Inpixon(INPX) - 2019 Q4 - Annual Report

Market Growth and Opportunities - The Global Indoor Positioning and Navigation market is projected to grow from $6.92 billion in 2017 to $54.60 billion by 2026, at a CAGR of 25.8%[25] - The indoor location market is expected to increase from $7.11 billion in 2017 to $40.99 billion by 2022, with a CAGR of 42%[25] - The LBS and RTLS market is forecasted to grow from $16.0 billion in 2019 to $40.0 billion by 2024, at a CAGR of 20.1%[25] - The video surveillance market is forecasted to grow from $36.9 billion in 2018 to $68.3 billion by 2023, at a CAGR of 13.1%, highlighting a significant market opportunity for the company's integrated solutions[66] Technology and Product Development - Inpixon's indoor intelligence platform utilizes sensor technology to detect cellular, Wi-Fi, Bluetooth, UWB, and RFID signals, providing near real-time insights for enhanced visibility and security[20] - The company aims to expand its use of ultra-wideband technology for asset tracking and enhance its positioning capabilities to offer a "blue dot" experience[31] - Inpixon's analytics platform integrates data from various sources, providing comprehensive insights for customers[31] - The IPA Wi-Fi product offers cloud-based visitor analytics, enabling organizations to understand visitor behavior and journey[33] - The company has a patented portfolio of algorithms and technology for indoor mapping, aiming to provide a "blue-dot navigation" experience for users[39] - The company plans to enhance its Inpixon IPA suite and existing tag tracking solutions, utilizing RFID, Dash7, and UWB frequencies for asset tracking with an accuracy of less than 0.5 meters[37] - The company intends to leverage advancements in battery technology and wearables to design new tag solutions for high-value assets[37] - The company is focused on leveraging AI and machine learning to improve device positioning and predictive analytics for security and marketing[34] Acquisitions and Strategic Moves - Inpixon has made strategic acquisitions, including Locality Systems, Inc. and Jibestream Inc., to enhance its technology and product offerings[23] - The company executed a reverse stock split at a ratio of 1-for-45 effective January 7, 2020, to comply with Nasdaq Listing Rule 5550(a)(2)[70] - The company completed the acquisition of Jibestream, integrating its indoor mapping and location technology into its operations, which has been deployed in hundreds of venues worldwide[69] - The company acquired assets from GTX, including a portfolio of GPS technologies and a smart school safety network solution, enhancing its product offerings[67] - The company has completed eight acquisitions since 2013, including Locality Systems and Jibestream, which may complicate future evaluations of its business[75] Financial Performance and Challenges - The company's top three customers accounted for approximately 66% and 49% of gross revenue during the years ended December 31, 2019, and 2018, respectively, with one customer alone accounting for 42% of gross revenue in 2019[43] - As of December 31, 2019, the company had cash and cash equivalents of approximately $4.8 million, up from $1 million at the end of 2018, but continues to incur significant operating losses[90] - The company has incurred net losses of approximately $34.0 million and $24.6 million for the fiscal years ended 2019 and 2018, respectively, indicating a history of operating losses[95] - Revenues have increased by 68% compared to the same period in 2018, but are still insufficient to cover operating losses[96] - The company reported a working capital deficiency of approximately $7.0 million and $3.9 million as of December 31, 2019 and December 31, 2018, respectively[95] - The company anticipates needing additional capital to support operations, which may involve dilutive equity offerings[87] - The company may need additional cash financing to support growth and operations, and failure to obtain such financing could limit its ability to respond to market demand[147] Risks and Legal Challenges - The company faces risks related to the integration of acquired businesses, which may disrupt ongoing operations and affect financial performance[78] - The company is subject to various risks that could materially harm its business and financial condition, including potential liabilities from acquisitions[86] - The company faces potential legal claims related to the wrongful use of trade secrets, which could result in substantial costs and distract management from core operations[117] - Governmental inquiries or adverse findings could materially affect the company's business, leading to increased legal fees and management distraction[118] - The company is exposed to numerous legal and regulatory requirements, and violations could result in significant fines and reputational damage[126] - The company acknowledges the risk of not being able to develop new products or enhance existing ones to keep pace with rapidly changing technology and customer requirements[171] Operational and Management Considerations - The company employs 109 individuals, including 80 technical and engineering personnel, reflecting a strong focus on technical capabilities[50] - The company may need to increase its employee infrastructure to manage future growth effectively, which could impact financial performance[93] - The loss of key personnel, including the CEO, could significantly impact the company's operations and productivity[121] - Internal system failures could disrupt business operations, impair service delivery, and negatively affect revenues and profitability[122] - The obligations of being a public company may divert management's attention from business operations and increase compliance costs[201] Market and Competitive Landscape - The company operates in a highly competitive market, which may force it to reduce prices for products and services, adversely affecting operating results[137] - Customer purchases are often subject to budget constraints and delays, which could adversely affect the company's business and financial condition[139] - The market acceptance of the company's products is critical, and failure to meet customer demands could materially affect financial results and growth prospects[149] - International operations expose the company to geopolitical and economic risks, which could negatively impact results[158] - Changes in U.S. administrative policy, including potential increases in tariffs on goods imported from China, could negatively impact the company's financial performance and supply chain economics[166] Future Outlook and Strategic Initiatives - The company is exploring opportunities to monetize its technology and services, but there is no assurance of success[92] - Significant investments in research and development are planned, but these may not yield immediate revenue or benefits[154] - The company expects to continue issuing securities to raise additional capital or satisfy outstanding debt obligations, which could significantly increase the number of outstanding shares[216] - Following the Spin-off, the company generates significantly less revenue compared to historical periods, although future revenue growth is anticipated[191] - The company does not intend to pay cash dividends to stockholders, focusing instead on retaining future earnings for growth[193]