10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 16, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 31, 2022
OR
For the transition period from ______________ to _______________
Commission File Number 001-36404
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Zip Code)
(408 ) 702-2167
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which each is registered |
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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 x 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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x 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 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 | ¨ |
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x |
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 issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
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 | ||||||||
(Class) | Outstanding at May 12, 2022 |
INPIXON
TABLE OF CONTENTS
Page No. | ||||||||||||||
Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report | ||||||||||||||
PART I - FINANCIAL INFORMATION | ||||||||||||||
ITEM 1. | Financial Statements | |||||||||||||
Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 |
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Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 |
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Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021 |
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Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders' Equity for the three months ended March 31, 2022 and 2021 |
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Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 |
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Notes to Unaudited Condensed Consolidated Financial Statements | ||||||||||||||
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 - 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 Disclosures | |||||||||||||
Item 5. | Other Information | |||||||||||||
Item 6. | Exhibits | |||||||||||||
Signatures | ||||||||||||||
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 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 supply chain challenges, increased costs for materials and labor and other impacts resulting from COVID-19 and the Russia/Ukraine conflict;
•our ability to obtain adequate financing in the future;
•our ability to consummate strategic transactions which may include acquisitions, mergers, dispositions or investments;
•our ability to maintain compliance with the continued listing requirements of the Nasdaq Stock Market LLC;
•lawsuits and other claims by third parties or investigations by various regulatory agencies that we are and may be become subject to and are required to report, including but not limited to, the U.S. Securities and Exchange Commission;
•our success at managing the risks involved in the foregoing items; and
•other factors discussed in this Form 10-Q.
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
ii
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, where appropriate, its subsidiaries.
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 March 31, 2022 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 December 31, 2021 and 2020 included in the annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 16, 2022.
iv
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and par value data)
As of March 31, 2022 |
As of December 31, 2021 |
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(Unaudited) | (Audited) | ||||||||||
Assets | |||||||||||
Current Assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ |
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Notes and other receivables | |||||||||||
Inventory, net of reserve of $ |
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Short-term investments | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total Current Assets | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use asset, net | |||||||||||
Software development costs, net | |||||||||||
Investments in equity securities | |||||||||||
Long-term investments | |||||||||||
Intangible assets, net | |||||||||||
Goodwill | |||||||||||
Other assets | |||||||||||
Total Assets | $ | $ |
The accompanying notes are an integral part of these financial statements
1
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except number of shares and par value data)
As of March 31, 2022 |
As of December 31, 2020 |
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(Unaudited) | (Audited) | ||||||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current Liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued liabilities | |||||||||||
Operating lease obligation, current | |||||||||||
Deferred revenue | |||||||||||
Short-term debt | |||||||||||
Acquisition liability | |||||||||||
Total Current Liabilities | |||||||||||
Long Term Liabilities | |||||||||||
Operating lease obligation, noncurrent | |||||||||||
Other liabilities, noncurrent | |||||||||||
Acquisition liability, noncurrent | |||||||||||
Total Liabilities | |||||||||||
Commitments and Contingencies | |||||||||||
Mezzanine Equity | |||||||||||
Series 7 Convertible Preferred Stock - |
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Series 8 Convertible Preferred Stock- |
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Stockholders’ Equity | |||||||||||
Preferred Stock -$ |
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Series 4 Convertible Preferred Stock - |
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Series 5 Convertible Preferred Stock - |
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Common Stock - $ |
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Additional paid-in capital | |||||||||||
Treasury stock, at cost, |
( |
( |
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Accumulated other comprehensive (loss) income | ( |
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Accumulated deficit | ( |
( |
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Stockholders’ Equity Attributable to Inpixon | |||||||||||
Non-controlling Interest |
2
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except number of shares and par value data)
Total Stockholders’ Equity | |||||||||||
Total Liabilities, Mezzanine Equity and Stockholders’ Equity | $ | $ |
3
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
(Unaudited) | ||||||||||||||
Revenues | $ | $ | ||||||||||||
Cost of Revenues | ||||||||||||||
Gross Profit | ||||||||||||||
Operating Expenses | ||||||||||||||
Research and development | ||||||||||||||
Sales and marketing | ||||||||||||||
General and administrative | ||||||||||||||
Acquisition-related costs | ||||||||||||||
Amortization of intangibles | ||||||||||||||
Total Operating Expenses | ||||||||||||||
Loss from Operations | ( |
$ | ( |
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Other Income (Expense) | ||||||||||||||
Interest income (expense), net | ( |
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Loss on exchange of debt for equity | ( |
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Provision for valuation allowance on related party loan - held for sale | ( |
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Other income | ||||||||||||||
Unrealized loss on equity securities | ( |
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Total Other Income (Expense) | ( |
( |
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Net Loss, before tax | ( |
( |
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Income tax provision | ( |
( |
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Net Loss | ( |
$ | ( |
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Net (Loss) Income Attributable to Non-controlling Interest | ( |
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Net Loss Attributable to Stockholders of Inpixon | ( |
( |
||||||||||||
Accretion of Series 7 Preferred Stock | ( |
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Accretion of Series 8 Preferred Stock | ( |
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Deemed dividend for the modification related to Series 8 Preferred Stock | ( |
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Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock | ||||||||||||||
Amortization premium- modification related to Series 8 Preferred Stock | ||||||||||||||
Net Loss Attributable to Common Stockholders | $ | ( |
$ | ( |
||||||||||
Net Loss Per Share - Basic and Diluted | $ | ( |
$ | ( |
4
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Weighted Average Shares Outstanding | ||||||||||||||
Basic and Diluted |
The accompanying notes are an integral part of these financial statements
5
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
For the Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(Unaudited) | |||||||||||
Net Loss | $ | ( |
$ | ( |
|||||||
Unrealized foreign exchange loss from cumulative translation adjustments | ( |
( |
|||||||||
Comprehensive Loss | $ | ( |
$ | ( |
The accompanying notes are an integral part of these financial statements
6
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands, except per share data)
Series 7 Preferred Stock | Series 8 Preferred Stock | Series 4 Convertible Preferred Stock | Series 5 Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Non-Controlling Interest | Total Stockholders’ (Deficit) Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - January 1, 2022 | $ | $ | $ | $ | $ | $ | ( |
$ | ( |
$ | $ | ( |
$ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for extinguishment of debt | — | — | — | — | — | — | — | — | — | — | — | — | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options and restricted stock awards granted to employees for services | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series 7 Preferred redeemed for cash | ( |
( |
— | — | — | — | — | — | — | — | — | 1 | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series 8 Preferred stock issued for cash | — | — | — | — | — | — | — | — | — | — | — | — | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accretion Discount- Series 7 Preferred Shares | — | — | — | — | — | — | — | — | — | ( |
— | — | — | — | — | $ | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accretion Discount- Series 8 Preferred Shares | — | — | — | — | — | — | — | — | — | ( |
— | — | — | — | — | $ | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed dividend for the modification related to Series 8 Preferred Stock | — | — | — | — | — | — | — | — | — | ( |
— | — | — | — | — | ( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock | — | — | — | ( |
— | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization Premium- modification related to Series 8 embedded warrants | — | — | — | ( |
— | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock grants withheld for taxes | — | — | — | — | — | — | — | — | ( |
( |
( |
— | — | — | — | — | $ | ( |
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Common shares issued for CXApp earnout | — | — | — | — | — | — | — | — | — | — | — | — | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for exchange of warrants | — | — | — | — | — | — | — | — | ( |
— | — | — | — | — | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | — | ( |
( |
$ | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ( |
( |
$ | ( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - March 31, 2022 | $ | $ | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
$ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements
1
7
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands, except per share data)
Series 7 Preferred Stock | Series 4 Convertible Preferred Stock | Series 5 Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Non-Controlling Interest | Total Stockholders’ (Deficit) Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - January 1, 2021 | — | — | $ | — | $ | — | $ | $ | ( |
$ | ( |
$ | $ | ( |
$ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for registered direct offering | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for extinguishment of debt | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for cashless stock options exercised | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for net proceeds from warrants exercised | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options granted to employees and consultants for services | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | — | — | — | — | — | — | — | ( |
— | — | ( |
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Net loss | — | — | — | — | — | — | — | — | — | — | — | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - March 31, 2021 | — | — | $ | — | $ | — | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
$ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements
8
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Cash Flows Used in Operating Activities | (Unaudited) | ||||||||||
Net loss | $ | ( |
$ | ( |
|||||||
Adjustment to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Amortization of intangible assets | |||||||||||
Amortization of right of use asset | |||||||||||
Stock based compensation | |||||||||||
Earnout payment expense | ( |
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Loss on exchange of debt for equity | |||||||||||
Amortization of debt discount | |||||||||||
Related party note, gain on foreign currency transaction | ( |
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Unrealized gain on note | ( |
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Provision for valuation allowance for held for sale loan | |||||||||||
Income tax expense | |||||||||||
Unrealized loss on equity securities | |||||||||||
Other | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable and other receivables | ( |
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Inventory | ( |
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Prepaid expenses and other current assets | ( |
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Other assets | ( |
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Accounts payable | ( |
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Accrued liabilities | ( |
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Income tax liabilities | ( |
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Deferred revenue | ( |
( |
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Operating lease obligation | ( |
( |
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Other liabilities | |||||||||||
Net Cash Used in Operating Activities | ( |
( |
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Cash Flows Used in Investing Activities | |||||||||||
Purchase of property and equipment | ( |
( |
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Purchases of capitalized software | ( |
( |
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Investments in short term investments | ( |
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Sales of treasury bills | |||||||||||
Purchase of Systat licensing agreement | ( |
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Net Cash Provided By (Used in) Investing Activities | ( |
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Cash From Financing Activities | |||||||||||
Net proceeds from issuance of preferred stock and warrants | |||||||||||
Net proceeds from issuance of common stock and warrants |
9
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Cash paid for redemption of preferred stock series 7 | ( |
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Restricted stock forfeiture for settlement of employee taxes | ( |
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Loans to related party | ( |
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Net proceeds from promissory notes | |||||||||||
Repayment of CXApp acquisition liability | ( |
||||||||||
Repayment of acquisition liability to Locality shareholders | ( |
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Net Cash (Used In) Provided By Financing Activities | ( |
||||||||||
Effect of Foreign Exchange Rate on Changes on Cash | ( |
( |
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Net Increase in Cash and Cash Equivalents | |||||||||||
Cash and Cash Equivalents - Beginning of period | |||||||||||
Cash and Cash Equivalents - End of period | $ | $ | |||||||||
Supplemental Disclosure of cash flow information: | |||||||||||
Cash paid for: | |||||||||||
Interest | $ | $ | |||||||||
Income Taxes | $ | $ | |||||||||
Non-cash investing and financing activities | |||||||||||
Common shares issued for extinguishment of debt | $ | $ | |||||||||
Common shares issued for CXApp Earnout Payment | $ | $ | |||||||||
Common shares issued in exchange for warrants | $ | $ | |||||||||
The accompanying notes are an integral part of these financial statements
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 1 - Organization and Nature of Business
Inpixon is the Indoor Intelligence™ company. Our solutions and technologies help organizations create and redefine exceptional workplace experiences that enable smarter, safer and more secure environments. We leverage our positioning, mapping, analytics and app technologies to achieve higher levels of productivity and performance, increase safety and security, improve worker and employee satisfaction rates and drive a more connected workplace. We have focused our corporate strategy on being the primary provider of the full range of foundational technologies needed in order to offer a comprehensive suite of solutions that make indoor data available and meaningful to organizations and their employees.
Our Indoor Intelligence solutions are used by our customers for a variety of use cases including, but not limited to, employee and visitor experience enhancement through a customer branded app with features such as desk booking, wayfinding and navigation, and the delivery of content to tens of thousands of attendees in hybrid events. Our real time location (RTLS) and asset tracking products offer manufacturing and warehouse logistics optimization and automation, increase workforce productivity, and enhance worker safety and security.
In addition to our Indoor Intelligence technologies and solutions, we also offer:
•Digital solutions (eTearsheets; eInvoice, adDelivery) or cloud-based applications and analytics for the advertising, media and publishing industries y advertising management platform referred to as Shoom by Inpixon; and
•A comprehensive set of data analytics and statistical visualization solutions for engineers and scientists referred to as SAVES by Inpixon.
Note 2 - Basis of Presentation
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
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, 2021 and 2020.
Liquidity
As of March 31, 2022, the Company has a working capital surplus of approximately $74.3 million, cash of approximately $60.9 million and short term investments of $15.0 million. For the three months ended March 31, 2022, the Company had a net loss of approximately $11.6 million.
On March 22, 2022, the Company entered into a Securities Purchase Agreement with certain institutional investors named therein, pursuant to which the Company sold in a registered direct offering (i) 53,197.7234 shares of Series 8 Convertible Preferred Stock and (ii) related warrants to purchase up to an aggregate of 112,778,720 shares of common stock. Each share of Series 8 Convertible Preferred Stock and the related warrants were sold at a subscription amount of $940 , representing an original issue discount of 6 % of the stated value of each share of Series 8 Convertible Preferred Stock for an aggregate subscription amount of $50.0 million. The net proceeds to the Company from this offering was $46.9 million after placement agent commissions and other offering costs. See further breakdown in Note 12 - Capital Raises.
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. While the impact of the COVID-19 pandemic is generally subsiding, the lasting impact on our business and results of operations continues to remain uncertain. While we were able to continue operations remotely throughout the pandemic, we have experienced supply chain cost increases and constraints and delays in the receipt of certain components of our hardware products impacting delivery times for our products. In addition, to the extent that certain customers continue to be challenged by the lasting effects of the pandemic, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders. Despite these challenges, we were able to realize growth in revenue for the first quarter of 2022 when compared to the same period of 2021 as a result of an increase in sales associated with our indoor intelligence platform including the CXApp and Intranav acquisitions completed in April and December 2021, respectively.
We anticipate that certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and Ukraine, and inflation on our customers and partners in regions throughout the world. We expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business. The impact that these global events will have on general economic conditions is continuously evolving and the ultimate that they will have on our results of operations continues to remain uncertain and there are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected.
The Company's recurring losses and utilization of cash in its operations are indicators of going concern however with the Company's current liquidity position, the Company believes it has the ability to mitigate such concerns for a period of at least one year from the date these financial statements are issued.
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 Company’s common stock issued in transactions, including acquisitions;
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 3 - Summary of Significant Accounting Policies (continued)
•the allowance for credit losses;
•the valuation of loans receivable;
•the valuation of equity securities;
•the valuation allowance for deferred tax assets; and
•impairment of long-lived assets and goodwill.
13
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 3 - Summary of Significant Accounting Policies (continued)
Business Combinations
The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date.
Investments
Short-term investments
Investments with maturities greater than 90 days but less than one year are classified as short-term investments on the consolidated balance sheets and consist of U.S. Treasury Bills. Accrued interest on U.S. Treasury bills are also classified as short term investment.
Mezzanine equity
When ordinary or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the issuer, and upon such event, the shares would become redeemable at the option of the holders, they are classified as ‘mezzanine equity’ (temporary equity). The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.
Revenue Recognition
The Company recognizes revenue when control is transferred of the promised products or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company derives revenue from software as a service, design and implementation services for its Indoor Intelligence systems, and professional services for work performed in conjunction with its systems.
Hardware and Software Revenue Recognition
For sales of hardware and software products, the Company’s performance obligation is satisfied at a point in time when they are shipped to the customer. This is when the customer has title to the product and the risks and rewards of ownership. The delivery of products to Inpixon's customers occurs in a variety of ways, including (i) as a physical product shipped from the Company’s warehouse, (ii) via drop-shipment by a third-party vendor, or (iii) via electronic delivery with respect to software licenses. The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer. Accordingly, the Company is the principal in the transaction with the customer and records revenue on a gross
14
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 3 - Summary of Significant Accounting Policies (continued)
basis. The Company receives fixed consideration for sales of hardware and software products. The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice. The Company has elected the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the asset that otherwise would have been recognized is less than a year.
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 advertising and electronic services, customers pay fixed monthly fees in exchange for the Company’s service. The Company’s performance obligation is satisfied over time as the digital advertising and electronic services are provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service.
Professional Services Revenue Recognition
The Company’s professional services include milestone, fixed fee and time and materials contracts.
Professional services under milestone contracts are 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 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 are also contracted on the fixed fee and time and materials basis. 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 months ended March 31, 2022 and 2021, the Company did not incur any such losses. These amounts are based on known and estimated factors.
License Revenue Recognition
The Company enters into contracts with its customers whereby it grants a non-exclusive on-premise license for the use of its proprietary software. The contracts provide for either (i) a one year stated term with a one year renewal option, (ii) a perpetual term or (iii) a two year term with the option to upgrade to a perpetual license at the end of the term. The contracts may also provide for yearly on-going maintenance services for a specified price, which includes maintenance services, designated support, and enhancements, upgrades and improvements to the software (the “Maintenance Services”), depending on the contract. Licenses for on-premises software provide the customer with a right to use the software as it exists when made available to the customer. All software provides customers with the same functionality and differ mainly in the duration over which the customer benefits from the software.
The timing of the Company's revenue recognition related to the licensing revenue stream is dependent on whether the software licensing agreement entered into represents a good or service. Software that relies on an entity’s IP and is delivered only through a hosting arrangement, where the customer cannot take possession of the software, is a service. A software arrangement that is provided through an access code or key represents the transfer of a good. Licenses for on-premises software represents a good and provide the customer with a right to use the software as it exists when made available to the customer. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer.
15
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 3 - Summary of Significant Accounting Policies (continued)
Renewals or extensions of licenses are evaluated as distinct licenses (i.e., a distinct good or service), and revenue attributed to the distinct good or service cannot be recognized until (1) the entity provides the distinct license (or makes the license available) to the customer and (2) the customer is able to use and benefit from the distinct license. Renewal contracts are not combined with original contracts, and, as a result, the renewal right is evaluated in the same manner as all other additional rights granted after the initial contract. The revenue is not recognized until the customer can begin to use and benefit from the license, which is typically at the beginning of the license renewal period. Therefore, the Company recognizes revenue resulting from renewal of licensed software at a point in time, specifically, at the beginning of the license renewal period.
The Company recognizes revenue related to Maintenance Services evenly over the service period using a time-based measure because the Company is providing continuous service and the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the services are performed.
Contract Balances
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.
Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period.
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date and recognized over the period services are required to be provided in exchange for the award, usually the vesting period. Forfeitures of unvested stock options are recorded when they occur.
The Company incurred stock-based compensation charges of approximately $1.5 million and $5.1 million for the three months ended March 31, 2022 and 2021, respectively, which are included in general and administrative expenses. Stock-based compensation charges are related to employee compensation and related benefits.
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