Inpixon, Inc. (Nasdaq: INPX) — Form 10-Q Summary
Issuer note: The filing identifies the registrant as Inpixon, not XTI Aerospace. It covers the quarter and six months ended June 30, 2020. Financial statement amounts below are in U.S. dollars; unless stated otherwise, amounts are in millions.
Business context and reporting period
Inpixon describes itself as an indoor-intelligence company offering positioning, mapping, analytics and related software and services to business and government customers, as well as digital publishing products. The unaudited interim statements reflect the company’s consolidated results and should be read with its 2019 Form 10-K. A 1-for-45 reverse stock split effective January 7, 2020 is reflected in reported share and per-share data.
Financial performance and liquidity
| Metric | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 |
|---|---|---|---|---|
| Revenue | $1.076 | $1.491 | $2.880 | $2.854 |
| Gross profit / margin | $0.771 / 72% | $1.100 / 74% | $2.066 / 72% | $2.127 / 75% |
| Operating expenses | $5.899 | $5.825 | $12.759 | $11.714 |
| Operating loss | $(5.128) | $(4.725) | $(10.693) | $(9.587) |
| Net loss | $(7.304) | $(5.231) | $(13.469) | $(10.380) |
| Adjusted EBITDA loss (non-GAAP) | $(3.879) | $(1.939) | $(7.764) | $(4.546) |
- Second-quarter revenue fell 28% year over year; first-half revenue increased about 1%. Recurring revenue was $0.839 million in Q2 and $1.701 million for the first half, versus $0.603 million and $1.214 million, respectively, in 2019.
- Management attributed the second-quarter revenue decline to COVID-related customer delays, including a postponed sensor order. Gross margin declined as mapping services contributed at lower margins. Operating expenses increased 1% in Q2 and 9% for the first half, with management citing Jibestream-related costs.
- Other expense was $2.176 million in Q2 and $2.863 million for the first half. Drivers included interest and debt-discount expense and valuation allowances of $0.835 million against the Sysorex note and $0.648 million against a related-party receivable.
- Net cash used in operating activities was $10.369 million for the first half, compared with $6.568 million in 2019. Investing cash use was $0.472 million; financing provided $45.537 million. Cash and cash equivalents were $39.458 million at June 30; cash, cash equivalents and restricted cash totaled $39.530 million.
- Working capital was $30.002 million, versus a $6.975 million deficit at December 31, 2019. Total current liabilities were $12.455 million. Short-term debt was $5.523 million on the balance sheet; the filing separately identifies $6.465 million of principal on the March 2020 note and approximately $6.7 million of principal and accrued interest in its risk discussion.
- Management said available funds were expected to support operations for at least 12 months after issuance of the statements. This is management’s estimate, not a profitability forecast.
Material changes, financing and unusual items
- The company raised approximately $41.8 million net through its at-the-market equity program during the first half, including $40.5 million in Q2. The program’s maximum was increased from $50 million to $150 million in June. It issued 29.0 million shares through the ATM in Q2; common shares issued rose from 4.2 million at year-end 2019 to 40.2 million at June 30, 2020. A further 1.6 million shares generated about $2.3 million net after quarter-end.
- Inpixon exchanged approximately $4.6 million of note balances for 3.89 million shares during Q2. Several older notes were fully satisfied through share exchanges. The March 2020 note, originally funded with $5 million and carrying $6.465 million initial principal including discount and fees, remained outstanding at June 30; it carries 10% interest and matures in March 2021, with cash-redemption provisions and a stated 22% default rate.
- On June 30, the company acquired an exclusive 15-year license to market, distribute and develop SYSTAT and SigmaPlot software. Consideration includes $2.2 million cash paid July 8 and assignments of portions of the Sysorex note, including a $3 million note at closing and scheduled additional assignments totaling $3.3 million. The purchase-price allocation was preliminary and subject to valuation.
- The Sysorex note was classified as held for sale and had a full valuation allowance at June 30; the company also fully reserved a related-party receivable of approximately $0.648 million. These write-downs reflect uncertainty about collection.
- Basic and diluted loss per share was $(0.32) for Q2 and $(0.97) for the first half. Year-over-year per-share comparisons are substantially affected by the reverse split and large changes in weighted-average shares.
Outlook, risks and controls
- No formal revenue, earnings or cash-flow guidance is provided. Management reported a substantial sensor purchase order and reseller partnerships for workplace-readiness solutions after quarter-end, but stated there is no assurance these opportunities will offset pandemic-related effects.
- COVID-19 caused supply-chain delays, lower demand for some products, delayed projects and customer orders, and constraints on onsite services. The duration and business impact remained uncertain.
- Key risks include continuing losses and cash burn, dependence on financing and potentially dilutive equity issuance, debt-service obligations, long sales cycles, technology and acquisition integration risks, customer and vendor concentration, data-privacy regulation, and the collectability of Sysorex-related balances.
- Inpixon’s Nasdaq listing was subject to a Panel Monitor through February 5, 2021. The filing warns that renewed bid-price or other listing deficiencies during the monitoring period could lead to a delisting determination.
- The filing reports no material pending legal proceedings beyond ordinary routine litigation. It says a material weakness relating to support for projections used in valuing the Sysorex note was remediated during Q2 through enhanced technical-accounting support; management concluded disclosure controls were effective at June 30.
- The company disclosed significant risks related to the Systat license, including integration and customer-retention challenges, possible conflicts involving the CEO’s Sysorex directorship, and Cranes’ creditor and regulatory difficulties that could threaten the licensed rights.
Investor verification checklist
- Reconcile the March 2020 note’s stated principal, accrued interest, unamortized discount and balance-sheet debt classification, and review its redemption, maturity and default terms.
- Assess the pace of operating cash burn against the 12-month liquidity assertion, including reliance on further ATM sales and the resulting dilution.
- Verify collection assumptions and valuation support for the Sysorex note and related-party receivable, including the effects of assigning note rights to Systat.
- Review the final Systat purchase-price allocation, scheduled consideration, license protections and Cranes-related risks, and determine whether the reported purchase economics and operating contribution are clear.
- Track execution of the post-quarter sensor order and workplace-readiness partnerships, as well as COVID-related supply and customer delays.
- Monitor Nasdaq listing compliance and whether the reported internal-control remediation remains effective.