Business Context and Reporting Period
This Form 8-K Current Report was filed by Inpixon (trading symbol: INPX) on June 19, 2020. The filing details two primary corporate actions: the entry into an exclusive software license agreement with Systat Software, Inc. and Cranes Software International Ltd., and an amendment to an existing Equity Distribution Agreement to increase the offering size.
Key Financial Metrics and Agreements
Systat License Agreement
- Consideration: Inpixon agreed to pay $2,200,000 in cash on the closing date.
- Note Assignment: Inpixon will assign rights to receive up to $6,300,000 under a promissory note issued by Sysorex, Inc. to Systat. The assignment schedule is: $3.0 million at closing, $1.3 million at three months, $1.0 million at six months, and $1.0 million at nine months.
- Option to Purchase: Inpixon has an option within the first 5 years to purchase the software assets for an additional assignment of $1,000,000 in principal under the Sysorex Note.
- Term: The license agreement is for a period of 15 years.
At-The-Market Offering
- Increased Cap: The aggregate gross sales amount under the Equity Distribution Agreement with Maxim Group LLC was increased from $50.0 million to $150.0 million.
- Current Status: As of June 19, 2020, Inpixon sold 29,071,766 shares for approximately $42.3 million.
- Remaining Capacity: Approximately $107.7 million in common stock remains available for sale under the agreement.
- Commissions: Maxim receives 4.0% on the first $50.0 million and 3.25% on the remaining $100.0 million of gross proceeds.
Unregistered Sales
- Exchange Shares: Since May 18, 2020, the company issued 894,549 shares of Common Stock to a noteholder in exchange for partitioned notes totaling $1,215,176.
- Price: The weighted average price per share was $1.36.
- Outstanding Shares: As of June 19, 2020, there were 39,276,721 shares of Common Stock issued and outstanding.
Material Changes and Related Party Transactions
The filing discloses significant related party transactions. Nadir Ali, Inpixon's CEO and director, is also a director of Sysorex, the issuer of the note being assigned as consideration. Additionally, directors Tanveer Khader and Kareem Irfan have employment relationships with the Systat Parties. The filing notes that the Sysorex Note assignment is contingent on the closing of the Systat License Agreement.
Guidance, Risks, and Contingencies
Management Commentary and Outlook
Management anticipates that the Systat licenses will result in increased revenues and allow Inpixon to provide a comprehensive indoor intelligence platform. However, the company explicitly states there is no assurance that the transaction will close or that the existing customer base will be retained.
Material Risks
- Cranes Bankruptcy Risk: Cranes Software International Ltd. is defending petitions from creditors, faces potential fines from Indian regulators, and owes significant taxes. There is a substantial risk of involuntary bankruptcy or receivership, which could void the license agreement or impair Inpixon's rights.
- Integration Risks: Combining the acquired technologies and personnel may disrupt current operations, divert management attention, and result in the loss of key personnel or customers.
- Regulatory and Data Privacy: The company faces evolving regulations regarding data privacy (GDPR, CCPA) and contact tracing technologies. Non-compliance could result in fines up to $7,500 per violation under CCPA and limit market adoption.
- Intellectual Property: Failure to comply with license obligations could result in termination of rights. Additionally, third-party infringement claims could arise despite indemnification provisions.
Investor Verification Checklist
- Verify the financial stability and litigation status of Cranes Software International Ltd. to assess the risk of the license agreement being voided.
- Confirm the solvency of Sysorex, Inc., as a significant portion of the Systat consideration depends on the repayment of the Sysorex Note.
- Review the specific terms of the "Offset Right" regarding indemnification losses against the Sysorex Note.
- Monitor the execution of the At-The-Market offering to determine if the remaining $107.7 million will be sold and at what price dilution.
- Assess the impact of data privacy regulations (GDPR, CCPA) on the company's new Workplace Readiness and contact tracing solutions.