Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2022

Organization and Business Operations [Abstract]

Basis of presentation

Basis of presentation

The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The Company has reclassified certain prior year amounts to conform to the current year presentation. Unless otherwise indicated, amounts provided in these Notes exclude operations classified as discontinued operations as of December 31, 2022. See Note 4 for information on discontinued operations.

Principles of consolidation

Principles of consolidation

The accompanying consolidated financial statements include the accounts of AVCT and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Use of estimates

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales (or revenues) and expenses during the reporting period.

Making estimates require management to exercise significant judgment. It is at least reasonably possible that estimates made as of the date of the financial statements could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include, but are not limited to, revenue recognition, estimates of impairment on long-lived assets, allowance for doubtful accounts, recognition and measurement of income tax assets, valuation of share-based compensation, the valuation of net assets acquired and the identification and measurements inherent in the classification of certain components of our operations as discontinued operations.

Discontinued Operations

Discontinued Operations

The Company classifies assets and liabilities of a business or asset group as held for sale, and the results of such operations as discontinued operations, for all periods presented, when it commits to a plan to divest a business or asset group, actively begin marketing it for sale, the sale is deemed probable of occurrence within the ensuing twelve months, and the business or asset group reflects a strategic shift that has, or will have, a major effect on the Company’s operations and its financial results. In measuring the assets and liabilities held for sale, the Company evaluates which businesses or asset groups are being marketed for sale. Upon designation as held for sale, the Company records the carrying value of the assets at the lower of the carrying value or estimated fair value, less costs to sell. Fair value is determined based on external data available or management’s estimates, depending upon the nature of the assets and liabilities.

The results of discontinued operations, as well as any gain or loss on the disposal transaction, are presented separately, net of tax, from the results of continuing operations for all periods presented. The revenue and expenses included in the results of discontinued operations are the revenue and direct operating expenses incurred by the discontinued component that may be reasonably segregated from the revenue and costs of the ongoing operations of the Company. The assets and liabilities for the Computex business have been accounted for as assets and liabilities held for sale in the consolidated balance sheet as of December 31, 2021 and the operating results have been included in discontinued operations in the consolidated statements of operations.

Revenue recognition

Revenue recognition

Revenue from contracts with customers are not recorded until the Company has the approval and commitment from the parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance and collectability of the consideration is probable. The Company also evaluates the following indicators, amongst others, when determining whether it is acting as a principal in the transaction (and therefore whether to record revenue on a gross basis): (i) whether the Company is primarily responsible for fulfilling the promise to provide the specified good or service, (ii) whether the Company has the inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) whether the Company has the discretion to establish the price for the specified good or service. If the terms of a transaction do not indicate that the Company is acting as a principal in the transaction, then the Company is acting as an agent in the transaction and therefore, the associated revenue is recognized on a net basis (that is revenue net of costs).

Revenue is recognized once control passes to the customer. The following indicators are evaluated in determining when control has passed to the customer: (i) whether the Company has a right to payment for the product or service, (ii) whether the customer has legal title to the product, (iii) whether the Company has transferred physical possession of the product to the customer, (iv) whether the customer has the significant risk and rewards of ownership of the product and (v) whether the customer has accepted the product. The Company’s products can be delivered to customers in a variety of ways, including (i) physical shipment from the Company’s warehouse, (ii) via drop-shipment by the vendor or supplier or (iii) via electronic delivery of keys for software licenses. The Company’s shipping terms typically allow for the Company to recognize revenue when the product is shipped to the customer’s location.

When an arrangement contains more than one performance obligation, the Company will allocate the transaction price to each performance obligation on a relative standalone selling price basis. The Company utilizes the observable price of goods and services when they are sold separately to similar customers in order to estimate standalone selling price.

Cloud subscription and software revenue

Revenue from subscriptions to the Company’s cloud-based technology platform is recognized on a ratable basis over the contractual subscription term beginning on the date that the platform is made available to the customer until the end of the contractual period. Payments received in advance of subscription services are recorded as deferred revenue; revenue recognized for services rendered in advance of payments received are recorded as contract assets. Usage fees, when bundled, are billed in advance and recognized on a ratable basis over the contractual subscription term, which is usually the monthly contractual billing period. Non-bundled usage fees are recognized as actual usage occurs.

The Company also recognizes revenue for term-based software licenses and has concluded that its software licenses are functional intellectual property that are distinct, as the user can benefit from the software on its own. The software license revenue is typically recognized upon transfer of control or when the software is made available for download, as this is the point at which the user of the software can direct the use of, and obtain substantially all of the remaining benefits from, the functional intellectual property.

When services do not meet certain service levels of commitments, customers are entitled to receive service credits, and in certain cases, refunds, each representing a form of variable consideration. The Company historically has not experienced any significant incidents affecting the defined levels of reliability and performance as required by its subscription contracts. Therefore, the variable consideration has been insignificant and there are no reserves for such service credits as of December 31, 2022.

Managed and professional services

Professional and managed services revenue include services for deployment, configuration, system integration, optimization, customer training and education.

Such professional services are provided under both time and materials and fixed price contracts. When services are provided on a time and materials basis, the Company recognizes revenues at agreed-upon billing rates as services are performed. When services are provided on a fixed fee basis, the Company recognizes revenues over time in proportion to the Company’s progress towards satisfaction of the performance obligation.

In arrangements for managed services, the Company’s arrangement is typically a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company typically recognizes revenue from these services on a straight-line basis over the period services are provided, which is consistent with the timing of services rendered.

Freight and sales tax

Freight billed to customers is included within sales on the consolidated statement of operations. The related freight charged to the Company is included within cost of revenue. Sales tax collected from customers is remitted to governmental authorities and is reflected as a payable until paid.

Contract liabilities

Contract liabilities (or deferred or unearned revenue) are recognized when cash payments are received or due in advance of the Company’s performance obligations.

Costs of obtaining and fulfilling a contract

The Company capitalizes and significant costs that are incremental to obtaining customer contracts, predominately sales commissions. Such deferrals are then amortized to expense, in proportion to each completed contract performance obligation, on a straight-line basis over the period during which the Company fulfills its performance obligation.

Any significant costs associated with contracts whereby the Company has an obligation to perform services, are incurred specifically to assist the Company in rendering services to its customers and are recorded as deferred customer support contract costs at the time the costs are incurred. The costs are amortized to expense on a straight-line basis over the period during which the Company fulfills its performance obligation.

Cash, cash equivalents

Cash, cash equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Trade receivables, net

Trade receivables, net

Trade receivables arise from granting credit to customers in the normal course of business, are unsecured and are presented net of an allowance for doubtful accounts. The allowance is based on a number of factors, including the length of time the receivable is past due, the Company’s previous loss history, the customer’s current ability to pay, and the general condition of the economy and industry as a whole. Depending on the customer, payment is due within 30, 60 or 90 days after the customer receives an invoice. Accounts that are more than 45 days past due are individually analyzed for collectability. When all collection efforts have been exhausted, the accounts are written off. Historically, the Company has not suffered significant losses with respect to its trade receivables. The allowance for doubtful accounts was approximately $471 and $147 at December 31, 2022 and 2021, respectively.

Business combinations

Business combinations

The Company accounts for business combinations in accordance with the Financial Accounting Standard Board’s (“FASB”) Accounting Standard Codification (“ASC”) 805, Business Combinations. Accordingly, identifiable tangible and intangible assets acquired and liabilities assumed are recorded at their estimated fair values, the excess of the purchase consideration over the fair values of net assets acquired is recorded as goodwill, and transaction costs are expensed as incurred.

Long-lived assets

Long-lived assets

Property and equipment are recorded at cost and presented net of accumulated depreciation. Major additions and betterments are capitalized while maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed. Property and equipment are depreciated on the straight-line basis over their estimated useful lives.

Definite-lived and indefinite-lived intangible assets arising from business combinations have, in the past, included customer relationships, trademarks, acquired technology and noncompete agreements. Definite-lived intangible assets are amortized over the estimated period during which the asset is expected to contribute directly or indirectly to future cash flows. Intangible assets that are considered to be indefinite-lived are not amortized.

The Company reviews its long-lived assets for impairment whenever events or circumstances exist that indicate the carrying amount of an asset or asset group may not be recoverable. The recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset or asset group to the future undiscounted cash flows expected to be generated by that asset group. If the asset or asset group is considered to be impaired, an impairment loss is recorded to adjust the carrying amounts to the estimated fair value. During the year ended December 31, 2021, the Company recorded impairment of intangible assets of $15,319 relating to the Kandy reporting unit based on a comparison of the reporting unit’s fair value with its carrying value. The excess of the carrying value of the reporting over the estimated fair value was first allocated to the intangibles and then to goodwill. Fair value was determined using the income approach. No impairment was evident on the Company’s other long-lived assets as of December 31, 2022.

Goodwill

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is reviewed for impairment at least annually, in December, or more frequently if a triggering event occurs between impairment testing dates. As of December 31, 2021, the Company had two operating segments and two reporting units for the purpose of evaluating goodwill impairment.

The Company’s impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity and Company specific events. If, based on the qualitative test, the Company determines that it is “more likely than not” that the fair value of a reporting unit is less than its carrying value, then the Company evaluates goodwill for impairment by comparing the fair value of the reporting unit to its respective carrying value, including its goodwill. If it is determined that it is “not likely” that the fair value of the reporting unit is less than its carrying value, then no further testing is required.

The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. Fair values may be determined using a combination of both income and market-based approaches.

As indicated in Note 1, in connection with the planned sale of Computex, the Company recorded a noncash goodwill impairment charge of $32,100 during the year ended December 31, 2021, which represented the excess of the carrying value of the Computex reporting unit over the expected sale proceeds less costs to sell. Impairment of Kandy’s goodwill was also recorded during the years ended December 31, 2022 and 2021. Goodwill impairment of the Kandy reporting unit was $10,468 and $13,676 during the years ended December 31, 2022 and 2021, respectively.

Deferred financing fees and debt discount

Deferred financing fees and debt discount

Deferred financing fees, which are debt issuance costs that qualify for deferral in connection with the issuance of new debt or the modification of existing debt facilities, are amortized over the term of the related debt using the effective interest method (straight-line method for revolving credit arrangements). Debt discounts are also amortized using the effective interest method, unless the interest method approximates the straight-line method. Amortization of such costs are included in interest expense, while the unamortized balances of deferred financing fees and debt discount are presented as reductions of the carrying value of the related debt.

Research and development

Research and development

The Company incurs software development costs to enhance, improve, expand and/or upgrade certain proprietary software in an agile software environment with releases broken down into several iterations called sprints. Such software development costs, research and development costs, and any new product development costs, are expensed as incurred, and include personnel-related costs, depreciation related to engineering and test equipment, allocated costs of facilities and information technology, outside services and consultant costs, supplies, software tools and product certification.

Software developed for internal use is capitalized. Capitalization ceases and amortization starts when the software is ready for its intended use.

Leases

Leases

As discussed below, the Company adopted the FASB issued Accounting Standard Update (“ASU”) No. 2016-02, Leases (ASC 842), as amended by multiple updates, hereafter ASC 842, as of January 1, 2022.

The Company determines if an arrangement is a lease at inception by determining whether the agreement conveys the right to control the use of the identified asset for a period of time, whether the Company has the right to obtain substantially all of the economic benefits from use of the identified asset, and the right to direct the use of the asset. Lease liabilities are recognized at the commencement date based upon the present value of the remaining future minimum lease payments over the lease term using the rate implicit in the lease or the incremental borrowing rate.  The Company’s lease terms include options to renew or terminate the lease when it is reasonably certain that it will exercise the option.

The right-of-use assets are initially measured at the carrying amount of the lease liability and adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use-asset. Certain leases contain escalation clauses, which are factored into the right-of-use asset where appropriate. Lease expense for minimum lease payments are recognized on straight-line basis over the lease term.

Variable lease expenses include payments based upon changes in a rate or index, such as real estate taxes, common area maintenance, insurance, and utilities are expensed as incurred.  The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Warrants

Warrants

Warrants issued by the Company are evaluated under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-40, Derivatives and Hedging—Contracts in an Entity’s Own Equity, to determine whether they meet the criteria to be accounted for as liabilities or as stockholders’ equity. If the Company determines that they should be accounted for as liabilities, then they are recorded at fair value on the issuance dates with subsequent changes in fair values recognized in the consolidated statement of operations at each reporting date. Changes in the fair values of the Company’s warrants may be material to the Company’s future operating results.

Series A, Series B, Series C, Series D, February 2022 and Monroe Warrants

As more fully discussed and defined in Note 10, between November 2021 and February 2022, the Company issued certain Series A, Series B, Series C, Series D and Monroe Warrants as well as certain February 2022 Warrants in a series of transactions, which were determined to qualify for treatment under ASC 480. All such warrants, except the Monroe warrants, were exercised and/or converted during the year ended December 31, 2022. The Monroe warrants were exercised in January 2023.

Public Warrants, Private Placement Warrants and EBC Warrants issued in 2017

On July 27, 2017, the Company entered into certain Warrant Purchase Agreements with each of Pensare Sponsor Group, LLC, a Delaware limited liability company (the “Sponsor”), MasTec, Inc., a Florida corporation, and EarlyBirdCapital, Inc., (“EBC”) a Delaware corporation (together with the Sponsor and MasTec, Inc., the “Purchasers”), pursuant to which the Purchasers, in connection with and simultaneously with the closing of the Company’s initial public offering (the “IPO”), purchased an aggregate of 700,833 warrants, including the full over-allotment amount, (the “2017 Private Placement Warrants.

On or about August 1, 2017, in the IPO, the Company sold units of the Company’s equity securities, each such unit consisting of one share of Common Stock, one-half of one Public Warrant and one-tenth of one right to acquire one share of the Company’s common stock (the “Units”) and, in connection therewith, issued and delivered 1,035,000 warrants to public investors in the Offering (the “Public Warrants”). In addition, at that time, there were 45,000 warrants underlying unit purchase options granted to EBC or its designees (the “2017 EBC Warrants”). The 2017 EBC Warrants, together with the 2017 Private Placement Warrants and the Public Warrants are referred to as the “2017 Warrants.” Each whole Warrant entitled the holder thereof to purchase one share of common stock of the Company for $172.50 per share, subject to adjustments. In addition to the 45,000 warrants, the unit purchase options, which expired in July 2022, entitled the holders to receive 99,000 shares of common stock for an exercise price of $150 per unit.

As of December 31, 2022, 1,035,000 Public Warrants and 700,833 of the 2017 Private Placement Warrants remained outstanding.

The 2017 Private Placement Warrants, if appropriately exercised, are exercisable on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial Purchasers or their permitted transferees. The 2017 Public Warrants and any 2017 Private Placement Warrants that are transferred to nonpermitted transferees are redeemable at the option of the Company and are not exercisable on a cashless basis.

The Company evaluated the 2017 Warrants under ASC 815-40, Derivatives and Hedging—Contracts in an Entity’s Own Equity, and concluded that the 2017 Private Placement Warrants and 2017 EBC Warrants did not meet the criteria to be classified in stockholders’ equity. A recent SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder and because a holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision precluded the 2017 Private Placement Warrants and the 2017 EBC Warrants from being classified in equity and therefore the 2017 Private Placement Warrants and the 2017 EBC Warrants were classified as liabilities at fair value, with subsequent changes in fair values recognized in the consolidated statement of operations at each reporting date.

The fair values of the 2017 Private Placement Warrants and the 2017 EBC Warrants were determined using the Black-Scholes model in which the following weighted average assumptions were used for the applicable valuations:

	December 31, 2022 (2017 Private Placement Warrants)			December 31, 2021 (2017 Private Placement and 2017 EBC Warrants)
stock price volatility		295	%		70	%
exercise price	$	172.50		$	172.50
discount rate		4.2139	%		0.9577	%
remaining useful life (in years)		2.27			3.11
stock price	$	1.16		$	36.45

Income taxes

Income taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company measures deferred tax assets and liabilities using the enacted tax rates for the years and jurisdictions in which the temporary differences are expected to be recovered. A change to the tax rates used to measure the Company’s deferred taxes is recognized in income during the period in which the new rate(s) were enacted.

The Company recognizes deferred tax assets to the extent the Company’s assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including the future reversals of existing taxable temporary differences, projected future taxable income exclusive of reversing temporary differences and carryforwards, tax-planning strategies, taxable income in prior carryback years if permitted under tax law, and the results from prior years. If the Company determines it is more likely than not, that all or a portion of a deferred tax asset will not be realized, a valuation allowance is recorded with a charge to income tax expense. Alternatively, if the Company determines that all or a portion of a deferred tax asset previously not meeting the more likely than not threshold will be realized, the Company reduces its valuation allowance and recognizes a benefit in income tax expense.

The Company recognizes and measure uncertain tax benefits in accordance with ASC Topic 740, Income Taxes (“ASC 740”), based on a two-step process in which (1) the Company determines whether it is more likely than not that the tax position will be sustained based on the technical merits of the position, and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than fifty percent likely to be realized upon ultimate settlement with the related tax authority. The Company’s policy is to recognize interest and penalties related to uncertain tax positions, if any, in income tax expense.

Share-based compensation

Share-based compensation

The Company accounts for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense, based on estimated fair values, for share-based awards made to employees and directors. Based on the grant date fair value of the award, the Company recognizes compensation expense, over the requisite service periods on a straight-line basis, and accounts for forfeitures as they occur.

For restricted stock awards with a time-based vesting condition, the fair value, which is fixed at the grant date for purposes of recognizing compensation costs, is determined by reference to the Company’s stock price on the grant date. A portion of the Company’s restricted stock awards contains a market condition. For such restricted stock awards, the fair value is estimated using a Monte Carlo simulation model, whereby the fair value of such awards is fixed at the grant date and amortized over the shorter of the performance or service period. The Monte Carlo simulation valuation model utilizes the following assumptions: expected stock price volatility, the expected life of the awards and a risk-free interest rate. Significant judgment is required in estimating the expected volatility of our common stock. Due to the limited trading history of the Company’s common stock, estimated volatility was based on a peer group of public companies and took into consideration the increased short-term volatility in historical data due to COVID-19.

Net loss per common share

Net loss per common share

Pursuant to ASC Topic 260, Earnings Per Share, basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting periods.

Diluted net loss per share is based on the weighted average number of shares outstanding during the periods plus the effect, if any, of the potential exercise or conversion of securities, such as warrants and restricted stock units that would cause the issuance of additional shares of common stock. In computing the basic and diluted net loss per share applicable to common stockholders during the periods listed in the consolidated statements of operations, the weighted average number of shares are the same for both basic and diluted net loss per share due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive. An anti-dilutive impact is an increase in earnings per share or a decrease in net loss per share that would result from the conversion, exercise, or issuance of certain contingent securities.

Concentration of business and credit risk

Concentration of business and credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and trade receivables. Cash held by the Company, in financial institutions, regularly exceeds the federally insured limit of $250. At December 31, 2022, cash balances held with a financial institution exceeded the federally insured limit by $11,955. However, management does not believe this poses a significant credit risk. During the year ended December 31, 2022, one vendor accounted for more than 10% of cost of revenue, accounting for approximately $3,230. Additional concentration of business risks are summarized in the following table:

	December 31, 2022			December 31, 2021
	Number of customers or vendors	Aggregate total		Number of customers or vendors	Aggregate total
Customers that individually accounted for 10% or more of trade accounts receivable	3	$	6,217	3	$	6,104
Vendors that individually accounted for 10% or more of trade accounts payable	2	$	3,139	2	$	2,527

	Year Ended December 31,
	2022		2021
Number of customers that individually accounted for 10% or more of sales		4		3
Aggregate total sales of customers that individually accounted for 10% or more of sales	$	11,849	$	9,929

Fair value of financial instruments

Fair value of financial instruments

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.

ASC Topic 820, Fair Value Measurements and Disclosures provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:

● Level 1 — inputs are based upon unadjusted quoted prices for identical assets or liabilities traded in active markets.

● Level 2 — inputs are based upon quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 — inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

Assets measured at fair value on a non-recurring basis include goodwill, and tangible and intangible assets. Such assets are reviewed annually for impairment indicators. If a triggering event has occurred, the assets are re-measured when the estimated fair value of the corresponding asset group is less than the carrying value. The fair value measurements, in such instances, are based on significant unobservable inputs (Level 3).

The carrying amounts of the Company’s financial instruments, which include trade receivables, deposits, accounts payable and accrued expenses and debt at floating interest rates, approximate their fair values, principally due to their short-term nature, maturities or nature of interest rates.

The fair values of warrant liabilities are reflected on the consolidated balance sheet as “Warrant Liabilities.” For the valuation methodologies and significant assumptions used in the valuations, see the section above titled, “Public Warrants, Private Placement Warrants and EBC Warrants issued in 2017.” The warrant liabilities are considered to be Level 2 valuations.

Foreign operations

Foreign operations

The Company’s reporting currency is the U.S. dollar and the Company’s records are maintained in US dollars. Any amounts due or receivable from foreign entities are translated into U.S. dollars at the current exchange rate on the balance sheet date. Any revenues or expenses that are billed in foreign currency are converted at the average rates of exchange prevailing during each period. Realized and unrealized foreign currency exchange gains and losses arising from transactions denominated in currencies other than the U.S dollar are reflected in earnings.

Operations outside the United States include a Canadian division. The Company also transacts certain business in other foreign countries. Foreign operations are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange. Long-lived assets located outside of the US was $1,301 as of December 31, 2022.

Advertising

Advertising

Advertising costs are expensed as incurred.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Change in Segment reporting

Change in Segment reporting

Effective January 1, 2021, the Company identified two operating segments, Computex and Kandy, pursuant to ASC 280, Segment Reporting, consistent with the information that was presented to the Chief Operating Decision Maker (“CODM”). Upon the sale of Computex in March 2022, the Company began operating as one reportable segment.

Emerging growth company

Emerging growth company

The Company ceased being an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), in December of 2022.

Recently adopted accounting standards

Recently adopted accounting standards

In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU No. 2021-04”), which provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. Under ASU 2021-04, an entity is required to treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option, that remains equity classified, as an exchange of the original instrument for a new instrument. ASU 2021-04 also provides guidance on the measurement of the effect of a modification or exchange and requires entities to recognize the effect of any such modification or exchange on the basis of the substance of the transaction.

ASU No. 2021-04 was effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities were required to apply the amendments prospectively to modifications or exchanges that occurred on or after the effective date. ASU No. 2021-04 was effective for the Company on January 1, 2022. The adoption did not materially impact the Company’s financial condition or results as the Company’s treatment of such modifications were already consistent with the guidance in ASU 2021-04.

The Company adopted ASC 842 effective January 1, 2022. ASC 842 requires lessees to recognize, on the balance sheet, a lease liability and a leased asset for all leases, including operating leases with a lease term greater than 12 months and requires lessors to classify leases as either sales-type, direct financing or operating. Accordingly, a right-of-use asset and related lease liability for the Company’s only qualifying operating lease is reflected on the balance sheet, and lease expense is included in selling, general and administrative expenses. ASC 842 also expands the required quantitative and qualitative disclosures surrounding leases. See Note 7.

Recently issued accounting standards

Recently issued accounting standards

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of changes in equity, statements of operations and statements of cash flows.