Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 11, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Sysorex Global | |
Entity Central Index Key | 1,529,113 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 26,709,460 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current Assets | ||
Cash and cash equivalents | $ 505 | $ 4,060 |
Accounts receivable, net | 7,785 | 12,209 |
Notes and other receivables | 1,294 | 1,340 |
Inventory | 852 | 755 |
Prepaid licenses and maintenance contracts | 6,971 | 7,509 |
Assets held for sale | 772 | 772 |
Prepaid assets and other current assets | 1,994 | 1,967 |
Total Current Assets | 20,173 | 28,612 |
Prepaid licenses and maintenance contracts, non-current | 5,876 | 6,586 |
Property and equipment, net | 1,442 | 1,392 |
Software development costs, net | 1,946 | 1,281 |
Intangible assets, net | 13,992 | 17,161 |
Goodwill | 13,166 | 13,166 |
Other assets | 425 | 517 |
Total Assets | 57,020 | 68,715 |
Current Liabilities | ||
Accounts payable | 10,170 | 9,320 |
Accrued liabilities | 1,786 | 2,992 |
Derivative liability | 11 | |
Deferred revenue | 11,912 | 9,095 |
Short-term debt | 4,600 | 9,417 |
Liabilities held for sale | 2,037 | 2,026 |
Total Current Liabilities | 30,516 | 32,850 |
Long Term Liabilities | ||
Deferred revenue, non-current | 6,764 | 7,666 |
Long-term debt | 3,753 | 1,226 |
Other liabilities | 341 | 542 |
Acquisition liability - LightMiner | 567 | 3,475 |
Total Liabilities | 41,941 | 45,759 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Convertible Series 1 Preferred Stock - $1,000.00 stated value; 5,000,000 shares authorized; 2,250 and 0 issued and outstanding at September 30, 2016 and December 31, 2015, respectively. Liquidation preference of $2,250,000 and $0 at September 30, 2016 and December 31, 2015, respectively. | 1,340 | |
Common stock - $0.001 par value; 50,000,000 shares authorized; 26,948,288 and 25,309,863 issued and 26,709,460 and 25,071,035 outstanding at September 30, 2016 and December 31, 2015, respectively | 27 | 25 |
Additional paid-in capital | 62,174 | 58,226 |
Treasury stock, at cost, 238,828 shares | (695) | (695) |
Due from Sysorex Consulting Inc. | (666) | (666) |
Accumulated other comprehensive income | 65 | 31 |
Accumulated deficit (excluding $2,442 reclassified to additional paid in capital in quasi-reorganization) | (45,548) | (32,359) |
Stockholders' Equity Attributable to Sysorex Global | 16,697 | 24,562 |
Non- controlling Interest | (1,618) | (1,606) |
Total Stockholders' Equity | 15,079 | 22,956 |
Total Liabilities and Stockholders' Equity | $ 57,020 | $ 68,715 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Convertible series 1 preferred stock, par value | $ 1,000 | $ 1,000 |
Convertible series 1 preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Convertible series 1 preferred stock, shares issued | 2,250 | 0 |
Convertible series 1 preferred stock, shares outstanding | 2,250 | 0 |
Convertible series 1 preferred stock, liquidation preference | $ 2,250 | $ 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 26,948,288 | 25,309,863 |
Common stock, shares outstanding | 26,709,460 | 25,071,035 |
Treasury stock, shares | 238,828 | 238,828 |
Accumulated deficit reclassified to additional paid in capital in quasi-reorganization | $ 2,442 | $ 2,442 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues | ||||
Products | $ 8,366 | $ 10,706 | $ 27,871 | $ 34,637 |
Services | 2,874 | 4,168 | 10,788 | 12,057 |
Total Revenues | 11,240 | 14,874 | 38,659 | 46,694 |
Cost of Revenues | ||||
Products | 6,873 | 8,601 | 22,363 | 27,601 |
Services | 1,269 | 1,885 | 5,807 | 4,962 |
Total Cost of Revenues | 8,142 | 10,486 | 28,170 | 32,563 |
Gross Profit | 3,098 | 4,388 | 10,489 | 14,131 |
Operating Expenses | ||||
Research and development | 587 | 207 | 1,711 | 620 |
Sales and marketing | 1,876 | 2,693 | 6,713 | 8,231 |
General and administrative | 3,699 | 3,542 | 11,116 | 9,768 |
Acquisition related costs | 22 | 13 | 52 | 200 |
Amortization of intangibles | 1,056 | 1,056 | 3,169 | 2,938 |
Total Operating Expenses | 7,240 | 7,511 | 22,761 | 21,757 |
Loss from Operations | (4,142) | (3,123) | (12,272) | (7,626) |
Other Income (Expense) | ||||
Interest expense | (639) | (120) | (1,037) | (340) |
Other income | 15 | 2 | 54 | 39 |
Change in fair value of derivative liability | 41 | 41 | ||
Change in fair value of shares to be issued | 5 | 69 | 13 | 157 |
Total Other Income (Expense) | (578) | (49) | (929) | (144) |
Net Loss | (4,720) | (3,172) | (13,201) | (7,770) |
Net Loss Attributable to Non-controlling Interest | (4) | (4) | (12) | (7) |
Net Loss Attributable to Stockholders of Sysorex Global | $ (4,716) | $ (3,168) | $ (13,189) | $ (7,763) |
Net Loss Per Share - Basic and Diluted | $ (0.18) | $ (0.16) | $ (0.52) | $ (0.39) |
Weighted Average Shares Outstanding | ||||
Basic and Diluted | 26,151,764 | 19,833,000 | 25,464,674 | 19,802,035 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net Loss | $ (4,720) | $ (3,172) | $ (13,201) | $ (7,770) |
Unrealized foreign exchange gain/(loss) from cumulative translation adjustments | 15 | (17) | 34 | (22) |
Comprehensive Loss | $ (4,705) | $ (3,189) | $ (13,167) | $ (7,792) |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) $ in Thousands | Total | Series 1 Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Treasury Stock | Due from Sysorex Consulting, Inc. | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Non-Controlling Interest |
Balance at Dec. 31, 2015 | $ 22,956 | $ 25 | $ 58,226 | $ (695) | $ (666) | $ 31 | $ (32,359) | $ (1,606) | |
Balance, shares at Dec. 31, 2015 | 25,309,863 | (238,828) | |||||||
Series 1 redeemable convertible preferred stock issued | 1,340 | $ 1,340 | |||||||
Series 1 redeemable convertible preferred stock issued, shares | 2,250 | ||||||||
Common shares issued for services | 47 | 47 | |||||||
Common shares issued for services, shares | 95,000 | ||||||||
Issuance of LightMiner Acquisition Shares | 2,895 | $ 2 | 2,893 | ||||||
Issuance of LightMiner Acquisition Shares, shares | 1,543,425 | ||||||||
Stock options granted to employees for services | 1,008 | 1,008 | |||||||
Cumulative translation adjustment | 34 | 34 | |||||||
Net loss | (13,201) | (13,189) | (12) | ||||||
Balance at Sep. 30, 2016 | $ 15,079 | $ 1,340 | $ 27 | $ 62,174 | $ (695) | $ (666) | $ 65 | $ (45,548) | $ (1,618) |
Balance, shares at Sep. 30, 2016 | 2,250 | 26,948,288 | (238,828) |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash Flows from Operating Activities | ||
Net loss | $ (13,201) | $ (7,770) |
Adjustment to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 884 | 446 |
Amortization of intangible assets | 3,169 | 2,938 |
Stock based compensation | 1,055 | 885 |
Change in fair value of shares to be issued | (13) | (157) |
Change in fair value of derivative liability | (41) | |
Amortization of deferred financing costs | 23 | |
Amortization of debt discount | 196 | |
Compensation expense, note receivable related party | 90 | |
Provision for doubtful accounts | 455 | 32 |
Other | 22 | (13) |
Changes in operating assets and liabilities: | ||
Accounts receivable and other receivables | 4,016 | (1,098) |
Inventory | (97) | 42 |
Other current assets | (26) | (266) |
Prepaid licenses and maintenance contracts | 1,248 | (255) |
Other assets | (173) | 67 |
Accounts payable | 850 | 751 |
Accrued liabilities | (1,205) | 143 |
Deferred revenue | 1,915 | 339 |
Other liabilities | (190) | (88) |
Total Adjustments | 12,065 | 3,879 |
Net Cash Used in Operating Activities | (1,136) | (3,891) |
Cash Flows Used in Investing Activities | ||
Purchase of property and equipment | (461) | (254) |
Cash paid for LightMiner | (19) | |
Investment in capitalized software | (1,160) | (618) |
Net Cash Flows Used in Investing Activities | (1,621) | (891) |
Cash Flows provided by Financing Activities | ||
Advances (repayment) of line of credit | (4,150) | 922 |
Advances from term loan | 2,000 | |
Repayment of term loan | (1,611) | (597) |
Proceeds from debenture and convertible preferred stock | 5,000 | |
Advances to related party | (3) | |
Advances from related party | 2 | 1 |
Net proceeds from issuance of common stock | 4,685 | |
Repayment of notes payable | (70) | (71) |
Net Cash (Used In) Provided by Financing Activities | (832) | 6,940 |
Effect of Foreign Exchange Rate on Changes on Cash | 34 | (22) |
Net (Decrease) Increase in Cash and Cash Equivalents | (3,555) | 2,136 |
Cash and Cash Equivalents - Beginning of period | 4,060 | 3,228 |
Cash and Cash Equivalents - End of period | 505 | 5,364 |
Cash paid for: | ||
Interest | 837 | 317 |
Income Taxes | ||
Non Cash Investing and Financing Activities: | ||
Debt discount of the fair value of the embedded conversion feature | 2,356 | |
Acquisition of LightMiner: | ||
Assumption of assets other than cash (property and equipment) | 225 | |
Assumption of assets - developed technology and export license | $ 3,479 |
Organization and Nature of Busi
Organization and Nature of Business | 9 Months Ended |
Sep. 30, 2016 | |
Organization and Nature of Business [Abstract] | |
Organization and Nature of Business | Note 1 - Organization and Nature of Business Overview Sysorex Global (“SG”), through its wholly-owned subsidiaries, Sysorex USA f/k/a Lilien Systems (“SUSA”), Sysorex Government Services, Inc. (“SGS”), Sysorex Canada Corp. f/k/a. AirPatrol Research Corp. (“Sysorex Canada”) and the majority-owned subsidiary, Sysorex Arabia LLC (“SA”) (Unless otherwise stated or the context otherwise requires, the terms “Sysorex” “we,” “us,” “our” and the “Company” refer collectively to Sysorex Global and its above subsidiaries), provides big data analytics and location based products and related services for the cyber-security and Internet of Things markets. The Company is headquartered in California, and has subsidiary offices in Virginia, Maryland, Oregon, Hawaii, State of Washington, California, Vancouver, Canada and Riyadh, Saudi Arabia. Liquidity As of September 30, 2016, the Company has a working capital deficiency of approximately $10.3 million. For the nine months ended September 30, 2016, the Company incurred a net loss of approximately $13.2 million and utilized cash in operations of approximately $1.1 million. On August 9, 2016, the Company entered into a Securities Purchase Agreement with Hillair Capital Investments L.P. pursuant to which it issued and sold (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amount of $5,700,000 due on August 9, 2018 and (ii) 2,250 shares of newly created Series 1 Convertible Preferred Stock, par value $0.001 per share (the “Preferred Stock”, together with the Debenture, the “Securities”), for an aggregate purchase price of $5,000,000 (the “Transaction”). The Company also has a Credit Facility for up to $10 million which we borrow against based on eligible assets with a maturity date of April 29, 2017 of which approximately $4.4 million is utilized. During the third quarter of 2016 the Company implemented a cost cutting program that would reduce operating expenses by approximately $1.8 million on an annual basis. The Company’s capital resources as of September 30, 2016, increased bank facility, net proceeds from the September 25, 2015 offering and August 9, 2016 convertible debenture and preferred stock offering, higher margin business line expansion and recent contract awards, including prepayments anticipated to be received are expected to be sufficient to fund planned operations during the next twelve months from the date of filing this quarterly report. While the Company also has an effective registration statement on Form S-3 which will allow it to raise additional capital from the sale of its securities, subject to certain limitations for registrants with a market capitalization of less than $75 million, if additional financing is needed we anticipate such financing will come from an increase in our bank facility rather than through a sale of equity, however, our decision will be based on our capital requirements and the terms of the various types of financing that will be available to us when we need it. The information in these condensed consolidated financial statements concerning the Company’s Form S-3 registration statement does not constitute an offer of any securities for sale. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months, the Company may need to reduce costs and curtail certain aspects of its expansion activities or consider other means of obtaining additional financing, although there is no guarantee that any such additional financing would be available to the Company on an acceptable term, if at all. |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Basis of Presentation/Summary of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Note 2 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of the Company’s operations for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016. These interim condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements and footnotes for the years ended December 31, 2015 and 2014 included in the Form 10-K filed with the Securities and Exchange Commission on March 30, 2016. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Basis of Presentation/Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 3 - Summary of Significant Accounting Policies Significant Accounting Policies The Company's complete accounting policies are described in Note 2 to the Company's audited financial statements and footnotes for the years ended December 31, 2015 and 2014. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of: ● The valuation of stock-based compensation; ● The allowance for doubtful accounts; ● The valuation allowance for the deferred tax asset; and ● Impairment of long-lived assets and goodwill. Revenue Recognition The Company provides IT solutions and services to customers and derives revenues primarily from the sale of third-party hardware and software products, software, assurance, licenses and other consulting services, including maintenance services and recognizes revenue once the following four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed and determinable, (3) shipment (software and hardware) or fulfillment (maintenance) has occurred, and (4) there is reasonable assurance of collection of the sales proceeds (the “Revenue Recognition Criteria”). In addition, the Company also records revenues in accordance with Accounting Standards Codification (“ASC”) Topic 605-45 “Principal Agent Consideration” (“ASC 605-45”). The Company evaluates the sales of products and services on a case by case basis to determine whether the transaction should be recorded gross or net, including, but not limited to, assessing whether or not the Company: 1) is the primary obligor in the transaction; 2) has inventory risk with respect to the products and/or services sold; 3) has latitude in pricing; and 4) changes the product or performs part of the services sold. The Company evaluates whether revenues received from the sale of hardware and software products, licenses, and services, including maintenance and professional consulting services, should be recognized on a gross or net basis on a transaction by transaction basis. As of September 30, 2016, the Company has determined that all revenues received should be recognized on a gross basis in accordance with applicable standards. Cooperative reimbursements from vendors, which are earned and available, are recorded during the period the related transaction has occurred. Cooperative reimbursements are recorded as a reduction of cost of sales in accordance with ASC Topic 605-50 “Accounting by a Customer (including reseller) for Certain Consideration Received from a Vendor.” Provisions for returns are estimated based on historical collections and credit memo analysis for the period. The Company receives Marketing Development Funds (MDF) from vendors based on quarterly or annual sales performance to promote the marketing of vendor products and services. The Company must file claims with vendors for these cooperative reimbursements by providing invoices and receipts for marketing expenses. Reimbursements are recorded as a reduction of marketing expenses and other applicable selling general and administrative expenses ratably over the period in which the expenses are expected to occur. The Company receives vendor rebates which are recorded to cost of sales. The Company also enters into sales transactions whereby customer orders contain multiple deliverables, and reports its multiple deliverable arrangements under ASC 605-25 “Revenue Arrangements with Multiple Deliverables” (“ASC-605-25”). These multiple deliverable arrangements primarily consist of the following deliverables: the Company’s design, configuration, installation, integration, warranty/maintenance and consulting services; and third-party computer hardware, software and warranty maintenance services. In situations where the Company bundles all or a portion of the separate elements, Vendor Specific Objective Evidence (“VSOE”) is determined based on prices when sold separately. For the three months ended September 30, 2016 and 2015 revenues recognized as a result of customer contracts requiring the delivery of multiple elements was $3.7 million and $7.4 million, respectively. For the nine months ended September 30, 2016 and 2015 revenues recognized as a result of customer contracts requiring the delivery of multiple elements was $15.4 million and $24.3 million, respectively. Hardware, Software and Licensing Revenue Recognition Generally, the Revenue Recognition Criteria are met with respect to the sales of hardware and software products when they are shipped to the customer. The delivery of products to our customers occurs in a variety of ways, including (i) as a physical product shipped from the Company’s warehouse, (ii) via drop-shipment by a third-party vendor, or (iii) via electronic delivery with respect to software licenses. The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer. As a result, the Company recognizes the sale of the product and the cost of such upon receiving notification from the supplier that the product has shipped. Vendor rebates and price protection are recorded when earned as a reduction to cost of sales or merchandise inventory, as applicable. Vendor product price discounts are recorded when earned as a reduction to cost of sales. Maintenance and Professional Services Revenue Recognition With respect to sales of our maintenance, consulting and other service agreements including our digital advertising and electronic services, the Revenue Recognition Criteria is met once the service has been provided. Revenue on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended. The fixed rate includes direct labor, indirect expenses, and profits. Materials, or other specified direct costs, are reimbursed as actual costs and may include markup. Anticipated losses are recognized as soon as they become known. For the three and nine months ended September 30, 2016 and 2015, the Company did not incur any such losses. These amounts are based on known and estimated factors. Revenues from time and material or firm fixed price long-term and short-term contracts are derived principally with various United States Government agencies and commercial customers. The Company recognizes revenue for sales of all services billed as a fixed fee ratably over the term of the arrangement as such services are provided. Billings for such services that are made in advance of the related revenue recognized are recorded as deferred revenue and recognized as revenue ratably over the billing coverage period. Amounts received as prepayments for services to be rendered are recognized as deferred revenue. Revenue from such prepayments is recognized when the services are provided. The Company’s storage and computing segment maintenance services agreements permit customers to obtain technical support from the Company and/or the manufacturer and to update, at no additional cost, to the latest technology when new software updates are introduced and available during the period that the maintenance agreement is in effect. Since the Company assumes certain responsibility for product staging, configuration, installation, modification, and integration with other client systems, or retains general inventory risk upon customer return or rejection and is most familiar with the customer and its required specifications, it generally serves as the initial contact with the customer with respect to any storage and computing maintenance services required and therefore will perform all or part of the required service. Typically, the Company sells maintenance contracts for a separate fee with initial contractual periods ranging from one to three years with renewal for additional periods thereafter. The Company generally bills maintenance fees in advance and records the amounts received as deferred revenue with respect to any portion of the fee for which services have not yet been provided. The Company recognizes the related revenue ratably over the term of the maintenance agreement as services are provided. In situations where the Company bundles all or a portion of the maintenance fee with products, VSOE for maintenance is determined based on prices when sold separately. Customers that have purchased maintenance/warranty services have a right to cancel and receive a refund of the amounts paid for unused services at any time during the service period upon advance written notice to the Company. Cancellation and refund privileges with respect to maintenance/warranty services lapse as to any period during the term of the agreement for which such services have already been provided. Customers do not have the right to a refund of paid fees for maintenance/warranty services that the Company has earned and recognized as revenue. Invoices issued for maintenance/warranty services not yet rendered are recorded as deferred revenue and then recognized as revenue ratably over the service period. As a result (1) the warranty and maintenance service fees payable by each customer are separately accounted for in each customer purchase order as a separate line item, and (2) upon the Company’s receipt and acceptance of a request for refund of maintenance/warranty services not yet provided, the Company’s obligation to perform any additional maintenance/warranty services will end. Sales are recorded net of discounts and returns. Stock-Based Compensation The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as expense over the period during which the recipient is required to provide services in exchange for that award. Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period. The Company incurred stock-based compensation charges, net of estimated forfeitures of $344,000 and $391,000 for the three months ended September 30, 2016 and 2015, and $1,055,000 and $885,000 for the nine month period ended September 30, 2016 and 2015, respectively. The following table summarizes the nature of such charges for the periods then ended (in thousands): For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Compensation and related benefits $ 334 $ 293 $ 1,008 $ 605 Professional and legal fees 10 98 47 280 Totals $ 344 $ 391 $ 1,055 $ 885 Net Loss Per Share The Company computes basic and diluted earnings per share by dividing net loss by the weighted average number of common shares outstanding during the period. Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options and warrants in the calculation of diluted net loss per common shares would have been anti-dilutive. The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the nine months ended September 30, 2016 and 2015: For the Nine Months Ended 2016 2015 Options 5,975,553 4,345,596 Warrants 561,262 511,262 Shares accrued but not issued 283,575 35,715 Convertible preferred stock 1,500,000 -- Convertible debenture 3,800,000 -- Totals 12,120,390 4,892,573 Preferred Stock The Company applies the accounting standards for distinguishing liabilities from equity under U.S. GAAP when determining the classification and measurement of its convertible preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as permanent equity. As of the issuance date, the carrying amount of the preferred stock was less than the redemption value. If the Company were to determine that redemption was probable, the carrying value would be increased by periodic accretions so that the carrying value would equal the redemption amount at the earliest redemption date. Such accretion would be recorded as a preferred stock dividend. Derivative Liabilities During the nine months ended September 30, 2016, the Company issued a convertible debenture that included reset provisions considered to be down-round protection. The Company determined that the conversion feature is a derivative instrument pursuant to FASB ASC 815 “Derivatives and Hedging.” The accounting treatment of derivative financial instruments requires that the Company bifurcate the conversion feature and record it as a liability at the fair value and mark-to-market the instrument at fair value as of each balance sheet date. Any change in fair value is recorded as a change in the fair value of derivative liabilities for each reporting period. The fair value of the conversion feature was determined using the Binomial Lattice model. The Company reassesses the classification at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition and most industry-specific guidance throughout the ASC. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. To allow entities additional time to implement systems, gather data and resolve implementation questions, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, in August 2015, to defer the effective date of ASU No. 2014-09 for one year, which is fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its financial statements or disclosures. In addition, the FASB issued ASU 2016-08 in March 2016, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently evaluating the accounting, transition, and disclosure requirements of the standard to determine the impact, if any, on its financial statements or disclosures. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations.” This update provides clarifying guidance regarding the application of ASU No. 2014-09 - Revenue From Contracts with Customers when another party, along with the reporting entity, is involved in providing a good or a service to a customer. In these circumstances, an entity is required to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The amendments in the Update clarify the implementation guidance on principal versus agent considerations. The update is effective, along with ASU 2014-09, for annual and interim periods beginning after December 15, 2017. The adoption of ASU 2016-08 is not expected to have a material impact on its financial statements or disclosures. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating ASU 2016-09 and its impact on its financial statements or disclosures. On May 9, 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”). ASU 2016-12 provides clarifying guidance in a few narrow areas and adds some practical expedients to the guidance. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements for ASU 2014-09. The Company is evaluating the effect of ASU 2014-09, if any, on its financial statements or disclosures. The FASB and the SEC have issued certain accounting standards updates and regulations that will become effective in subsequent periods; however, management of the Company does not believe that any of those updates would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during 2016 or 2015, and does not believe that any of those pronouncements will have a significant impact on the Company’s consolidated financial statements at the time they become effective. Subsequent Events The Company evaluates events and/or transactions occurring after the balance sheet date and before the issue date of the condensed consolidated financial statements to determine if any of those events and/or transactions requires adjustment to or disclosure in the condensed consolidated financial statements. |
Related Party
Related Party | 9 Months Ended |
Sep. 30, 2016 | |
Related Party [Abstract] | |
Related Party | Note 4 – Related Party Due from Related Parties Non-interest bearing amounts due on demand from a related party was $666,000 as of September 30, 2016 and December 31, 2015, and consists primarily of amounts due from Sysorex Consulting, Inc. As Sysorex Consulting, Inc. is a direct shareholder of and an investor in the Company, the amounts due from Sysorex Consulting, Inc. as of September 30, 2016 and December 31, 2015 have been classified in and as a reduction of stockholders' equity. Consulting Services Ordering Agreement Amendment On March 25, 2016, the Company entered into an Amendment No. 3 to its Consulting Services Ordering Agreement with Mr. A Salam Qureishi, who served as Chairman of the Board and a Director of the Company (the “Consultant”) until September 30, 2016, effective March 16, 2016 (the “Amended Agreement”), pursuant to which the Company agreed to pay the Consultant a fee of $20,000 per month for all consulting services performed during the term of the agreement. In addition, the Amended Agreement provided for an extension of the original term for an additional nine months from March 31, 2016 to December 31, 2016. For the three and nine months ended September 30, 2016 and 2015 the Company recorded a charge of $90,000 and $210,000, and $90,000 and $270,000, respectively. |
Notes and Other Receivables
Notes and Other Receivables | 9 Months Ended |
Sep. 30, 2016 | |
Notes and Other Receivables [Abstract] | |
Notes and Other Receivables | Note 5 - Notes and Other Receivables Notes and other receivables at September 30, 2016 and December 31, 2015 consisted of the following (in thousands): September 30, December 31, Notes receivable $ 900 $ 900 Other receivables 394 440 Total Notes and Other Receivables $ 1,294 $ 1,340 Note Receivable On July 17, 2014, the Company loaned $900,000 to a third party pursuant to the terms of a promissory note. The promissory note’s extended due date is December 31, 2016. The promissory note accrues interest at a rate of 8% per annum. The Company and the third party are negotiating an extension of the note. Other Receivables Other receivables primarily consist of receivables for cooperative reimbursements from vendors; marketing development funds from vendors; interest receivables; and revenue earned under contracts in advance of billings. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2016 | |
Inventory [Abstract] | |
Inventory | Note 6 – Inventory Inventory at September 30, 2016 and December 31, 2015 consisted of the following (in thousands): September 30, December 31, Raw materials $ 142 $ 153 Work in process 25 64 Finished goods 685 538 Total Inventory $ 852 $ 755 |
Discontinued Operations
Discontinued Operations | 9 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations [Abstract] | |
Discontinued Operations | Note 7 – Discontinued Operations 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. In accordance with ASC topic 360 “Property, Plant and Equipment”, the Company has elected to classify the assets and liabilities as discontinued assets and liabilities in the accompanying consolidated financial statements. The major categories of discontinued assets and liabilities in the consolidated balance sheets at September 30, 2016 and December 31, 2015 (in thousands): September 30, December 31, 2015 Assets Accounts receivable, net 1 1 Notes and other receivables 8 8 Other assets 763 763 Total Current Assets 772 772 Other assets -- -- Total Assets $ 772 $ 772 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable $ 178 $ 178 Accrued liabilities 900 888 Deferred revenue 236 236 Due to related party 1 2 Short-term debt 722 722 Total Current Liabilities 2,037 2,026 Long Term Liabilities -- -- Total Liabilities $ 2,037 $ 2,026 The Company has entered into surety bonds with a financial institution in Saudi Arabia which guaranteed performance on certain contracts. Deposits for surety bonds amounted to $749,000 as of September 30, 2016 and December 31, 2015. These bonds will be released once the related contract is closed out which is expected to occur during the year ended December 31, 2016. Deposits are included on the condensed consolidated balance sheets in assets held for sale. The Company did not recognize any depreciation or amortization expense related to discontinued operations during the nine months ended September 30, 2016 or 2015. 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 three and nine months ended September 30, 2016 and 2015. |
Deferred Revenue
Deferred Revenue | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Revenue [Abstract] | |
Deferred Revenue | Note 8 - Deferred Revenue Deferred revenue as of September 30, 2016 and December 31, 2015 consisted of the following: September 30, December 31, Deferred Revenue, Current Maintenance agreements $ 8,192 $ 9,025 Service agreements 3,720 70 Total Deferred Revenue, Current 11,912 9,095 Deferred Revenue, Non-Current Maintenance agreements 6,764 7,666 Total Deferred Revenue $ 18,676 $ 16,761 The fair value of the deferred revenue approximates the services to be rendered. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2016 | |
Debt [Abstract] | |
Debt | Note 9 - Debt Debt as of September 30, 2016 and December 31, 2015 consisted of the following (in thousands): September 30, December 31, Short-Term Debt Notes payable $ 170 $ 170 Revolving line of credit 4,430 8,580 Term loan -- 667 Total Short-Term Debt $ 4,600 $ 9,417 Long-Term Debt Notes payable $ 212 $ 282 Term loan, non-current portion -- 944 Senior secured convertible debenture, less debt discount of $2,159 3,541 -- Total Long-Term Debt $ 3,753 $ 1,226 Revolving Line of Credit and Term Loan On May 4, 2015 (effective as of April 29, 2015), the Company and Bridge Bank entered into Amendment 4 to Bridge Bank’s Business Financing Agreement (“BFA”) dated March 15, 2013 to add the Company, Sysorex Federal, AirPatrol and Shoom as borrowers under the agreement (collectively, the “Borrowers”), amend certain financial covenants, increase the credit limit to $10.0 million and provide for a second term loan of $2 million which matures on April 29, 2018 of which $167,000 was used to pay off the balance of the initial term loan. The term loan accrues interest at the greater of 5.25% or Bridge Bank's prime rate plus 2%. The Company will make payments of $56,000 on the term loan on the first day of each month commencing on May 1, 2015 until the loan amount is paid in full. The balance due on the term loan is scheduled to be paid in full during the year ending December 31, 2018. Effective as of September 30, 2015 the Borrowers, entered into Amendment 5 (the “Amendment”), dated October 7, 2015, to the BFA, with Western Alliance Bank, as successor in interest (“Western Alliance”) to Bridge Bank. Pursuant to Amendment 5, Western Alliance assumed the rights and obligations of Bridge Bank as successor in interest to Bridge Bank and the lender under the Agreement. The Amendment also amended certain financial covenants of the Borrowers required by the Agreement. Western Alliance Amendment On March 25, 2016, Sysorex Global, together with Sysorex USA and Sysorex Government Services, Inc. (collectively, the “Borrowers”) entered into an amendment and waiver (the “Amendment”) to the BFA with Western Alliance (the “Lender”), pursuant to which the Lender waived any non-compliance by the Borrowers with respect to the minimum adjusted EBITDA requirements as of December 31, 2015. In addition, the Lender and the Borrowers agreed that the adjusted EBITDA for the six months ended March 31, 2016 would not be less than $(2,200,000) and on or before April 30, 2016, the Borrowers and Lender must agree to additional financial covenants for the fiscal quarters ended June 30, 2016, September 30, 2016 and December 31, 2016. The lender has agreed to extend the April 30, 2016 deadline and the parties are currently negotiating the additional financial covenants with the exception of the changes the parties have agreed upon in the Amendments No. 6 and No. 7 (as described below). Western Alliance Amendment No. 6 On June 3, 2016, the Borrowers entered into Amendment No. 6 to Business Financing Agreement and Forbearance Agreement (the “Amendment”) with Western Alliance Bank, as successor in interest to Bridge Bank National Association (the “Lender”). Pursuant to the Amendment, the Lender agreed to (i) amend the Financing Agreement dated March 15, 2013 (the “Original Agreement”) as described below, (ii) forbear from the exercise of its rights and remedies under the Original Agreement until June 30, 2016, subject to compliance by the Borrowers with certain other conditions as set forth in the Amendment, and (iii) waive certain defaults of the Borrowers, including the Borrowers’ failure to repay overadvances, as defined in the Original Agreement. Material changes made to the Original Agreement by the Amendment include, but are not limited to: (i) agreement by the Lender to allow the Company to finance a receivable from a customer outside of the United States for a limited period of time; (ii) modification of the date for the repayment of the Term Advance to June 30, 2016; (iii) agreement by the Borrowers to maintain, beginning on June 30, 2016, an Asset Coverage Ratio of not less than 1.25 to 1; and (iv) revisions to the definition of certain terms that are included in the Original Agreement and providing definitions for certain terms that are included in the Amendment. Western Alliance Financing Agreement Amendment No. 7 On August 5, 2016, the Company, together with Sysorex USA and Sysorex Government Services, Inc. (collectively, the “Borrowers”) entered into Amendment No. 7 to Business Financing Agreement with Western Alliance Bank, as successor in interest to Bridge Bank National Association (the “Lender”). Pursuant to the 7th Amendment the Lender agreed to (among other things), (1) waive any non-compliance by the Borrowers with respect to any defaults and consented to the Transaction and (2) the Borrowers agreed to pay the outstanding principal amount of the Term Advance upon the earlier of the closing of the Transaction and August 10, 2016. In addition, the Company agreed to pay a fee of $200,000 in lieu of issuing an additional warrant to the Lender and agreed to negotiate in good faith to further amend the Agreement to provide for certain financial covenants for periods after August 31, 2016. Convertible Debenture and Preferred Stock Financing On August 9, 2016, the Company entered into a Purchase Agreement with Hillair Capital Investments L.P. pursuant to which it issued and sold (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amount of $5,700,000 due on August 9, 2018 and (ii) 2,250 shares of newly created Series 1 Convertible Preferred Stock, par value $0.001 per share (the “Preferred Stock”, together with the Debenture, the “Securities”), for an aggregate purchase price of $5,000,000 (the “Transaction”). The debenture is due on August 9, 2018 and interest is payable quarterly on February 9, May 9, August 9 and November 9, commencing on May 9, 2017, as well as the dates on which principal payments are made, as described in the agreement in cash, or upon notice to the holder and compliance with certain equity conditions as set forth in the agreement in shares of the Company’s common stock. The debenture is convertible any time at the option of the holder at a conversion price of $1.50 per share, subject to adjustments provided in the agreement. Subject to certain equity conditions, the Company has the option to redeem the debenture before its maturity by payment in cash of 120% or 110% (depending on the timing of the redemption) of the then outstanding principal amount plus accrued interest and other charges. The Company is required to redeem 25% of the initial principal amount of the debenture plus accrued unpaid interest and other charges in November 2017, February 2018, May 2018, and August 2018. The debenture is convertible into common stock at any time by the shareholder at $1.50 per share. In addition under the terms of the agreement if, at any time following the six month anniversary of the original issue date or, in the event the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues any shares of common stock or common stock equivalents at an effective price per share that is lower than the conversion price then the conversion price is reduced to equal the lower price. The conversion price will have a floor $0.47 per share. The Company evaluated the embedded conversion feature within the debenture in accordance with FASB ASC 815 “Derivatives and Hedging.” The conversion price was deemed to have a reset provision with down round protection and was recorded as a derivative liability. The Company calculated the fair value of $51,000 for the embedded conversion feature using the Binomial Lattice Model which was recorded as a discount to the debenture using the residual method. The debt discount is charged to interest expense ratably over the term of the note and the derivative liability will be marked to market through earnings at the end of each reporting period. The proceeds from the sale of the Securities will be used for the repayment of the outstanding balance on the Company’s term loan with Western Alliance Bank, as successor in interest to Bridge Bank National Association (the “Lender”) in an amount equal to approximately $1.4 million, the repayment of accounts payable of at least $1 million, business development activities, capital expenditures, working capital and general and administrative expenses. |
Common Stock
Common Stock | 9 Months Ended |
Sep. 30, 2016 | |
Common Stock [Abstract] | |
Common Stock | Note 10 - Common Stock During the nine months ended September 30, 2016, the Company issued 95,000 shares of common stock for services which were fully vested upon the date of issuance. The Company recorded an expense of $47,000 for the fair value of those shares. During the nine months ended September 30, 2016, the Company issued an aggregate of 1,543,425 shares of common stock to LMS Holding Corp., Chris Baskett and Matthew and Hannah Granade issued in accordance with the terms of that certain Asset Purchase Agreement, dated April 24, 2015 by and among the Company, LightMiner and Chris Baskett. 283,575 shares owed under the Lightminer acquisition remain in escrow as of September 30, 2016. The Company had recorded the $3,781,000 value of the shares as part of the purchase price of the assets during the quarter ended June 30, 2015. |
Convertible Series 1 Preferred
Convertible Series 1 Preferred Stock | 9 Months Ended |
Sep. 30, 2016 | |
Convertible Series 1 Preferred Stock [Abstract] | |
Convertible Series 1 Preferred Stock | Note 11 - Convertible Series 1 Preferred Stock On August 9, 2016, the Company entered into a Securities Purchase Agreement pursuant to which it issued and sold (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amount of $5,700,000 and (See Note 9) (ii) 2,250 shares of newly created Series 1 Convertible Preferred Stock for an aggregate purchase price of $5,000,000. The Series 1 Convertible Preferred Stock authorized has a stated price of $1,000 per share, par value of $0.001 and the Company is authorized to issue 5,000,0000 shares. The Series 1 Convertible Preferred Stock is not cumulative, has no redemption features outside the control of the Company and has a liquidation preference of $2,250,000 and is subject to certain typical anti-dilution provisions, such as stock dividend or stock splits. The Series 1 Convertible Preferred Stock is convertible at any time by the shareholder at $1.50 per share. In addition under the terms of the agreement if, at any time following the six month anniversary of the original issue date or, in the event the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues any shares of common stock or common stock equivalents at an effective price per share that is lower than the conversion price, then the conversion price is reduced to equal the lower price . The conversion price will have a floor $0.47 per share. The holders of the Company’s Series 1 Convertible Preferred Stock have no voting rights. Because the conversion option associated with the Series 1 Convertible Preferred Stock is clearly and closely related to the host instrument, the conversion option does not require bifurcation and classification as a derivative liability. |
Stock Options
Stock Options | 9 Months Ended |
Sep. 30, 2016 | |
Stock Options [Abstract] | |
Stock Options | Note 12 - Stock Options During the three months ended March 31, 2016, the Company granted options for the purchase of 102,500 shares of common stock to employees of the Company. These options vest pro-rata over 48 months and have a life of ten years and an exercise price of $0.52 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the award was $27,000. The fair value of the common stock as of the grant date was determined to be $0.52 per share. During the three months ended June 30, 2016, the Company granted options for the purchase of 1,131,894 shares of common stock to employees of the Company. These options vest pro-rata over 48 months and have a life of ten years and an exercise price of $0.52 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the award was $292,000. The fair value of the common stock as of the grant date was determined to be $0.52 per share. During the three months ended September 30, 2016, the Company granted options for the purchase of 347,500 shares of common stock to employees of the Company. These options vest pro-rata over 48 months and have a life of ten years and an exercise price of $0.47 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the award was $81,000. The fair value of the common stock as of the grant date was determined to be $0.47 per share. As of September 30, 2016, the fair value of non-vested options totaled $2,639,000 which will be amortized to expense over the weighted average remaining term of 1.45 years. The fair value of each employee option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. Key weighted-average assumptions used to apply this pricing model during the three months ended September 30, 2016 and 2015 were as follows: September 30, September 30, Risk-free interest rate 1.41% 1.93-2.02% Expected life of option grants 7 years 7 years Expected volatility of underlying stock 47.47% 51.4% Dividends Assumption $ -- $ -- The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. The Company attributes the value of stock-based compensation to operations on the straight-line single option method. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods. The dividends assumptions was $0 as the Company historically has not declared any dividends and does not expect to. |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value [Abstract] | |
Fair Value | Note 13 – Fair Value The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices available in active markets for identical assets or liabilities trading in active markets. Level 2 - Observable inputs other than quoted prices included in Level 1, such as quotable prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs. Financial instruments, including accounts receivable, accounts payable, accrued liabilities, short term advances and deferred revenues are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company’s other financial instruments include notes payable, the carrying value of which approximates fair value, as the notes bear terms and conditions comparable to market for obligations with similar terms and maturities, as well as warrant liabilities that are accounted for at fair value on a recurring basis as of September 30, 2016, by level within the fair value hierarchy (in thousands): Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs Total Embedded Conversion Feature $ 0 $ 0 $ 11 $ 11 The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the nine months ended September 30, 2016 (in thousands): Embedded Conversion Feature Balance at January 1, 2016 $ 0 Included in Debt Discount 52 Change in fair value of derivative (41 ) Balance at September 30, 2016 $ 11 |
Credit Risk and Concentrations
Credit Risk and Concentrations | 9 Months Ended |
Sep. 30, 2016 | |
Credit Risk and Concentrations [Abstract] | |
Credit Risk and Concentrations | Note 14 - Credit Risk and Concentrations Financial instruments that subject the Company to credit risk consist principally of trade accounts receivable and cash and cash equivalents. The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowances is limited. The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits. Cash is also maintained at foreign financial institutions for its Canadian subsidiary and its majority-owned Saudi Arabia subsidiary. Cash in foreign financial institutions as of September 30, 2016 and December 31, 2015 was immaterial. The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash. The following table sets forth the percentages of revenue derived by the Company from those customers which accounted for at least 10% of revenues during the nine months ended September 30, 2016 and 2015 (in thousands): Nine Months Ended Nine Months Ended September 30, 2015 $ % $ % Customer A 10,180 26% 12,047 26% Customer B -- -- 5,641 12% The following table sets forth the percentages of revenue derived by the Company from those customers which accounted for at least 10% of revenues during the three months ended September 30, 2016 and 2015 (in thousands): Three Months Ended September 30, 2016 Three Months Ended $ % $ % Customer A 1,463 13% 3,037 20% Customer B -- -- 1,510 10% Customer F 1,857 17% -- -- As of September 30, 2016, Customer C represented approximately 51% of total accounts receivable. As of September 30, 2015, Customer A represented approximately 11%, and Customer E represented approximately 11% of total accounts receivable. As of September 30, 2016, one vendor represented approximately 56% of total gross accounts payable. Purchases from this vendor during the three months ended September 30, 2016 were $3.7 million. Purchases from this vendor during the nine months ended September 30, 2016 were $13.5 million. As of September 30, 2015, one vendor represented approximately 54% of total gross accounts payable. Purchases from this vendor during the three months ended September 30, 2015 were $5.0 million. Purchases from this vendor during the nine months ended September 30, 2015 were $17.7 million. |
Segment Reporting and Foreign O
Segment Reporting and Foreign Operations | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting and Foreign Operations [Abstract] | |
Segment Reporting and Foreign Operations | Note 15 - Segment Reporting and Foreign Operations The Company operates in the following business segments: ● Mobile, IoT & Big Data Products: These products currently include our AirPatrol product line (location-based security and marketing platform for wireless and cellular devices that can detect, monitor and manage the content and behavior of smartphones, tablets and other mobile devices based on their location and user); on-premise big data appliance product (Light Miner Studio “LMS”) and will include future Sysorex owned products. ● Storage and Computing: This segment includes third party hardware, software and related maintenance/warranty products and services that Sysorex resells. It includes but is not limited to products for enterprise computing; storage; virtualization; networking; etc. ● SaaS Revenues: These are Software-as-a-Services (SaaS) or internet based hosted services including the Shoom product line and cloud based big data analytics services (based on our LMS product) and other data science services; analytics services for AirPatrol products and other managed services on a SaaS basis. ● Professional Services: These are general IT services including but not limited to: custom application/software design; architecture and development; project management; C4I system consulting; strategic outsourcing; staff augmentation; data center design and operations services; data migration services and other non-SaaS services. The following tables present key financial information of the Company's reportable segments before unallocated corporate expenses (in thousands): Mobile, IoT & Big Data Products Storage and Computing SaaS Revenues Professional Services Consolidated Three Months Ended September 30, 2016: Net revenues $ 542 $ 7,865 $ 826 $ 2,007 $ 11,240 Cost of net revenues $ (249 ) $ (6,625 ) $ (239 ) $ (1,029 ) $ (8,142 ) Gross profit $ 293 $ 1,240 $ 587 $ 978 $ 3,098 Gross margin % 54 % 16 % 71 % 49 % 28 % Depreciation and amortization $ 122 $ 206 $ 6 $ -- 334 Amortization of intangibles $ 728 $ 192 $ 136 $ -- $ 1,056 Three Months Ended September 30, 2015: Net revenues $ 487 $ 10,321 $ 871 $ 3,195 $ 14,874 Cost of net revenues $ (183 ) $ (8,432 ) $ (192 ) $ (1,679 ) $ (10,486 ) Gross profit $ 304 $ 1,889 $ 679 $ 1,516 $ 4,388 Gross margin % 62 % 18 % 78 % 47 % 30 % Depreciation and amortization $ 47 $ 36 $ 64 $ 1 $ 148 Amortization of intangibles $ 728 $ 192 $ 136 $ -- $ 1,056 Nine Months Ended September 30, 2016: Net revenues $ 1,228 $ 26,692 $ 2,446 $ 8,293 $ 38,659 Cost of net revenues $ (416 ) $ (21,947 ) $ (649 ) $ (5,158 ) $ (28,170 ) Gross profit $ 812 $ 4,745 $ 1,797 $ 3,135 $ 10,489 Gross margin % 66 % 18 % 73 % 38 % 27 % Depreciation and amortization $ 290 $ 574 $ 19 $ 1 $ 884 Amortization of intangibles $ 2,185 $ 576 $ 408 $ -- $ 3,169 Nine Months Ended September 30, 2015: Net revenues $ 862 $ 33,970 $ 2,831 $ 9,031 $ 46,694 Cost of net revenues $ (377 ) $ (27,261 ) $ (620 ) $ (4,305 ) $ (32,563 ) Gross profit $ 485 $ 6,709 $ 2,211 $ 4,726 $ 14,131 Gross margin % 56 % 20 % 78 % 52 % 30 % Depreciation and amortization $ 102 $ 98 $ 70 $ 2 $ 272 Amortization of intangibles $ 1,954 $ 576 $ 408 $ -- $ 2,938 Reconciliation of reportable segments’ combined income from operations to the consolidated loss before income taxes is as follows (in thousands): For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Income from operations of reportable segments $ 3,098 $ 4,388 $ 10,489 $ 14,131 Unallocated operating expenses (7,240 ) (7,511 ) (22,761 ) (21,757 ) Interest expense (639 ) (120 ) (1,037 ) (340 ) Other income (expense) 61 71 108 196 Consolidated loss before income taxes $ (4,720 ) $ (3,172 ) $ (13,201 ) $ (7,770 ) The Company’s operations are located primarily in the United States, Canada and Saudi Arabia. Revenues by geographic area are attributed by country of domicile of our subsidiaries. The financial data by geographic area are as follows (in thousands): United Saudi States Canada Arabia Eliminations Total Three Months Ended September 30, 2016: Revenues by geographic area $ 11,231 $ 9 $ -- $ -- $ 11,240 Operating loss by geographic area $ (3,622 ) $ (511 ) $ (9 ) $ -- $ (4,142 ) Net loss by geographic area $ (4,200 ) $ (511 ) $ (9 ) $ -- $ (4,720 ) Three Months Ended September 30, 2015: Revenues by geographic area $ 14,862 $ 12 $ -- $ -- $ 14,874 Operating loss by geographic area $ (2,835 ) $ (280 ) $ (8 ) $ -- $ (3,123 ) Net loss by geographic area $ (2,884 ) $ (280 ) $ (8 ) $ -- $ (3,172 ) Nine Months Ended September 30, 2016: Revenues by geographic area $ 38,605 $ 54 $ -- $ -- $ 38,659 Operating loss by geographic area $ (10,903 ) $ (1,344 ) $ (25 ) $ -- $ (12,272 ) Net loss by geographic area $ (11,832 ) $ (1,344 ) $ (25 ) $ -- $ (13,201 ) Nine Months Ended September 30, 2015: Revenues by geographic area $ 46,664 $ 30 $ -- $ -- $ 46,694 Operating loss by geographic area $ (6,830 ) $ (772 ) $ (24 ) $ -- $ (7,626 ) Net loss by geographic area $ (6,984 ) $ (772 ) $ (14 ) $ -- $ (7,770 ) As of September 30, 2016: Identifiable assets by geographic area $ 55,761 $ 487 $ 772 $ -- $ 57,020 Long lived assets by geographic area $ 30,220 $ 325 $ -- $ -- $ 30,545 As of December 31, 2015: Identifiable assets by geographic area $ 67,538 $ 405 $ 772 $ -- $ 68,715 Long lived assets by geographic area $ 32,759 $ 241 $ -- $ -- $ 33,000 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 16 - Commitments and Contingencies Litigation Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. During the year ended December 31, 2011, a judgment in the amount of $936,000 was levied against Sysorex Arabia LLC in favor of Creative Edge, Inc. in connection with amounts advanced for operations. Of that amount, $214,000 has been repaid, $515,000 will be repaid through a surety bond and the remaining $207,000 has been accrued and is included as a component of liabilities held for sale as of September 30, 2016 and December 31, 2015 in the condensed consolidated balance sheets. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 17 – Subsequent Events Integrio Technologies Asset Acquisition Asset Purchase Agreement On November 14, 2016, the Company and its wholly-owned subsidiary, Sysorex Government Services, Inc. entered into an Asset Purchase Agreement with Integrio Technologies, LLC, a Delaware limited liability company (“Integrio”) and Emtec Federal, LLC, a Delaware limited liability company and wholly-owned subsidiary of Integrio, which are in the business of providing IT integration and engineering services to customers, primarily government agencies. The consideration to be paid for the Assets will include an aggregate of (A) $1,800,000 in cash, of which $1,400,000 minus the Seller’s Cash On Hand (as defined in the Purchase Agreement) and certain amounts payable to creditors of the Seller shall be paid upon the closing of the Acquisition (the “Closing”) and $400,000 shall be paid in two (2) annual installments of $200,000 each on the respective anniversary dates of the Closing, subject to certain set offs and recoupment by Buyer; (B) 530,000 unregistered restricted shares of the Company’s voting common stock valued at $1.50 per share; (C) the aggregate amount of certain specified assumed liabilities; and (D) up to an aggregate of $1,200,000 in earnout payments, of which up to $400,000 shall be payable to the Seller per year for the three years following the Closing. GemCap Lending Loan and Security Agreement The Company and its wholly-owned subsidiaries, Sysorex USA and Sysorex Government Services, Inc. (jointly and severally, the “Borrower”), entered into a Loan and Security Agreement (the “Loan Agreement”) with GemCap Lending I, LLC, a Delaware limited liability company (the “Lender”) dated as of November 14, 2016. Under the terms of the Loan Agreement, and subject to the satisfaction of certain conditions to funding, the Lender has agreed to make revolving credit loans to the Borrower in an aggregate principal amount which does not exceed 85% of Eligible Accounts (as defined in the Purchase Agreement) at any one time outstanding, net of all taxes, discounts, allowances and credits given or claimed, provided that in no event can the aggregate amount of the revolving credit loans outstanding at any time exceed $10 million (subject to certain conditions). All amounts due under the Loan Agreement upon funding will be secured by the assets of the Company. Borrowings pursuant to the Loan Agreement will bear interest at an annual rate equal to the greater of (a) 9.5% and (b) the sum of (i) the “Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such Prime Rate changes, plus (ii) 6%. The interest rate on borrowings is subject to increase by 4% if an event of default has occurred and is continuing. In connection with the Loan and Security Agreement, the Borrower will pay to the Lender a $100,000 closing fee. The Lender will also receive (a) an annual line fee equal to $100,000; (b) an unused line fee equal to 0.5% of the daily average unused portion of the maximum amount of Availability (as defined in the Loan Agreement), calculated on an annualized basis, due and payable monthly; (c) a loan administration and monitoring fee equal to 0.5% of the daily average used portion of Availability calculated on a monthly basis, due and payable monthly; and (d) certain other audit and wire fees. The closing of the transactions contemplated by the Loan Agreement are subject to the satisfaction of certain closing conditions. Upon closing, the Loan and Security Agreement will provide the Borrower with a revolving line of credit, the proceeds of which are to be used to repay in full the existing indebtedness owed to Western Alliance Bank, as successor in interest to Bridge Bank, N.A.; pay certain expenses related to obtaining the revolving line of credit and for general working capital purposes. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Basis of Presentation/Summary of Significant Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies The Company's complete accounting policies are described in Note 2 to the Company's audited financial statements and footnotes for the years ended December 31, 2015 and 2014. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of: ● The valuation of stock-based compensation; ● The allowance for doubtful accounts; ● The valuation allowance for the deferred tax asset; and ● Impairment of long-lived assets and goodwill. |
Revenue Recognition | Revenue Recognition The Company provides IT solutions and services to customers and derives revenues primarily from the sale of third-party hardware and software products, software, assurance, licenses and other consulting services, including maintenance services and recognizes revenue once the following four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed and determinable, (3) shipment (software and hardware) or fulfillment (maintenance) has occurred, and (4) there is reasonable assurance of collection of the sales proceeds (the “Revenue Recognition Criteria”). In addition, the Company also records revenues in accordance with Accounting Standards Codification (“ASC”) Topic 605-45 “Principal Agent Consideration” (“ASC 605-45”). The Company evaluates the sales of products and services on a case by case basis to determine whether the transaction should be recorded gross or net, including, but not limited to, assessing whether or not the Company: 1) is the primary obligor in the transaction; 2) has inventory risk with respect to the products and/or services sold; 3) has latitude in pricing; and 4) changes the product or performs part of the services sold. The Company evaluates whether revenues received from the sale of hardware and software products, licenses, and services, including maintenance and professional consulting services, should be recognized on a gross or net basis on a transaction by transaction basis. As of September 30, 2016, the Company has determined that all revenues received should be recognized on a gross basis in accordance with applicable standards. Cooperative reimbursements from vendors, which are earned and available, are recorded during the period the related transaction has occurred. Cooperative reimbursements are recorded as a reduction of cost of sales in accordance with ASC Topic 605-50 “Accounting by a Customer (including reseller) for Certain Consideration Received from a Vendor.” Provisions for returns are estimated based on historical collections and credit memo analysis for the period. The Company receives Marketing Development Funds (MDF) from vendors based on quarterly or annual sales performance to promote the marketing of vendor products and services. The Company must file claims with vendors for these cooperative reimbursements by providing invoices and receipts for marketing expenses. Reimbursements are recorded as a reduction of marketing expenses and other applicable selling general and administrative expenses ratably over the period in which the expenses are expected to occur. The Company receives vendor rebates which are recorded to cost of sales. The Company also enters into sales transactions whereby customer orders contain multiple deliverables, and reports its multiple deliverable arrangements under ASC 605-25 “Revenue Arrangements with Multiple Deliverables” (“ASC-605-25”). These multiple deliverable arrangements primarily consist of the following deliverables: the Company’s design, configuration, installation, integration, warranty/maintenance and consulting services; and third-party computer hardware, software and warranty maintenance services. In situations where the Company bundles all or a portion of the separate elements, Vendor Specific Objective Evidence (“VSOE”) is determined based on prices when sold separately. For the three months ended September 30, 2016 and 2015 revenues recognized as a result of customer contracts requiring the delivery of multiple elements was $3.7 million and $7.4 million, respectively. For the nine months ended September 30, 2016 and 2015 revenues recognized as a result of customer contracts requiring the delivery of multiple elements was $15.4 million and $24.3 million, respectively. Hardware, Software and Licensing Revenue Recognition Generally, the Revenue Recognition Criteria are met with respect to the sales of hardware and software products when they are shipped to the customer. The delivery of products to our customers occurs in a variety of ways, including (i) as a physical product shipped from the Company’s warehouse, (ii) via drop-shipment by a third-party vendor, or (iii) via electronic delivery with respect to software licenses. The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer. As a result, the Company recognizes the sale of the product and the cost of such upon receiving notification from the supplier that the product has shipped. Vendor rebates and price protection are recorded when earned as a reduction to cost of sales or merchandise inventory, as applicable. Vendor product price discounts are recorded when earned as a reduction to cost of sales. Maintenance and Professional Services Revenue Recognition With respect to sales of our maintenance, consulting and other service agreements including our digital advertising and electronic services, the Revenue Recognition Criteria is met once the service has been provided. Revenue on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended. The fixed rate includes direct labor, indirect expenses, and profits. Materials, or other specified direct costs, are reimbursed as actual costs and may include markup. Anticipated losses are recognized as soon as they become known. For the three and nine months ended September 30, 2016 and 2015, the Company did not incur any such losses. These amounts are based on known and estimated factors. Revenues from time and material or firm fixed price long-term and short-term contracts are derived principally with various United States Government agencies and commercial customers. The Company recognizes revenue for sales of all services billed as a fixed fee ratably over the term of the arrangement as such services are provided. Billings for such services that are made in advance of the related revenue recognized are recorded as deferred revenue and recognized as revenue ratably over the billing coverage period. Amounts received as prepayments for services to be rendered are recognized as deferred revenue. Revenue from such prepayments is recognized when the services are provided. The Company’s storage and computing segment maintenance services agreements permit customers to obtain technical support from the Company and/or the manufacturer and to update, at no additional cost, to the latest technology when new software updates are introduced and available during the period that the maintenance agreement is in effect. Since the Company assumes certain responsibility for product staging, configuration, installation, modification, and integration with other client systems, or retains general inventory risk upon customer return or rejection and is most familiar with the customer and its required specifications, it generally serves as the initial contact with the customer with respect to any storage and computing maintenance services required and therefore will perform all or part of the required service. Typically, the Company sells maintenance contracts for a separate fee with initial contractual periods ranging from one to three years with renewal for additional periods thereafter. The Company generally bills maintenance fees in advance and records the amounts received as deferred revenue with respect to any portion of the fee for which services have not yet been provided. The Company recognizes the related revenue ratably over the term of the maintenance agreement as services are provided. In situations where the Company bundles all or a portion of the maintenance fee with products, VSOE for maintenance is determined based on prices when sold separately. Customers that have purchased maintenance/warranty services have a right to cancel and receive a refund of the amounts paid for unused services at any time during the service period upon advance written notice to the Company. Cancellation and refund privileges with respect to maintenance/warranty services lapse as to any period during the term of the agreement for which such services have already been provided. Customers do not have the right to a refund of paid fees for maintenance/warranty services that the Company has earned and recognized as revenue. Invoices issued for maintenance/warranty services not yet rendered are recorded as deferred revenue and then recognized as revenue ratably over the service period. As a result (1) the warranty and maintenance service fees payable by each customer are separately accounted for in each customer purchase order as a separate line item, and (2) upon the Company’s receipt and acceptance of a request for refund of maintenance/warranty services not yet provided, the Company’s obligation to perform any additional maintenance/warranty services will end. Sales are recorded net of discounts and returns. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as expense over the period during which the recipient is required to provide services in exchange for that award. Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period. The Company incurred stock-based compensation charges, net of estimated forfeitures of $344,000 and $391,000 for the three months ended September 30, 2016 and 2015, and $1,055,000 and $885,000 for the nine month period ended September 30, 2016 and 2015, respectively. The following table summarizes the nature of such charges for the periods then ended (in thousands): For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Compensation and related benefits $ 334 $ 293 $ 1,008 $ 605 Professional and legal fees 10 98 47 280 Totals $ 344 $ 391 $ 1,055 $ 885 |
Net Loss Per Share | Net Loss Per Share The Company computes basic and diluted earnings per share by dividing net loss by the weighted average number of common shares outstanding during the period. Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options and warrants in the calculation of diluted net loss per common shares would have been anti-dilutive. The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the nine months ended September 30, 2016 and 2015: For the Nine Months Ended 2016 2015 Options 5,975,553 4,345,596 Warrants 561,262 511,262 Shares accrued but not issued 283,575 35,715 Convertible preferred stock 1,500,000 -- Convertible debenture 3,800,000 -- Totals 12,120,390 4,892,573 |
Preferred Stock | Preferred Stock The Company applies the accounting standards for distinguishing liabilities from equity under U.S. GAAP when determining the classification and measurement of its convertible preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as permanent equity. As of the issuance date, the carrying amount of the preferred stock was less than the redemption value. If the Company were to determine that redemption was probable, the carrying value would be increased by periodic accretions so that the carrying value would equal the redemption amount at the earliest redemption date. Such accretion would be recorded as a preferred stock dividend. |
Derivative Liabilities | Derivative Liabilities During the nine months ended September 30, 2016, the Company issued a convertible debenture that included reset provisions considered to be down-round protection. The Company determined that the conversion feature is a derivative instrument pursuant to FASB ASC 815 “Derivatives and Hedging.” The accounting treatment of derivative financial instruments requires that the Company bifurcate the conversion feature and record it as a liability at the fair value and mark-to-market the instrument at fair value as of each balance sheet date. Any change in fair value is recorded as a change in the fair value of derivative liabilities for each reporting period. The fair value of the conversion feature was determined using the Binomial Lattice model. The Company reassesses the classification at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition and most industry-specific guidance throughout the ASC. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. To allow entities additional time to implement systems, gather data and resolve implementation questions, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, in August 2015, to defer the effective date of ASU No. 2014-09 for one year, which is fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its financial statements or disclosures. In addition, the FASB issued ASU 2016-08 in March 2016, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently evaluating the accounting, transition, and disclosure requirements of the standard to determine the impact, if any, on its financial statements or disclosures. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations.” This update provides clarifying guidance regarding the application of ASU No. 2014-09 - Revenue From Contracts with Customers when another party, along with the reporting entity, is involved in providing a good or a service to a customer. In these circumstances, an entity is required to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The amendments in the Update clarify the implementation guidance on principal versus agent considerations. The update is effective, along with ASU 2014-09, for annual and interim periods beginning after December 15, 2017. The adoption of ASU 2016-08 is not expected to have a material impact on its financial statements or disclosures. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating ASU 2016-09 and its impact on its financial statements or disclosures. On May 9, 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”). ASU 2016-12 provides clarifying guidance in a few narrow areas and adds some practical expedients to the guidance. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements for ASU 2014-09. The Company is evaluating the effect of ASU 2014-09, if any, on its financial statements or disclosures. The FASB and the SEC have issued certain accounting standards updates and regulations that will become effective in subsequent periods; however, management of the Company does not believe that any of those updates would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during 2016 or 2015, and does not believe that any of those pronouncements will have a significant impact on the Company’s consolidated financial statements at the time they become effective. |
Subsequent Events | Subsequent Events The Company evaluates events and/or transactions occurring after the balance sheet date and before the issue date of the condensed consolidated financial statements to determine if any of those events and/or transactions requires adjustment to or disclosure in the condensed consolidated financial statements. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Basis of Presentation/Summary of Significant Accounting Policies [Abstract] | |
Schedule of stock-based compensation charges | For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Compensation and related benefits $ 334 $ 293 $ 1,008 $ 605 Professional and legal fees 10 98 47 280 Totals $ 344 $ 391 $ 1,055 $ 885 |
Schedule of number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share | For the Nine Months Ended 2016 2015 Options 5,975,553 4,345,596 Warrants 561,262 511,262 Shares accrued but not issued 283,575 35,715 Convertible preferred stock 1,500,000 -- Convertible debenture 3,800,000 -- Totals 12,120,390 4,892,573 |
Notes and Other Receivables (Ta
Notes and Other Receivables (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Notes and Other Receivables [Abstract] | |
Schedule of notes and other receivable | September 30, December 31, Notes receivable $ 900 $ 900 Other receivables 394 440 Total Notes and Other Receivables $ 1,294 $ 1,340 |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventory [Abstract] | |
Schedule of inventory | September 30, December 31, Raw materials $ 142 $ 153 Work in process 25 64 Finished goods 685 538 Total Inventory $ 852 $ 755 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations [Abstract] | |
Schedule of major categories of discontinued assets and liabilities | September 30, December 31, 2015 Assets Accounts receivable, net 1 1 Notes and other receivables 8 8 Other assets 763 763 Total Current Assets 772 772 Other assets -- -- Total Assets $ 772 $ 772 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable $ 178 $ 178 Accrued liabilities 900 888 Deferred revenue 236 236 Due to related party 1 2 Short-term debt 722 722 Total Current Liabilities 2,037 2,026 Long Term Liabilities -- -- Total Liabilities $ 2,037 $ 2,026 |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Revenue [Abstract] | |
Schedule of deferred revenue | September 30, December 31, Deferred Revenue, Current Maintenance agreements $ 8,192 $ 9,025 Service agreements 3,720 70 Total Deferred Revenue, Current 11,912 9,095 Deferred Revenue, Non-Current Maintenance agreements 6,764 7,666 Total Deferred Revenue $ 18,676 $ 16,761 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt [Abstract] | |
Schedule of debt | September 30, December 31, Short-Term Debt Notes payable $ 170 $ 170 Revolving line of credit 4,430 8,580 Term loan -- 667 Total Short-Term Debt $ 4,600 $ 9,417 Long-Term Debt Notes payable $ 212 $ 282 Term loan, non-current portion -- 944 Senior secured convertible debenture, less debt discount of $2,159 3,541 -- Total Long-Term Debt $ 3,753 $ 1,226 |
Stock Options (Tables)
Stock Options (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Stock Options [Abstract] | |
Schedule of weighted-average assumptions Black-Scholes option-pricing model | September 30, September 30, Risk-free interest rate 1.41% 1.93-2.02% Expected life of option grants 7 years 7 years Expected volatility of underlying stock 47.47% 51.4% Dividends Assumption $ -- $ -- |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value [Abstract] | |
Schedule of fair value on a recurring basis | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs Total Embedded Conversion Feature $ 0 $ 0 $ 11 $ 11 |
Schedule of the fair value reconciliation of Level 3 liabilities measured at fair value | Embedded Conversion Feature Balance at January 1, 2016 $ 0 Included in Debt Discount 52 Change in fair value of derivative (41 ) Balance at September 30, 2016 $ 11 |
Credit Risk and Concentrations
Credit Risk and Concentrations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Credit Risk and Concentrations [Abstract] | |
Schedule of risk percentage of revenue from customers | Nine Months Ended Nine Months Ended September 30, 2015 $ % $ % Customer A 10,180 26% 12,047 26% Customer B -- -- 5,641 12% Three Months Ended September 30, 2016 Three Months Ended $ % $ % Customer A 1,463 13% 3,037 20% Customer B -- -- 1,510 10% Customer F 1,857 17% -- -- |
Segment Reporting and Foreign35
Segment Reporting and Foreign Operations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting and Foreign Operations [Abstract] | |
Schedule of financial data by business segment | Mobile, IoT & Big Data Products Storage and Computing SaaS Revenues Professional Services Consolidated Three Months Ended September 30, 2016: Net revenues $ 542 $ 7,865 $ 826 $ 2,007 $ 11,240 Cost of net revenues $ (249 ) $ (6,625 ) $ (239 ) $ (1,029 ) $ (8,142 ) Gross profit $ 293 $ 1,240 $ 587 $ 978 $ 3,098 Gross margin % 54 % 16 % 71 % 49 % 28 % Depreciation and amortization $ 122 $ 206 $ 6 $ -- 334 Amortization of intangibles $ 728 $ 192 $ 136 $ -- $ 1,056 Three Months Ended September 30, 2015: Net revenues $ 487 $ 10,321 $ 871 $ 3,195 $ 14,874 Cost of net revenues $ (183 ) $ (8,432 ) $ (192 ) $ (1,679 ) $ (10,486 ) Gross profit $ 304 $ 1,889 $ 679 $ 1,516 $ 4,388 Gross margin % 62 % 18 % 78 % 47 % 30 % Depreciation and amortization $ 47 $ 36 $ 64 $ 1 $ 148 Amortization of intangibles $ 728 $ 192 $ 136 $ -- $ 1,056 Nine Months Ended September 30, 2016: Net revenues $ 1,228 $ 26,692 $ 2,446 $ 8,293 $ 38,659 Cost of net revenues $ (416 ) $ (21,947 ) $ (649 ) $ (5,158 ) $ (28,170 ) Gross profit $ 812 $ 4,745 $ 1,797 $ 3,135 $ 10,489 Gross margin % 66 % 18 % 73 % 38 % 27 % Depreciation and amortization $ 290 $ 574 $ 19 $ 1 $ 884 Amortization of intangibles $ 2,185 $ 576 $ 408 $ -- $ 3,169 Nine Months Ended September 30, 2015: Net revenues $ 862 $ 33,970 $ 2,831 $ 9,031 $ 46,694 Cost of net revenues $ (377 ) $ (27,261 ) $ (620 ) $ (4,305 ) $ (32,563 ) Gross profit $ 485 $ 6,709 $ 2,211 $ 4,726 $ 14,131 Gross margin % 56 % 20 % 78 % 52 % 30 % Depreciation and amortization $ 102 $ 98 $ 70 $ 2 $ 272 Amortization of intangibles $ 1,954 $ 576 $ 408 $ -- $ 2,938 |
Schedule of reconciliation of reportable segments' combined income from operations to the consolidated loss before income taxes | For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Income from operations of reportable segments $ 3,098 $ 4,388 $ 10,489 $ 14,131 Unallocated operating expenses (7,240 ) (7,511 ) (22,761 ) (21,757 ) Interest expense (639 ) (120 ) (1,037 ) (340 ) Other income (expense) 61 71 108 196 Consolidated loss before income taxes $ (4,720 ) $ (3,172 ) $ (13,201 ) $ (7,770 ) |
Schedule of financial data by geographic area | United Saudi States Canada Arabia Eliminations Total Three Months Ended September 30, 2016: Revenues by geographic area $ 11,231 $ 9 $ -- $ -- $ 11,240 Operating loss by geographic area $ (3,622 ) $ (511 ) $ (9 ) $ -- $ (4,142 ) Net loss by geographic area $ (4,200 ) $ (511 ) $ (9 ) $ -- $ (4,720 ) Three Months Ended September 30, 2015: Revenues by geographic area $ 14,862 $ 12 $ -- $ -- $ 14,874 Operating loss by geographic area $ (2,835 ) $ (280 ) $ (8 ) $ -- $ (3,123 ) Net loss by geographic area $ (2,884 ) $ (280 ) $ (8 ) $ -- $ (3,172 ) Nine Months Ended September 30, 2016: Revenues by geographic area $ 38,605 $ 54 $ -- $ -- $ 38,659 Operating loss by geographic area $ (10,903 ) $ (1,344 ) $ (25 ) $ -- $ (12,272 ) Net loss by geographic area $ (11,832 ) $ (1,344 ) $ (25 ) $ -- $ (13,201 ) Nine Months Ended September 30, 2015: Revenues by geographic area $ 46,664 $ 30 $ -- $ -- $ 46,694 Operating loss by geographic area $ (6,830 ) $ (772 ) $ (24 ) $ -- $ (7,626 ) Net loss by geographic area $ (6,984 ) $ (772 ) $ (14 ) $ -- $ (7,770 ) As of September 30, 2016: Identifiable assets by geographic area $ 55,761 $ 487 $ 772 $ -- $ 57,020 Long lived assets by geographic area $ 30,220 $ 325 $ -- $ -- $ 30,545 As of December 31, 2015: Identifiable assets by geographic area $ 67,538 $ 405 $ 772 $ -- $ 68,715 Long lived assets by geographic area $ 32,759 $ 241 $ -- $ -- $ 33,000 |
Organization and Nature of Bu36
Organization and Nature of Business (Details) - USD ($) $ in Thousands | Aug. 09, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Organization and Nature of Business (Textual) | |||||
Working capital deficiency | $ 10,300 | $ 10,300 | |||
Net loss | (4,720) | $ (3,172) | (13,201) | $ (7,770) | |
Net cash used in operating activities | (1,136) | $ (3,891) | |||
S-3 Market capitalization ceiling | 75,000 | $ 75,000 | |||
Credit facility, Maximum borrowing capacity | $ 10,000 | ||||
Credit facility, Maturity date | Apr. 29, 2017 | ||||
Line of credit facility utilized | $ 4,400 | ||||
Reduction in operating expenses on an annual basis | $ 1,800 | ||||
Hillair Capital Investments L.P. [Member] | |||||
Organization and Nature of Business (Textual) | |||||
Securities purchase agreement, description | (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amount of $5,700,000 due on August 9, 2018 and (ii) 2,250 shares of newly created Series 1 Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock", together with the Debenture, the "Securities"), for an aggregate purchase price of $5,000,000 (the "Transaction"). |
Summary of Significant Accoun37
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Stock Based Compensation [Abstract] | ||||
Compensation and related benefits | $ 334 | $ 293 | $ 1,008 | $ 605 |
Professional and legal fees | 10 | 98 | 47 | 280 |
Totals | $ 344 | $ 391 | $ 1,055 | $ 885 |
Summary of Significant Accoun38
Summary of Significant Accounting Policies (Details 1) - shares | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Number of common shares and common share equivalents excluded from the calculation of diluted net loss per share | 12,120,390 | 4,892,573 |
Options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Number of common shares and common share equivalents excluded from the calculation of diluted net loss per share | 5,975,553 | 4,345,596 |
Warrants [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Number of common shares and common share equivalents excluded from the calculation of diluted net loss per share | 561,262 | 511,262 |
Shares accrued but not issued [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Number of common shares and common share equivalents excluded from the calculation of diluted net loss per share | 283,575 | 35,715 |
Convertible preferred stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Number of common shares and common share equivalents excluded from the calculation of diluted net loss per share | 1,500,000 | |
Convertible debenture [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Number of common shares and common share equivalents excluded from the calculation of diluted net loss per share | 3,800,000 |
Summary of Significant Accoun39
Summary of Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Summary of Significant Accounting Policies (Textual) | ||||
Share-based compensation | $ 344 | $ 391 | $ 1,055 | $ 885 |
Revenues | 11,240 | 14,874 | 38,659 | 46,694 |
Multiple deliverable elements [Member] | ||||
Summary of Significant Accounting Policies (Textual) | ||||
Revenues | $ 3,700 | $ 7,400 | $ 15,400 | $ 24,300 |
Related Party (Details)
Related Party (Details) - USD ($) | Mar. 25, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Related Party (Textual) | ||||||
Due from Sysorex Consulting Inc. | $ 666,000 | $ 666,000 | $ 666,000 | |||
Effective date of Amended Agreement | Mar. 16, 2016 | |||||
Monthly consultant fee | $ 20,000 | |||||
Related party Amendment Agreement, Description | The Amended Agreement provided for an extension of the original term for an additional nine months from March 31, 2016 to December 31, 2016. | |||||
Consulting services | 10,000 | $ 98,000 | 47,000 | $ 280,000 | ||
Consulting Services Ordering Agreement [Member] | ||||||
Related Party (Textual) | ||||||
Consulting services | $ 90,000 | $ 210,000 | $ 90,000 | $ 270,000 |
Notes and Other Receivables (De
Notes and Other Receivables (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Notes and Other Receivables [Abstract] | ||
Notes receivable | $ 900 | $ 900 |
Other receivables | 394 | 440 |
Total Notes and Other Receivables | $ 1,294 | $ 1,340 |
Notes and Other Receivables (42
Notes and Other Receivables (Details Textual) - Third Party [Member] | 1 Months Ended |
Jul. 17, 2014USD ($) | |
Notes and Other Receivables (Textual) | |
Interest rate per annum | 8.00% |
Promissory note's, extended due date | Dec. 31, 2016 |
Notes receivable net | $ 900,000 |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory [Abstract] | ||
Raw materials | $ 142 | $ 153 |
Work in process | 25 | 64 |
Finished goods | 685 | 538 |
Total Inventory | $ 852 | $ 755 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets | ||
Accounts receivable, net | $ 1 | $ 1 |
Notes and other receivables | 8 | 8 |
Other assets | 763 | 763 |
Total Current Assets | 772 | 772 |
Other assets | ||
Total Assets | 772 | 772 |
Current Liabilities | ||
Accounts payable | 178 | 178 |
Accrued liabilities | 900 | 888 |
Deferred revenue | 236 | 236 |
Due to related party | 1 | 2 |
Short-term debt | 722 | 722 |
Total Current Liabilities | 2,037 | 2,026 |
Long Term Liabilities | ||
Total Liabilities | $ 2,037 | $ 2,026 |
Discontinued Operations (Deta45
Discontinued Operations (Details Textual) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Discontinued Operations [Abstract] | ||
Deposits for surety bonds | $ 749,000 | $ 749,000 |
Deferred Revenue (Details)
Deferred Revenue (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Deferred Revenue, Current | ||
Total Deferred Revenue, Current | $ 11,912 | $ 9,095 |
Deferred Revenue, Non-Current | ||
Total Deferred Revenue, Non-Current | 6,764 | 7,666 |
Total Deferred Revenue | 18,676 | 16,761 |
Service agreements [Member] | ||
Deferred Revenue, Current | ||
Total Deferred Revenue, Current | 3,720 | 70 |
Maintenance agreements [Member] | ||
Deferred Revenue, Current | ||
Total Deferred Revenue, Current | 8,192 | 9,025 |
Deferred Revenue, Non-Current | ||
Total Deferred Revenue, Non-Current | $ 6,764 | $ 7,666 |
Debt (Details)
Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Short-Term Debt | ||
Notes payable | $ 170 | $ 170 |
Revolving line of credit | 4,430 | 8,580 |
Term loan | 667 | |
Total Short-Term Debt | 4,600 | 9,417 |
Long-Term Debt | ||
Notes payable | 212 | 282 |
Term loan, non-current portion | 944 | |
Senior secured convertible debenture, less debt discount of $2,159 | 3,541 | |
Total Long-Term Debt | $ 3,753 | $ 1,226 |
Debt (Details Textual)
Debt (Details Textual) - USD ($) | Aug. 09, 2016 | Aug. 05, 2016 | Mar. 25, 2016 | May 04, 2015 | Mar. 31, 2016 | Sep. 30, 2016 |
Debt Instrument [Line Items] | ||||||
Borrowers adjusted EBITDA covenant | $ (2,200,000) | |||||
Western Alliance Amendment, description | The Lender and the Borrowers agreed that the adjusted EBITDA for the six months ended March 31, 2016 would not be less than $(2,200,000) and on or before April 30, 2016, the Borrowers and Lender must agree to additional financial covenants for the fiscal quarters ended June 30, 2016, September 30, 2016 and December 31, 2016. | (i) agreement by the Lender to allow the Company to finance a receivable from a customer outside of the United States for a limited period of time; (ii) modification of the date for the repayment of the Term Advance to June 30, 2016; (iii) agreement by the Borrowers to maintain, beginning on June 30, 2016, an Asset Coverage Ratio of not less than 1.25 to 1; and (iv) revisions to the definition of certain terms that are included in the Original Agreement and providing definitions for certain terms that are included in the Amendment. | ||||
Fee in Lieu of Warrants | $ 200,000 | |||||
Fair value for the embedded conversion feature recorded as discount to the debenture | $ 196,000 | |||||
Conversion price | $ 0.47 | |||||
Debt discount | $ 2,159,000 | |||||
Binomial Lattice Model [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Fair value of the embedded conversion feature | $ 51,000 | |||||
Bridge Bank [Member] | ||||||
Debt Instrument [Line Items] | ||||||
New credit limit of line of credit | $ 10,000,000 | |||||
Bank term loan payable | $ 2,000,000 | |||||
Debt Instrument, maturity date | Apr. 29, 2018 | |||||
Repayments of term loan | $ 167,000 | |||||
Description on debt instrument | The term loan accrues interest at the greater of 5.25% or Bridge Bank's prime rate plus 2%. | |||||
Debt Instrument periodic payment principal | $ 56,000 | |||||
Bank loan repayment from debt issuance | $ 1,400,000 | |||||
Accounts payable repayment from debt issuance | $ 1,000,000 | |||||
Hillair Capital Investments L.P. [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Securities purchase agreement, description | (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amount of $5,700,000 due on August 9, 2018 and (ii) 2,250 shares of newly created Series 1 Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock", together with the Debenture, the "Securities"), for an aggregate purchase price of $5,000,000 (the "Transaction"). |
Common Stock (Details)
Common Stock (Details) - Common Stock [Member] - USD ($) | 3 Months Ended | 9 Months Ended |
Jun. 30, 2015 | Sep. 30, 2016 | |
Common Stock (Textual) | ||
Common shares issued for services, shares | 95,000 | |
Fair value of shares issued for services | $ 47,000 | |
Company issued an aggregate shares of common stock | 1,543,425 | |
Value of the shares as part of the purchase price of the assets | $ 3,781,000 | |
Issuance of common stock under Lightminer acquisition remain in escrow | 283,575 |
Convertible Series 1 Preferre50
Convertible Series 1 Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 09, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Convertible Series 1 Preferred Stock (Textual) | |||
Convertible series 1 preferred stock, par value | $ 1,000 | $ 1,000 | |
Convertible series 1 preferred stock, shares authorized | 5,000,000 | 5,000,000 | |
Convertible series 1 preferred stock, liquidation preference | $ 2,250 | $ 0 | |
Conversion price floor | $ 0.47 | ||
Convertible Series 1 Preferred Stock [Member] | |||
Convertible Series 1 Preferred Stock (Textual) | |||
Securities purchase agreement, description | (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amount of $5,700,000 and (See Note 9) (ii) 2,250 shares of newly created Series 1 Convertible Preferred Stock for an aggregate purchase price of $5,000,000. |
Stock Options (Details)
Stock Options (Details) - Stock options [Member] - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Schedule of weighted-average assumptions Black-Scholes option-pricing model | ||
Risk-free interest rate | 1.41% | |
Expected life of option grants | 7 years | 7 years |
Expected volatility of underlying stock | 47.47% | 51.40% |
Dividends Assumption | ||
Minimum [Member] | ||
Schedule of weighted-average assumptions Black-Scholes option-pricing model | ||
Risk-free interest rate | 1.93% | |
Maximum [Member] | ||
Schedule of weighted-average assumptions Black-Scholes option-pricing model | ||
Risk-free interest rate | 2.02% |
Stock Options (Details Textual)
Stock Options (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | |
Employee Stock Option [Member] | |||||
Share-based Arrangements with Employees and Nonemployees [Abstract] | |||||
Expected life of option grants | 7 years | 7 years | |||
Fair value of non-vested options | $ 2,639,000 | ||||
Weighted average remaining term of non-vested options | 1 year 5 months 12 days | ||||
Dividends Assumption | |||||
Employee [Member] | |||||
Share-based Arrangements with Employees and Nonemployees [Abstract] | |||||
Number of options granted, shares | 347,500 | 1,131,894 | 102,500 | ||
Options vest pro-rata | 48 months | 48 months | 48 months | ||
Expected life of option grants | 10 years | 10 years | 10 years | ||
Options exercise price | $ 0.47 | $ 0.52 | $ 0.52 | ||
Fair value of options granted | $ 81,000 | $ 292,000 | $ 27,000 | ||
Fair value of the stock option as of grant date | $ 0.47 | $ 0.52 | $ 0.52 |
Fair Value (Details)
Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Schedule of fair value on a recurring basis [Abstract] | ||
Embedded Conversion Feature | $ 11 | $ 0 |
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member] | ||
Schedule of fair value on a recurring basis [Abstract] | ||
Embedded Conversion Feature | 0 | |
Significant Other Observable Inputs (Level 2) [Member] | ||
Schedule of fair value on a recurring basis [Abstract] | ||
Embedded Conversion Feature | 0 | |
Significant Unobservable Inputs (Level 3) [Member] | ||
Schedule of fair value on a recurring basis [Abstract] | ||
Embedded Conversion Feature | $ 11 |
Fair Value (Details 1)
Fair Value (Details 1) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Schedule of the fair value reconciliation of Level 3 liabilities measured at fair value [Abstract] | |
Embedded Conversion Feature, Balance | $ 0 |
Included in Debt Discount | 52 |
Change in fair value of derivative | (41) |
Embedded Conversion Feature, Balance | $ 11 |
Credit Risk and Concentration55
Credit Risk and Concentrations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Concentration Risk [Line Items] | ||||
Net revenues | $ 11,240 | $ 14,874 | $ 38,659 | $ 46,694 |
Customer concentration risk [Member] | Customer A [Member] | ||||
Concentration Risk [Line Items] | ||||
Net revenues | $ 1,463 | $ 3,037 | $ 10,180 | $ 12,047 |
Concentration risk, percentage | 13.00% | 20.00% | 26.00% | 26.00% |
Customer concentration risk [Member] | Customer B [Member] | ||||
Concentration Risk [Line Items] | ||||
Net revenues | $ 1,510 | $ 5,641 | ||
Concentration risk, percentage | 10.00% | 12.00% | ||
Customer concentration risk [Member] | Customer F [Member] | ||||
Concentration Risk [Line Items] | ||||
Net revenues | $ 1,857 | |||
Concentration risk, percentage | 17.00% |
Credit Risk and Concentration56
Credit Risk and Concentrations (Details Textual) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)Vendor | Sep. 30, 2015USD ($)Vendor | |
Accounts Receivable [Member] | Customer A [Member] | ||||
Credit Risk and Concentrations (Textual) | ||||
Concentration risk, percentage | 11.00% | |||
Accounts Receivable [Member] | Customer C [Member] | ||||
Credit Risk and Concentrations (Textual) | ||||
Concentration risk, percentage | 51.00% | |||
Accounts Receivable [Member] | Customer E [Member] | ||||
Credit Risk and Concentrations (Textual) | ||||
Concentration risk, percentage | 11.00% | |||
Accounts payable [Member] | ||||
Credit Risk and Concentrations (Textual) | ||||
Concentration risk, percentage | 56.00% | 54.00% | ||
Purchases from vendors | $ | $ 3.7 | $ 5 | $ 13.5 | $ 17.7 |
Number of vendors | Vendor | 1 | 1 |
Segment Reporting and Foreign57
Segment Reporting and Foreign Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Segment Reporting Information [Line Items] | ||||
Net revenues | $ 11,240 | $ 14,874 | $ 38,659 | $ 46,694 |
Cost of net revenues | (8,142) | (10,486) | (28,170) | (32,563) |
Gross profit | $ 3,098 | $ 4,388 | $ 10,489 | $ 14,131 |
Gross margin % | 28.00% | 30.00% | 27.00% | 30.00% |
Depreciation and amortization | $ 334 | $ 148 | $ 884 | $ 272 |
Amortization of intangibles | 1,056 | 1,056 | 3,169 | 2,938 |
Mobile, IoT & Big Data Products [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net revenues | 542 | 487 | 1,228 | 862 |
Cost of net revenues | (249) | (183) | (416) | (377) |
Gross profit | $ 293 | $ 304 | $ 812 | $ 485 |
Gross margin % | 54.00% | 62.00% | 66.00% | 56.00% |
Depreciation and amortization | $ 122 | $ 47 | $ 290 | $ 102 |
Amortization of intangibles | 728 | 728 | 2,185 | 1,954 |
Storage and Computing [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net revenues | 7,865 | 10,321 | 26,692 | 33,970 |
Cost of net revenues | (6,625) | (8,432) | (21,947) | (27,261) |
Gross profit | $ 1,240 | $ 1,889 | $ 4,745 | $ 6,709 |
Gross margin % | 16.00% | 18.00% | 18.00% | 20.00% |
Depreciation and amortization | $ 206 | $ 36 | $ 574 | $ 98 |
Amortization of intangibles | 192 | 192 | 576 | 576 |
SaaS Revenues [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net revenues | 826 | 871 | 2,446 | 2,831 |
Cost of net revenues | (239) | (192) | (649) | (620) |
Gross profit | $ 587 | $ 679 | $ 1,797 | $ 2,211 |
Gross margin % | 71.00% | 78.00% | 73.00% | 78.00% |
Depreciation and amortization | $ 6 | $ 64 | $ 19 | $ 70 |
Amortization of intangibles | 136 | 136 | 408 | 408 |
Professional Services [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net revenues | 2,007 | 3,195 | 8,293 | 9,031 |
Cost of net revenues | (1,029) | (1,679) | (5,158) | (4,305) |
Gross profit | $ 978 | $ 1,516 | $ 3,135 | $ 4,726 |
Gross margin % | 49.00% | 47.00% | 38.00% | 52.00% |
Depreciation and amortization | $ 1 | $ 1 | $ 2 | |
Amortization of intangibles |
Segment Reporting and Foreign58
Segment Reporting and Foreign Operations (Details 1) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Segment Reporting and Foreign Operations [Abstract] | ||||
Income from operations of reportable segments | $ 3,098 | $ 4,388 | $ 10,489 | $ 14,131 |
Unallocated operating expenses | (7,240) | (7,511) | (22,761) | (21,757) |
Interest expense | (639) | (120) | (1,037) | (340) |
Other income (expense) | 61 | 71 | 108 | 196 |
Consolidated loss before income taxes | $ (4,720) | $ (3,172) | $ (13,201) | $ (7,770) |
Segment Reporting and Foreign59
Segment Reporting and Foreign Operations (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Revenues by geographic area | $ 11,240 | $ 14,874 | $ 38,659 | $ 46,694 | |
Operating loss by geographic area | (4,142) | (3,123) | (12,272) | (7,626) | |
Net loss by geographic area | (4,720) | (3,172) | (13,201) | (7,770) | |
Identifiable assets by geographic area | 57,020 | 57,020 | $ 68,715 | ||
Long lived assets by geographic area | 30,545 | 30,545 | 33,000 | ||
United States [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Revenues by geographic area | 11,231 | 14,862 | 38,605 | 46,664 | |
Operating loss by geographic area | (3,622) | (2,835) | (10,903) | (6,830) | |
Net loss by geographic area | (4,200) | (2,884) | (11,832) | (6,984) | |
Identifiable assets by geographic area | 55,761 | 55,761 | 67,538 | ||
Long lived assets by geographic area | 30,220 | 30,220 | 32,759 | ||
Canada [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Revenues by geographic area | 9 | 12 | 54 | 30 | |
Operating loss by geographic area | (511) | (280) | (1,344) | (772) | |
Net loss by geographic area | (511) | (280) | (1,344) | (772) | |
Identifiable assets by geographic area | 487 | 487 | 405 | ||
Long lived assets by geographic area | 325 | 325 | 241 | ||
Saudi Arabia [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Revenues by geographic area | |||||
Operating loss by geographic area | (9) | (8) | (25) | (24) | |
Net loss by geographic area | (9) | (8) | (25) | (14) | |
Identifiable assets by geographic area | 772 | 772 | 772 | ||
Long lived assets by geographic area | |||||
Eliminations [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Revenues by geographic area | |||||
Operating loss by geographic area | |||||
Net loss by geographic area | |||||
Identifiable assets by geographic area | |||||
Long lived assets by geographic area |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2011 | Dec. 31, 2015 | |
Commitments and Contingencies [Abstract] | |||
Litigation settlement in favor of Creative Edge, Inc. | $ 936,000 | ||
Amount paid towards loss contingency | $ 214,000 | ||
Surety bond towards loss contingency | 515,000 | ||
Litigation amount accrued as advances payable | $ 207,000 | $ 207,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] | Nov. 14, 2016USD ($) |
Asset Purchase Agreement [Member] | |
Subsequent Event [Line Items] | |
Asset purchase agreement, description | The consideration to be paid for the Assets will include an aggregate of (A) $1,800,000 in cash, of which $1,400,000 minus the Seller's Cash On Hand (as defined in the Purchase Agreement) and certain amounts payable to creditors of the Seller shall be paid upon the closing of the Acquisition (the "Closing") and $400,000 shall be paid in two (2) annual installments of $200,000 each on the respective anniversary dates of the Closing, subject to certain set offs and recoupment by Buyer; (B) 530,000 unregistered restricted shares of the Company's voting common stock valued at $1.50 per share; (C) the aggregate amount of certain specified assumed liabilities; and (D) up to an aggregate of $1,200,000 in earnout payments, of which up to $400,000 shall be payable to the Seller per year for the three years following the Closing. |
Loan and Security Agreement [Member] | |
Subsequent Event [Line Items] | |
Revolving line of credit, description | (i) repay in full the existing indebtedness owed to Western Alliance Bank, as successor in interest to Bridge Bank, N.A.; pay certain expenses related to obtaining the revolving line of credit and for general working capital purposes. |
Interest rate for amount borrowed under loan and security agreement, description | (a) 9.5% and (b) the sum of (i) the "Prime Rate" as reported in the "Money Rates" column of The Wall Street Journal, adjusted as and when such Prime Rate changes, plus (ii) 6%. The interest rate on borrowings is subject to increase by 4% if an event of default has occurred and is continuing. |
Bank line fees, description | (a) an annual line fee equal to $100,000; (b) an unused line fee equal to 0.5% of the daily average unused portion of the maximum amount of Availability (as defined in the Loan Agreement), calculated on an annualized basis, due and payable monthly; (c) a loan administration and monitoring fee equal to 0.5% of the daily average used portion of Availability calculated on a monthly basis, due and payable monthly; and (d) certain other audit and wire fees. |
Payment to lender for closing fee | $ 100,000 |