Business context and reporting period
This is Inpixon, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. The filing identifies the registrant as Inpixon, not XTI Aerospace, Inc. Inpixon describes itself as an indoor-intelligence company providing indoor positioning, mapping, real-time location, analytics, workplace-app, and related software and services. It reports three segments: Indoor Intelligence, Saves, and Shoom.
Inpixon expanded through acquisitions in 2021, including CXApp, Game Your Game, and Visualix, and purchased additional Systat assets. Acquisitions and the related costs contributed to higher revenue and operating expenses.
Financial results and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $4.45 million | $2.55 million | $10.86 million | $5.43 million |
| Gross profit / margin | $3.26 million / 73% | $1.91 million / 75% | $7.89 million / 73% | $3.98 million / 73% |
| Operating expenses | $15.72 million | $8.16 million | $46.06 million | $20.91 million |
| Loss from operations | $12.46 million | $6.25 million | $38.17 million | $16.94 million |
| Net loss | $33.95 million | $7.45 million | $31.98 million | $20.92 million |
| Net loss per share, basic and diluted | $0.29 | $0.18 | $0.31 | $0.90 |
| Adjusted EBITDA loss | $6.68 million | $4.62 million | $18.51 million | $12.38 million |
At September 30, 2021, cash and cash equivalents were $66.8 million and short-term investments were $43.2 million. Working capital surplus was $96.8 million. Total assets were $191.0 million, total liabilities were $26.7 million, and short-term debt was $3.3 million. Series 7 convertible preferred stock of $39.5 million was classified as mezzanine equity.
For the first nine months, operating cash outflow was $24.0 million, investing cash outflow was $52.7 million, and financing cash inflow was $125.4 million. Cash increased by $48.8 million from year-end 2020. Financing included approximately $77.9 million net proceeds from common-stock and warrant offerings and $50.6 million from preferred-stock and warrant issuance.
Material changes versus prior comparable periods
- Revenue increased 74% in Q3 and approximately 100% for the nine-month period. Management attributed the growth mainly to Indoor Intelligence, acquired products and technologies, and increased Saves sales.
- Operating expenses rose substantially, reflecting acquired-business costs, higher stock-based compensation, intangible amortization, CXApp earnout compensation, and increased wages and infrastructure spending. Q3 gross margin declined two percentage points, which management attributed to sales mix; nine-month gross margin was unchanged.
- Q3 net loss widened to $33.9 million, largely because of a $22.3 million unrealized loss on Sysorex securities and higher operating expenses. For the nine months, the $32.0 million net loss included a $49.8 million gain on settlement of a related-party Sysorex debt and a $51.3 million unrealized loss on the securities received in settlement, as well as a $7.3 million valuation-allowance benefit.
- Common shares outstanding increased from approximately 53.2 million at December 31, 2020 to approximately 124.6 million at September 30, 2021. The company also had substantial outstanding warrants and convertible preferred stock.
Outlook, commentary, risks, and unusual items
- Management stated that existing funds were expected to support operations for the 12 months following issuance of the financial statements, while warning that economic conditions or difficulty accessing capital could affect liquidity and growth plans. No specific revenue or earnings guidance was provided.
- COVID-19-related supply constraints, higher costs, hardware delivery delays, customer project delays, and uncertainty in demand continued. Management said the ultimate effect remained uncertain.
- The Series 7 preferred stock gives holders a cash-redemption right during a specified window beginning six months after issuance. The terms also require the company to maintain a prescribed cash balance through June 14, 2022. The filing notes that this may limit cash available for deployment.
- The Series 7 offering included warrants for up to 47 million common shares. Inpixon disclosed that it had insufficient authorized common shares to cover potential warrant exercises and needed stockholder approval or an alternative corporate action.
- Inpixon reported a Nasdaq minimum-bid-price deficiency notice dated October 25, 2021, with a stated compliance deadline of April 25, 2022; failure to regain compliance could lead to delisting.
- The Sysorex securities were valued at $7.7 million at quarter-end, down from their carrying value in the prior quarter. Their market-price volatility can materially affect reported assets and earnings.
- Management reported no material pending legal proceedings other than routine litigation. It also concluded that disclosure controls were effective at quarter-end.
Important facts for investors to verify
- Confirm the issuer and filing match the intended company: this 10-Q is for Inpixon, not XTI Aerospace, Inc.
- Review the Series 7 preferred-stock redemption and minimum-cash provisions, including the cash needed if holders exercise redemption rights.
- Assess potential dilution from warrants, convertible preferred stock, stock awards, and the company’s need for additional authorized common shares.
- Examine the Sysorex investment valuation, market liquidity, and sensitivity of earnings and assets to further price declines.
- Track operating cash burn, acquisition integration and costs, and whether management’s stated 12-month liquidity expectation remains supportable.
- Monitor Nasdaq bid-price compliance and the effects of supply-chain disruption and customer delays on revenue and margins.