in thousands):FY 2022 FY 2021 Income(expense)Series A Warr
280、ants$8,133$(7,834)Series B Warrants -(2,296)Series C Warrants -675 Series D Warrants 13,469 (9,688)Monroe Warrants 4,901 (2,394)February 2022 Warrants 6,676 -2017 Private Placement and EBC Warrants 2,724 1,929$35,903$(19,608)202025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10
281、k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm25/99 Interest expense Interest expense for FY 2022 and FY 2021 consisted of the following(in thousands):FY 2022 FY 2021 Interest expense and financing fees-Credit Agreement$6,870$9
282、,131 Amortization of deferred financing costs and issue discount-February 2022 Warrants 1,431 -Interest and extension fee on related party promissory note 764 1,986 Amortization of deferred financing costs and discount-Series B Preferred Stock 844 -Amortization of deferred financing costs and discou
283、nt-Convertible Notes 3,171 -Amortization of debenture discount and debenture deferred fees -9,881 Debenture interest paid-in-kind -8,257 Financing charges due to a triggering event related to a floor price,as defined-Series B PreferredStock 7,141 -Hudson Bay waiver fee -2,000 Other 143 450$20,364$31
284、,705 Interest expense was$20.4 million in FY 2022 compared with$31.7 million in FY 2021,a decrease of$11.3 million.Substantiallyall of such charges are not expected to recur due to the following:i)In aggregate,$11.2 million of the$20.3 million incurred during FY 2022 relate to financing charges and
285、amortization ofdeferred charges relating to the Series B Preferred Stock and the Convertible Notes.All amounts outstanding and allobligations under the Series B Preferred Stock and the Convertible Notes have since been repaid ii)An aggregate$6.9 million of the$20.3 million incurred during FY 2022 re
286、lated to the Credit Agreement which was fullyrepaid on March 1,2022 iii)An aggregate$1.4 million of the$20.3 million incurred during FY 2022 was attributable to the February Warrants whichhave been converted to common stock iv)Debenture-related charges incurred in FY 2021 of$18.1 million,relate to D
287、ebentures which were fully converted tocommon stock FY 2021 v)The related party promissory note was repaid in FY 2022.Other income(expense)Other income of$0.9 million in FY 2022 consists of the gain of$1.7 million recorded in connection with the Ribbon SettlementAgreement(See Note 11 of Notes to the
288、 Consolidated Financial Statements),partially offset by other expenses of$0.8 million.Other income for FY 2021 was nominal.Net income(loss)on discontinued operations,net of tax Discontinued operations relate to Computex,which was sold in March 2022.Net income on discontinued operations,net of tax,fo
289、rFY 2022 was$0.7 million compared with a net loss on discontinued operations,net of tax,in FY 2021 of$30.5 million.The loss inFY 2021 was primarily a result of a$32.1 million impairment charge recorded in Fiscal 2021 within the Computex business unit,inconnection with the pending sale of Computex at
290、 that time.Provision for income taxes The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will begenerated to permit the use of existing deferred tax assets.A significant component of objective negative evidence identified duringmanageme
291、nts evaluation was the three-year cumulative loss for FY 2022 and FY 2021.Such objective negative evidenceoutweighed the positive evidence identified by the Company.On the basis of this evaluation,the Company maintained a fullvaluation allowance as of December 31,2022 and December 31,2021.In 2022,th
292、e Company identified uncertain tax positionsrelating to its domestic and foreign operations and recorded liabilities for the uncertain tax benefits 212025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/00012
293、1390023028156/f10k2022_americanvirtual.htm26/99 Liquidity and Capital Resources Overview Historically,the Companys primary sources of liquidity have been cash and cash equivalents,cash flows from operations(whenavailable)and cash flows from financing activities,including funding under credit agreeme
294、nts and the sale of equity securities.Asof December 31,2022,the Company had an aggregate cash balance of$12.6 million in its operating bank accounts and networking capital of$15.3 million.As of March 31,2023,aggregate cash in the Companys operating bank accounts was$13.3million.During 2022,the Compa
295、ny projected and announced that it would need additional capital to fund its operations including research&development and capital investment requirements.The Company also announced that it was pursuing strategic initiatives thatcould result in a sale of all or a portion of the assets of the Company
296、.In addition,the Company continued to explore strategicopportunities,including the rationalization of resource allocation and core competencies.Further,the Company took actions that itbelieved resulted in significant cost savings.Such savings were generated from selective reductions in workforce and
297、 negotiatedconversions of certain material vendor support costs from fixed to variable,thereby eliminating certain cost burdens related tounused capacity.Additionally,the Company obtained strategic and operating restructuring support services of certain capitaladvisors.On January 11,2023,the Company
298、 filed for Chapter 11 and,in March 2023,entered into an agreement to sellsubstantially all of the assets of the Company.On March 15,2023,the Court entered an order authorizing the Asset Sale pursuantto the terms of the Purchase Agreement.On March 24,2023,the Asset Sale closed,thereby completing the
299、disposition ofsubstantially all of the Companys assets.After the consummation of the sale,the Company plans to pursue steps to facilitate an orderly winding up of its remainingoperations and believes it has sufficient liquidity to achieve such.However,no assurance can be provided that such projectio
300、ns willbe realized.Cash balances and working capital noted above were impacted by the following recent transactions.The entry into and subsequent repayment of the Credit Agreement with Monroe,which was entered into on December 2,2021,for a$27 million term loan facility,to fund working capital,genera
301、l business activities and to pay off amountsowing under a prior credit agreement($12.8 million)that the Company previously assumed when it acquired Computex.Interest on the Credit Agreement was payable monthly at the rate of 12%per annum.However,the lenders under theCredit Agreement were guaranteed
302、a minimum return of$7.3 million.On March 1,2022,all amounts owing under theCredit Agreement were repaid,including the unpaid amounts of the minimum return.The issuance and repayment of a$5.0 million subordinated promissory note(the“2021 Note”),which was entered into onSeptember 16,2021,which was sec
303、ured by an affiliate of a shareholder that owned more than five percent of theCompanys common stock and which was repaid on March 15,2022.The 2021 Note,which had a minimum return of25%,became due on March 1,2022,due to the Companys sale of registered equity securities and the early pay-off of theCre
304、dit Agreement.However,for a waiver fee of$250,000,the lender extended the maturity date to May 1,2022,and onMarch 15,2022,the 2021 Note was paid in full using proceeds received from the sale of Computex.The receipt of gross proceeds of$5.0 million(before deduction of offering costs),in November 2021
305、,from the sale to aninstitutional investor in a registered direct offering,of 166,666 shares of common stock at a purchase price of$2.00 pershare.In addition to the 166,666 shares of the Companys common stock,the buyer received certain warrants.InDecember,the Company received an additional$5.0 milli
306、on in gross proceeds from the subsequent exercise of one groupof the warrants.The repayment of a subordinated note of$0.5 million along with related accrued interest in November 2021.222025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.go
307、v/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm27/99 The receipt of gross proceeds of$25.0 million(before deduction of offering costs),in December 2021,from the sale ofsecurities consisting of 522,666 shares of common stock,12,456 units of convertible preferred stock an
308、d certain warrants.The receipt of gross proceeds of$15.0 million on March 1,2022,representing the first tranche of a sale of securities inconnection with a February 28,2022 securities purchase agreement(the“February 2022 Purchase Agreement”)enteredinto with a buyer.The sale in April 2022 of addition
309、al securities,which resulted in net cash proceeds of$9.9 million.Cash financing charges of$2.8 million paid to the previous holders of the Series B Preferred Stock as a result of theCompanys stock price falling below a stipulated floor price,as defined in the Series B Preferred Stock agreement the s
310、ale of 4,515,000 shares of the Companys common stock,in September 2022,for net proceeds of$14.3 million,afterdeducting commission and other offering costs Increased payments for legal,professional and advisory fees in 2022 and early 2023 The consummation,on October 20,2022,of a securities purchase a
311、greement entered into with two institutional accreditedinvestors,which netted cash proceeds of$9.3 million,and which related to the sale of(i)an aggregate of 5,000,000 sharesof the Companys common stock,in a registered direct offering and(ii)warrants to purchase up to an aggregate of10,000,000 share
312、s of the Companys common stock,at an exercise price of$1.80 per share,in a concurrent privateplacement,for a combined purchase price of$2.00 per share Cash of$2.5 million received in connection with the Ribbon Settlement Agreement.The Company believes that current cash balances,accounts receivable c
313、ollections,funds held in escrow and proceeds from the saleof substantially all its assets will provide sufficient liquidity to fund the Companys remaining activities through the anticipatedliquidation date.However,there is no assurance that such projections will be achieved.This projection is based
314、on the Companyscurrent expectations.Cash flows Net cash used in continuing operating activities was$64.1 million and$47.4 million in Fiscal 2022 and Fiscal 2021,respectively,and primarily consisted of cash used in Kandys operating activities(including its research and development activities),interes
315、t andcertain financing costs,professional fees,insurance premiums and corporate support costs.Interest and financing costs includedcash interest and other financing costs of$10.9 million primarily related to the Credit Agreement that was repaid in the 1st quarterof 2022 as well as$2.8 million in fin
316、ancing charges that were paid to the previous holders of the Series B Preferred Stock.Investing activities Cash provided by continuing investing activities was$1.3 million in Fiscal 2022.Cash used in investing activities was$3.9 millionin Fiscal 2021.Cash provided by continuing investing activities
317、for Fiscal 2022 consisted of proceeds from the sale of certainsoftware rights of$2.5 million,partially offset by$0.9 million of deferred development costs on the enterprise resource planningand customer relationship management system(commonly referred to as ERP and CRM systems)and other capital spen
318、ding of$0.3 million.For FY 2021,cash used in continuing investing activities consisted of$0.9 million of deferred development costs onthe ERP and CRM system and$3.0 million on other capital spending.232025/1/17 20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmh
319、ttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm28/99 Financing activities Cash provided by continuing financing activities was$13.5 million in Fiscal 2022 and primarily consisted of proceeds from theissuance of securities of$48.7 million,partially offset
320、 by debt repayments of$33.9 million and payment of deferred financing feesof$1.2 million.Cash provided by continuing financing activities was$71.9 million in Fiscal 2021 and consisted primarily of proceeds of$27.8million from the issuance of securities,$27.0 million from issuance of debt,$24.0 milli
321、on from the issuance of Debentures,$5.0million from the issuance of a promissory note,and$5.0 million from the exercise of warrants,partially offset by$1.1 million oftax payment for withheld shares associated with vested restricted stock units issued under the Companys equity incentive plan,payment
322、of deferred financing fees of$1.9 million and debt repayments of$13.9 million.Cash flows from discontinued operations Net cash provided by discontinued operations consisted of the following:FY 2022 FY 2021 Net cash(used in)provided by operating activities$(5,291)$5,148 Net cash provided by(used in)i
323、nvesting activities 31,948 (1,012)Net cash provided by discontinued operations$26,657$4,136 Off-Balance Sheet Arrangements As of December 31,2022,we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii)of Regulation S-K and hadnot guaranteed any debt or commitments of other entities
324、 or entered into any options on non-financial assets.Critical Accounting Policies,Judgements and Estimates This discussion of critical accounting policies,judgments and estimates should be read in conjunction with our consolidatedfinancial statements and other disclosures included elsewhere in this
325、annual report.The preparation of financial statements andrelated disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities,disclosure of contingent assets and liabilities at the date of the financial statements
326、,and incomeand expenses during the periods reported.Actual results could differ materially from those estimates.Currently,we believe theaccounting policies that involve the most significant judgments and estimates used in the preparation of the consolidated financialstatements include those relating
327、 to revenue recognition,accounting for warrants,accounting for income taxes,the recognition andimpairment evaluation relating to tangible and intangible assets,and accounting for share-based compensation.We discuss some ofthese policies below.The ones not discussed below are discussed in Note 3 of t
328、he Notes to the Consolidated Financial Statements.Revenue recognition Revenue from contracts with customers are not recorded until the Company has the approval and commitment from the parties,therights of the parties are identified,payment terms are established,the contract has commercial substance
329、and collectability of theconsideration is probable.The Company also evaluates the following indicators,amongst others,when determining whether it isacting as a principal in the transaction(and therefore whether to record revenue on a gross basis):(i)whether the Company isprimarily responsible for fu
330、lfilling the promise to provide the specified good or service,(ii)whether the Company has the inventoryrisk before the specified good or service has been transferred to a customer or after transfer of control to the customer and(iii)whether the Company has the discretion to establish the price for t
331、he specified good or service.If the terms of a transaction do notindicate that the Company is acting as a principal in the transaction,then the Company is acting as an agent in the transaction andtherefore,the associated revenue is recognized on a net basis(that is revenue net of costs).242025/1/17
332、20:10sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htmhttps:/www.sec.gov/Archives/edgar/data/1704760/000121390023028156/f10k2022_americanvirtual.htm29/99 Revenue is recognized once control passes to the customer.The following indicators are evaluated in determining
333、when control haspassed to the customer:(i)whether the Company has a right to payment for the product or service,(ii)whether the customer haslegal title to the product,(iii)whether the Company has transferred physical possession of the product to the customer,(iv)whetherthe customer has the significant risk and rewards of ownership of the product and(v)whether the customer has accepted theproduct.T
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