Company Quick10K Filing
Inpixon
Price0.21 EPS-0
Shares51 P/E-1
MCap11 P/FCF-1
Net Debt-1 EBIT-17
TEV10 TEV/EBIT-1
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-12
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-05-12
10-K 2019-12-31 Filed 2020-03-03
10-Q 2019-09-30 Filed 2019-11-05
S-1 2019-09-13 Public Filing
10-Q 2019-06-30 Filed 2019-08-14
S-1 2019-06-28 Public Filing
10-Q 2019-03-31 Filed 2019-05-14
10-K 2018-12-31 Filed 2019-03-28
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-13
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-27
10-Q 2017-09-30 Filed 2017-11-20
10-Q 2017-06-30 Filed 2017-08-21
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-04-17
10-Q 2016-09-30 Filed 2016-11-16
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-13
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10-K 2014-12-31 Filed 2015-03-27
10-Q 2014-09-30 Filed 2014-11-13
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8-K 2020-11-24
8-K 2020-11-12
8-K 2020-10-06
8-K 2020-09-30
8-K 2020-09-01
8-K 2020-08-19
8-K 2020-08-13
8-K 2020-07-08
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8-K 2020-06-19
8-K 2020-05-18
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8-K 2018-12-21
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8-K 2018-07-13
8-K 2018-06-27
8-K 2018-06-20
8-K 2018-06-05
8-K 2018-05-23
8-K 2018-05-17
8-K 2018-05-15
8-K 2018-05-02
8-K 2018-04-30
8-K 2018-04-23
8-K 2018-04-20
8-K 2018-04-01
8-K 2018-03-22
8-K 2018-03-05
8-K 2018-02-15
8-K 2018-02-05
8-K 2018-02-02
8-K 2018-01-05

INPX 10Q Quarterly Report

Part I&Mdash;Financial Information
Item 1. Financial Statements
Note 1 - Organization and Nature of Business
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 - Systat Licensing Agreement
Note 8 - Ten Degrees Acquisition
Note 9 - Proforma Financial Information
Note 10 - Inventory
Note 11 - Debt
Note 12 - Capital Raises
Note 13 - Common Stock
Note 14 - Preferred Stock
Note 15 - Reverse Stock Split
Note 16 - Stock Options
Note 17 - Credit Risk and Concentrations
Note 18 - Foreign Operations
Note 19 - Related Party Transactions
Note 20 - Leases
Note 21 - Commitments and Contingencies
Note 22 - 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 f10q0920ex31-1_inpixon.htm
EX-31.2 f10q0920ex31-2_inpixon.htm
EX-32.1 f10q0920ex32-1_inpixon.htm

Inpixon Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
0.10.10.0-0.0-0.1-0.12014201620182020
Assets, Equity
0.10.10.0-0.0-0.1-0.12014201620182020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12014201620182020
Ops, Inv, Fin

10-Q 1 f10q0920_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, 2020

 

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

 

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 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 ☒

 

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   42,472,787
(Class)   Outstanding at November 9, 2020

 

 

 

 

 

 

INPIXON

 

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

 

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, 2020 and December 31, 2019 2
     
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 4 
     
  Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019 5
     
  Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2020 and 2019 6
     
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 8
     
  Notes to Unaudited Condensed Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 45
     
Item 4. Controls and Procedures 46
     
PART II - OTHER INFORMATION 47
     
Item 1. Legal Proceedings 47
     
Item 1A. Risk Factors 47
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47
     
Item 3. Defaults Upon Senior Securities 47
     
Item 4. Mine Safety Disclosure 47
     
Item 5. Other Information 48
     
Item 6. Exhibits 48
     
Signatures 49

 

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 recent acquisitions;

 

our ability to successfully integrate companies or technologies 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, including but not limited to the impact of COVID-19;

 

our ability to obtain adequate financing in the future;

 

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, but not limited to, the U.S. Securities and Exchange Commission;

 

our ability to maintain compliance with Nasdaq’s 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.

  

On January 7, 2020, the Company effected a 1-for-45 reverse stock split of its outstanding common stock. We have reflected the reverse split herein, unless otherwise indicated.

 

Unless indicated otherwise in this Form 10-Q, all references to “$” refer to United States dollars, the lawful currency of the United States of America. References to “CAD” refer to Canadian dollars, the lawful currency of Canada. References to “INR” refer to Indian rupees, the lawful currency of India. References to “EUR” refer to euros, the single currency of Participating Member States of the European Union. References to “GBP” refer to the British pound, the lawful currency of the United Kingdom.

 

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, 2020 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, 2019 and 2018 included in the annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 3, 2020.

 

1

 

 

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

   As of
September 30,
2020
   As of
December 31,
2019
 
   (Unaudited)   (Audited) 
Assets        
         
Current Assets        
Cash and cash equivalents  $31,376   $4,777 
Accounts receivable, net   1,948    1,108 
Notes and other receivables   378    74 
Inventory   414    400 
Prepaid assets and other current assets   1,144    406 
           
Total Current Assets   35,260    6,765 
           
Property and equipment, net   553    145 
Operating lease right-of-use asset, net   1,622    1,585 
Software development costs, net   1,729    1,544 
Intangible assets, net   10,761    8,400 
Goodwill   2,555    2,070 
Receivable from related party   --    616 
Other assets   113    94 
           
Total Assets  $52,593   $21,219 

 

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
September 30,
2020
   As of
December 31,
2019
 
   (Unaudited)   (Audited) 
Liabilities and Stockholders’ Equity        
         
Current Liabilities        
Accounts payable  $813   $2,383 
Accrued liabilities   1,914    1,863 
Operating lease obligation   572    776 
Deferred revenue   1,842    912 
Short-term debt   6,150    7,304 
Acquisition liability   750    502 
           
Total Current Liabilities   12,041    13,740 
           
Long Term Liabilities          
Operating lease obligation, noncurrent   1,074    837 
Other liabilities   7    7 
Deferred tax liability, noncurrent   --    87 
Acquisition liability, noncurrent   --    500 
           
Total Liabilities   13,122    15,171 
           
Commitments and Contingencies   --     -- 
           
Stockholders’ Equity          
           
Preferred Stock - $0.001 par value; 5,000,000 shares authorized, consisting of Series 4 Convertible Preferred Stock - 10,415 shares authorized; 1 and 1 issued, and 1 and 1 outstanding as of September 30, 2020 and December 31, 2019, respectively, Series 5 Convertible Preferred Stock - 12,000 shares authorized; 126 and 126 issued, and 126 and 126 outstanding as of September 30, 2020 and December 31, 2019, respectively.   --    -- 
Common Stock - $0.001 par value; 250,000,000 shares authorized; 42,259,314 and 4,234,923 issued and 42,259,313 and 4,234,922 outstanding as of September 30, 2020 and December 31, 2019, respectively.   42    4 
Additional paid-in capital   212,913    158,382 
Treasury stock, at cost, 1 share   (695)   (695)
Accumulated other comprehensive income   (130)   94 
Accumulated deficit (Excluding $2,442 reclassified to additional paid in capital in quasi-reorganization)   (172,710)   (151,763)
           
Stockholders’ Equity Attributable to Inpixon   39,420    6,022 
           
Non-controlling Interest   51    26 
           
Total Stockholders’ Equity   39,471    6,048 
           
Total Liabilities and Stockholders’ Equity  $52,593   $21,219 

 

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, 
   2020   2019   2020   2019 
   (Unaudited)   (Unaudited) 
Revenues  $2,554   $1,534   $5,434   $4,387 
                     
Cost of Revenues   645    382    1,459    1,109 
                     
Gross Profit   1,909    1,152    3,975    3,278 
                     
Operating Expenses                    
Research and development   1,717    926    4,329    2,677 
Sales and marketing   1,703    847    3,862    2,161 
General and administrative   4,103    3,521    10,371    9,890 
Acquisition related costs   344    573    540    1,220 
Amortization of intangibles   288    969    1,811    2,602 
                     
Total Operating Expenses   8,155    6,836    20,913    18,550 
                     
Loss from Operations   (6,246)   (5,684)   (16,938)   (15,272)
                     
Other Income (Expense)                    
Interest expense, net   (537)   (1,190)   (1,934)   (2,053)
Provision for valuation allowance on held for sale loan   (679)   --    (1,514)   -- 
Loss on exchange of debt for equity   --    (27)   (132)   (188)
Other income/(expense)   11    289    (488)   518 
                     
Total Other Income (Expense)   (1,205)   (928)   (4,068)   (1,723)
                     
Net Loss from Operations, before tax   (7,451)   (6,612)   (21,006)   (16,995)
Income tax benefit   --    33    87    35 
Net Loss   (7,451)   (6,579)   (20,919)   (16,960)
                     
Net Income Attributable to Non-controlling Interest   16    5    25    9 
                     
Net Loss Attributable to Stockholders of Inpixon  $(7,467)  $(6,584)  $(20,944)  $(16,969)
                     
Deemed dividend for triggering of warrant down round feature   --    --    --    (1,250)
Net Loss Attributable to Common Stockholders   (7,467)   (6,584)   (20,944)   (18,219)
                     
Net Loss Per Share - Basic and Diluted  $(0.18)  $(12.68)  $(0.90)  $(65.89)
                     
Weighted Average Shares Outstanding                    
Basic and Diluted   41,544,961    519,257    23,203,004    276,499 

 

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, 
   2020   2019   2020   2019 
   (Unaudited)   (Unaudited) 
                 
Net Loss  $(7,451)  $(6,579)  $(20,919)  $(16,960)
                     
Unrealized foreign exchange loss from cumulative translation adjustments   70    (67)   (225)   (36)
                     
Comprehensive Loss  $(7,381)  $(6,646)  $(21,144)  $(16,996)

 

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 NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited)

(In thousands, except per share data)

 

   Series 4 Convertible   Series 5 Convertible   Series 6 Convertible       Additional           Accumulated Other       Non-   Total Stockholders’ 
   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Treasury Stock   Comprehensive   Accumulated   Controlling   (Deficit) 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Shares   Amount   Income (Loss)   Deficit   Interest   Equity 
                                                             
Balance - January 1, 2020   1   $--    126   $--    --   $--    4,234,923   $4   $158,383    (1)  $(695)  $96   $(151,762)  $26   $6,052 
                                                                            
Stock options granted to employees and consultants for services   --    --    --    --    --    --    --    --    399    --    --    --    --    --    399 
Common Shares issued for net cash proceeds of a public offering   --    --    --    --    --    --    937,010    1    1,251    --    --    --    --    --    1,252 
Common shares issued for extinguishment of debt   --    --    --    --    --    --    1,896,557    2    4,192    --    --    --    --    --    4,194 
Cumulative Translation Adjustment   --    --    --    --    --    --    -    --    --    --    --    (613)   --    (1)   (614)
Net loss   --    --    --    --    --    --    -    --    --    --    --    --    (6,158)   (10)   (6,168)
                                                                            
Balance - March 31, 2020   1   $--    126   $--   $--   $--    7,068,490   $7   $164,225    (1)  $(695)  $(517)  $(157,920)  $15   $5,115 
                                                                            
Stock options granted to employees for services   --    --    --    --    --    --    --    --    286    --    --    --    --    --    286 
Common and preferred shares issued for net cash proceeds from a public offering   --    --    --    --    --    --    29,033,036    29    40,490    --    --    --    --    --    40,519 
Common shares issued for extinguishment of debt   --    --    --    --    --    --    3,889,990    4    4,588    --    --    --    --    --    4,592 
Common shares issued for extinguishment of liability   --    --    --    --    --    --    183,486    --    200    --    --    --    --    --    200 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    318    --    --    318 
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    (7,322)   19    (7,303)
                                                                            
Balance - June 30, 2020   1   $--    126   $--   $--   $--    40,175,002   $40   $209,789    (1)  $(695)  $(199)  $(165,242)  $34   $43,727 
                                                                            
Stock options granted to employees and consultants for services   --    --    --    --    --    --    --    --    256    --    --    --    --    --    256 
Common shares issued for net cash proceeds from a public offering   --    --    --    --    --    --    1,604,312    2    2,268    --    --    --    --    --    2,270 
Issuance of Ten Degrees Acquisition shares   --    --    --    --    --    --    480,000    --    600    --    --    --    --    --    600 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    69    --    --    69 
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    (7,468)   17    (7,451)
                                                                            
Balance - September 30, 2020   1   $--    126   $--   $--   $--    42,259,314   $42   $212,913    (1)  $(695)  $(130)  $(172,710)  $51   $39,471 

 

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

 

6

 

 

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited)

(In thousands, except per share data)

 

   Series 4 Convertible   Series 5 Convertible   Series 6 Convertible       Additional           Accumulated Other       Non-   Total Stockholders’ 
   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Treasury Stock   Comprehensive   Accumulated   Controlling   (Deficit) 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Shares   Amount   Income (Loss)   Deficit   Interest   Equity 
                                                             
Balance - January 1, 2019   1   $--    --   $--    --   $--    35,154   $--   $123,226    (1)  $(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   --    --    --    --    --    --    3,842    --    384    --    --    --    --    --    384 
Common shares issued for net proceeds from warrants exercised   --    --    --    --    --    --    306    --    46    --    --    --    --    --    46 
Common shares issued for warrants exercised   --    --    --    --    --    --    27,741    --    --    --    --    --    --    --    -- 
Redemption of convertible Series 5 Preferred Stock   --    --    (10,062)   --    --    --    67,149    --    --    --    --    --    --    --    -- 
Common shares issued for extinguishment of liability   --    --    --    --    --    --    16,655    --    1,130    --    --    --    --    --    1,130 
Common shares issued for services   --    --    --    --    --    --    4,445    --    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   $--   $--   $--    155,292   $--   $136,490    (1)  $(695)  $18   $(122,917)  $13   $12,909 
                                                                            
Common shares issued for extinguishment of debt   --    --    --    --    --    --    61,636    --    2,005    --    --    --    --    --    2,005 
Common shares issued for warrants exercised   --    --    --    --    --    --    18,572    --    --    --    --    --    --    --    -- 
Redemption of convertible Series 5 Preferred Stock   --    --    (1,812)   --    --    --    12,093    --    --    --    --    --    --    --    -- 
Stock options granted to employees and consultants for services   --    --    --    --    --    --    --    --    858    --    --    --    --    --    858 
Issuance of Locality Acquisition Shares   --    --    --    --    --    --    14,445    --    513    --    --    --    --    --    513 
Issuance of GTX Acquisition Shares   --    --    --    --    --    --    22,223    --    650    --    --    --    --    --    650 
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    39    --    --    39 
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    (5,240)   9    (5,231)
                                                                            
Balance - June 30, 2019   1   $--    126   $--   $--   $--    284,261   $--   $140,516    (1)  $(695)  $57   $(128,157)  $22   $11,743 
                                                                            
Common shares issued for extinguishment of debt   --    --    --    --    --    --    31,195    --    724    --    --    --    --    --    724 
Common shares issued for warrants exercised   --    --    --    --    --    --    310,154    1    (1)   --    --    --    --    --    -- 
Stock options granted to employees and consultants for services   --    --    --    --    --    --    --    --    872    --    --    --    --    --    872 
Issuance of Jibestream Acquisition Shares   --    --    --    --    --    --    112,644    --    862    --    --    --    --    --    862 
Common and Preferred Shares issued for net cash proceeds of a public offering   --    --    --    --    2,997    --    144,387    --    3,931    --    --    --    --    --    3,931 
Redemption of convertible Series 6 Preferred Stock   --    --    --    --    (2,997)   --    240,001    --    --    --    --    --    --    --    
Cumulative Translation Adjustment   --    --    --    --    --    --    --    --    --    --    --    (67)   --    --    (67)
Net loss   --    --    --    --    --    --    --    --    --    --    --    --    (6,584)   4    (6,580)
                                                                           
Balance - September 30, 2019   1   $--    126   $--    --   $--    1,122,642   $1   $146,904    (1)  $(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, 
   2020   2019 
   (Unaudited) 
Cash Flows (Used In) from Operating Activities        
Net loss  $(20,919)  $(16,960)
Adjustment to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   568    826 
Amortization of intangible assets   1,929    2,602 
Amortization of right of use asset   322    267 
Stock based compensation   941    2,618 
Amortization of technology   --    50 
Loss on exchange of debt for equity   132    188 
Amortization of debt discount   2,272    1,543 
Accrued interest income, related party   (32)   -- 
Provision for doubtful accounts   --    358 
Provision for the valuation allowance held for sale loan   1,514    -- 
Provision for the valuation allowance related party receivable   648    -- 
Income tax benefit   (87)   (35)
Other   74    23 
Changes in operating assets and liabilities:          
Accounts receivable and other receivables   (1,111)   (1,241)
Inventory   (14)   (194)
Other current assets   (814)   (45)
Other assets   (20)   (284)
Accounts payable   (1,359)   1,140 
Accrued liabilities   54    56 
Deferred revenue   224    (369)
Operating lease liabilities   (325)   -- 
Other liabilities   453    400 
Total Adjustments   5,369    7,903 
           
Net Cash Used in Operating Activities   (15,550)   (9,057)
           
Cash Flows Used in Investing Activities          
Purchase of property and equipment   (546)   (58)
Investment in capitalized software   (688)   (658)
Cash paid for the acquisition of Jibestream   --    (3,714)
Cash paid for the acquisition of GTX   --    (250)
Cash paid for the acquisition of Locality   --    (204)
Cash paid for the Systat Licensing Agreement   (2,200)   -- 
Cash paid for the acquisition of Ten Degrees   (1,500)   -- 
Net Cash Flows Used in Investing Activities   (4,934)   (4,884)
           
Cash Flows From Financing Activities          
Net (repayments) proceeds to bank facility   (150)   237 
Net proceeds from issuance of common stock, preferred stock and warrants   --    14,791 
Net proceeds from issuance of common stock   44,041    -- 
Net repayments of notes payable   (74)   (71)
Loans to related party   (1,806)   (9,866)
Advances to related party   --    (15)
Repayments from related party   292    1,683 
Loan to Jibestream   --    (141)
Loan to GTX   --    (50)
Net proceeds from promissory notes   5,000    6,750 
Repayment of acquisition liability to Locality shareholders   (250)   -- 
Net Cash Provided By Financing Activities   47,053    13,318 
           
Effect of Foreign Exchange Rate on Changes on Cash   (42)   (36)
           
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash   26,527    (659)
           
Cash, Cash Equivalents and Restricted Cash - Beginning of period   4,849    1,224 
           
Cash, Cash Equivalents and Restricted Cash - End of period (Note 3)  $31,376   $565 
           
Supplemental Disclosure of cash flow information:          
Cash paid for:          
Interest  $4   $3 
Income Taxes  $--   $-- 
           
Non-cash investing and financing activities          
Common shares issued for extinguishment of liability  $200   $1,130 
Common shares issued for extinguishment of debt  $8,786   $3,114 
Right of use asset obtained in exchange for lease liability  $389   $1,003 
Common shares issued for GTX acquisition  $--   $650 
Common shares issued for Locality acquisition  $--   $514 
Common shares issued for Jibestream acquisition  $--   $862 
Common shares issued for Ten Degrees acquisition  $600   $-- 

 

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, 2020 AND 2019

  

Note 1 - Organization and Nature of Business

 

Inpixon, and its wholly-owned subsidiaries, Inpixon Canada, Inc. (“Inpixon Canada”), Inpixon Limited, Inpixon GmbH 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), are an indoor intelligence company. Our business and government customers use our solutions to secure, digitize and optimize their indoor spaces with our positioning, mapping and analytics products. Our indoor intelligence platform uses sensor technology to detect accessible cellular, Wi-Fi, Bluetooth, ultra-wide band (“UWB”) and radio frequency identification (“RFID”) signals emitted from devices within a venue providing positional information similar to what global positioning system (“GPS”) satellite systems provide for the outdoors. Combining this positional data with our dynamic and interactive mapping solution and a high-performance analytics engine, yields near real time insights to our customers providing them with visibility, security and business intelligence within their indoor spaces. Our highly configurable platform can also ingest data from our customers’ and other third party sensors, Wi-Fi access points, Bluetooth beacons, video cameras, and big data sources, among others, to maximize indoor intelligence. The Company also offers digital tear-sheets with optional invoice integration, digital ad delivery, and an e-edition designed for reader engagement for the media, publishing and entertainment industry. The Company is headquartered in Palo Alto, California, and has subsidiary offices in Coquitlam, Canada, New Westminster, Canada, Toronto, Canada, Slough, United Kingdom, Ratingen, Germany, Bangalore, India and Hyderabad, India. 

 

Liquidity

 

As of September 30, 2020, the Company has a working capital total of approximately $23.2 million and cash of $31.4 million. The Company experienced a net loss of approximately $7.5 million and $6.6 million for the three months ended September 30, 2020 and 2019, respectively, and a net loss of $20.9 million and $17.0 million for the nine months ended September 30, 2020 and 2019, respectively. On March 3, 2020, the Company entered into an Equity Distribution Agreement (“EDA”) with Maxim Group LLC (“Maxim”) under which the Company may offer and sell shares of its common stock in connection with an at-the-market equity facility (“ATM”) in an aggregate offering amount of up to $50 million, which was increased on June 19, 2020 to $150 million pursuant to an amendment to the EDA, from time to time through Maxim, acting exclusively as the Company’s sales agent. The Company issued 31,574,358 shares of common stock during the nine months ended September 30, 2020 in connection with the ATM resulting in net proceeds to the Company of approximately $44.0 million. Subsequent to the quarter ended September 30, 2020, the Company issued an additional 213,474 shares of common stock in connection with the ATM, resulting in net proceeds to the Company of approximately $230,000.

 

Risks and Uncertainties

 

The Company cannot assure you that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In order to continue our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds from loans and bank credit lines. The impact of the COVID-19 pandemic on our business and results of operations continues to remain uncertain at this time. While we have been able to continue operations remotely, we have experienced supply chain constraints and delays in the receipt of certain components of our products impacting delivery times for our products. We have also seen some impact in the demand of certain products, delays in certain projects and customer orders either because they require onsite services which could not be performed while shelter in place orders have been in effect or because of the uncertainty of the customer’s financial position and ability to invest in our technology. Despite these challenges, we were able to realize growth in revenue during the first and third quarters of 2020 and for the first nine months of 2020 when compared to the same periods of 2019 as a result of an increase in sales associated with our indoor intelligence platform, including our sensors, in addition to additional revenue from the sale of Systat software licenses. The impact that COVID-19 will have on general economic conditions is continuously evolving and the ultimate impact the pandemic will have on our results of operations continues to remain uncertain. There are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected.

 

Given our cash balances and our budgeted cash flow requirements, the Company believes such funds are sufficient to support ongoing operations for at least one year after the issuance of these financial statements. The Company has control over its expenditures and has the ability to adjust spending accordingly based on its budgeted cash flow requirements and the excess cash on hand.

 

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, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.  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, 2019 and 2018 included in the annual report on Form 10-K filed with the SEC on March 3, 2020. 

 

9

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 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, 2019 and 2018.

 

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 in connection with certain recent acquisitions as described in Notes 4, 5, 6, 7 and 8, as well as the valuation of the Company’s common stock issued in the transactions, as applicable;
     
  the allowance for doubtful accounts;
     
  the valuation of loans receivable;
     
  the valuation allowance for deferred tax assets; and
     
  the 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 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, 2020 and 2019, the Company had $0 and $71,000, respectively, deposited in escrow as restricted cash for the Shoom acquisition, of which any amounts not subject to claims were to be released to the pre-acquisition stockholders of Shoom pro-rata on the anniversary dates of the closing date of the Shoom acquisition. As of September 30, 2019, $71,000 was current and included in Prepaid Assets and Other Current Assets on the condensed consolidated balance sheet. As of September 30, 2020, the final escrowed amount had been released and the restricted cash balance was $0. 

 

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.

 

   As of September 30, 
(in thousands)  2020   2019 
Cash and cash equivalents  $31,376   $494 
Restricted cash, current included in prepaid assets and other current assets   --    71 
Total cash, cash equivalents, and restricted cash in the balance sheets  $31,376   $565 

 

Revenue Recognition

 

The Company reports revenues under Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” and all the related amendments (Topic 606). The Company recognizes revenue after applying the following five steps:

 

1) identification of the contract, or contracts, with a customer;

 

2) identification of the performance obligations in the contract, including whether they are distinct within the context of the contract;

 

3) determination of the transaction price, including the constraint on variable consideration;

 

4) allocation of the transaction price to the performance obligations in the contract; and

 

5) recognition of revenue when, or as, performance obligations are satisfied.

 

10

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 3 - Summary of Significant Accounting Policies (continued)

 

Revenue Recognition (continued)

 

Software As A Service Revenue Recognition

 

With respect to sales of the Company’s maintenance, consulting and other service agreements including the Company’s digital tear-sheets, customers pay fixed monthly fees in exchange for the Company’s services. The Company’s performance obligation is satisfied over time as the digital tear-sheets 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 services.  

 

 Mapping Services Revenue Recognition

 

Mapping services revenue is accounted for using the percentage of completion method. As soon as the outcome of a contract can be estimated reliably, contract revenue is recognized in the condensed consolidated statement of operations in proportion to the stage of completion of the contract. Contract costs are expensed as incurred. Contract costs include all amounts that relate directly to the specific contract, are attributable to contract activity, and are specifically chargeable to the customer under the terms of the contract.

 

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 material 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 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, 2020 and 2019, the Company did not incur any such losses. These amounts are based on known and estimated factors.

 

Contract Balances

 

The timing of the Company’s revenue recognition may differ from the timing of payment by its 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. The Company had deferred revenue of approximately $1,842,000 and $912,000 as of September 30, 2020 and December 31, 2019, respectively, related to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff. The Company expects to satisfy its remaining performance obligations for these product maintenance services and professional services and recognize the deferred revenue and related contract costs over the next twelve months. The Company’s contract balances as of September 30, 2020 and December 31, 2019 were deemed immaterial.

 

Disaggregation of Revenue

 

Revenues consisted of the following (in thousands):

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2020   2019   2020   2019 
Recurring revenue  $1,182   $754   $2,883   $1,968 
Non-recurring revenue   1,372    780    2,551    2,419 
Totals  $2,554   $1,534   $5,434   $4,387 

   

Stock-Based Compensation

 

The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as an expense over the period during which the recipient is required to provide services in exchange for that award. 

 

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.

 

11

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 3 - Summary of Significant Accounting Policies (continued)

 

Stock-Based Compensation (continued)

 

The Company incurred stock-based compensation charges of $256,000 and $871,000 for the three months ended September 30, 2020 and 2019, respectively, and $941,000 and $2,618,000 for the nine months ended September 30, 2020 and 2019, respectively, which are included in general and administrative expenses. 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,
 
   2020   2019   2020   2019 
Compensation and related benefits  $256   $871   $941   $2,376 
Professional and legal fees   --    --    --    242 
Totals  $256   $871   $941   $2,618 

 

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.

 

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, 2020 and 2019:

 

   For the Nine Months Ended
September 30,
 
   2020   2019 
Options   5,544,594    124,099 
Warrants   93,252    162,646 
Convertible preferred stock   846    846 
Reserved for service providers   --    25 
Common stock issuable pursuant to Jibestream acquisition share purchase agreement   --    63,645 
Totals   5,638,692    351,261 

 

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.

 

Recently Issued and Adopted Accounting Standards

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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. In November 2019, the FASB issued ASU No. 2019-10 Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) clarifying effective dates for the impacted ASUs. For public business entities that meet the definition of an SEC filer and smaller reporting company, ASU 2016-13 is effective for annual and interim reporting periods beginning after December 15, 2022, 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. The Company has adopted this standard and the adoption of this standard did not have a material impact on its condensed consolidated 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. The Company has adopted these ASU’s and the adoption of these ASU’s did not have a material impact on its condensed consolidated financial statements or disclosures.

 

12

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 3 - Summary of Significant Accounting Policies (continued)

 

Recently Issued and Adopted Accounting Standards (continued)

 

In April 2019, the FASB issued ASU 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”). These amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years with early application permitted. The Company has adopted this standard and the adoption of this standard did not have a material impact on its condensed consolidated financial statements or disclosures.

 

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) (“ASU 2019-12”): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning January 1, 2021. The Company does not expect this ASU will have a material effect on its condensed consolidated financial statements or disclosures.

 

In February 2020, the FASB issued ASU 2020-02, “Financial Statements - Credit losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Relating to Accounting Standards Update No. 2016-02, Leases (Topic 842)” (“ASU 2020-02”), which provides guidance on the measurement and requirements related to credit losses. The new guidance was effective upon issuance of this final accounting standards update. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements or disclosures. 

 

Reverse Stock Split

 

On January 7, 2020, the Company effected a 1-for-45 reverse stock split of its outstanding common stock. The condensed consolidated financial statements and accompanying notes give effect to the stock split as if it occurred at the beginning of the first period presented.  There was no change to the previously reported net loss.

 

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, the Company, through its wholly owned subsidiary, Inpixon Canada as purchaser, completed its acquisition of Locality Systems, Inc. (“Locality”) in which Locality’s stockholders sold all of their shares to the purchaser in exchange for consideration of (i) $1,500,000 (the “Aggregate Cash Consideration”) minus a working capital adjustment equal to $85,923, and (ii) 14,445 shares of the Company’s common stock with a fair market value of $514,000. Locality was a technology company specializing in wireless device positioning and radio frequency augmentation of video surveillance systems. The Locality acquisition allows us to accept wireless device positioning from third-party Wi-Fi access points as well as surveillance systems and combine that information with our own location data into our analytics platform providing our customers with additional data and ability to see video and radio frequency data concurrently.

 

The Aggregate Cash Consideration, less the working capital adjustment applied against the Aggregate Cash Consideration of $85,923, is payable 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 was paid on November 21, 2019, which was 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.

 

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 at closing.

 

13

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 4 - Locality Acquisition (continued)

 

The purchase price was allocated and modified for measurement period adjustments due to the receipt of the final valuation report and updated tax provision estimates as follows (in thousands):

 

   Preliminary Allocation   Valuation Measurement Period Adjustments   Tax Provision Measurement Period Adjustments   Adjusted Allocation 
Assets Acquired:                
Cash  $70   $--   $--   $70 
Accounts receivable   7    --           --    7 
Other current assets   4    --    --    4 
Inventory   2    --    --    2 
Fixed assets   1    --    --    1 
Developed technology   1,523    (78)   --    1,445 
Customer relationships   216    (31)   --    185 
Non-compete agreements   49    --    --    49 
Goodwill   619    80    (46)   653 
   $2,491   $(29)  $(46)  $2,416 
Liabilities Assumed:                    
Accounts payable  $13   $--   $--   $13 
Accrued liabilities   48    --    --    48 
Deferred revenue   28    --    --    28 
Deferred tax liability   474    (29)   (46)   399 
    563    (29)   (46)   488 
Total Purchase Price  $1,928   $--   $--   $1,928 

 

The value of the intangibles and goodwill were calculated by a third party valuation firm based on projections and financial data provided by management of the Company. The deferred revenue included in the financial statements is the expected liability to service the projects. The goodwill represents the excess fair value after the allocation to the intangibles. The calculated goodwill is not deductible for tax purposes. The financial data of Locality is included in the Company’s financial statements starting on the acquisition date through the period ended September 30, 2020. Proforma information has not been presented as it has been deemed to be immaterial.

 

Note 5 - GTX Acquisition

 

On June 27, 2019, the Company completed its acquisition of certain assets of GTX Corp (“GTX”), consisting of a portfolio of GPS technologies and intellectual property (the “Assets”) that allow us to provide positioning and positioning solutions for assets and devices homogenously from the indoors to the outdoors. Prior to this asset acquisition, the Company was only providing indoor location. 

 

The Assets were acquired for aggregate consideration consisting of (i) $250,000 in cash delivered at the closing and (ii) 22,223 shares of the Company’s restricted common stock.

 

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. 

 

The purchase price was allocated based on the receipt of a final valuation report as follows (in thousands):

 

Developed technology  $830 
Non-compete agreements   68 
Goodwill   2 
      
Total Purchase Price  $900 

 

On September 16, 2019, the Company loaned GTX $50,000 in accordance with the terms of the asset purchase agreement. The note began to accrue interest at a rate of 5% per annum beginning on November 1, 2019. The note was amended on May 11, 2020 to extend the maturity date from April 13, 2020 to September 13, 2020 and require monthly payments against the outstanding balance of the note. The note was amended on October 28, 2020 to extend the maturity date from September 13, 2020 to December 31, 2020 and waive the requirement for the monthly repayment installment obligation provided for in the May 11, 2020 amendment. This note is included as part of other receivables in the Company’s condensed consolidated financial statements. As of September 30, 2020, the balance of the note including interest was $52,381. Proforma information has not been presented as it has been deemed to be immaterial.

 

14

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 6 - Jibestream Acquisition

 

On August 15, 2019, the Company, through its wholly owned subsidiary, Inpixon Canada as purchaser (the “Purchaser”), completed its acquisition of Jibestream Inc. (“Jibestream”), a provider of indoor mapping and location technology, 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 purchase agreement (the “Purchase 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) 176,289 shares of the Company’s common stock, which was equal to CAD $3,000,000, converted to U.S. dollars based on the exchange rate at the time of the closing, divided by $12.4875 which was the price per share at which shares of the Company’s common stock were issued in the Company’s common stock offering on August 12, 2019 (“Inpixon Shares”).

 

Jibestream provided a dynamic interactive map that allowed customers to put their digitized map into their mobile app or provide the map on a kiosk or other interface. Inpixon can now utilize the Jibestream map to offer a more intuitive interface to see its locationing data and analytics.

 

The Nasdaq listing rules required the Company to obtain the approval of the Company’s stockholders for the issuance of 63,645 of the Inpixon Shares (the “Excess Shares”), which was obtained on October 31, 2019, and the shares were issued on November 5, 2019. A number of Inpixon Shares representing fifteen percent (15%) of the value of the purchase price (the “Holdback Amount”) were 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 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. Subsequently, the Company agreed not to enforce any right of setoff resulting from a Working Capital Adjustment. 

 

The purchase price was allocated based on the receipt of a final valuation report and modified for measurement period adjustments due to updated tax provision estimates as follows (in thousands):

 

   Preliminary Allocation   Tax Provision Measurement Period Adjustments   Adjusted Allocation 
Assets Acquired:            
Cash  $5   $--   $5 
Accounts receivable   309    --    309 
Other current assets   137    --    137 
Fixed assets   10    --    10 
Other assets   430    --    430 
Developed technology   3,193    --    3,193 
Customer relationships   1,253    --    1,253 
Non-compete agreements   420    --    420 
Goodwill   2,407    (919)   1,488 
   $8,165   $(919)  $7,245 
Liabilities Assumed:               
Accounts payable   51    --    51 
Accrued liabilities   94    --    94 
Deferred revenue   1,156    --    1,156 
Other liabilities   513    --    513 
Deferred tax liability   1,289    (919)   370 
    3,103    (919)   2,183 
Total Purchase Price  $5,062   $--   $5,062 

 

The value of the intangibles and goodwill were calculated by a third party valuation firm based on projections and financial data provided by management of the Company. The deferred revenue included in the condensed consolidated financial statements is the expected liability to service the projects. The goodwill represents the excess fair value after the allocation to the intangibles. The calculated goodwill is not deductible for tax purposes. As part of the acquisition, the Company acquired a lease obligation with an operating lease right of use asset of approximately $371,000 and an operating lease obligation of approximately $371,000 which are included in other assets and other liabilities, respectively, in the purchase price allocation. The financial data of Jibestream is included in the Company’s financial statements starting on the acquisition date through the period ended September 30, 2020.

  

Jibestream was amalgamated into Inpixon Canada on January 1, 2020. 

15

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 7 - Systat Licensing Agreement 

 

On June 19, 2020, the Company entered into an exclusive license with Cranes Software International Ltd. and Systat Software, Inc. (together the “Systat Parties”) to use, market, distribute, and develop the SYSTAT and SigmaPlot software suite of products (the “License Grant”) pursuant to the terms and conditions of that certain Exclusive Software License and Distribution Agreement, deemed effective as of June 1, 2020 (the “Effective Date”), and amended on June 30, 2020 (as amended, the “License Agreement”).  In accordance with Rule 11-01(d) and ASC 805, the transaction was deemed to be the acquisition of a business and accounted for as a business combination with an acquisition date of June 30, 2020 (the “Closing Date”). In accordance with the terms of the License Agreement, on the Closing Date, we partitioned a portion of that certain promissory note (the “Sysorex Note”) issued to us by Sysorex, Inc. (“Sysorex”), into a new note in an amount equal to $3 million in principal plus accrued interest (the “Closing Note”) and assigned the Closing Note and all rights and obligations thereunder to Systat Software, Inc. in accordance with the terms and conditions of that certain Promissory Note Assignment and Assumption Agreement. An additional $3.3 million of the principal balance underlying the Sysorex Note will be partitioned and assigned to Systat Software, Inc. as consideration payable for the rights granted under the license as follows: (i) $1.3 million on the three month anniversary of the Closing Date; (ii) $1.0 million on the six month anniversary of the Closing Date; and (iii) $1.0 million on the nine month anniversary of the Closing Date. In addition, the cash consideration of $2.2 million was delivered on July 8, 2020.

 

In connection with the License Grant, the Systat Parties provided us with equipment for us to use at no additional cost for a minimum period of six months following the Closing Date. We are also entitled to any customer maintenance revenue, new license fees, or license renewal fees, received by any of the Systat Parties after June 1, 2020 in connection with the Systat Customer Contracts and/or Systat Distribution Agreements (as such terms are defined in the License Agreement) assigned to and assumed by us in connection with the License Agreement. The net amount owed to the Company for this period is included in the Other Receivable line item listed in the assets acquired below. The License Grant will remain in effect for a period of 15 years following the Closing Date, unless terminated sooner upon mutual written consent of Systat Software, Inc. and us or upon termination by either for the other party’s specified breach.

 

In connection with the License Grant, the Company expanded its operations into the United Kingdom and Germany. As a result of such expansion, the Company formed Inpixon Limited, a new wholly owned subsidiary in the United Kingdom, and established Inpixon GmbH, a wholly owned subsidiary incorporated under the laws of Germany.

 

The total recorded purchase price for the transaction was $2,200,000, which consisted of the $2,200,000 cash consideration as a full valuation allowance was retained against the Sysorex note.

 

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

  

Assets Acquired:    
Other receivable  $44 
Developed technology   1,200 
Customer relationships   395 
Tradename & Trademarks   279 
Non-compete agreements   495 
Goodwill   520 
   $2,933 
Liabilities Assumed:     
Deferred Revenue  $733 
Total Purchase Price  $2,200 

  

The value of the intangibles and goodwill were calculated by a third party valuation firm based on projections and financial data provided by management of the Company. The deferred revenue included in the condensed consolidated financial statements is the expected liability to service the projects. The goodwill represents the excess fair value after the allocation to the intangibles. The calculated goodwill is not deductible for tax purposes. The financial data of the License Grant is included in the Company’s financial statements as of deemed acquisition date of June 30, 2020.

 

A final valuation of the assets and purchase price allocation of the License Grant has not been completed as of the end of this reporting period as the third party valuation has not been finalized. Consequently, the purchase price was preliminarily allocated based upon the Company’s 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 2020. 

 

16

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 8 - Ten Degrees Acquisition

 

On August 19, 2020, in accordance with the terms and conditions of that certain Asset Purchase Agreement, by and among the Company, Ten Degrees Inc. (“TDI”), Ten Degrees International Limited (“TDIL”), mCube International Limited (“MCI”), and the holder of a majority of the outstanding capital of TDIL and mCube, Inc., and the sole shareholder of 100% of the outstanding capital stock of MCI (“mCube,” together with TDI, TDIL, and MCI collectively, the “Transferors”), we acquired a suite of on-device “blue-dot” indoor location and motion technologies, including patents, trademarks, software and related intellectual property from the Transferors (collectively, the “Assets”). The Assets were acquired for consideration consisting of (i) $1,500,000 in cash and (ii) 480,000 shares of our common stock. In accordance with the terms of the APA, commencing as of the date of the APA, the Transferors, and their affiliates, have agreed to not compete with our business associated with the Assets for a period of five years from the closing date. In addition, each party agreed to not solicit any employees from the other party for a period of one year from the closing date, subject to certain exceptions.

 

The total recorded purchase price for the transaction was $2,100,000, which consisted of the cash paid of $1,500,000 and $600,000 representing the value of the stock issued upon closing. 

 

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

 

Developed technology  $1,701 
Non-compete agreements   399 
      
Total Purchase Price  $2,100 

 

The value of the intangibles were calculated by a third party valuation firm based on projections and financial data provided by management of the Company. A final valuation of the assets and purchase price allocation has not been completed as of the end of this reporting period as the third party valuation has not been finalized. Consequently, the purchase price was preliminarily allocated based upon the Company’s 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 2020. 

 

Note 9 - Proforma Financial Information

 

The following unaudited proforma financial information presents the condensed consolidated results of operations of the Company and Jibestream for the three and nine months ended September 30, 2019, 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,
2019
   For the Nine 
Months
Ended
September 30,
2019
 
Revenues  $2,031   $5,898 
Net loss attributable to common stockholders  $(7,226)  $(19,805)
Net loss per basic and diluted common share  $(9.31)  $(37.19)
Weighted average common shares outstanding:          
Basic and Diluted   776,288    532,588 

 

Note 10 - Inventory

 

Inventory as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

 

   As of
September 30,
2020
   As of
December 31,
2019
 
Raw materials  $73   $13 
Finished goods   341    387 
Total Inventory  $414   $400 

 

17

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 11 - Debt

 

Debt as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

 

   As of
September 30,
2020
  

As of
December 31,

2019

 
Short-Term Debt        
Notes payable, less debt discount of $655 and $628, respectively (A)  $6,150   $7,080 
Revolving line of credit (B)   --    150 
Other short-term debt (C)   --    74 
Total Short-Term Debt  $6,150   $7,304 

 

  (A) Notes Payable

 

December 2018 Note Purchase Agreement and Promissory Note

 

On December 21, 2018, the Company entered into a note purchase agreement with Iliad Research and Trading, L.P. (“Iliad” or the “Holder”), 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 December 2018 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. 

 

The Company and Iliad entered into an amendment to the December 2018 Note pursuant to which the maturity date of the note was further extended from December 31, 2019 to March 31, 2020. In addition, Iliad agreed to further extend the standstill previously agreed to pursuant to the terms of that certain Standstill Agreement, dated as of August 8, 2019, whereby Iliad will not be entitled to redeem all or any portion of the principal amount of the Note until March 31, 2020. 

 

Note Exchanges

 

From October 15, 2019 through December 31, 2019, the Company exchanged approximately $2,112,000 of the outstanding principal and interest under the December 2018 Note for 707,078 shares of the Company’s common stock at exchange prices between $1.80 and $4.95 per share. As of March 31, 2020, the outstanding principal balance of the December 2018 Note was approximately $28,749.

 

On April 1, 2020, the Company exchanged approximately $223,000 of the remaining outstanding principal and interest under the December 2018 Note for 187,517 shares of the Company’s common stock at an exchange price of $1.19 per share. After this exchange the balance owed under the December 2018 Note was $0.

18

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 11 - Debt (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 Partners, L.P. (“Chicago Venture”), an affiliate of Iliad, 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.

 

During the year ended December 31, 2019, the Company exchanged approximately $2,076,000 of the outstanding principal and interest under the note for 738,891 shares of the Company’s common stock at exchange prices between $1.80 and $3.51 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 an approximately $96,000 loss on the exchange of debt for equity as a separate item in the other income/expense section of the consolidated statements of operations for the year ended December 31, 2019.

 

During the three months ended March 31, 2020, the Company exchanged approximately $1,958,000 of the outstanding principal and interest under the May 2019 Note for 524,140 shares of the Company’s common stock at exchange prices between $3.65 and $4.05 per share. The Company analyzed the exchange of principal under the May 2019 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 an approximately $53,000 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 months ended March 31, 2020.

 

As of September 30, 2020, the outstanding balance of the May 2019 Note was $0 and the note was fully satisfied.

 

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 the Company consummates an offering of its equity securities, the Company is required to 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.

 

19

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 11 - Debt (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.

 

During the three months ended March 31, 2020, the Company exchanged approximately $2,236,000 of the outstanding principal and interest under the June 2019 Note for 1,372,417 shares of the Company’s common stock at exchange prices between $1.12 and $3.05 per share. The Company analyzed the exchange of principal under the June 2019 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 an approximately $33,000 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 months ended March 31, 2020.

 

As of September 30, 2020, the outstanding balance of the June 2019 Note was $0 and the note was fully satisfied. 

 

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.

 

During the three months ended June 30, 2020, the Company exchanged approximately $2,034,000 of the outstanding principal and interest under the August 2019 Note for 1,832,220 shares of the Company’s common stock at exchange prices between $1.09 and $1.128 per share. The Company analyzed the exchange of principal under the August 2019 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 an approximately $25,000 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 months ended June 30, 2020.

 

As of September 30, 2020, the outstanding balance of the August 2019 Note was $0 and the note was fully satisfied.

 

20

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 11 - Debt (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, 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 September 2019 Note, the holder paid an aggregate purchase price of $750,000. 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 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 September 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 September 2019 Note will become immediately due and payable at the Mandatory Default Amount. Under the terms of the September 2019 Note, since it was still outstanding on December 17, 2019, a one-time monitoring fee equal to ten percent (10%) of the then outstanding balance, or $97,661, was added to the September 2019 Note.

 

During the three months ended June 30, 2020, the Company exchanged approximately $1,120,000 of the outstanding principal and interest under the September 2019 Note for 975,704 shares of the Company’s common stock at exchange prices between $1.136 and $1.17 per share. The Company analyzed the exchange of principal under the September 2019 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 an approximately $22,000 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 months ended June 30, 2020.

 

As of September 30, 2020, the outstanding balance of the September 2019 Note was $0 and the note was fully satisfied.

 

November 2019 Note Purchase Agreement and Promissory Note

 

On November 22, 2019, the Company issued a promissory note to St. George Investments LLC (“St. George”), an affiliate of Iliad and Chicago Venture, pursuant to which the Company agreed to issue and sell to the holder an unsecured promissory note (the “November 2019 Note”) in the initial principal amount of $952,500, which is payable on or before the date that is 6 months from the issuance date, subject to extension in accordance with the terms of the November 2019 Note. The initial principal amount includes an original issue discount of $187,500 and $15,000 that the Company agreed to pay to St. George to cover its legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the November 2019 Note, St. George paid an aggregate purchase price of $750,000. Interest on the November 2019 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the 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. The November 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 November 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. Under the terms of the November 2019 Note, since it was still outstanding on February 22, 2020, a one-time monitoring fee equal to ten percent (10%) of the then-current outstanding balance, or approximately $97,688, was added to the note. As of March 31, 2020, the outstanding balance of the November 2019 Note was approximately $1,050,188.

 

During the three months ended June 30, 2020, the Company exchanged approximately $1,215,000 of the outstanding principal and interest under the November 2019 Note for 894,549 shares of the Company’s common stock at exchange prices between $1.354 and $1.362 per share.

 

As of September 30, 2020, the outstanding balance of the November 2019 Note was $0 and the note was fully satisfied.

 

21

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 11 - Debt (continued)

 

March 2020 Note Purchase Agreement and Promissory Note

 

On March 18, 2020, 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 “March 2020 Note”) in an aggregate initial principal amount of $6,465,000, 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 $1,450,000 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 March 2020 Note, the holder paid an aggregate purchase price of $5,000,000. Interest on the March 2020 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the March 2020 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 March 2020 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 March 2020 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 of the Company’s receipt of such Monthly Redemption Notice. The March 2020 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 holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the March 2020 Note to be immediately due and payable. 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 March 2020 Note will become immediately due and payable at the mandatory default amount. If the March 2020 Note is still outstanding on the date that is six (6) months from the issuance date, then a one-time monitoring fee equal to ten percent (10%) of the then-current outstanding balance shall be added to the March 2020 Note.

 

As of September 30, 2020, the outstanding principal balance of the March 2020 Note was approximately $6,805,000.

 

  (B) Revolving Line of Credit

  

Payplant Accounts Receivable Bank Line

 

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, before the loan is made, the Company must provide Lender with (i) one or more promissory notes for the amount being loaned in favor of Lender, (ii) one or more guaranties executed in favor of Lender and (iii) other documents and evidence of the completion of such other matters as Lender may request. The principal amount of each loan shall accrue interest at a 30 day rate of 2% (the “Interest Rate”), calculated per day on the basis of a year of 360 days and, when combined with all fees that may be characterized as interest will not exceed the maximum rate allowed by law. Upon the occurrence and during the continuance of any event of default, interest shall accrue at a rate equal to the Interest Rate plus 0.42% per 30 days. All computations of interest shall be made on the basis of a year of 360 days. The promissory note is subject to the interest rates described in the Loan Agreement and is secured by the assets of the Company pursuant to the Loan Agreement and will be satisfied in accordance with the terms of the Payplant Client Agreement.

 

On August 31, 2018, Inpixon, Sysorex, Sysorex Government Services, Inc. (“SGS”), and Payplant executed Amendment 1 to Payplant Client Agreement (the “Amendment”). Pursuant to the Amendment, Sysorex and SGS are no longer parties to the Payplant Client Agreement, originally entered into on August 14, 2017, and have been released from any and all obligations and liabilities arising under the Payplant Client Agreement, whether such obligations and liabilities were in existence prior to or on the date of the Amendment or arise after the date of the Amendment. As of September 30, 2020, the outstanding balance on the revolving line of credit is $0.

 

On August 13, 2020, we provided Payplant a Notice of Termination (the “Notice”) of (i) that certain Loan and Security Agreement, dated as of August 14, 2017 (the “Loan Agreement”), by and among the Company, Payplant and Lender and (ii) that certain Payplant Client Agreement, dated as of August 14, 2017, as amended (the “Client Agreement”), by and between the Company and Payplant, pursuant to which we are able to request loans from the Lender. In accordance with Section 14 and Section 27 of the Loan Agreement and the Client Agreement, respectively, we terminated each agreement as the Company has fully satisfied all obligations under the Loan Agreement and will not incur any additional obligations thereunder. As a result of the termination, the security interest we previously granted under the Loan Agreement was terminated and we paid a corresponding UCC termination fee of $150 to Payplant in accordance with Section 27 of the Client Agreement.

 

  (C) Other Short-Term Debt

 

As of September 30, 2020, the Company owed $0 to the pre-acquisition stockholders of Shoom.

  

22

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 12 - Capital Raises

 

At-The-Market Program

 

On March 3, 2020, the Company entered into an Equity Distribution Agreement (“EDA”) with Maxim Group LLC (“Maxim”) under which the Company may offer and sell shares of our common stock in connection with an at-the-market equity facility (“ATM”) in an aggregate offering amount of up to $50 million, which was increased on June 19, 2020 to $150 million pursuant to an amendment to the EDA, from time to time through Maxim, acting exclusively as our sales agent. The Company intends to use the net proceeds of the ATM primarily for working capital and general corporate purposes. The Company may also use a portion of the net proceeds to invest in or acquire businesses or technologies that it believes are complementary to its own, although the Company has no current plans, commitments or agreements with respect to any acquisitions as of the date of this filing. Maxim will be entitled to compensation at a fixed commission rate of 4.0% of the gross sales price per share sold for the initial $50.0 million of shares and 3.25% for any sales in excess of such amount. In addition, the Company has agreed to reimburse Maxim for its costs and out-of-pocket expenses incurred in connection with its services, including the fees and out-of-pocket expenses of its legal counsel.

 

The Company is not obligated to make any sales of the shares under the EDA and no assurance can be given that the Company will sell any shares under the EDA, or if it does, as to the price or amount of shares that the Company will sell, or the dates on which any such sales will take place. The EDA will continue until the earliest of (i) December 3, 2021, (ii) the sale of shares having an aggregate offering price of $150.0 million, and (iii) the termination by either Maxim or the Company upon the provision of 15 days written notice or otherwise pursuant to the terms of the EDA.

   

The Company issued 937,010 shares of common stock during the quarter ended March 31, 2020, in connection with the ATM at per share prices between $1.23 and $2.11, resulting in net proceeds to the Company of approximately $1.25 million after subtracting sales commissions and other offering expenses.

 

The Company issued 29,033,036 shares of common stock during the quarter ended June 30, 2020, in connection with the ATM at per share prices between $1.13 and $2.02, resulting in net proceeds to the Company of approximately $40.52 million after subtracting sales commissions and other offering expenses. 

 

The Company issued 1,604,312 shares of common stock during the quarter ended September 30, 2020, in connection with the ATM at per share prices between $1.5064 and $1.5134, resulting in net proceeds to the Company of approximately $2.27 million after subtracting sales commissions and other offering expenses. 

 

Note 13 - Common Stock

 

During the three months ended March 31, 2020, the Company issued 1,896,557 shares of common stock under exchange agreements to settle outstanding balances totaling approximately $4,194,000 under partitioned notes.

 

During the three months ended March 31, 2020, the Company issued 937,010 shares of common stock in connection with the ATM at per share prices between $1.23 and $2.11, resulting in net proceeds to the Company of approximately $1.25 million after subtracting sales commissions and other offering expenses (see Note 12).

 

During the three months ended June 30, 2020, the Company issued 3,889,990 shares of common stock under exchange agreements to settle outstanding balances totaling approximately $4,592,000 under partitioned notes.

 

During the three months ended June 30, 2020, the Company issued 29,033,036 shares of common stock in connection with the ATM at per share prices between $1.13 and $2.02, resulting in net proceeds to the Company of approximately $40.52 million after subtracting sales commissions and other offering expenses (see Note 12).

 

During the three months ended June 30, 2020, the Company issued 183,486 shares of common stock for the extinguishment of liability totaling approximately $200,000.

 

During the three months ended September 30, 2020, the Company issued 1,604,312 shares of common stock in connection with the ATM at per share prices between $1.5064 and $1.5134, resulting in net proceeds to the Company of approximately $2.27 million after subtracting sales commissions and other offering expenses (see Note 12).

 

On August 19, 2020, the Company issued 480,000 shares of common stock to the security holders of Ten Degrees as part of an acquisition (See Note 8).

 

Note 14 - Preferred Stock

 

The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001 per share with rights, preferences, privileges and restrictions as to be determined by the Company’s Board of Directors.

 

23

 

 

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

Note 14 - Preferred Stock (continued)

 

Series 4 Convertible Preferred Stock

 

On April 20, 2018, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 4 Convertible Preferred Stock (“Series 4 Preferred”), authorized 10,415 shares of Series 4 Preferred and designated the preferences, rights and limitations of the Series 4 Preferred. The Series 4 Preferred is non-voting (except to the extent required by law) and was convertible into the number of shares of common stock, determined by dividing the aggregate stated value of the Series 4 Preferred of $1,000 per share to be converted by $828.00.

 

As of September 30, 2020, there was 1 share of Series 4 Preferred outstanding.

   

Series 5 Convertible Preferred Stock

 

On January 14, 2019, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 5 Convertible Preferred Stock, authorized 12,000 shares of Series 5 Convertible Preferred Stock and designated the preferences, rights and limitations of the Series 5 Convertible Preferred Stock. The Series 5 Convertible Preferred Stock is non-voting (except to the extent required by law). The Series 5 Convertible Preferred Stock is convertible into the number of shares of Common Stock, determined by dividing the aggregate stated value of the Series 5 Convertible Preferred Stock of $1,000 per share to be converted by $149.85.

  

As of September 30, 2020, there were 126 shares of Series 5 Convertible Preferred Stock outstanding. 

  

Note 15 - Reverse Stock Split

 

On January 3, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada to effect a 1-for-45 reverse stock split of the Company’s issued and outstanding shares of common stock, effective as of January 7, 2020.

 

The condensed consolidated financial statements and accompanying notes give effect to 1-for-45 reverse stock split as if it occurred at the first period presented. 

 

Note 16 - Stock Options

 

In September 2011, the Company adopted the 2011 Employee Stock Incentive Plan (the “2011 Plan”) which provides for the granting of incentive and non-statutory common stock options and stock based incentive awards to employees, non-employee directors, consultants and independent contractors. The plan was amended and restated in May 2014. Unless terminated sooner by the Board of Directors, this plan will terminate on August 31, 2021.

 

In February 2018, the Company adopted the 2018 Employee Stock Incentive Plan (the “2018 Plan” and together with the 2011 Plan, the “Option Plans”), which will be utilized with the 2011 Plan for employees, corporate officers, directors, consultants and other key persons employed. The 2018 Plan will provide for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan).

  

Incentive stock options granted under the Option Plans are granted at exercise prices not less than 100% of the estimated fair market value of the underlying common stock at date of grant. The exercise price per share for incentive stock options may not be less than 110% of the estimated fair value of the underlying common stock on the grant date for any individual possessing more that 10% of the total outstanding common stock of the Company. Options granted under the Option Plans vest over periods ranging from immediately to four years and are exercisable over periods not exceeding ten years.

 

On August 10, 2020, our Board of Directors approved an amendment to the Company’s 2018 Plan to remove the limit on the amount of non-qualified stock options that can be issued under the 2018 Plan to any one individual.

 

The aggregate number of shares that may be awarded as of September 30, 2020 under the 2011 Plan and the 2018 Plan were 417,270 and 12,730,073, respectively. As of September 30, 2020, 5,544,594 of options were granted to employees, directors and consultants of the Company (including 1 share outside of the Company’s Option Plans) and 7,602,750 options were available for future grant under the Option Plans.

 

During the three months ended June 30, 2020, the Company granted stock options for the purchase of 5,567,500 shares of common stock to employees and directors of the Company. These stock options are 100% vested at grant or vest pro-rata over 12 to 48 months, have a life of ten years and an exercise price of $1.10 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the awards was determined to be approximately $1,911,000. The fair value of the common stock as of the grant date was determined to be $1.10 per share.

 

During the three months ended September 30, 2020 and 2019, the Company recorded a charge for the amortization of employee stock options of approximately $256,000 and $871,000, respectively, and $941,000 and $2,376,000