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Description of Business, the Spin-Off and Going Concern and Management's Plans
9 Months Ended
Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business, the Spin-Off and Going Concern and Management's Plans

Note 1 — Description of Business, the Spin-Off and Going Concern and Management's Plans

 

Description of Business

 

The Company through its wholly-owned subsidiary, Sysorex Government Services, Inc., formerly known as (f/k/a) Inpixon Federal, Inc. ("SGS") (unless otherwise stated or the context otherwise requires, the terms "SGS" "we," "us," "our" and the "Company" refer collectively to Sysorex, Inc. and SGS), provides information technology solutions primarily to the public sector. These solutions include cybersecurity, professional services, engineering support, IT consulting, enterprise level technology, networking, wireless, help desk and custom IT solutions. The Company is headquartered in Virginia.

 

The Spin-Off

 

On August 31, 2018 (the "Distribution Date"), the Company became an independent company through the pro rata distribution by Inpixon of 100% of the outstanding common stock of Sysorex to Inpixon equity holders (the "Distribution"). Each Inpixon equity holder of record as of the close of business on August 21, 2018 received one share of the Company's common stock (on a pre-reverse stock split basis) for every three shares of Inpixon common stock held on the record date or such number of shares of common stock issuable upon complete conversion of Inpixon convertible preferred stock or exercise of certain participating warrants. Approximately 400,000 shares of the Company's common stock were distributed on the Distribution Date to Inpixon equity holders. In connection with the initial Distribution of its common stock, the Company reserved 117,917 shares of common stock for issuance in treasury (a) to the holders of certain Inpixon warrants who will be entitled to receive shares of the Company's common stock if the warrants are exercised, and (b) the holders of Inpixon securities that were subject to beneficial ownership limitations in connection with the distribution and for future issuances. The Company's common stock began regular-way trading on the OTC Markets under the symbol "SYSX" on September 4, 2018.

 

Immediately prior to the Distribution, Inpixon transferred substantially all of the assets and liabilities and operations of Inpixon's value added reseller business to the Company, which was completed on August 31, 2018 (the "Capitalization"). The Company's condensed consolidated financial statements prior to the Capitalization were prepared on a stand-alone basis and were derived from Inpixon's condensed consolidated financial statements and accounting records. The condensed consolidated financial statements included herein reflect the Company's financial position, results of operations, and cash flows as the Company's business was operated as part of Inpixon's prior to the Capitalization. Following the Capitalization, the condensed consolidated financial statements include the accounts of the Company and SGS. All periods presented have been accounted for in conformity with the accounting principles that are generally accepted in the United States of America ("GAAP").

 

Going Concern and Management's Plans

 

As of September 30, 2019, the Company had cash balance of $48,000 and a working capital deficit of approximately $9.3 million. In addition, the Company has a stockholders' deficit of approximately $19.3 million. For the nine months ended September 30, 2019 and 2018, the Company incurred net losses of approximately $4.7 million and $5.4 million, respectively. The aforementioned factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the condensed consolidated financial statements are issued.

 

The Company does not believe that its capital resources as of September 30, 2019, availability on the Payplant facility to finance purchase orders and invoices in an amount equal to 80% of the face value of purchase orders received, funds from financing from our related party note (as defined in Note 7 below) and other short-term borrowings, higher margin public sector contracts capture, reauthorization of key vendors and credit limitation improvements will be sufficient to fund planned operations during the year ending December 31, 2019. As a result, substantial doubt exists that the Company will be able to support its obligations for the next twelve months. The Company may raise additional capital as needed, through the issuance of equity, equity-linked or debt securities. In addition, the Company is evaluating various strategic transactions and acquisitions of companies with technologies and intellectual property that the Company believes will enhance our products and services by adding technology, differentiation, customers and/or revenue. The Company is primarily looking for accretive opportunities that have business value and operational synergies. If the Company makes any acquisitions in the future, the Company expects to pay for such acquisitions using our equity securities, cash and debt financing in combinations appropriate for each acquisition. The Company may face significant competition in seeking appropriate strategic transaction opportunities and the negotiation process for any strategic transaction can be time-consuming and complex. In addition, the Company may not be successful in its efforts to engage in certain strategic transactions because its financial resources may be insufficient. The Company may not be able to expand its business or realize its strategic goals if it does not have sufficient funding or cannot borrow or raise additional capital. There is no assurance that the Company will be able to complete any acquisition or following an acquisition transaction or other strategic transaction, the Company will achieve expected results.

 

The Company's condensed consolidated financial statements as of September 30, 2019 have been prepared under the assumption that we will continue as a going concern for the next twelve months from the date the financial statements are issued. Management's plans and assessment of the probability that such plans will mitigate and alleviate any substantial doubt about the Company's ability to continue as a going concern, is dependent upon the ability to attain funding to secure additional resources to generate sufficient revenues and increased margin. The Company's condensed consolidated financial statements as of September 30, 2019 do not include any adjustments that might result from the outcome of this uncertainty.