Item
2.01. Completion of Acquisition or Disposition of Assets
The
disclosure set forth under “Introductory Note” above is incorporated in this Item 2.01 by reference. The material
provisions of the Agreement are described in the Proxy Statement, in the section entitled “The Business Combination Agreement”,
beginning on page 104, which is incorporated herein by reference. On February 27, 2020, the Merger was approved by AVCT’s
stockholders at the special meeting of AVCT’s stockholders. The Merger was completed on April 7, 2020.
As
of the date of the Closing:
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Computex
merged with and into Merger Sub, with Merger Sub surviving the Merger as a wholly-owned
direct subsidiary of AVCT, on the terms and subject to the conditions set forth in the
Agreement;
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all
shares of Computex common stock issued and outstanding immediately prior to the Effective
Time were canceled;
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all
shares of Computex common stock held in the treasury of Computex were canceled without
any conversion thereof;
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each
share of common stock of Merger Sub issued and outstanding immediately prior to the Effective
Time was converted into and exchanged for one validly issued, fully paid and nonassessable
share of Common Stock, par value $0.01 per share, of the Surviving Corporation; and
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AVCT
delivered to Holdings (i) the Stock Consideration, consisting of 8,189,490 shares of
Common Stock of AVCT and (ii) the PIPE Consideration, consisting of 20,000 Units (as
defined below).
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Cautionary
Note Regarding Forward-Looking Statements
Certain
statements in this Current Report on Form 8-K may constitute “forward-looking statements” for purposes of the federal
securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s
expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections,
forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking
statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intends,” “may,” “might,” “plan,” “possible,”
“potential,” “predict,” “project,” “should,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking statements in this Current Report on Form 8-K may include, for example, statements about:
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the
benefits of the Merger;
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our
future financial performance following the Merger;
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changes
in our strategy, future operations, financial position, estimated revenues and losses,
projected costs, prospects and plans;
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our
ability to complete acquisitions of other businesses;
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expansion
plans and opportunities; and
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the
outcome of any known and unknown litigation and regulatory proceedings.
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These
forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations,
forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements
should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update
forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information,
future events or otherwise, except as may 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 materially different
from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
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the
ability to maintain the listing of Common Stock on the Nasdaq Stock Market (“Nasdaq”)
following the Merger;
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the
risk that the Merger disrupts current plans and operations as a result of the consummation
of the transactions described herein;
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our
ability to recognize the anticipated benefits of the Merger, which may be affected by,
among other things, competition and the ability of the Company to grow and manage growth
profitably following the Merger;
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costs
related to the Merger;
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adverse
effects that the novel coronavirus (COVID-19) may have on the Company and/or the economy
in general;
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changes
in applicable laws or regulations;
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the
possibility the Company may be adversely affected by other economic, business, and/or
competitive factors; and
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other
risks and uncertainties including those set forth in the “Risk Factors” section
in the Proxy Statement beginning on page 29 of the Proxy Statement, which is incorporated
herein by reference.
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Business
and Properties
The
business and properties of Computex prior to the Merger are described in the Proxy Statement in the section entitled “Information
About Computex” beginning on page 133, which is incorporated herein by reference. The business of AVCT prior to the Merger
is described in the Proxy Statement in the section entitled “Information About Pensare” beginning on page 163, which
is incorporated herein by reference.
Risk
Factors
The
risk factors related to Computex’s business and operations are described in the Proxy Statement in the section entitled
“Risk Factors” beginning on page 29, which is incorporated herein by reference.
Unaudited
Pro Forma Condensed Combined Financial Information
The
unaudited pro forma condensed combined financial information of the Company for the years ended December 31, 2019 and 2018 is
set forth in Exhibit 99.1 hereto and is incorporated herein by reference.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Management’s
discussion and analysis of financial condition and results of operations of Computex for the for the years ended December 31,
2019, 2018 and 2017 is set forth in Exhibit 99.3 hereto and is incorporated herein by reference.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information known to the Company regarding the beneficial ownership of Common Stock immediately following
consummation of the Transactions by:
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each
person who is the beneficial owner of more than 5% of the outstanding shares of Common
Stock;
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each
of our officers and directors as of the Closing; and
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all
current officers and directors of the Company, as a group.
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Beneficial
ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a
security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire securities
within 60 days, including options and warrants that are currently exercisable or exercisable within 60 days.
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all
shares beneficially owned by them. The calculation of percentage of beneficial ownership is based on 19,635,830 shares of Common
Stock that were outstanding upon the Closing, including the 3,105,000 shares that were issued as a result of the conversion of
the Company’s rights.
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After the Transaction
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Name and Address of Beneficial Owner(1)
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Number of Shares of Common Stock Beneficially Owned
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Percentage of Outstanding Shares of Common Stock
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Directors and Executive Officers of the Company:
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Pensare Sponsor Group, LLC
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16,278,433
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(2)(3)
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54.1
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%
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Darrell J. Mays
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16,375,897
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(2)(3)(4)
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54.2
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%
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Lawrence E. Mock, Jr.(5)
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194,928
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(6)
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*
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Dr. Robert Willis(5)
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—
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—
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Tom King
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—
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—
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Graham McGonigal
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—
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—
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Sam Haffar
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—
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—
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Mark Downs
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—
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—
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U. Bertram Ellis, Jr.
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124,464
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(7)
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*
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Suzanne Shank
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27,000
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*
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Karl Krapek
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27,000
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*
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Dennis Lockhart
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27,000
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*
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Dr. Klaas Baks
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27,000
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*
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All directors and executive officers as a group (ten individuals)
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16,803,289
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55.1
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%
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Five Percent or More Holders and Certain Other Holders:
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MasTec, Inc.(8)
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4,870,565
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21.4
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%
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Navigation Capital Partners II, L.P.(9)
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15,986,591
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58.3
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%
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*
Less than 1%.
(1)
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Unless otherwise indicated, the business address of
each of the persons and entities is 1720 Peachtree Street, Suite 629, Atlanta, GA 30309.
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(2)
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Represents shares held by Pensare Sponsor Group, LLC,
of which Mr. Mays is the managing member.
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(3)
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Includes 7,017,290 shares of Common Stock underlying
the Private Placement Warrants which may be exercised commencing 30 days after the Closing, 883,057 shares of Common Stock underlying
Warrants and 2,559,586 shares of Common Stock underlying Debentures in the principal amount of $8,830,570.
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(4)
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Includes 25,000 shares of Common Stock underlying Warrants and 72,464 shares of Common Stock underlying Debentures in the principal amount of $250,000 held directly by Mr. Mays’ daughter.
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(5)
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Mr. Mock, Dr. Willis and Mr. Foley hold economic interests
in Pensare Sponsor Group, LLC and pecuniary interests in the securities held by Pensare Sponsor Group, LLC. Each of Mr. Mock,
Dr. Willis and Mr. Foley disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein.
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(6)
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Includes 194,928 shares of Common Stock underlying Units
consisting of warrants to purchase 50,000 shares of Common Stock and Series A convertible debentures in the principal amount of
$500,000 held directly by Nobadeer LP and indirectly by Lawrence E. Mock, Jr. who is the general partner of Nobadeer LP. Mr. Mock
disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein.
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(7)
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Includes 97,464 shares of Common Stock underlying Units
consisting of warrants to purchase 25,000 shares of Common Stock and Series A convertible debentures in the principal amount of
$250,000.
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(8)
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According to a Form 3 filed with the SEC on July 3,
2019, as amended, and a Form 4 filed with the SEC on April 8, 2020. Includes 2,000,000 shares of Common Stock underlying the Private
Placement Warrants which may be exercised commencing 30 days after the closing, 300,000 shares of Common Stock underlying Warrants
and 869,565 shares of Common Stock underlying Debentures in the principal amount of $3,000,000. The business address of this stockholder
is 800 S Douglas Road, 12th Floor Coral Gables, FL 33134.
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(9)
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Includes 8,189,490 shares of Common Stock delivered
to Holdings as the Stock Consideration, 200,000 shares of Common Stock underlying Warrants and 5,797,101 shares of Common Stock
underlying Debentures in the principal amount of $20,000,000. Holdings is controlled by Navigation Capital Partners II, L.P. The
business address of this stockholder is 1175 Peachtree Street NE, 10th Floor, Atlanta, GA 30361.
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Directors
and Executive Officers
Information
with respect to the Company’s directors and executive officers immediately after the Closing is set forth in the Proxy Statement
in the section entitled “Directors and Executive Officers” beginning on page 170 of the Proxy Statement, which is
incorporated herein by reference. Each of AVCT’s prior directors and executive officers continued to serve in their prior
positions following the Closing, with the exception of John Foley, who resigned from his position as the Chief Financial Officer
of AVCT upon the Closing. In addition, the Company’s board of directors expanded the board of directors from seven members
to eight members, appointed Sam Haffar and Mark Downs to serve on the board of directors of the Company upon the Closing, and
appointed Tom King to replace John Foley as the Chief Financial Officer of the Company upon the Closing. The biographical information
of Mr. Haffar, Mr. Downs and Mr. King is set forth below:
Sam
Haffar has served as Computex, Inc.’s Chief Executive Officer and President at different times over 30 years. Mr. Haffar,
along with his brother founded, Computex, Inc. in 1987 and has helped grow Computex, Inc. to be an industry leading solution provider
that has been recognized by industry publications such as CRN. Mr. Haffar also serves on the Cisco and Hewlett Packard Enterprise
advisory boards and provides strategic direction and feedback to some of Computex’s OEM partners. Mr. Haffar is a graduate
of the University of Houston and holds a Bachelor's degree in Computer Science.
Mark
Downs is the founder of Navigation Capital Partners, a private equity firm where he has served as a partner since January 2007.
Mr. Downs has in excess of 20 years of experience serving on for profit boards of directors as a control investor. Mr. Downs has
served as a director of Computex, Inc. from January 2017 to April 2020; a director of Stratos Management Systems, Inc. from January
2017 to April 2020; a director of Stratos Management Systems Holdings, LLC January 2017 to April 2020; a director of Michon, Inc.
(d/b/a Definition6) from July 2015 to the present; a director of Brown Integrated Logistics, Inc. from January 2017 to the present;
a director of Brightwell Payments, Inc. from May 2015 to Present; and a director of Five Star Food Service, Inc. from October
2016 to March 2019. Mr. Downs holds a Bachelor’s degree in Economics from the University of Pittsburgh and a Master’s
of Management degree from Northwestern University.
Thomas H. King was the
Chief Financial Officer of Tier One Holding Corp. and its subsidiaries from January 2017 to June 2019, after serving as its interim
Chief Financial Officer from January 2016 to December 2017. Prior to January 2016, Mr. King served as Chief Financial Officer
to numerous private equity sponsored companies primarily as an engagement partner with Tatum, a Randstad Company. Also while at Tatum,
he was Chief Financial Officer at Allied Systems Holdings, Inc. from August 2004 until September 2008 and served as Vice President-Finance
at Rock-Tenn Company (currently known as WestRock Company) from November 2000 to July 2004. Mr. King was also an Assurance Manager
at PricewaterhouseCoopers. Mr. King received a MS Industrial Administration from Carnegie-Mellon University and a BS in Business
Administration from Pennsylvania State University.
Committees
of the Board of Directors
The
committees of AVCT’s board of directors remained unchanged following the Closing. Information with respect to the Company’s
directors and executive officers immediately after the Closing is set forth in the Proxy Statement in the section entitled “Committees
of the Board of Directors” beginning on page 173 of the Proxy Statement, which is incorporated herein by reference.
Independence
of Directors
Nasdaq
listing standards require that a majority of our board of directors be independent. An “independent director” is defined
generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship
which, in the opinion of the Company’s board of directors, would interfere with the director’s exercise of independent
judgment in carrying out the responsibilities of a director. AVCT’s board of directors has determined that Messrs. U. Bertram
Ellis, Jr., Karl Krapek, Dennis Lockhart, Dr. Klaas Baks and Ms. Suzanne Shank are “independent directors” as defined
in the Nasdaq listing.
Director
and Executive Officer Compensation
Pre-Closing
Compensation of Executive Officers and Directors
The
compensation of Computex’s named executive officers and directors before the consummation of the Merger is set forth in
the Proxy Statement in the section titled “Executive Compensation of Computex” beginning on page 142, which is incorporated
herein by reference.
Post-Closing
Compensation of Executive Officers and Directors
The
compensation of the Company’s named executive officers and directors after the consummation of the Merger is set forth in
the Proxy Statement in the section titled “Information About Pensare—Executive Compensation” beginning on page
175, which is incorporated herein by reference.
Mr.
Haffar, in addition to being a director of the AVCT, will continue to serve as the Chief Executive Officer of Computex, whereby
he will receive a base salary and discretionary annual cash bonus as compensation for his services.
American
Virtual Cloud Technologies, Inc. 2020 Equity Incentive Plan
On
February 27, 2020, the stockholders of AVCT approved the American Virtual Cloud Technologies, Inc. 2020 Equity Incentive Plan
(the “2020 Plan”), effective upon Closing. The description of the 2020 Plan is set forth in the Proxy Statement section
titled “Proposal No. 3—Incentive Plan Proposal” beginning on page 122 of the Proxy Statement, which is incorporated
herein by reference. A copy of the full text of the 2020 Plan is filed as Exhibit 10.3 to this Current Report on Form 8-K.
Director
Compensation
The
compensation committee will determine the annual compensation to be paid to the members of the board of directors of the Company.
Certain
Relationships and Related Party Transactions
Information
about related party transactions of AVCT is set forth in the Proxy Statement in the section entitled “Certain Pensare Relationships
and Related Person Transactions” beginning on page 186 of the Proxy Statement.
Information
about related party transactions of Computex is set forth in the Proxy Statement in the section entitled “Certain Computex
Relationships and Related Person Transactions” beginning on page 162 of the Proxy Statement.
Legal
Proceedings
Information
about legal proceedings of Computex is set forth in the Proxy Statement in the section entitled “Information About Computex—Litigation”
beginning on page 140, which is incorporated herein by reference.
Market
Price and Dividends
AVCT’s
units, shares of Common Stock, warrants and rights were historically quoted on Nasdaq under the symbols “WRLSU” “WRLS”,
“WRLSW”, and “WRLSR” respectively. AVCT units commenced public trading on July 27, 2017, and the holders
of AVCT’s units could elect to separately trade the Common Stock, warrants and rights underlying the units commencing on
August 8, 2017. On July 23, 2019, the trading date before the public announcement of the Agreement, the Common Stock traded at
$10.70.
On
April 8, 2020, in connection with the Closing, all of the units of AVCT separated into their component parts of one-half of one
warrant (each whole warrant entitling the holder thereof to purchase one share of Common Stock) and one right to receive one-tenth
of one share of Common Stock. The rights were converted into an aggregate of 3,105,000 shares of Common Stock, and the rights
and units ceased trading on Nasdaq. As of the Closing Date, there were eleven holders of record of Common Stock.
Shares
of Common Stock and warrants of the Company are listed on the Nasdaq under the new trading symbols of “AVCT” and “AVCTW,”
respectively.
Historical
market information regarding the Company is not provided because there has been no public market for Computex’s equity securities.
AVCT
has not paid any cash dividends on any shares of Common Stock to date. The board of directors is not currently contemplating,
and does not anticipate declaring, any stock dividends in the foreseeable future. Further, our ability to declare dividends may
be limited by restrictive covenants contained in any existing or future indebtedness of the Company.
Recent
Sales of Unregistered Securities
In
addition to the below, information about unregistered sales of AVCT’s equity securities is set forth in “Item 15.
Recent Sales of Unregistered Securities” of AVCT’s Registration Statement on Form S-1 (File No. 333-219162) filed
with the SEC on July 6, 2017 as amended on July 21, 2017, as amended as amended on July 24, 2017, as amended on July 26, 2017.
The
information set forth under the heading “Debentures, Warrants and Guaranty” in Item 1.01 of this Current Report on
Form 8-K is incorporated in this Item 2.01 by reference.
Description
of the Company’s Securities
A
description of the shares of Common Stock and the Company’s warrants is included in the Proxy Statement in the section entitled
“Description of Pensare Securities” beginning on page 190 of the Proxy Statement, which is incorporated by reference
herein.
As
of the Closing, the Company has authorized 505,000,000 shares of capital stock, consisting of (a) 500,000,000 shares of Common
Stock, par value $0.0001 per share and (b) 5,000,000 shares of preferred stock, par value $0.0001 per share.
As
of the Closing Date, there were: (a) eleven holders of record of Common Stock and 19,635,830 shares of Common Stock outstanding;
and (b) four holders of record of warrants and 26,037,500 warrants outstanding.
Financial
Statements and Supplementary Data
The
information set forth under Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.