XTI Aerospace, Inc. (formerly Inpixon) — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. The filing was submitted under the name Inpixon; the contemplated XTI merger and name change had not closed as of the report date. Financial amounts below are in U.S. dollars and generally millions, unless stated otherwise.
Business context and period
Inpixon reported three continuing segments: Indoor Intelligence, SAVES, and Shoom. Its Indoor Intelligence business provides industrial real-time location and IoT solutions. The Enterprise Apps business was spun off as CXApp on March 14, 2023 and is reported as discontinued operations. The company was pursuing a merger with XTI Aircraft and planned further business divestitures.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $2.0 | $2.4 | $7.2 | $7.7 |
| Gross profit / margin | $1.6 / 78% | $1.7 / 69% | $5.5 / 77% | $5.3 / 69% |
| Operating loss | $(9.1) | $(5.5) | $(23.9) | $(20.5) |
| Net loss from continuing operations | $(10.8) | $(10.9) | $(30.5) | $(27.1) |
| Net loss attributable to Inpixon stockholders | $(10.4) | $(17.6) | $(34.2) | $(48.7) |
| Adjusted EBITDA loss (non-GAAP) | $(4.1) | $(1.4) | $(14.0) | $(9.4) |
Q3 revenue declined 17%, primarily due to longer sales cycles in Indoor Intelligence; nine-month revenue declined 6% for the same stated reason. Higher gross margins reflected lower costs, but operating losses widened as acquisition and transaction expenses rose. Q3 included $1.7 million of acquisition-related costs and $1.5 million of transaction costs. Nine-month interest expense was $4.3 million, compared with $0.1 million a year earlier.
- Cash flow: Operating activities used $25.1 million in the first nine months, versus $26.9 million in 2022. Investing activities used $1.8 million, versus $36.7 million provided in 2022; financing activities provided $20.2 million, versus $0.9 million. Cash and cash equivalents were $13.5 million at September 30, 2023.
- Liquidity: Working capital surplus was approximately $3.0 million, down from $5.2 million at December 31, 2022. Current liabilities were $19.6 million.
- Debt and obligations: Short-term debt was $11.2 million, primarily notes due May 2024 and a third-party note due November 2023. The company also recorded a $1.4 million warrant liability and $0.4 million of operating lease liabilities.
- Balance sheet: Total assets were $27.6 million, total liabilities $19.8 million, and stockholders’ equity $7.9 million. Common shares outstanding increased from 3.6 million at year-end 2022 to 111.7 million at September 30, 2023; the filing reports 127.7 million outstanding as of November 17, 2023.
Material changes and unusual items
- The CXApp spin-off removed the Enterprise Apps business from continuing operations. Nine-month discontinued-operations loss was $4.9 million in 2023 versus $22.8 million in 2022; the periods are not directly comparable because the spin-off closed in March 2023.
- Equity-security volatility materially affected earnings: Q3 2023 included a $5.8 million unrealized gain and a $6.7 million realized loss on equity securities. The prior-year quarter included a $5.9 million unrealized loss. The filing says the 2023 gains primarily reflect FOXO shares.
- The company raised $26.5 million net through its ATM equity program during the nine months, issued shares to exchange debt, and received $2.3 million from warrant exercises. These financings contributed to substantial share-count growth and dilution.
- Goodwill was fully impaired cumulatively by September 30, 2023; the filing reports no goodwill remaining.
Outlook, risks, and contingencies
Management stated that cash, financing facilities, and budgeted cash flows were expected to cover working capital, capital spending, debt repayment, and other existing-operation needs for at least 12 months from issuance of the financial statements. The company nevertheless reported recurring losses and operating cash outflows, acknowledged that profitability is uncertain, and said it may need further financing. Its liquidity outlook depends in part on continued access to capital markets.
- The XTI merger was subject to shareholder, Nasdaq listing, and other closing conditions. Inpixon shareholders were expected to own approximately 40% of the combined company, subject to exchange-ratio adjustments. Inpixon had advanced approximately $2.0 million to XTI by September 30 under a senior secured note; the principal cap was later increased to approximately $3.1 million, and the filing reports approximately $2.7 million outstanding at filing.
- As a condition to the XTI transaction, Inpixon was required to divest Shoom, SAVES, and Game Your Game and applicable investment securities. After quarter-end it agreed to a proposed SAVES spin-off and Damon Motors combination, and purchased a $3.0 million Damon convertible note. These transactions remained subject to conditions.
- Nasdaq had granted an extension through April 8, 2024 to cure the minimum bid-price deficiency. A separate November 2023 delisting determination followed a closing bid price at or below $0.10 for ten consecutive trading days; the company appealed, and a reverse split was among the possible remedies. Delisting could impair share liquidity and access to capital.
- Two shareholder lawsuits and related demand letters alleged omissions or misleading statements in the XTI merger Form S-4. The filing says additional similar claims were possible; it does not provide a clear estimate of potential loss.
- Management cited longer sales cycles, competition and technology change, supply constraints and rising input costs, macroeconomic and geopolitical uncertainty, financing needs, transaction execution, and potential share dilution as risks.
Investor facts to verify
- Current cash, operating cash burn, debt balances, maturities, and actual financing availability after September 30, including subsequent debt-for-equity exchanges.
- Fully diluted share count and potential dilution from ATM sales, warrants, debt exchanges, transaction compensation, and proposed business combinations.
- Status and final economics of the XTI merger, required divestitures, Damon transaction, and proposed Grafiti distribution.
- Nasdaq appeal outcome and any reverse split or other action taken to maintain listing.
- Exposure and realizable value of FOXO and other investment securities, and the effect of their price movements on reported earnings and cash proceeds.
- Developments in the shareholder litigation and any resulting costs, settlements, or required disclosures.