Company Quick10K Filing
Inpixon
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 13 $3
10-Q 2019-11-05 Quarter: 2019-09-30
S-1 2019-09-13 Public Filing
10-Q 2019-08-14 Quarter: 2019-06-30
S-1 2019-06-28 Public Filing
10-Q 2019-05-14 Quarter: 2019-03-31
10-K 2019-03-28 Annual: 2018-12-31
10-Q 2018-11-06 Quarter: 2018-09-30
10-Q 2018-08-13 Quarter: 2018-06-30
10-Q 2018-05-15 Quarter: 2018-03-31
10-K 2018-03-27 Annual: 2017-12-31
10-Q 2017-11-20 Quarter: 2017-09-30
10-Q 2017-08-21 Quarter: 2017-06-30
10-Q 2017-05-15 Quarter: 2017-03-31
10-K 2017-04-17 Annual: 2016-12-31
10-Q 2016-11-16 Quarter: 2016-09-30
10-Q 2016-08-15 Quarter: 2016-06-30
10-Q 2016-05-16 Quarter: 2016-03-31
10-K 2016-03-30 Annual: 2015-12-31
10-Q 2015-11-13 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-14 Quarter: 2015-03-31
10-K 2015-03-27 Annual: 2014-12-31
10-Q 2014-11-13 Quarter: 2014-09-30
10-Q 2014-08-14 Quarter: 2014-06-30
10-Q 2014-05-15 Quarter: 2014-03-31
8-K 2020-01-14 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-12-31 Enter Agreement, Shareholder Rights, Amend Bylaw, Regulation FD, Exhibits
8-K 2019-12-26 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-12-23 Enter Agreement, Off-BS Arrangement, Sale of Shares, Other Events, Exhibits
8-K 2019-12-19 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-12-18 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-12-13 Enter Agreement, Off-BS Arrangement, Sale of Shares, Shareholder Vote, Exhibits
8-K 2019-12-10 Regulation FD, Exhibits
8-K 2019-12-05 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-12-03 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-12-02 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-11-27
8-K 2019-11-26 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-11-22 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-11-21 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-11-15 Enter Agreement, Off-BS Arrangement, Sale of Shares, Shareholder Vote, Other Events, Exhibits
8-K 2019-11-12 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-11-06 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-11-05 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-10-31 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-10-31 Officers, Shareholder Vote, Exhibits
8-K 2019-10-30 Earnings, Exhibits
8-K 2019-10-24 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-10-18
8-K 2019-10-15
8-K 2019-10-10 Enter Agreement, Other Events, Exhibits
8-K 2019-09-17 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-09-13 Other Events
8-K 2019-09-06 Other Events
8-K 2019-08-15 Enter Agreement, M&A, Sale of Shares, Regulation FD, Exhibits
8-K 2019-08-14 Earnings, Exhibits
8-K 2019-08-12 Enter Agreement, Amend Bylaw, Regulation FD, Exhibits
8-K 2019-08-08 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-09 Enter Agreement, Off-BS Arrangement, Sale of Shares, Regulation FD, Exhibits
8-K 2019-07-09 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-07-05 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-06-27 Enter Agreement, M&A, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-06-26 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-06-25 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-06-20 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-06-13 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-06-04 Regulation FD, Exhibits
8-K 2019-05-28 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-05-21 Enter Agreement, M&A, Off-BS Arrangement, Sale of Shares, Regulation FD, Exhibits
8-K 2019-05-13 Earnings, Exhibits
8-K 2019-05-03 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-04-24 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-04-10 Regulation FD, Exhibits
8-K 2019-04-10 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-04-02 Enter Agreement, Exhibits
8-K 2019-03-26 Earnings, Exhibits
8-K 2019-03-26 Regulation FD, Other Events
8-K 2019-03-18 Regulation FD, Exhibits
8-K 2019-02-22 Other Events
8-K 2019-02-20 Enter Agreement, Other Events, Exhibits
8-K 2019-02-04 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-01-29 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-01-18 Other Events
8-K 2019-01-14 Enter Agreement, Shareholder Rights, Amend Bylaw, Exhibits
8-K 2019-01-07 Other Events, Exhibits
8-K 2018-12-21 Regulation FD, Exhibits
8-K 2018-12-21 Regulation FD, Exhibits
8-K 2018-12-07 Enter Agreement, Regulation FD, Exhibits
8-K 2018-11-30 Shareholder Vote
8-K 2018-11-29 Regulation FD, Exhibits
8-K 2018-11-26 Enter Agreement, Exhibits
8-K 2018-11-15 Other Events
8-K 2018-11-05 Earnings, Exhibits
8-K 2018-10-31 Shareholder Rights, Officers, Amend Bylaw, Shareholder Vote, Regulation FD, Exhibits
8-K 2018-10-12 Enter Agreement, Earnings, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-10-05 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2018-08-31 Enter Agreement, M&A, Officers, Regulation FD, Exhibits
8-K 2018-08-17 Regulation FD, Exhibits
8-K 2018-08-09 Earnings, Regulation FD, Other Events, Exhibits
8-K 2018-07-25 Enter Agreement, Exhibits
8-K 2018-07-13 Other Events
8-K 2018-06-27 Other Events
8-K 2018-06-20 Officers, Other Events
8-K 2018-06-05 Regulation FD, Exhibits
8-K 2018-05-23 Enter Agreement, Exhibits
8-K 2018-05-17 Officers, Exhibits
8-K 2018-05-15 Earnings, Exhibits
8-K 2018-05-02 Regulation FD, Other Events, Exhibits
8-K 2018-04-30 Other Events
8-K 2018-04-23 Other Events, Exhibits
8-K 2018-04-20 Enter Agreement, Shareholder Rights, Amend Bylaw, Exhibits
8-K 2018-04-01 Other Events
8-K 2018-03-22 Earnings, Exhibits
8-K 2018-03-05 Other Events
8-K 2018-02-15 Enter Agreement, Shareholder Rights, Amend Bylaw, Other Events, Exhibits
8-K 2018-02-05 Shareholder Rights, Amend Bylaw, Regulation FD, Exhibits
8-K 2018-02-02 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-01-05 Enter Agreement, Sale of Shares, Exhibits
INPX 2019-09-30
Part I&Mdash;Financial Information
Item 1. Financial Statements
Note 1 - Organization and Nature of Business and Going Concern
Note 2 - Basis of Presentation
Note 3 - Summary of Significant Accounting Policies
Note 4 - Locality Acquisition
Note 5 - Gtx Acquisition
Note 6 - Jibestream Acquisition
Note 7 - Proforma Financial Information
Note 8 - Inventory
Note 9 - Debt
Note 10 - Capital Raises
Note 11 - Common Stock
Note 12 - Preferred Stock
Note 13 - Stock Options
Note 14 - Credit Risk and Concentrations
Note 15 - Foreign Operations
Note 16 - Related Party Transactions
Note 17 - Leases
Note 18 - Commitments and Contingencies
Note 19 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii&Mdash;Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure
Item 5. Other Information
Item 6. Exhibits
EX-31.1 f10q0919ex31-1_inpixon.htm
EX-31.2 f10q0919ex31-2_inpixon.htm
EX-32.1 f10q0919ex32-1_inpixon.htm

Inpixon Earnings 2019-09-30

INPX 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
ANY 4 10 19 -26 -9 -17 -15 4 35% -0.2 -170%
INPX 3 24 12 4 4 -23 -22 1 83% -0.0 -96%
CREX 0 36 18 30 14 -7 -4 4 46% -1.0 -19%
LKCO
KERN
LTRPA
KLR
HHHH
PHUN
CIH

10-Q 1 f10q0919_inpixon.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to            

 

Commission file number: 001-36404

 

INPIXON

(Exact name of registrant as specified in its charter)

 

Nevada   88-0434915
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

2479 Bayshore Road
Suite 195
Palo Alto, CA
  94303
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:  (408) 702-2167

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 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 submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the 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 smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

  

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   INPX   The Nasdaq Capital Market

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Common Stock, par value $0.001  

66,314,768

(Class)   Outstanding at October 31, 2019

   

 

 

 

 

 

INPIXON

 

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

 

TABLE OF CONTENTS

 

  Page No.
   
Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report ii
   
PART I - FINANCIAL INFORMATION 1
     
Item 1. Financial Statements 1
     
  Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 2-3
     
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 4
     
  Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 5
     
  Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2018 and 2019 6-7
     
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 8
     
  Notes to Unaudited Condensed Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 51
     
Item 4. Controls and Procedures 51
     
PART II - OTHER INFORMATION 52
     
Item 1. Legal Proceedings 52
     
Item 1A. Risk Factors 52
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 55
     
Item 3. Defaults Upon Senior Securities 55
     
Item 4. Mine Safety Disclosure 55
     
Item 5. Other Information 55
     
Item 6. Exhibits 55
     
Signatures 56

 

i

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

AND OTHER INFORMATION CONTAINED IN THIS REPORT

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

  our limited cash and our history of losses;
     
  our ability to achieve profitability;

 

  our limited operating history with recent acquisitions;

 

  risks related to our acquisition of Jibestream Inc.;

 

  our ability to successfully integrate companies we acquire;
     
  emerging competition and rapidly advancing technology in our industry that may outpace our technology;

 

  customer demand for the products and services we develop;

 

  the impact of competitive or alternative products, technologies and pricing;

 

  our ability to manufacture any products we develop;

 

  general economic conditions and events and the impact they may have on us and our potential customers;

 

  our ability to obtain adequate financing in the future;

 

  our ability to continue as a going concern;

 

  our ability to consummate strategic transactions, which may include acquisitions, mergers, dispositions or investments;

 

  lawsuits and other claims by third parties or investigations by various regulatory agencies that we are required to report to including the uncertainty relating to the ongoing U.S. Securities and Exchange Commission investigation;
     
  the impact of a delisting from the Nasdaq Stock Market if we are not able to organically cure the existing bid price deficiency prior to November 26, 2019 and our ability to maintain compliance with other continued listing requirements;

 

  our success at managing the risks involved in the foregoing items; and

 

  other factors discussed in this Form 10-Q.

 

ii

 

 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.

 

You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Unless otherwise stated or the context otherwise requires, the terms “Inpixon,” “we,” “us,” “our” and the “Company” refer collectively to Inpixon and its subsidiaries.

 

Note Regarding Reverse Stock Splits

 

Except where indicated, all share and per share data in this Form 10-Q, including the unaudited condensed consolidated financial statements, reflect the 1-for-15 reverse stock split of the Company’s issued and outstanding common stock effected on March 1, 2017, the 1-for-30 reverse stock split of the Company’s issued and outstanding common stock effected on February 6, 2018 and the 1-for-40 reverse stock split of the Company’s issued and outstanding common stock effected on November 2, 2018.

 

iii

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information which are the accounting principles that are generally accepted in the United States of America and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

 

The results for the period ended September 30, 2019 are not necessarily indicative of the results of operations for the full year. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited consolidated financial statements for the fiscal years ended December 31, 2018 and 2017 included in the annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 28, 2019.

 

1

 

 

INPIXON AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands, except number of shares and par value data)

 

   As of   As of 
   September 30,
2019
   December 31,
2018
 
   (Unaudited)   (Audited) 
Assets        
         
Current Assets        
Cash and cash equivalents  $494   $1,008 
Accounts receivable, net   2,451    1,280 
Notes and other receivables   219    4 
Inventory   764    568 
Prepaid assets and other current assets   607    496 
           
Total Current Assets   4,535    3,356 
           
Property and equipment, net   138    202 
Operating lease right-of-use asset, net   736    -- 
Software development costs, net   1,566    1,690 
Intangible assets, net   9,338    4,509 
Goodwill   3,097    -- 
Loan to related party   10,366    2,204 
Receivable from related party   601    -- 
Other assets   114    217 
           
Total Assets  $30,491   $12,178 

 

The accompanying notes are an integral part of these financial statements.

 

2

 

 

INPIXON AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

 

(In thousands, except number of shares and par value data)

 

   As of   As of 
   September 30,
2019
   December 31,
2018
 
   (Unaudited)   (Audited) 
Liabilities and Stockholders’ Equity        
         
Current Liabilities        
Accounts payable  $2,333   $1,129 
Accrued liabilities   1,401    1,792 
Operating lease obligation   440    -- 
Deferred revenue   1,051    234 
Short-term debt   10,059    4,127 
Acquisition liability   952    -- 
           
Total Current Liabilities   16,236    7,282 
           
Long Term Liabilities          
Long-term debt   --    74 
Operating lease obligation, noncurrent   317    -- 
Other liabilities   7    19 
Deferred tax liability, noncurrent   1,696    -- 
Acquisition liability, noncurrent   750    -- 
           
Total Liabilities   19,006    7,375 
           
Commitments and Contingencies          
           
Stockholders’ Equity          
           

Preferred Stock - $0.001 par value; 5 mill shares authorized, consisting of Series 4 Convertible Pref Stock - 10,415 shares authorized; 1 and 1 issued, and 1 and 1 outstanding as of Sept 30, 2019 and Dec 31, 2018, respectively, and Series 5 Convertible Pref Stock - 12,000 shares authorized; 126 and 0 issued, and 126 and 0 outstanding as of Sept 30, 2019 and Dec 31, 2018, respectively.

   --    -- 
Common Stock - $0.001 par value; 250,000,000 shares authorized; 50,518,513 and 1,581,893 issued and 50,518,500 and 1,581,880 outstanding as of September 30, 2019 and December 31, 2018, respectively.   51    2 
Additional paid-in capital   146,854    123,224 
Treasury stock, at cost, 13 shares   (695)   (695)
Accumulated other comprehensive income   (10)   26 
Accumulated deficit (excluding $2,442 reclassified to additional paid in capital in quasi-reorganization)   (134,741)   (117,772)
           
Stockholders’ Equity Attributable to Inpixon   11,459    4,785 
           
Non-controlling Interest   26    18 
           
Total Stockholders’ Equity   11,485    4,803 
           
Total Liabilities and Stockholders’ Equity  $30,491   $12,178 

  

The accompanying notes are an integral part of these financial statements.

 

3

 

 

INPIXON AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In thousands, except per share data)

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2019   2018   2019   2018 
   (Unaudited)   (Unaudited) 
Revenues  $1,534   $940   $4,387   $2,627 
                     
Cost of Revenues   382    298    1,109    818 
                     
Gross Profit   1,152    642    3,278    1,809 
                     
Operating Expenses                    
Research and development   926    296    2,677    820 
Sales and marketing   847    447    2,161    1,259 
General and administrative   3,521    2,326    9,890    8,796 
Acquisition related costs   573    78    1,220    94 
Amortization of intangibles   969    812    2,602    2,419 
                     
Total Operating Expenses   6,836    3,959    18,550    13,388 
                     
Loss from Operations   (5,684)   (3,317)   (15,272)   (11,579)
                     
Other Income (Expense)                    
Interest expense   (1,190)   (78)   (2,053)   (981)
Loss on exchange of debt for equity   (27)   --    (188)   -- 
Change in fair value of derivative liability   --    --    --    48 
Gain on the sale of Sysorex Arabia   --    --    --    23 
Other income/(expense)   289    --    518    (11)
                     
Total Other Income (Expense)   (928)   (78)   (1,723)   (921)
                     
Net Loss from Continuing Operations, before tax   (6,612)   (3,395)   (16,995)   (12,500)
    Income tax benefit   33    --    35    -- 
Net Loss from Continuing Operations   (6,579)   (3,395)   (16,960)   (12,500)
                     
Loss from Discontinued Operations, Net of Tax   --    (1,785)   --    (4,778)
                     
Net Loss   (6,579)   (5,180)   (16,960)   (17,278)
                     
Net Income/(Loss) Attributable to Non-controlling Interest   5    4    9    6 
                     
Net Loss Attributable to Stockholders of Inpixon  $(6,584)  $(5,184)  $(16,969)  $(17,284)
                     
Deemed dividend to preferred stockholders   --    --    --    (11,235)
Deemed dividend for triggering of warrant down round feature   --    --    (1,250)   -- 
Net Loss Attributable to Common Stockholders   (6,584)   (5,184)   (18,219)   (28,519)
                     
Net Loss Per Basic and Diluted Common Share                    
Loss from continuing operations  $(0.28)  $(3.17)  $(1.46)  $(45.97)
Loss from discontinued operations  $--   $(1.67)  $--   $(9.25)
Net Loss Per Share - Basic and Diluted  $(0.28)  $(4.84)  $(1.46)  $(55.24)
                     
Weighted Average Shares Outstanding                    
Basic and Diluted   23,366,543    1,071,310    12,442,450    516,302 

  

The accompanying notes are an integral part of these financial statements.

 

4

 

 

INPIXON AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(In thousands)

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2019   2018   2019   2018 
   (Unaudited)   (Unaudited) 
                 
Net Loss  $(6,579)  $(5,180)  $(16,960)  $(17,278)
                     
Unrealized foreign exchange gain/(loss) from cumulative translation adjustments   (67)   (10)   (36)   (15)
                     
Comprehensive Loss  $(6,646)  $(5,190)  $(16,996)  $(17,293)

 

The accompanying notes are an integral part of these financial statements.

 

5

 

 

INPIXON AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2019

 

(Unaudited)

 

(In thousands, except per share data)

 

   Series 3 Convertible   Series 4 Convertible   Series 5 Convertible   Series 6 Convertible       Additional           Accumulated
Other Comprehensive
       Non-   Total
Stockholders’
 
   Preferred Stock   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Treasury Stock   Income   Accumulated   Controlling   (Deficit) 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Shares   Amount   (Loss)   Deficit   Interest   Equity 
                                                                     
Balance - January 1, 2018   --   $--    --   $--    --   $--    --   $--    24,055   $--   $78,303    (13)  $(695)  $31   $(94,484)  $(2,006)  $(18,851)
                                                                                      
Common shares issued for services   --    --    --    --    --    --    --    --    196    --    80    --    --    --    --    --    80 
Stock options granted to employees for services   --    --    --    --    --    --    --    --    --    --    206    --    --    --    --    --    206 
Fractional shares issued for stock split   --    --    --    --    --    --    --    --    243    --    -    --    --    --    --    --    -- 
Common and preferred shares issued for net cash proceeds from a public offering   4,105.5252    --    --    --    --    --    --    --    98,145    --    18,942    --    --    --    --    --    18,942 
Redemption of convertible series 3 preferred stock   (3,694.2752)   --    --    --    --    --    --    --    39,301    --    --    --    --    --    --    --    -- 
Common shares issued for extinguishment of debenture liability   --    --    --    --    --    --    --    --    6,881    --    1,456    --    --    --    --    --    1,456 
Sale of Sysorex Arabia   --    --    --    --    --    --    --    --    --    --    --    --    --    --    --    2,013    2,013 
Adoption of accounting standards (Note 2)   --    --    --    --    --    --    --    --    --    --    --    --    --    --    1,287    --    1,287 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    --    --    (7)   --    --    (7)
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    --    --    (6,244)   --    (6,244)
                                                                                      
Balance - March 31, 2018   411.2500   $--    --   --   --   --   --   $--    168,821   --   98,987   (13)  (695)  $24   (99,441)  7   (1,118)
                                                                                      
Stock options granted to employees for services   --    --    --    --    --    --    --    --    --    --    571    --    --    --    --    --   571 
Common and preferred shares issued for net cash proceeds from a public offering   --    --    10,115.0000    --    --    --    --    --    --    --    9,021    --    --    --    --    --   9,021 
Redemption of convertible series 3 preferred stock   (411.2500)   --    --    --    --    --    --    --    69,050    --    (2)   --    --    --    --    --   (2
Redemption of convertible series 4 preferred stock   --     --     (7,796.7067)   --    --    --    --    --    718,452    1    (1)   --    --    --    --    --   -- 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    --    --    2    --    --   2 
Net loss   --   --    --   --    --   --    --    --    --    --    --    --    --    --    (5,857)   2   (5,855)
                                                                                      
Balance - June 30, 2018   --   $--    2,318.2933   $--    --   $--    --   $--    956,323   $1   108,576    (13)  $(695)  $26   $(105,298)  $9   $2,619 
                                                                                      
Stock options granted to employees for services   --    --    --    --    --    --    --    --    --    --    122    --    --    --    --    --   122 
Redemption of convertible series 4 preferred stock   --    --    (2,311.2933)   --    --    --    --    --    324,803    --    --  --    --    --    --    --   -- 
Deconsolidation of Sysorex as a result of spin-off   --    --    --    --    --    --    --    --    --    --    11,476    --    --    --    --    --   11,476 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    --    --    (10)   --    --   (10)
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    --    --    (5,184)   4   (5,180)
                                                                                      
Balance - September 30, 2018   --   $--    7   $--    --   $--    --   $--    1,281,126   $1   $120,174    (13)  $(695)  $16   $(110,482)  $13   $9,027 

 

The accompanying notes are an integral part of these financial statements.

 

6

 

 

INPIXON AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2019

(CONTINUED) 

 

(Unaudited)

(In thousands, except per share data)

 

   Series 3 Convertible   Series 4 Convertible   Series 5 Convertible   Series 6 Convertible       Additional           Accumulated
Other Comprehensive
       Non-   Total
Stockholders’
 
   Preferred Stock   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Treasury Stock   Income   Accumulated   Controlling   (Deficit) 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Shares   Amount   (Loss)   Deficit   Interest   Equity 
                                                                     
Balance - January 1, 2019   --   $--    1   $--    --   $--    --   $--    1,581,893   $2   $123,224    (13)  $(695)  $26   $(117,773)  $18   $4,802 
                                                                                      
Preferred Shares issued for net cash proceeds of a public offering   --    --    --    --    12,000    --    --    --    --    --    10,814    --    --    --    --    --    10,814 
Common shares issued for extinguishment of debt   --    --    --    --    --    --    --    --    172,869    --    384    --    --    --    --    --    384 
Common shares issued for net proceeds from warrants exercised   --    --    --    --    --    --    --    --    13,761    --    46    --    --    --    --    --    46 
Common shares issued for warrants exercised   --    --    --    --    --    --    --    --    1,248,324    1    (1)   --    --    --    --    --    -- 
Redemption of convertible Series 5 Preferred Stock   --    --    --    --    (10,062)   --    --    --    3,021,663    3    (3)   --    --    --    --    --    -- 
Common shares issued for extinguishment of liability   --    --    --    --    --    --    --    --    749,440    1    1,129    --    --    --    --    --    1,130 
Common shares issued for services   --    --    --    --    --    --    --    --    200,000    --    242    --    --    --    --    --    242 
Stock options granted to employees and consultants for services   --    --    --    --    --    --    --    --    --    --    648    --    --    --    --    --    648 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    --    --    (8)   --    --    (8)
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    --    --    (5,144)   (5)   (5,149)
                                                                                      
Balance - March 31, 2019   --   $--    1   $--    1,938   $--    --   $--    6,987,950   $7   $136,483    (13)  $(695)  $18   $(122,917)  $13   $12,909 
                                                                                      
Common shares issued for extinguishment of debt   --    --    --    --    --    --    --    --    2,773,607    3    2,002    --    --    --    --    --    2,005 
Common shares issued for warrants exercised   --    --    --    --    --    --    --    --    835,740    1    (1)   --    --    --    --    --    -- 
Redemption of convertible Series 5 Preferred Stock   --    --    --    --    (1,812)   --    --    --    544,145    1    (1)   --    --    --    --    --    -- 
Stock options granted to employees and consultants for services   --    --    --    --    --    --    --    --    --    --    858    --    --    --    --    --    858 
Issuance of Locality Acquisition Shares   --    --    --    --    --    --    --    --    650,000    --    513    --    --    --    --    --    513 
Issuance of GTX Acquisition Shares   --    --    --    --    --    --    --    --    1,000,000    1    649    --    --    --    --    --    650 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    --    --    39    --    --    39 
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    --    --    (5,240)   9    (5,231)
                                                                                      
Balance - June 30, 2019   --   $--    1   $--    126   $--    --   $--    12,791,442   $13   $140,503    (13)  $(695)  $57   $(128,157)  $22   $11,743 
                                                                                      
Common shares issued for extinguishment of debt   --    --    --    --    --    --    --    --    1,403,772    1    723    --    --    --    --    --    724 
Common shares issued for warrants exercised   --    --    --    --    --    --    --    --    13,956,909    14    (14)   --    --    --    --    --    -- 
Stock options granted to employees and consultants for services   --    --    --    --    --    --    --    --    --    --    872    --    --    --    --    --    872 
Issuance of Jibestream Acquisition Shares   --    --    --    --    --    --    --    --    5,068,969    5    857    --    --    --    --    --    862 
Common and Preferred Shares issued for net cash proceeds of a public offering   --    --    --    --    --    --    2,997    3    6,497,410    7    3,924    --    --    --    --    --    3,934 
Redemption of convertible Series 6 Preferred Stock   --    --    --    --    --    --    (2,997)   (3)   10,800,011    11    (11)   --    --    --    --    --    (3)
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    --    --    (67)   --    --    (67)
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    --    --    (6,584)   4    (6,580)
                                                                                      
Balance - September 30, 2019   --   $--    1   $--    126   $--    --   $--    50,518,513   $51   $146,854    (13)  $(695)  $(10)  $(134,741)  $26   $11,485 

 

The accompanying notes are an integral part of these financial statements.

 

7

 

 

INPIXON AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands)

 

   For the Nine Months Ended 
   September 30, 
   2019   2018 
   (Unaudited) 
Cash Flows (Used In) from Operating Activities        
Net loss  $(16,960)  $(17,278)
Adjustment to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   826    1,334 
Amortization of intangible assets   2,602    3,804 
Amortization of right of use asset   267    -- 
Stock based compensation   2,618    979 
Amortization of technology   50    50 
Loss on exchange of debt for equity   188    -- 
Change in fair value of derivative liability   --    (48)
Amortization of debt discount   1,543    417 
Provision for doubtful accounts   358    221 
Gain on earnout   --    (934)
Gain on the settlement of liabilities   --    (307)
Gain on the sale of Sysorex Arabia   --    (23)
Income tax benefit   (35)   -- 
Other   23    (37)
           
Changes in operating assets and liabilities:          
Accounts receivable and other receivables   (1,241)   207 
Inventory   (194)   (19)
Other current assets   (45)   54 
Prepaid licenses and maintenance contracts   --    (5)
Other assets   (284)   (36)
Accounts payable   1,140    (8,797)
Accrued liabilities   56    (3,057)
Deferred revenue   (369)   64 
Other liabilities   400    (44)
Total Adjustments   7,903    (6,177)
           
Net Cash Used in Operating Activities   (9,057)   (23,455)
           
Cash Flows Used in Investing Activities          
Purchase of property and equipment   (58)   (39)
Investment in capitalized software   (658)   (661)
Investment in Athentek   --    (175)
Cash spun off as a result of de-consolidation   --    (362)
Cash paid for acquisition of GTX   (250)   -- 
Cash paid for acquisition of Locality   (204)   -- 
Cash paid for acquisition of Jibestream   (3,714)   -- 
Net Cash Flows Used in Investing Activities   (4,884)   (1,237)
           
Cash Flows From (Used in) Financing Activities          
Net proceeds (repayments) to bank facility   237    (1,141)
Net proceeds from issuance of common stock, preferred stock and warrants   14,791    27,961 
Repayment of notes payable   (71)   (113)
Loans to related party   (9,866)   (774)
Repayments from related party   1,683    24 
Advances to related party   (15)   -- 
Loan to Jibestream   (141)   -- 
Loan to GTX   (50)   -- 
Net proceeds from promissory notes   6,750    -- 
Net Cash Provided By Financing Activities   13,318    25,957 
           
Effect of Foreign Exchange Rate on Changes on Cash   (36)   (15)
           
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash   (659)   1,250 
           
Cash, Cash Equivalents and Restricted Cash - Beginning of period   1,224    351 
           
Cash, Cash Equivalents and Restricted Cash - End of period (Note 3)  $565   $1,601 
           
Supplemental Disclosure of cash flow information:          
Cash paid for:          
Interest  $3   $798 
Income Taxes  $--   $-- 
           
Non-cash investing and financing activities          
Common shares issued for extinguishment of debenture liability  $--   $1,457 
Adjustment to opening retained earnings for the adoption of ASC 606  $--   $1,287 
Deconsolidation of Sysorex as a result of spin-off  $--   $11,838 
Common shares issued for extinguishment of liability  $1,130   $-- 
Common shares issued for extinguishment of debt  $3,114   $-- 
Right of use asset obtained in exchange for lease liability  $1,003   $-- 
Common shares issued for GTX acquisition  $650   $-- 
Common shares issued for Locality acquisition  $514   $-- 
Common shares issued for Jibestream acquisition  $862   $-- 

   

The accompanying notes are an integral part of these financial statements.

 

8

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 1 - Organization and Nature of Business and Going Concern

 

Inpixon, and its wholly-owned subsidiaries, Inpixon Canada, Inc. (“Inpixon Canada”) and Jibestream, Inc. (“Jibestream”), and its majority-owned subsidiary Inpixon India Limited (“Inpixon India”) (unless otherwise stated or the context otherwise requires, the terms “Inpixon” “we,” “us,” “our” and the “Company” refer collectively to Inpixon and the aforementioned subsidiaries), provide Big Data analytics and location based products and related services. The Company is headquartered in California, and has subsidiary offices in Coquitlam, Canada, Vancouver, Canada, Toronto, Canada and Hyderabad, India. India.

 

On August 31, 2018, the Company completed the spin-off of its value-added reseller business from its indoor positioning analytics business by way of a distribution of all the shares of common stock of its wholly-owned subsidiary, Sysorex, Inc. (“Sysorex”), to its stockholders of record as of August 21, 2018 and certain warrant holders. 

 

On May 21, 2019, the Company acquired Locality Systems Inc. (“Locality”), a technology company based near Vancouver, Canada, specializing in wireless device positioning and radio frequency augmentation of video surveillance systems (See Note 4). On June 27, 2019, the Company acquired certain global positioning system (“GPS”) products, software, technologies, and intellectual property from GTX Corp (“GTX”), a U.S. based company specializing in GPS technologies (See Note 5). These transactions expanded our patent portfolio and included certain granted or licensed patents and GPS and radio frequency (“RF”) technologies. Additionally, on August 15, 2019, the Company acquired Jibestream, a provider of indoor mapping and location technology based in Toronto, Canada (See Note 6).

 

Going Concern and Management’s Plans

 

As of September 30, 2019, the Company has a working capital deficiency of approximately $11.5 million. For the three and nine months ended September 30, 2019, the Company incurred a net loss of approximately $6.3 million and $16.7 million, respectively. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the financial statements are issued.

 

On January 15, 2019, the Company completed a rights offering whereby it sold 12,000 units at a price to the public of $1,000 per unit for aggregate net proceeds of approximately $10.77 million after commissions and expenses. On August 12, 2019, the Company completed a capital raise whereby the Company sold an aggregate of (i) 6,497,410 shares of our common stock, (ii) 2,997 shares of our Series 6 Convertible Preferred Stock, and (iii) Series A warrants to purchase up to an aggregate of 17,297,410 shares of common stock at an exercise price per share of $0.2775, resulting in net proceeds of approximately $4 million after deducting the underwriting discounts and offering expenses. The Company also raised approximately $3 million, $1.5 million, $1.5 million and $750,000 in net proceeds from the sale of promissory notes on May 3, 2019, June 26, 2019, August 8, 2019 and September 17, 2019, respectively.

 

The Company does not expect its capital resources as of September 30, 2019, availability on the Payplant facility to finance purchase orders and invoices in an amount equal to 80% of the face value of purchase orders received (as described in Note 7), and funds from revenue to be sufficient to fund planned operations for the next twelve months from the date the financial statements are issued.  In addition, the Company is pursuing possible strategic transactions and may raise such additional capital as needed, through the issuance of equity, equity-linked or debt securities.  In this regard, on October 10, 2019, the Company entered into an equity distribution agreement with Maxim Group LLC as its exclusive sales agent, under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $6,500,000 from time to time.

 

The Company’s condensed consolidated financial statements as of September 30, 2019 have been prepared under the assumption that the Company will continue as a going concern for the next twelve months from the date the financial statements are issued. Management’s plans and assessment of the probability that such plans will mitigate and alleviate any substantial doubt about the Company’s ability to continue as a going concern is dependent upon the ability to attain further operating efficiency, reduce expenditures, and, ultimately, to generate sufficient levels of revenue. The Company’s condensed consolidated financial statements as of September 30, 2019 do not include any adjustments that might result from the outcome of this uncertainty. 

 

9

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 2 - Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“GAAP”), which are the accounting principles that are generally accepted in the United States of America. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of the Company’s operations for the nine-month period ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.  These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the years ended December 31, 2018 and 2017 included in the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 28, 2019. 

 

Note 3 - Summary of Significant Accounting Policies

 

The Company’s complete accounting policies are described in Note 2 to the Company’s audited consolidated financial statements and notes for the years ended December 31, 2018 and 2017.

 

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 revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of:

 

  the valuation of stock-based compensation;
     
  the valuation of the assets and liabilities acquired of Locality, GTX and Jibestream as described in Notes 4, 5 and 6, respectively, as well as the valuation of the Company’s common shares issued in the transaction;
     
  the allowance for doubtful accounts;
     
  the valuation allowance for the deferred tax asset; and
     
  impairment of long-lived assets and goodwill.

 

Restricted Cash

 

In connection with certain transactions, the Company may be required to deposit assets, including cash or investment shares, in escrow accounts. The assets held in escrow are subject to various contingencies that may exist with respect to such transactions. Upon resolution of those contingencies or the expiration of the escrow period, some or all the escrow amounts may be used and the balance released to the Company. As of September 30, 2019, the Company had $71,000 deposited in escrow as restricted cash for the Shoom acquisition, of which any amounts not subject to claims shall be released to the pre-acquisition stockholders of Shoom, on a pro-rata basis, on the next anniversary date of the closing date of the Shoom acquisition which is current and included in Prepaid Assets and Other Current Assets on the condensed consolidated balance sheet. As of September 30, 2018, the Company had $140,000 deposited in escrow as restricted cash for the Shoom acquisition, of which any amounts not subject to claims would be released to the pre-acquisition stockholders of Shoom, on a pro-rata basis, on each of the next (2) anniversary dates of the closing date of the Shoom acquisition. $70,000 of that amount is current and included in Prepaid Assets and Other Current Assets and $70,000 is non-current and included in Other Assets on the condensed consolidated balance sheet as of September 30, 2018.

 

10

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 3 - Summary of Significant Accounting Policies (continued)

 

Restricted Cash (continued)

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the balance sheets that sum to the total of the same amounts shown in the statement of cash flows.

 

    For the
Nine Months Ended
September 30,
 
(in thousands)  2019   2018 
Cash and cash equivalents  $494   $1,461 
Restricted cash   71    70 
Restricted cash included in other assets, noncurrent   --    70 
Total cash, cash equivalents, and restricted cash in the balance sheet  $565   $1,601 

 

Revenue Recognition

 

The Company records revenue according to “Revenue from Contracts with Customers (Topic 606)”, or ASU 2016-12, which requires revenue to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and is evaluated using a five-step model.

 

Software As A Service Revenue Recognition

 

With respect to sales of our maintenance, consulting and other service agreements, including our digital advertising and electronic services, customers pay fixed monthly fees in exchange for the Company’s service. The Company’s performance obligation is satisfied over time as the digital advertising and electronic services are provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service. 

 

Professional Services Revenue Recognition

 

The Company’s professional services include fixed fee and time and materials contracts. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company’s time and materials contracts are paid weekly or monthly based on hours worked. Revenue on time and materials contracts is recognized based on a fixed hourly rate as direct labor hours are expended. Materials, or other specified direct costs, are reimbursed as actual costs and may include markup. The Company has elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date. For fixed fee contracts including maintenance service provided by in-house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous service. Because the Company’s contracts have an expected duration of one year or less, the Company has elected the practical expedient in Accounting Standards Codification (“ASC”) 606-10-50-14(a) to not disclose information about its remaining performance obligations. Anticipated losses are recognized as soon as they become known. For the three and nine months ended September 30, 2019 and 2018, the Company did not incur any such losses. These amounts are based on known and estimated factors.

 

11

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 3 - Summary of Significant Accounting Policies (continued)

 

Revenue Recognition (continued)

 

Contract Balances

 

The timing of our revenue recognition may differ from the timing of payment by our customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. As of September 30, 2019, the Company had deferred revenue of approximately $789,000 related to software license agreements and approximately $262,000 related to cash received in advance for product maintenance services provided by the Company’s technical staff. The Company expects to satisfy its remaining performance obligations for these maintenance services and recognize the deferred revenue and related contract costs over the next twelve months after September 30, 2019.

 

Stock-Based Compensation

 

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date and recognized over the period services are required to be provided in exchange for the award, usually the vesting period. Forfeitures of unvested stock options are recorded when they occur.

 

The Company incurred stock-based compensation charges of $871,000 and $122,000 for the three months ended September 30, 2019 and 2018, respectively, and $2,618,000 and $979,000 for the nine months ended September 30, 2019 and 2018, respectively, which are included in general and administrative expenses. The Company recognizes forfeitures as they occur. The following table summarizes the nature of such charges for the periods then ended (in thousands):  

 

   For the
Three Months Ended
September 30,
   For the
Nine Months Ended
September 30,
 
   2019   2018   2019   2018 
Compensation and related benefits  $871   $122   $2,376   $899 
Professional and legal fees   --    --    242    80 
Totals  $871   $122   $2,618   $979 

 

Net Loss Per Share

 

The Company computes basic and diluted earnings per share by dividing net loss by the weighted average number of common shares outstanding during the period. Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options and warrants in the calculation of diluted net loss per common shares would have been anti-dilutive.

 

12

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 3 - Summary of Significant Accounting Policies (continued) 

 

Net Loss Per Share (continued)

 

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the nine months ended September 30, 2019 and 2018:

 

   For the
Nine Months Ended
September 30,
 
   2019   2018 
Options   5,584,423    67,454 
Warrants   7,319,040    1,622,971 
Convertible preferred stock   38,040    984 
Convertible note   --    15,881 
Reserved for service providers   1,100    1,100 
Common stock issuable pursuant to Jibestream acquisition share purchase agreement   2,864,000    -- 
Totals   15,806,603    1,708,390 

 

Preferred Stock

 

The Company applies the accounting standards for distinguishing liabilities from equity under GAAP when determining the classification and measurement of its convertible preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as permanent equity.

 

Reclassification

 

Certain accounts in the prior year’s consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current year’s consolidated financial statements. These reclassifications have no effect on previously reported earnings.

 

Recently Issued and Adopted Accounting Standards

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. As a result of the new standard, all of our leases greater than one year in duration are recognized in our balance sheets as both operating lease liabilities and right-of-use assets upon adoption of the standard. The Company adopted the standard using the modified-retrospective method effective January 1, 2019. This adoption primarily affected the Company’s condensed consolidated balance sheet based on the recording of right-of-use assets and the lease liability, current and noncurrent, for its operating leases. The adoption of ASU 2016-02 did not change the Company’s historical classification of these leases or the straight-line recognition of related expenses. Upon adoption, the Company recorded approximately $0.6 million in right-of-use assets and $0.7 million in operating lease liabilities on the Company’s balance sheet.

 

13

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 3 - Summary of Significant Accounting Policies (continued) 

 

Recently Issued and Adopted Accounting Standards (continued)

 

In June 2018, the FASB issued ASU No. 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company has adopted this standard and the adoption of this standard did not have a material impact on its financial statements or disclosures.

 

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement,” (“ASU 2018-13”). ASU 2018-13 requires application of the prospective method of transition (for only the most recent interim or annual period presented in the initial fiscal year of adoption) to the new disclosure requirements for (1) changes in unrealized gains and losses included in other comprehensive income and (2) the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 also requires prospective application to any modifications to disclosures made because of the change to the requirements for the narrative description of measurement uncertainty. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year.

 

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. For public business entities that meet the definition of a Securities and Exchange Commission filer, ASU 2016-13 is effective for annual and interim reporting periods beginning after December 15, 2019, and the guidance is to be applied using the modified retrospective approach. Earlier adoption is permitted for annual and interim reporting periods beginning after December 15, 2018.

 

In April 2019, the FASB issued Accounting Standards Update No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”) and in May 2019, the FASB issued Accounting Standards Update No. 2019-05, Financial Instruments—Credit Losses (Topic 326) (“ASU 2019-05”). The Company is currently evaluating ASU 2016-13 and the related ASU 2019-04 and ASU 2019-05 to determine the impact to its condensed consolidated financial statements and related disclosures.

 

Subsequent Events

 

The Company evaluates events and/or transactions occurring after the balance sheet date and before the issue date of the condensed consolidated financial statements to determine if any of those events and/or transactions requires adjustment to or disclosure in the condensed consolidated financial statements. 

 

Note 4 - Locality Acquisition

 

On May 21, 2019, Inpixon, through its wholly owned subsidiary, Inpixon Canada as purchaser, completed its acquisition of Locality in which Locality’s stockholders sold all of their Locality Shares to the purchaser in exchange for consideration of (i) $1,500,000 (the “Aggregate Cash Consideration”) plus or minus the amount by which the estimated working capital is more or less than the working capital target (as defined in the purchase agreement), and (ii) 650,000 shares of common stock of Inpixon.

 

The Aggregate Cash Consideration, less the working capital adjustment to be applied against the Aggregate Cash Consideration of $85,923, will be paid in installments as follows: (i) the initial installment representing $250,000 minus $46,422 of the working capital adjustment was paid on the closing date; (ii) $210,499 on November 21, 2019 which is comprised of a $250,000 installment less $39,501 of the working capital adjustment; (iii) two additional installments, each equal to $250,000, will be paid twelve months and eighteen months after the closing date; and (iv) one final installment representing $500,000 will be paid on the second anniversary of the closing date, in each case minus the cash fees payable to the advisor in connection with the acquisition. Inpixon Canada will have the right to offset any loss, as defined in the purchase agreement, first, against any installment of the installment cash consideration that has not been paid and second, against the sellers and the advisor on a several basis, in accordance with the indemnification provisions of the purchase agreement.

 

14

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 4 - Locality Acquisition (continued)

 

The total recorded purchase price for the transaction was approximately $1,928,000, which consisted of cash at closing of $204,000, approximately $1,210,000 of cash that will be paid in installments as discussed above and $514,000 representing the value of the stock issued upon closing.

 

The preliminary purchase price is allocated as follows (in thousands):    
     
Assets Acquired:    
Cash  $70 
Accounts receivable   7 
Other current assets   4 
Inventory   2 
Fixed assets   1 
Developed technology   1,523 
Customer relationships   216 
Non-compete agreements   49 
Goodwill   619 
    2,491 
Liabilities Assumed:     
Accounts payable  $13 
Accrued liabilities   48 
Deferred revenue   28 
Deferred tax liability   474 
    563 
Total Purchase Price  $1,928 

  

Proforma information has not been presented as it has been deemed to be immaterial.

 

Note 5 - GTX Acquisition

 

On June 27, 2019, Inpixon completed its acquisition of certain assets of GTX, consisting of a portfolio of GPS technologies and intellectual property (the “Assets”).

 

The Assets were acquired for aggregate consideration consisting of (i) $250,000 in cash delivered at the closing and (ii) 1,000,000 shares of Inpixon’s restricted common stock of which 100,000 shares of common stock are subject to certain holdback restrictions and forfeiture for the purpose of satisfying indemnification claims.

 

The total recorded purchase price for the transaction was $900,000, which consisted of the cash paid of $250,000 and $650,000 representing the value of the stock issued upon closing.

 

Assets acquired (in thousands):    
     
Developed technology  $850 
Non-compete agreements   50 
      
Total Purchase Price  $900 

 

A final valuation of the assets and purchase price allocation of GTX has not been completed as of the end of this reporting period. Consequently, the purchase price was preliminarily allocated based upon our best estimates at the time of this filing. These amounts are subject to revision upon the completion of formal studies and valuations, as needed, which the Company expects to occur during the fourth quarter of 2019.

 

On September 16, 2019, the Company loaned GTX $50,000. The note accrues interest at a rate of 5% per annum and has a maturity date of April 13, 2020. Interest accrues beginning on the date that is the earlier of (i) 180 days from the issue date of the note and (ii) the registration effective date as defined in the acquisition agreement. This note is included as part of other receivables in the Company’s condensed consolidated financial statements. As of September 30, 2019, the balance of the note was $50,000.

 

15

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 6 - Jibestream Acquisition

 

On August 15, 2019, Inpixon, through its wholly owned subsidiary, Inpixon Canada as purchaser (the “Purchaser”), completed its acquisition of Jibestream for consideration consisting of: (i) CAD $5,000,000, plus an amount equal to all cash and cash equivalents held by Jibestream at the closing, minus, if a negative number, the absolute value of the Estimated Working Capital Adjustment (as defined in the acquisition agreement), minus any amounts loaned by the Purchaser to Jibestream to settle any Indebtedness (as defined in the Purchase Agreement) or other fees, minus any cash payments to the holders of outstanding options to settle any in-the-money options, minus the deferred revenue costs of CAD $150,000, and minus the costs associated with the audit and review of the financial statements of Jibestream required by the Purchase Agreement (collectively, the “Estimated Cash Closing Amount”); plus (ii) a number of shares of the Company’s common stock equal to CAD $3,000,000, which will be converted to U.S. dollars based on the exchange rate at the time of the closing, divided by $0.2775 which is the price per share at which shares of the Company’s common stock are issued in of the Company’s common stock the Offering on August 12, 2019 (“Inpixon Shares”).

 

The Nasdaq listing rules require the Company to obtain the approval of the Company’s stockholders for the issuance of 2,864,000 of the Inpixon Shares (the “Excess Shares”), which was obtained on October 31, 2019. A number of Inpixon Shares representing fifteen percent (15%) of the value of the Purchase Price (the “Holdback Amount”) will be subject to stop transfer restrictions and forfeiture to secure the indemnification and other obligations of the Vendors in favor of the Company arising out of or pursuant to Article VIII of the Purchase Agreement and, at the option of the Company, to secure the obligation of the Vendors’ to pay any adjustment to the Purchase Price pursuant to Section 2.5 of the Purchase Agreement. The Company has accrued an acquisition liability for the Excess Shares of approximately $490.000 which is included in the current liabilities section of the condensed consolidated balance sheet.

 

The total recorded purchase price for the transaction was approximately $5,062,000, which consisted of cash at closing of approximately $3,714,000 and $1,348,000 representing the value of the stock issued upon closing determined based on the closing price of the Company’s common stock as of the closing date on August 15, 2019. The purchase price is subject to adjustment for the Working Capital Adjustment as defined above.

 

The preliminary purchase price is allocated as follows (in thousands):

 

Assets Acquired:    
Cash  $6 
Accounts receivable   309 
Other current assets   137 
Fixed assets   10 
Other assets   430 
Developed technology   3,193 
Customer relationships   1,253 
Non-compete agreements   420 
Goodwill   2,407 
    8,165 
Liabilities Assumed:     
Accounts payable  $51 
Accrued liabilities   95 
Deferred revenue   1,156 
Other liabilities   512 
Deferred tax liability   1,289 
    3,103 
Total Purchase Price  $5,062 

 

A final valuation of the assets and purchase price allocation of Jibestream has not been completed as of the end of this reporting period. Consequently, the purchase price was preliminarily allocated based upon our best estimates at the time of this filing. These amounts are subject to revision upon the completion of formal studies and valuations, as needed, which the Company expects to occur during the fourth quarter of 2019.

 

16

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 7 - Proforma Financial Information

 

The following unaudited proforma financial information presents the consolidated results of operations of the Company and Jibestream for the three and nine months ended September 30, 2019 and 2018, as if the acquisition had occurred as of the beginning of the first period presented instead of on August 15, 2019. The proforma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.

 

(in thousands, except per share data)  For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2019   2018   2019   2018 
Revenues  $1,777   $1,597   $5,644   $4,646 
Net loss attributable to common stockholders  $(6,488)  $(5,734)  $(19,241)  $(29,934)
Net loss per basic and diluted common share  $(0.22)  $(0.45)  $(0.87)  $(2.48)
Weighted average common shares outstanding:                    
Basic and Diluted   29,149,733    12,637,689    22,059,916    12,082,681 

 

Note 8 - Inventory

 

Inventory as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

 

   As of
September 30,
2019
   As of
December 31,
2018
 
Raw materials  $179   $143 
Finished goods   585    425 
Total Inventory  $764   $568 

  

Note 9 - Debt

 

Debt as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

 

   As of
September 30,
2019
  

As of
December 31,

2018

 
Short-Term Debt        
Notes payable, less debt discount of $1,118 and $752, respectively (A)  $9,800   $4,104 
Revolving line of credit (B)   259    23 
Total Short-Term Debt  $10,059   $4,127 
           
Long-Term Debt          
Notes payable  $--   $74 
Total Long-Term Debt  $--   $74 

 

17

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 9 - Debt (continued)

 

(A) Notes Payable

 

On January 29, 2019, the Company and Chicago Venture Partners, L.P., the holder of that certain outstanding convertible promissory note ( “Chicago Venture” or the “Note Holder”), issued on November 17, 2017 (as amended, supplemented or otherwise modified, the “Original Note”), with an outstanding balance of $383,768 (the “Remaining Balance”), entered into an exchange agreement (the “Exchange Agreement”), pursuant to which the Company and the Note Holder agreed to (i) partition a new convertible promissory note in the form of the Original Note (the “Partitioned Note”) in the original principal amount equal to the Remaining Balance (the “Exchange Amount”) and then cause the Remaining Balance to be reduced by the Exchange Amount; and (ii) exchange the Partitioned Note for the delivery of 172,869 shares of the Company’s common stock at an effective price share equal to $2.22. Following such partition of the Original Note, the Original Note was deemed paid in full, was automatically deemed canceled, and shall not be reissued.

 

October 2018 Note Purchase Agreement and Promissory Note

 

On October 12, 2018, the Company entered into a note purchase agreement with Iliad Research and Trading, L.P. (the “Holder” or “Iliad”), which is affiliated with Chicago Venture, pursuant to which the Company agreed to issue and sell to the Holder an unsecured promissory note in an aggregate principal amount of $2,520,000, which is payable on or before the date that is 12 months from the issuance date. The initial principal amount includes an original issue discount of $500,000 and $20,000 that the Company agreed to pay to the Holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the note, the Holder paid an aggregate purchase price of $2,000,000. Interest on the note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the note. Beginning as of the date that was 6 months from the issuance date and at the intervals indicated below until the note is paid in full, the Holder has the right to redeem up to an aggregate of 1/3 of the initial principal balance of the note each month (each monthly exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”) to the Company; provided, however, that if the Monthly Redemption Amount is not exercised in its corresponding month then such Monthly Redemption Amount will be available for the Holder to redeem in any future month in addition to such future month’s Monthly Redemption Amount. Upon receipt of any Monthly Redemption Notice, the Company is required to pay the applicable Monthly Redemption Amount in cash to the Holder within 5 business days of the Company’s receipt of such Monthly Redemption Notice.

 

During the nine months ended September 30, 2019, the Company exchanged $2,730,000 of the outstanding principal and interest under the note for 4,177,379 shares of the Company’s common stock at exchange prices between $0.51 and $0.8989 per share. The Company analyzed the exchange of principal under the note as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and recorded a $188,000 loss on the exchange of debt for equity as a separate item in the other income/expense section of the condensed consolidated statements of operations for the three and nine months ended September 30, 2019. These exchanges satisfied the liability in full and the balance owed under the note was $0 as of September 30, 2019.

 

18

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 9 - Debt (continued)

 

(A) Notes Payable (continued)

 

December 2018 Note Purchase Agreement and Promissory Note

 

On December 21, 2018, the Company entered into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue and sell to Iliad an unsecured promissory note (the “December 2018 Note”) in an aggregate principal amount of $1,895,000, which is payable on or before December 31, 2019 (as provided in the Exchange Agreement, dated October 24, 2019, described below (the “October 24th Exchange Agreement”)). The initial principal amount includes an original issue discount of $375,000 and $20,000 that the Company agreed to pay to the Holder to cover its legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the December 2018 Note, the Holder paid an aggregate purchase price of $1,500,000. Interest on the Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the December 2018 Note. The Company may pay all or any portion of the amount owed earlier than it is due; provided, that in the event the Company elects to prepay all or any portion of the outstanding balance, it will pay 115% of the portion of the outstanding balance the Company elects to prepay. Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the December 2018 Note is paid in full, the Holder has the right to redeem up to an aggregate of 1/3 of the initial principal balance of the December 2018 Note each month (each monthly exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”) delivered to the Company; provided, however, that if any Monthly Redemption Amount is not exercised in its corresponding month then such Monthly Redemption Amount will be available for the Holder to redeem in any future month in addition to such future month’s Monthly Redemption Amount. Upon receipt of any Monthly Redemption Notice, the Company shall pay the applicable Monthly Redemption Amount in cash within 5 business days of the Company’s receipt of such Monthly Redemption Notice. Pursuant to the October 24th Exchange Agreement described below, the Holder agreed that the exercise of any redemption rights described above would be deferred until no earlier than December 31, 2019.

 

Amendment to Note Purchase Agreements

 

On February 8, 2019, the Company entered into a global amendment (the “Global Amendment”) to the note purchase agreements entered into on October 12, 2018 and December 21, 2018, in connection with the notes issued as of such dates, to delete the phrase “by cancellation or exchange of the Note, in whole or in part” from Section 8.1 of those agreements. The Company also agreed to pay Iliad’s fees and other expenses in an aggregate amount of $80,000 (the “Fee”) in connection with the preparation of the Global Amendment by adding $40,000 of the Fee to the outstanding balance of each of the notes.

 

Standstill Agreement

 

On August 8, 2019, the Company and Iliad entered into a standstill agreement with respect to the December 2018 Note (the “Standstill Agreement”). Pursuant to the Standstill Agreement, Iliad agreed that it will not redeem all or any portion of the December 2018 Note for a period beginning on August 8, 2019, and ending on the date that is 90 days from August 8, 2019. As consideration for this, the outstanding balance of the December 2018 Note was increased by $206,149.

 

19

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 9 - Debt (continued)

 

(A) Notes Payable (continued)

 

May 2019 Note Purchase Agreement and Promissory Note

 

On May 3, 2019, the Company entered into a note purchase agreement (the “Purchase Agreement”) with Chicago Venture, pursuant to which the Company agreed to issue and sell to the investor an unsecured promissory note (the “May 2019 Note”) in an aggregate principal amount of $3,770,000, which is payable on or before the date that is 10 months from the issuance date. The initial principal amount includes an original issue discount of $750,000 and $20,000 that the Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the May 2019 Note, the holder paid an aggregate purchase price of $3,000,000. Interest on the May 2019 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the May 2019 Note. The Company may pay all or any portion of the amount owed earlier than it is due; provided, that in the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of the outstanding balance the Company elects to prepay. Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the May 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the May 2019 Note each month (each monthly exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”) delivered to the Company; provided, however, that if the holder does not exercise any Monthly Redemption Amount in its corresponding month then such Monthly Redemption Amount shall be available for the holder to redeem in any future month in addition to such future month’s Monthly Redemption Amount. Upon receipt of any Monthly Redemption Notice, the Company shall pay the applicable Monthly Redemption Amount in cash to the holder within five business days of the Company’s receipt of such Monthly Redemption Notice.

 

June 2019 Note Purchase Agreement and Promissory Note

 

On June 27, 2019, the Company entered into a note purchase agreement (the “Purchase Agreement”) with Chicago Venture, pursuant to which the Company agreed to issue and sell to the holder an unsecured promissory note (the “June 2019 Note”) in an aggregate principal amount of $1,895,000, which is payable on or before the date that is 9 months from the issuance date. The initial principal amount includes an original issue discount of $375,000 and $20,000 that the Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the June 2019 Note, the holder paid an aggregate purchase price of $1,500,000. Interest on the June 2019 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the June 2019 Note. The Company may pay all or any portion of the amount owed earlier than it is due; provided, that in the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of the outstanding balance the Company elects to prepay. Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the June 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the June 2019 Note each month by providing written notice delivered to the Company; provided, however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption amount. Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to the holder within five business days. The June 2019 Note includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%. Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings (the “Bankruptcy-Related Event of Default”)), the holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the June 2019 Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the June 2019 Note (the “Mandatory Default Amount”). Upon the occurrence of a Bankruptcy-Related Event of Default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the June 2019 Note will become immediately due and payable at the Mandatory Default Amount. Pursuant to the terms of the Purchase Agreement, if at any time while the June 2019 Note is outstanding, the Company will immediately following the completion of any offering of its equity securities make a cash payment to the holder in the following amount: (a) twenty-five percent (25%) of the outstanding balance of the June 2019 Note if the Company receives net proceeds equal to $2,500,000.00 or less; (b) fifty percent (50%) of the outstanding balance of the June 2019 Note if the Company receives net proceeds of more than $2,500,000.00 but less than $5,000,000.00; and (c) one hundred percent (100%) of the outstanding balance of the June 2019 Note if the Company receives net proceeds equal to $5,000,000.00 or more.

 

20

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 9 - Debt (continued)

 

(A) Notes Payable (continued)

 

Effective as of August 12, 2019, the Company and Chicago Venture entered into an amendment agreement, dated as of August 14, 2019, to provide that the Company’s obligation to repay all or a portion of the outstanding balance of the June 2019 Note upon the completion of any offering of equity securities of the Company would not apply or be effective until December 27, 2019. As consideration for the amendment, a fee of $191,883 was added to the outstanding balance of the June 2019 Note.

 

August 2019 Note Purchase Agreement and Promissory Note

 

On August 8, 2019, the Company entered into a note purchase agreement with Chicago Venture, pursuant to which the Company agreed to issue and sell to the holder an unsecured promissory note (the “August 2019 Note”) in an aggregate principal amount of $1,895,000, which is payable on or before the date that is 9 months from the issuance date. The Initial Principal Amount includes an original issue discount of $375,000 and $20,000 that the Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the August 2019 Note, the holder paid an aggregate purchase price of $1,500,000. Interest on the Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the August 2019 Note. The Company may pay all or any portion of the amount owed earlier than it is due; provided, that in the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the Holder 115% of the portion of the outstanding balance the Company elects to prepay. Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the August 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the August 2019 Note each month by providing written notice to the Company; provided, however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption amount. Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to the holder within five business days of the Company’s receipt of such monthly redemption notice. The August 2019 Note includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%. Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings (the “Bankruptcy-Related Event of Default”)), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the August 2019 Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the Note (the “Mandatory Default Amount”). Upon the occurrence of a Bankruptcy-Related Event of Default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the Note will become immediately due and payable at the Mandatory Default Amount.

 

21

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

Note 9 - Debt (continued)

 

(A) Notes Payable (continued)

 

September 2019 Note Purchase Agreement and Promissory Note

 

On September 17, 2019, the Company entered into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue and sell to the Holder an unsecured promissory note (the “September 2019 Note”) in an aggregate principal amount of $952,500.00, which is payable on or before the date that is 9 months from the issuance date. The Initial Principal Amount includes an original issue discount of $187,500 and $15,000 that the Company agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the Note, the Holder paid an aggregate purchase price of $750,000.00. Interest on the Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the September 2019 Note. The Company may pay all or any portion of the amount owed earlier than it is due; provided, that in the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the Holder 115% of the portion of the outstanding balance the Company elects to prepay. Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the September 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the September 2019 Note each month by providing written notice to the Company; provided, however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption amount. Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to the holder within five business days of the Company’s receipt of such monthly redemption notice. The September 2019 Note includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%. Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings (the “Bankruptcy-Related Event of Default”)), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the September 2019 Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the Note (the “Mandatory Default Amount”). Upon the occurrence of a Bankruptcy-Related Event of Default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the Note will become immediately due and payable at the Mandatory Default Amount.

 

(B) Revolving Line of Credit

 

In accordance with the Payplant Loan and Security Agreement, dated as of August 14, 2017 (the “Loan Agreement”), the Loan Agreement allows the Company to request loans from the Lender (in the manner provided therein) with a term of no greater than 360 days in amounts that are equivalent to 80% of the face value of purchase orders received. The Lender is not obligated to make the requested loan, however, if the Lender agrees to make the requested loan, b