Business context and reporting period
Inpixon (the issuer named in this filing; not XTI Aerospace) filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2020. Inpixon sells indoor positioning, mapping and analytics solutions, along with digital publishing products. Dollar amounts below are in U.S. dollars; financial statements report amounts in thousands unless otherwise noted.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $2.554m | $1.534m | $5.434m | $4.387m |
| Gross profit / margin | $1.909m / 75% | $1.152m / 75% | $3.975m / 73% | $3.278m / 75% |
| Operating loss | $(6.246)m | $(5.684)m | $(16.938)m | $(15.272)m |
| Net loss | $(7.451)m | $(6.579)m | $(20.919)m | $(16.960)m |
| Adjusted EBITDA, non-GAAP | $(4.618)m | $(2.409)m | $(12.381)m | $(6.956)m |
| Operating cash flow | Not separately presented for the quarter | $(15.550)m | $(9.057)m |
- Q3 revenue increased 66%; management attributed growth mainly to Aware and Mapping products and new Systat license sales. Nine-month revenue rose 24%, reflecting more mapping revenue and Systat sales, partly offset by lower Aware sales in Q2.
- Gross margin held at 75% in Q3; the nine-month margin declined to 73%, which management attributed to lower-margin Systat sales.
- At September 30, cash was $31.376m, working capital was positive $23.219m, total assets were $52.593m, and total liabilities were $13.122m. Short-term debt was $6.150m; the balance sheet reported no long-term borrowings. Lease liabilities totaled $1.646m.
- Financing cash flow was $47.053m for the nine months, including $44.041m net common-stock proceeds and $5.0m promissory-note proceeds. Investing cash use was $4.934m.
Material changes versus the prior comparable period
- Operating expenses increased to $8.155m in Q3 and $20.913m for nine months, as revenue growth did not cover higher costs. Management cited Systat expenses, a full nine months of Jibestream costs, professional fees and marketing; lower travel, stock compensation and intangible amortization partly offset increases.
- Net loss grew 13% in Q3 and 23% for nine months. Nine-month other expense rose to $4.068m, including $1.514m of valuation allowance against the Sysorex held-for-sale note and $0.648m against a related-party receivable.
- Operating cash use increased by $6.493m year over year for the nine months. The company attributed the change in part to operating losses, receivables and other working-capital movements.
- The company issued 31.574m shares through its ATM during the nine months, raising about $44.0m net. Common shares outstanding were 42.259m at September 30, compared with 4.235m at December 31, 2019. The filing reflects a 1-for-45 reverse split effective January 7, 2020.
Outlook, commentary, risks and unusual items
- Management said cash and budgeted cash flows were expected to support operations for at least 12 months from the financial-statement issuance date. This is not a profitability forecast; the company reported continuing losses and said it could not assure future profitability.
- The ATM authorization was increased to $150m; the company had raised approximately $44m net through September 30. Further funding depends on market conditions and access to equity capital, and additional share sales could dilute investors.
- COVID-19 caused component supply delays, slower product deliveries, weaker demand for some products, and delays to projects requiring onsite services. Management said the ultimate impact remained uncertain.
- Debt-related unusual items included $2.272m amortization of debt discount and $1.514m valuation allowance on the Sysorex note during the nine months. The company also fully reserved the $0.648m Sysorex settlement receivable. The March 2020 note had approximately $6.805m principal outstanding at September 30.
- Acquisitions and investments: Ten Degrees technology was acquired in August for $1.5m cash and 480,000 shares. Subsequent to quarter-end, Inpixon acquired Nanotron for stated consideration of $8.7m, subject to adjustments, and paid $1.8m for an investment in Cardinal Venture Holdings. The Cardinal investment involves the CEO’s membership interest in the entity; Inpixon generally has no management or voting control.
- Customer concentration remained significant: two customers represented 31% and 12% of Q3 revenue; one customer accounted for 44% of receivables at quarter-end. Nasdaq listing remained subject to a Panel Monitor through February 5, 2021. The filing reported no material pending legal proceedings and stated disclosure controls were effective.
Important facts for investors to verify
- Confirm the issuer: this filing is for Inpixon, not XTI Aerospace, and verify that it is the intended filing for the requested company.
- Assess the cash runway against the $15.550m nine-month operating cash burn, current debt, lease commitments and subsequent acquisition and investment spending.
- Review the Sysorex note’s collectability and the related-party receivable, including the full valuation allowances and any subsequent developments.
- Evaluate dilution from ATM sales and other equity issuance, and the remaining capacity and terms of the $150m ATM program.
- Track revenue mix, gross-margin pressure, customer concentration, COVID-related delivery and demand effects, acquisition integration, and Nasdaq listing compliance.