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Description of Business, the Spin-Off and Going Concern and Management's Plans
3 Months Ended
Mar. 31, 2020
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

 

Sysorex, Inc., 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.

 

Going Concern and Management’s Plans

 

As of March 31, 2020, the Company had a working capital deficit of approximately $10.3 million. In addition, the Company has a stockholders’ deficit of approximately $21.2 million. For the three months ended March 31, 2020 and 2019, the Company incurred net losses of approximately $1.2 million and $1.9 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 March 31, 2020, 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 and other short-term borrowings (as defined in Notes 5 and 6 below), 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, 2020. As a result, substantial doubt exists the Company will be able to support its obligations for the next twelve months from the issuance date of the financial statements. The Company may raise additional capital as needed, through the issuance of equity, equity-linked or debt securities. The Company’s condensed consolidated financial statements as of March 31, 2020 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 March 31, 2020 do not include any adjustments that might result from the outcome of this uncertainty.

 

Impact of COVID 19

 

The outbreak of the novel coronavirus, SARS-CoV-2, which causes coronavirus disease 2019 (COVID-19), has evolved into a global pandemic. COVID -19 has spread to many regions of the world, including the United States. In response to the pandemic, the Company has implemented a work from home policy, with all employees continuing their work outside of the Company’s office. The Company’s sales and services activities to our customers, predominately the Federal and Local Government, are causing disruption and curtailment of our product offering and services as many of the offices and field locations are now closed.

 

The Company is maintaining its overall headcount but continues to identify potential reductions in cash flows for operating expenses and other purchases to the extent possible. On May 3, 2020, the Company received a loan of approximately $349,700 under the Payroll Protection Program as part of the Coronavirus Aid, Relief and Economic Security Act (see Note 9 – Subsequent Events). While the company expects some degree of an adverse impact on revenues in the second quarter of 2020 and possibly the third quarter of 2020, the Company will need to implement its plan as discussed above in Going Concern and Management’s Plans.