Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

Discontinued Operations
12 Months Ended
Dec. 31, 2019
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

Note 12 - Discontinued Operations


Sale of Sysorex Arabia


As of December 31, 2015, the Company's management decided to close its Saudi Arabia legal entity as business activities and operations have been strategically shifted according to the business plan of the Company. On January 18, 2018, the Company sold its 50.2% interest in Sysorex Arabia to SCI in consideration for SCI's assumption of 50.2% of the assets and liabilities of Sysorex Arabia, totaling approximately $11,500 and $1 million, respectively.


The Company did not recognize any depreciation or amortization expense related to discontinued operations during the years ended December 31, 2019 and 2018. There were no significant capital expenditures or non-cash operating or investing activities of discontinued operations during the periods presented. The operations of Sysorex Arabia were insignificant for the January 1 – 18, 2018 period. On January 18, 2018, the Company sold its 50.2% interest in Sysorex Arabia to SCI (Abdus Salam Qureishi, the former Chairman of the Board, is the majority stockholder of SCI and is the father in law of Nadir Ali the Company's CEO) in consideration for SCI's assumption of 50.2% of the assets and liabilities of Sysorex Arabia.


Spin-Off of Sysorex, Inc. and its wholly owned subsidiary, Sysorex Government Services, Inc.


On August 31, 2018, the Company completed the spin-off (the "Spin-off") of its enterprise infrastructure business from its indoor positioning analytics business by way of a distribution of all the shares of common stock of the Company's wholly-owned subsidiary, Sysorex, Inc. ("Sysorex"), to the Company's stockholders of record as of August 21, 2018 (the "Record Date") and certain warrant holders. The distribution occurred by way of a pro rata stock distribution to such common stock, preferred stock and warrant holders, each of whom received one share of Sysorex's common stock for every 3 shares of the Company's common stock held on the Record Date (without taking into effect the 1-for-40 reverse stock split) or such number of shares of common stock issuable upon complete conversion of the preferred stock or exercise of the warrants.


As a result of the Spin-off, the Company's common stock continues trading on the Nasdaq Stock Market ("Nasdaq"), and Sysorex is an independent public company with common stock that is quoted on the OTC Markets.


In accordance with ASC 205-20, "Discontinued Operations," the results of Sysorex, including Inpixon's former subsidiary, Sysorex Government Services, Inc., formerly Inpixon Federal, Inc. ("SGS"), are reflected in Inpixon's consolidated financial statements as discontinued operations and, therefore, are presented as loss from discontinued operations on the consolidated statements of operations.


Gain on Earnout


Under the terms of the asset purchase agreement between Integrio Technologies, LLC and Emtec Federal, LLC (its wholly owned subsidiary) (collectively, the "Seller") and the Company and SGS, the Seller was eligible for an earnout that was included as part of the purchase consideration. During the year ended December 31, 2018, the Company determined that the Seller was ineligible for a portion of the earnout as the Seller did not meet the terms of the earnout provisions under the agreement and therefore recorded a gain on earnout of $934,000, which is included in the net loss from discontinued operations section of the consolidated statements of operations. 


The assets and liabilities that were divested as part of the Spin-off completed on August 31, 2018 were as follows:


Sysorex/SGS Assets/Liabilities (In thousands)

Accounts receivable, net   $ 651  
Notes and other receivables     473  
Prepaid licenses and maintenance contracts     5  
Other current assets     146  
Property and equipment, net     41  
Intangible assets, net     3,728  
Other assets     34  
Total Assets   $ 5,078  
Accounts payable   $ (15,952 )
Accrued liabilities     (792 )
Deferred revenue     (70 )
Other liabilities     (40 )
Acquisition liability - Integrio     (62 )
Total Liabilities   $ (16,916 )
Total Net Liabilities Deconsolidated as Result of Spin-off   $ (11,838 )