What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-14 compared with 2020-05-12 · 1646 added, 1331 removed, 870 unchanged (77% of the section changed)

Financial Statements

The accompanying condensed

consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial

information which are the accounting principles that are generally accepted in the United States of America and in accordance with

the instructions for Form 10-Q.

Accordingly, they do not include all of the information and footnotes required by generally accepted

accounting principles for complete financial statements.

In the opinion of management,

the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments

necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods

The results for the

period ended March 31, 2020 are not necessarily indicative of the results of operations for the full year.

These financial statements

and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited

consolidated financial statements for the fiscal years ended December 31, 2019 and 2018 included in the annual report on Form 10-K

filed with the U.S.

accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles

for interim financial information which are the accounting principles that are generally accepted in the United States of America

and in accordance with the instructions for Form 10-Q.

Accordingly, they do not include all of the information and footnotes required

by generally accepted accounting principles for complete financial statements.

the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of

normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the

Company for the interim periods presented.

results for the period ended June 30, 2020 are not necessarily indicative of the results of operations for the full year.

financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto

included in our audited consolidated financial statements for the fiscal years ended December 31, 2019 and 2018 included in the

annual report on Form 10-K filed with the U.S.

Securities and Exchange Commission (the “SEC”) on March 3, 2020.

INPIXON AND SUBSIDIARIES

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

11 unchanged sentences

Receivable from related party

The accompanying notes are an integral part of these financial statements.

INPIXON AND SUBSIDIARIES

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

17 unchanged sentences

Stockholders’

Stock - $0.001 par value;

5,000,000 shares authorized, consisting of Series 4 Convertible Preferred Stock - 10,415 shares

1 and 1 issued, and 1 and 1 outstanding as of March 31, 2020 and December 31, 2019, respectively, Series 5

Convertible Preferred Stock - 12,000 shares authorized;

126 and 126 issued, and 126 and 126 outstanding as of March 31, 2020

and December 31, 2019, respectively.

Preferred Stock - $0.001 par value;

5,000,000 shares authorized, consisting of Series 4 Convertible Preferred Stock - 10,415 shares authorized;

1 and 1 issued, and 1 and 1 outstanding as of June 30, 2020 and December 31, 2019, respectively, Series 5 Convertible Preferred Stock - 12,000 shares authorized;

126 and 126 issued, and 126 and 126 outstanding as of June 30, 2020 and December 31, 2019, respectively.

Common Stock - $0.001 par value;

250,000,000 shares authorized;

7,068,490 and 4,234,923 issued and 7,068,489 and 4,234,922 outstanding as of March 31, 2020 and December 31, 2019, respectively.

40,175,002 and 4,234,923 issued and 40,175,001 and 4,234,922 outstanding as of June 30, 2020 and December 31, 2019, respectively.

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive income

deficit (excluding $2,442 reclassified to additional paid in capital in quasi-reorganization)

Accumulated deficit (excluding $2,442 reclassified to additional paid in capital in quasi-reorganization)

Stockholders’

3 unchanged sentences

Total Liabilities and Stockholders’

The accompanying notes are an integral part of these financial statements.

INPIXON AND SUBSIDIARIES

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

Cost of Revenues

9 unchanged sentences

Interest expense, net

Provision for valuation allowance on held for sale loan

Loss on exchange of debt for equity

1 unchanged sentence

Total Other Income (Expense)

Loss from Operations, before tax

Net Loss from Operations, before tax

Income tax benefit

Net Loss Attributable to Non-controlling Interest

Income Attributable to Non-controlling Interest

Net Loss Attributable to Stockholders of Inpixon

5 unchanged sentences

accompanying notes are an integral part of these financial statements.

INPIXON AND SUBSIDIARIES

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Three Months Ended

Unrealized foreign exchange loss from cumulative translation adjustments

For the Six Months Ended

Unrealized foreign exchange gain/(loss) from cumulative translation adjustments

Comprehensive Loss

The accompanying notes are an integral part of these financial statements.

INPIXON AND SUBSIDIARIES

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands, except per share data)

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

thousands, except per share data)

Series 4 Convertible

Series 5 Convertible

Accumulated Other

Total Stockholders’

Stockholders’

Preferred Stock

Treasury Stock

Comprehensive

- January 1, 2020

options granted to employees and consultants for services

Shares issued for net cash proceeds of a public offering

shares issued for extinguishment of debt

Translation Adjustment

- March 31, 2020

Income (Loss)

Balance - January 1, 2020

Stock options granted to employees and consultants for services

Common Shares issued for net cash proceeds of a public offering

Common shares issued for extinguishment of debt

Cumulative Translation Adjustment

Balance - March 31, 2020

Stock options granted to employees for services

Common and preferred shares issued for net cash proceeds from a public offering

Common shares issued for extinguishment of debt

Common shares issued for extinguishment of liability

Cumulative Translation Adjustment

Balance - June 30, 2019

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

thousands, except per share data)

Series 4 Convertible

Series 5 Convertible

Accumulated Other

Total Stockholders’

Stockholders’

Preferred Stock

Treasury Stock

Comprehensive

Income (Loss)

- January 1, 2019

Shares issued for net cash proceeds of a public offering

shares issued for extinguishment of debt

shares issued for net proceeds from warrants exercised

shares issued for warrants exercised

of convertible Series 5 Preferred Stock

shares issued for extinguishment of liability

shares issued for services

options granted to employees and consultants for services

Translation Adjustment

- March 31, 2019

The accompanying notes are an integral part of these financial statements.

INPIXON AND SUBSIDIARIES

Preferred Shares issued

for net cash proceeds of a public offering

Common shares issued

for extinguishment of debt

Common shares issued

for net proceeds from warrants exercised

Common shares issued

for warrants exercised

Redemption of convertible

Series 5 Preferred Stock

Common shares issued

for extinguishment of liability

Common shares issued

Stock options granted

to employees and consultants for services

Cumulative Translation

Balance - March 31,

Common shares issued

for extinguishment of debt

Common shares issued

for warrants exercised

Redemption of convertible

Series 5 Preferred Stock

Stock options granted

to employees and consultants for services

Issuance of Locality

Acquisition Shares

Issuance of GTX Acquisition

Cumulative Translation

- June 30, 2019

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

As of March 31,

For the Six Months Ended

Cash Flows (Used In) from Operating Activities

9 unchanged sentences

Provision for doubtful accounts

Provision for the valuation allowance for held for sale loan

Provision for the valuation allowance for related party receivable

Income tax benefit

12 unchanged sentences

Investment in capitalized software

Investment in GTX

Investment in Locality

Net Cash Flows Used in Investing Activities

4 unchanged sentences

Net proceeds from notes payable

Repayment of notes payable

Loans to related party

1 unchanged sentence

Net proceeds from promissory notes

Repayment of acquisition liability to Locality shareholders

Net Cash Provided By Financing Activities

9 unchanged sentences

Right of use asset obtained in exchange for lease liability

The accompanying notes are an integral part of these financial statements.

Common shares issued for GTX acquisition

Common shares issued for Locality acquisition

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

1 - Organization and Nature of Business and Going Concern

Inpixon, and its wholly-owned subsidiary,

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

1 - Organization and Nature of Business

Inpixon, and its wholly-owned subsidiaries,

Inpixon Canada, Inc.

(“Inpixon Canada”), and its majority-owned subsidiary Inpixon India Limited (“Inpixon India”)

(unless otherwise stated or the context otherwise requires, the terms “Inpixon”

(“Inpixon Canada”), Inpixon Limited, Inpixon GmbH and its majority-owned subsidiary Inpixon India

Limited (“Inpixon India”) (unless otherwise stated or the context otherwise requires, the terms “Inpixon”

“we,”

2 unchanged sentences

and the “Company”

refer collectively to Inpixon and the aforementioned subsidiaries), are an indoor

intelligence company.

Our business and government customers use our solutions to secure, digitize and optimize their indoor spaces

with our positioning, mapping and analytics products.

Our indoor intelligence platform uses sensor technology to detect accessible

cellular, Wi-Fi, Bluetooth, ultra-wide band “UWB”

and radio frequency identification “RFID”

signals emitted

from devices within a venue providing positional information similar to what global positioning system (“GPS”) satellite

systems provide for the outdoors.

Combining this positional data with our dynamic and interactive mapping solution and a high-performance

analytics engine, yields near real time insights to our customers providing them with visibility, security and business intelligence

within their indoor spaces.

Our highly configurable platform can also ingest data from our customers’

and other third party

sensors, Wi-Fi access points, Bluetooth beacons, video cameras, and big data sources, among others to maximize indoor intelligence.

The Company also offers digital tear-sheets with optional invoice integration, digital ad delivery, and an e-edition designed

for reader engagement for the media, publishing and entertainment industry.

Our Indoor Intelligence products secure, digitize

and optimize the interior of any premises with indoor positioning and data analytics that provide rich positional information,

similar to a GPS, and browser-like intelligence for the indoors.

The Company is headquartered in Palo Alto, California, and

has subsidiary offices in Coquitlam, Canada, New Westminster, Canada, Toronto, Canada and Hyderabad, India.

Concern and Management’s Plans

of March 31, 2020, the Company has a working capital deficiency of approximately $6.2 million.

For the three months ended March

31, 2020, the Company incurred a net loss of approximately $6.2 million.

The aforementioned factors raise substantial doubt about

the Company’s ability to continue as a going concern.

The accompanying condensed consolidated financial statements have

been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the

normal course of business.

The financial statements do not include any adjustments relating to the recoverability and classification

of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going

concern within one year after the date the financial statements are issued.

On March 3, 2020, the Company entered into

an Equity Distribution Agreement with Maxim Group LLC (“Maxim”) under which the Company may offer and sell shares of

our common stock in connection with an at-the-market equity facility (“ATM”) in an aggregate offering amount of up

to $50 million.

The Company issued 937,010 shares of common stock during the quarter ended March 31, 2020 in connection with the

ATM resulting in net proceeds to the Company of approximately $1.3 million.

Subsequent to the quarter ended March 31, 2020, the

Company issued an additional 9,551,636 shares of common stock in connection with the ATM, resulting in net proceeds to the Company

of approximately $10.6 million.

While the Company believes that its recent debt financing, access

to capital in connection with the sale of its securities under the ATM, availability on the Payplant facility to finance purchase

orders and invoices in an amount equal to 80% of the face value of purchase orders received (as described in Note 9), and

funds from revenue may be sufficient to fund planned operations for the next 12 months from the date the financial statements are

issued, the impact of the COVID-19 pandemic on our business and results of operations is uncertain at this time.

While the Company

has been able to continue operations remotely and has not seen a significant impact in the demand for certain products including

our SaaS or subscription based services and products, certain projects and customer requests have had to be delayed either because

they require onsite services, which could not be performed while shelter in place orders have been in effect or because of the

uncertainty of the customer’s financial position and ability to invest in our technology.

However, the Company has also seen

an increase in interest in our indoor intelligence solutions for workplace readiness, which is directed at enterprise organizations

and government agencies to assist them in optimizing the use of their facilities as well as in developing and monitoring compliance

with corporate policies and government regulations for physical distancing, exposure notification, and the identification of high

traffic areas for sanitizing and cleaning in order to keep their employees healthier and safer within the workplace.

If the Company

is successful in expanding the adoption of our products and services for this solution, the Company may be able to offset any revenue

loss that may be experienced, however, there are no assurances that the Company will be successful or that the Company will be

able to offset any losses, if realized.

In addition, if general economic or other conditions resulting from COVID 19 or other events

materially impact the liquidity of our common stock or ability to access capital from the ATM in addition to our ability to generate

revenue from the sales of our products and services, the Company may not have sufficient funds to support our operations

for the next 12 months.

The Company is also pursuing possible strategic transactions and may raise such additional capital as needed, using

our equity securities, an assignment of our note receivable from Sysorex Inc.

(“Sysorex”) and/or cash and debt financings

in combinations appropriate for each acquisition.

Company’s condensed consolidated financial statements as of March 31, 2020 have been prepared under the assumption that

the Company will continue as a going concern for the next twelve months from the date the financial statements are issued.

Management’s

plans and assessment of the probability that such plans will mitigate and alleviate any substantial doubt about the Company’s

ability to continue as a going concern is dependent upon the ability to attain further operating efficiency, reduce expenditures,

and, ultimately, to generate sufficient levels of revenue.

The Company’s condensed consolidated financial statements as

of March 31, 2020 do not include any adjustments that might result from the outcome of this uncertainty.

refer collectively to Inpixon and the aforementioned

subsidiaries), are an indoor intelligence company.

Our business and government customers use our solutions to secure, digitize

and optimize their indoor spaces with our positioning, mapping and analytics products.

Our indoor intelligence platform uses sensor

technology to detect accessible cellular, Wi-Fi, Bluetooth, ultra-wide band (“UWB”) and radio frequency identification

(“RFID”) signals emitted from devices within a venue providing positional information similar to what global positioning

system (“GPS”) satellite systems provide for the outdoors.

Combining this positional data with our dynamic and interactive

mapping solution and a high-performance analytics engine, yields near real time insights to our customers providing them with

visibility, security and business intelligence within their indoor spaces.

Our highly configurable platform can also ingest data

from our customers’

and other third party sensors, Wi-Fi access points, Bluetooth beacons, video cameras, and big data sources,

among others to maximize indoor intelligence.

The Company also offers digital tear-sheets with optional invoice integration, digital

ad delivery, and an e-edition designed for reader engagement for the media, publishing and entertainment industry.

is headquartered in Palo Alto, California, and has subsidiary offices in Coquitlam, Canada, New Westminster, Canada, Toronto,

Canada and Hyderabad, India.

As of June 30, 2020, the Company has a working

capital total of approximately $30.0 million and cash of $39.5 million.

The Company experienced a net loss of approximately

$7.3 million and $5.2 million for the three months ended June 30, 2020 and 2019, respectively, and a net loss of $13.5

million and $10.4 million for the six months ended June 30, 2020 and 2019, respectively.

On March 3, 2020,

the Company entered into an Equity Distribution Agreement (“EDA”) with Maxim Group LLC (“Maxim”) under

which the Company may offer and sell shares of our common stock in connection with an at-the-market equity facility (“ATM”)

in an aggregate offering amount of up to $50 million, which was increased on June 19, 2020 to $150 million pursuant to an amendment

to the EDA, from time to time through Maxim, acting exclusively as our sales agent.

The Company issued 29,970,046 shares of

common stock during the six months ended June 30, 2020 in connection with the ATM resulting in net proceeds to the Company of approximately

$41.8 million.

Subsequent to the quarter ended June 30, 2020, the Company issued an additional 1,604,312 shares of common stock

in connection with the ATM, resulting in net proceeds to the Company of approximately $2.3 million.

Risks and Uncertainties

The Company cannot assure you that we will

ever earn revenues sufficient to support our operations, or that we will ever be profitable.

In order to continue our operations,

we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds from loans

and bank credit lines.

While we believe that the capital raised or that may be raised in connection with sales under our ATM in

an aggregate amount of up to $150 million, the impact of the COVID-19 pandemic on our business and results of operations is uncertain

at this time.

While we have been able to continue operations remotely we have experienced supply chain constraints and delays in

the receipt of certain components of our products impacting delivery times for our products, we have also seen some impact in the

demand of certain products, delays in certain projects and customer orders either because they require onsite services which could

not be performed while shelter in place orders have been in effect or because of the uncertainty of the customer’s financial

position and ability to invest in our technology.

In addition, while certain anticipated second quarter projects were initially

delayed by customers, following the end of the quarter we received a substantial purchase order for our sensors from a significant

customer and have also secured certain reseller partnerships focused on increasing interest in our indoor intelligence solutions

for workplace readiness which is directed at enterprise organizations and government agencies to assist them in optimizing the

use of their facilities as well as in developing and monitoring compliance with corporate policies and government regulations for

physical distancing, exposure notification, and the identification of high traffic areas for sanitizing and cleaning in order to

keep their employees healthier and safer within the workplace.

If we are successful in expanding the adoption of our products and

services for this and or other solutions, and are able to add to our revenue growth through the completion of strategic transactions,

we may be able to offset any revenue loss that may be experienced due to any constraints resulting from the pandemic or other general

economic conditions, however, there are no assurances that we will be successful or that we will be able to offset any losses,

Given our cash balances and our budgeted cash

flow requirements, the Company believes such funds are sufficient to support ongoing operations at least one year after the issuance

of these financial statements.

The Company has control over its expenditures and has the ability to adjust spending accordingly

based on its budgeted cash flow requirements and the excess cash on hand.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

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”),

which are the accounting principles that are generally accepted in the United States of America.

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-month period ended March 31, 2020 are not necessarily indicative of the results to be

expected for the year ending December 31, 2020.

These interim unaudited condensed consolidated financial statements should

be read in conjunction with the Company’s audited consolidated financial statements and notes for the years ended December

31, 2019 and 2018 included in the Annual Report on Form 10-K filed with the SEC on March 3, 2020.

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Note 2 - Basis of Presentation

accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally

accepted accounting principles (“GAAP”), which are the accounting principles that are generally accepted in the United

States of America.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial

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 six-month period ended June 30, 2020

are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

These interim unaudited

condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial

statements and notes for the years ended December 31, 2019 and 2018 included in the Annual Report on Form 10-K filed with

the SEC on March 3, 2020.

3 - Summary of Significant Accounting Policies

1 unchanged sentence

and notes for the years ended December 31, 2019 and 2018.

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:

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:

valuation of stock-based compensation;

valuation of the assets and liabilities acquired in connection with certain recent acquisitions as described in Notes 4, 5 and

6, respectively, as well as the valuation of the Company’s common stock issued in the transaction;

valuation of the assets and liabilities acquired in connection with certain recent acquisitions as described in Notes 4, 5,

6 and 7, as well as the valuation of the Company’s common stock issued in the transaction;

allowance for doubtful accounts;

4 unchanged sentences

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

In connection with certain transactions, the

Company may be required to deposit assets, including cash or shares, in escrow accounts.

The assets held in escrow are subject

to various contingencies that may exist with respect to such transactions.

Upon resolution of those contingencies or the expiration

of the escrow period, some or all the escrow amounts may be used and the balance released to the Company.

As of March 31, 2020

and 2019, the Company had $71,000 and $140,000, respectively, deposited in escrow as restricted cash for the Shoom acquisition,

of which any amounts not subject to claims shall be released to the pre-acquisition stockholders of Shoom pro-rata on the next

anniversary dates of the closing date of the Shoom acquisition.

As of March 31, 2020 and 2019, $71,000 and $70,000, respectively,

were current and included in Prepaid Assets and Other Current Assets on the condensed consolidated balance sheets.

31, 2020 and 2019, $0 and $70,000 were non-current and included in Other Assets on the condensed consolidated balance sheets.

The following table provides a reconciliation

of cash, cash equivalents and restricted cash reported in the balance sheets that sum to the total of the same amounts shown in

the statement of cash flows.

As of March 31,

connection with certain transactions, the Company may be required to deposit assets, including cash or shares, in escrow accounts.

The assets held in escrow are subject to various contingencies that may exist with respect to such transactions.

Upon resolution

of those contingencies or the expiration of the escrow period, some or all the escrow amounts may be used and the balance released

to the Company.

As of June 30, 2020 and 2019, the Company had $72,000 and $140,000, respectively, deposited in escrow as restricted

cash for the Shoom acquisition, of which any amounts not subject to claims shall be released to the pre-acquisition stockholders

of Shoom pro-rata on the next anniversary dates of the closing date of the Shoom acquisition.

As of June 30, 2020 and 2019, $72,000

and $70,000, respectively, were current and included in Prepaid Assets and Other Current Assets on the condensed consolidated

balance sheets.

As of June 30, 2020 and 2019, $0 and $70,000 were non-current and included in Other Assets on the condensed consolidated

balance sheets.

following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the balance sheets that sum

to the total of the same amounts shown in the statement of cash flows.

As of June 30,

(in thousands)

Cash and cash equivalents

Restricted cash,

current included in prepaid assets and other current assets

Restricted cash,

non-current included in other assets

Restricted cash, current included in prepaid assets and other current assets

Restricted cash, non-current included in other assets

Total cash, cash equivalents, and restricted cash in the balance sheets

Company reports revenues under ASC 606, “Revenue from Contracts with Customers”

and all the related amendments (Topic

The Company reports revenues under Accounting

Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”

and all the related amendments

The Company recognizes revenue after applying the following five steps:

1) identification of the contract, or contracts,

with a customer;

2) identification of the performance obligations

in the contract, including whether they are distinct within the context of the contract;

3) determination of the transaction price,

including the constraint on variable consideration;

4) allocation of the transaction price

to the performance obligations in the contract;

5) recognition of revenue when, or as,

performance obligations are satisfied.

identification of the contract, or contracts, with a customer;

identification of the performance obligations in the contract, including whether they are distinct within the context of the contract;

determination of the transaction price, including the constraint on variable consideration;

allocation of the transaction price to the performance obligations in the contract;

recognition of revenue when, or as, performance obligations are satisfied.

As A Service Revenue Recognition

With respect to sales of the Company’s

maintenance, consulting and other service agreements including the Company’s digital tear-sheets, customers pay fixed monthly

fees in exchange for the Company’s services.

The Company’s performance obligation is satisfied over time as the digital

tear-sheets are provided continuously throughout the service period.

The Company recognizes revenue evenly over the service period

using a time-based measure because the Company is providing continuous access to its services.

respect to sales of the Company’s maintenance, consulting and other service agreements including the Company’s digital

tear-sheets, customers pay fixed monthly fees in exchange for the Company’s services.

The Company’s performance obligation

is satisfied over time as the digital tear-sheets are provided continuously throughout the service period.

The Company recognizes

revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its services.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

2 unchanged sentences

services revenue is accounted for using the percentage of completion method.

As soon as the outcome of a contract can be

estimated reliably, contract revenue is recognized in the condensed consolidated statement of operations in proportion to the

stage of completion of the contract.

As soon as the outcome of a contract can be estimated

reliably, contract revenue is recognized in the condensed consolidated statement of operations in proportion to the stage of completion

of the contract.

Contract costs are expensed as incurred.

Contract costs include all amounts that relate

directly to the specific contract, are attributable to contract activity, and are specifically chargeable to the customer

under the terms of the contract.

Contract costs include all amounts that relate directly to the specific

contract, are attributable to contract activity, and are specifically chargeable to the customer under the terms of the contract.

Services Revenue Recognition

14 unchanged sentences

Anticipated losses are recognized as soon as they become known.

For the three months ended March 31, 2020 and 2019,

the Company did not incur any such losses.

For the three and six months ended June 30, 2020

and 2019, the Company did not incur any such losses.

These amounts are based on known and estimated factors.

timing of the Company’s revenue recognition may differ from the timing of payment by its customers.

The Company records

a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment.

Alternatively,

when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations

are satisfied.

The Company had deferred revenue of approximately $877,000 and $912,000 as of March 31, 2020 and December 31, 2019,

respectively, related to cash received in advance for product maintenance services and professional services provided by the Company’s

technical staff.

The Company expects to satisfy its remaining performance obligations for these maintenance services and professional

services, and recognize the deferred revenue and related contract costs over the next twelve months.

The Company’s contract balances as of March 31, 2020 and December 31, 2019 were deemed immaterial.

The timing of the Company’s revenue

recognition may differ from the timing of payment by its customers.

The Company records a receivable when revenue is recognized

prior to payment and the Company has an unconditional right to payment.

Alternatively, when payment precedes the provision of

the related services, the Company records deferred revenue until the performance obligations are satisfied.

The Company had deferred

revenue of approximately $1,509,000 and $912,000 as of June 30, 2020 and December 31, 2019, respectively, related to cash received

in advance for product maintenance services and professional services provided by the Company’s technical staff.

expects to satisfy its remaining performance obligations for these maintenance services and professional services, and recognize

the deferred revenue and related contract costs over the next twelve months.

The Company’s contract balances as of June

30, 2020 and December 31, 2019 were deemed immaterial.

Disaggregation

Revenues consisted of the following (in millions):

For the Three Months Ended March 31,

Digital tear-sheets

(A) Mapping revenue is a result of the Jibestream acquisition in August

consisted of the following (in thousands):

For the Three Months Ended

For the Six Months Ended

Recurring revenue

Non-recurring revenue

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

7 unchanged sentences

Forfeitures of unvested stock options are recorded when they occur.

Company incurred stock-based compensation charges of $399,000 and $890,000 for the three months ended March 31, 2020 and 2019,

respectively, which are included in general and administrative expenses.

The following table summarizes the nature of such charges

for the periods then ended (in thousands):

For the Three Months Ended March 31,

The Company incurred stock-based compensation

charges of $286,000 and $858,000 for the three months ended June 30, 2020 and 2019, respectively, and $685,000 and $1,748,000 for

the six months ended June 30, 2020 and 2019, respectively, which are included in general and administrative expenses.

The following table summarizes the nature of such charges for the periods then ended (in thousands):

For the Three Months Ended

For the Six Months Ended

Compensation and related benefits

5 unchanged sentences

to the exercise of options and warrants in the calculation of diluted net loss per common shares would have been anti-dilutive.

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 three months ended March 31, 2020 and 2019:

For the Three Months Ended March 31,

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 six months

ended June 30, 2020 and 2019:

For the Six Months Ended

Convertible preferred stock

ATM sales of common stock to be issued*

Reserved for service providers

Represents shares of common stock sold as of March 31, 2020, with a closing date following the period covered by this Form 10-Q.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Company applies the accounting standards for distinguishing liabilities from equity under GAAP when determining the classification

7 unchanged sentences

as permanent equity.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Issued and Adopted Accounting Standards

In August 2018, the FASB issued ASU No.

August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement,”

Disclosure Framework-Changes to the Disclosure

Requirements for Fair Value Measurement,”

(“ASU 2018-13”).

ASU 2018-13 requires application of the prospective method of transition (for only the most recent

interim or annual period presented in the initial fiscal year of adoption) to the new disclosure requirements for (1) changes

in unrealized gains and losses included in other comprehensive income and (2) the range and weighted average used to develop significant

unobservable inputs for Level 3 fair value measurements.

ASU 2018-13 also requires prospective application to any modifications

to disclosures made because of the change to the requirements for the narrative description of measurement uncertainty.

is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year.

has adopted this standard and the adoption of this standard did not have a material impact on its financials or disclosures.

In June 2016, the FASB issued ASU No.

ASU 2018-13 requires application of the prospective

method of transition (for only the most recent interim or annual period presented in the initial fiscal year of adoption) to the

new disclosure requirements for (1) changes in unrealized gains and losses included in other comprehensive income and (2) the

range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

ASU 2018-13 also

requires prospective application to any modifications to disclosures made because of the change to the requirements for the narrative

description of measurement uncertainty.

ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including

interim periods within that fiscal year.

The Company has adopted this standard and the adoption of this standard did not have

a material impact on its financials or disclosures.

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of

financial instruments, including trade receivables.

The estimate of expected credit losses will require entities to incorporate

considerations of historical information, current information and reasonable and supportable forecasts.

ASU 2016-13 also expands

the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods

for estimating expected credit losses.

For public business entities that meet the definition of a Securities and Exchange Commission

filer and smaller reporting company, ASU 2016-13 is effective for annual and interim reporting periods beginning after December

15, 2022, and the guidance is to be applied using the modified retrospective approach.

Earlier adoption is permitted for annual

and interim reporting periods beginning after December 15, 2018.

The Company has adopted this standard and the adoption of this

standard did not have a material impact on its financials or disclosures.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Issued and Adopted Accounting Standards (continued)

Measurement of Credit Losses on Financial

Instruments (“ASU 2016-13”).

ASU 2016-13 introduces a new forward-looking approach, based on expected losses, to estimate

credit losses on certain types of financial instruments, including trade receivables.

The estimate of expected credit losses will

require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts.

ASU 2016-13 also expands the disclosure requirements to enable users of financial statements to understand the entity’s

assumptions, models and methods for estimating expected credit losses.

For public business entities that meet the definition of

a Securities and Exchange Commission filer and smaller reporting company, ASU 2016-13 is effective for annual and interim reporting

periods beginning after December 15, 2022, and the guidance is to be applied using the modified retrospective approach.

adoption is permitted for annual and interim reporting periods beginning after December 15, 2018.

The Company has adopted this

standard and the adoption of this standard did not have a material impact on its financials or disclosures.

In April 2019, the FASB issued ASU No.

1 unchanged sentence

825, Financial Instruments (“ASU 2019-04”) and in May 2019, the FASB issued Accounting Standards Update No.

2019-05, Financial

Instruments--Credit Losses (Topic 326) (“ASU 2019-05”).

Financial Instruments--Credit Losses (Topic 326) (“ASU 2019-05”).

These amendments are effective for fiscal years beginning

after December 15, 2022, including interim periods within those fiscal years with early application permitted.

The Company is

currently evaluating ASU 2016-13 and the related ASU 2019-04 and ASU 2019-05 to determine the impact to its condensed consolidated

financial statements and related disclosures.

December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

The Company has

adopted this standard and the adoption of this standard did not have a material impact on its financials or disclosures.

In December 2019, the FASB issued ASU

2019-12, “Income Taxes (Topic 740) (“ASU 2019-12”):

Simplifying the Accounting for Income Taxes,”

which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to

the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

is effective for the Company beginning in fiscal 2021.

The Company is currently assessing the impact that this pronouncement will

have on its condensed consolidated financial statements.

On January 7, 2020, the Company effected

a 1-for-45 reverse stock split of its outstanding common stock.

The condensed consolidated financial statements and accompanying

notes give effect to the stock split as if it occurred at the beginning of the first period presented.

was no change to the previously reported net loss.

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.

is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the

general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

is effective for the Company beginning January 1, 2021.

The Company is currently assessing the impact that this pronouncement

will have on its condensed consolidated financial statements.

In February 2020, the FASB issued ASU 2020-02, “Financial

Statements - Credit losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

119 and Update to SEC Section on Effective Date Relating to Accounting Standards Update No.

2016-02, Leases (Topic 842)”

(“ASU 2020-02”), which provides guidance on the measurement and requirements related to credit losses.

The new guidance

was effective upon issuance of this final accounting standards update.

The adoption of this standard did not have a material impact

on our condensed consolidated financial statements.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

January 7, 2020, the Company effected a 1-for-45 reverse stock split of its outstanding common stock.

The condensed consolidated

financial statements and accompanying notes give effect to the stock split as if it occurred at the beginning of the first period

There was no change to the previously reported net loss.

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.

4 - Locality Acquisition

May 21, 2019, the Company, through its wholly owned subsidiary, Inpixon Canada as purchaser, completed its acquisition of Locality

On May 21, 2019, the Company, through its

wholly owned subsidiary, Inpixon Canada as purchaser, completed its acquisition of Locality Systems, Inc.

(“Locality”)

in which Locality’s stockholders sold all of their shares to the purchaser in exchange for consideration of (i) $1,500,000

(the “Aggregate Cash Consideration”) minus a working capital adjustment equal to $39,501 calculated in accordance

with the terms of the purchase agreement), and (ii) 14,445 shares of common stock of Inpixon with a fair market value of $514,000.

Locality is a technology company specializing in wireless device positioning and radio frequency augmentation of video surveillance

The Locality acquisition allows us to accept wireless device positioning from third-party Wi-Fi access points as well

as surveillance systems and combine that information with our own location data into our analytics platform providing our customers

with additional data and ability to see video and radio frequency data concurrently.

(the “Aggregate Cash Consideration”) minus a working capital adjustment equal to $85,923, and (ii) 14,445 shares of

the Company’s common stock with a fair market value of $514,000.

Locality is a technology company specializing in wireless

device positioning and radio frequency augmentation of video surveillance systems.

The Locality acquisition allows us to accept

wireless device positioning from third-party Wi-Fi access points as well as surveillance systems and combine that information

with our own location data into our analytics platform providing our customers with additional data and ability to see video and

radio frequency data concurrently.

Aggregate Cash Consideration, less the working capital adjustment applied against the Aggregate Cash Consideration of $85,923,

16 unchanged sentences

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

4 - Locality Acquisition (continued)

17 unchanged sentences

Total Purchase Price

value of the intangibles and goodwill were calculated by a third party valuation firm based on projections and financial data

provided by management of the Company.

The deferred revenue included in the financial statements is the expected liability to

service the projects.

The goodwill represents the excess fair value after the allocation to the intangibles.

The calculated goodwill

is not deductible for tax purposes.

The financial data of Locality is included in the Company’s financial statements starting

on the acquisition date through the three months ended March 31, 2020.

Proforma information has not been presented as it has been

deemed to be immaterial.

The value of the intangibles and goodwill

were calculated by a third party valuation firm based on projections and financial data provided by management of the Company.

The deferred revenue included in the financial statements is the expected liability to service the projects.

The goodwill represents

the excess fair value after the allocation to the intangibles.

The calculated goodwill is not deductible for tax purposes.

financial data of Locality is included in the Company’s financial statements starting on the acquisition date through the

period ended June 30, 2020.

Proforma information has not been presented as it has been deemed to be immaterial.

5 - GTX Acquisition

On June 27, 2019, the Company completed

its acquisition of certain assets of GTX, consisting of a portfolio of GPS technologies and intellectual property (the “Assets”)

that allow us to provide positioning and positioning solutions for assets and devices homogenously from the indoors to the outdoors.

its acquisition of certain assets of GTX Corp (“GTX”), consisting of a portfolio of GPS technologies and intellectual

property (the “Assets”) that allow us to provide positioning and positioning solutions for assets and devices homogenously

from the indoors to the outdoors.

Prior to this asset acquisition, the Company was only providing indoor location.

Assets were acquired for aggregate consideration consisting of (i) $250,000 in cash delivered at the closing and (ii) 22,223 shares

of Inpixon’s restricted common stock.

The Assets were acquired for aggregate consideration consisting

of (i) $250,000 in cash delivered at the closing and (ii) 22,223 shares of the Company’s restricted common stock.

total recorded purchase price for the transaction was $900,000, which consisted of the cash paid of $250,000 and $650,000 representing

2 unchanged sentences

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

5 - GTX Acquisition (continued)

The purchase price was allocated based

on the receipt of a final valuation report as follows (in thousands):

purchase price was allocated based on the receipt of a final valuation report as follows (in thousands):

Developed technology

1 unchanged sentence

Total Purchase Price

On September 16, 2019, the Company

loaned GTX $50,000 in accordance with the terms of the asset purchase agreement.

The note began to accrue interest at a rate

of 5% per annum beginning on November 1, 2019.

The note was amended on May 11, 2020 to extend the maturity date from April

13, 2020 to September 13, 2020 and require monthly payments against the outstanding balance of the note.

included as part of other receivables in the Company’s condensed consolidated financial statements.

As of March 31,

September 16, 2019, the Company loaned GTX $50,000 in accordance with the terms of the asset purchase agreement.

The note began

to accrue interest at a rate of 5% per annum beginning on November 1, 2019.

The note was amended on May 11, 2020 to extend the

maturity date from April 13, 2020 to September 13, 2020 and require monthly payments against the outstanding balance of the note.

This note is included as part of other receivables in the Company’s condensed consolidated financial statements.

30, 2020 the balance of the note including interest was $51,716.

Proforma information has not been presented as it has been

deemed to be immaterial.

Proforma information has not been presented as it has been deemed

to be immaterial.

6 - Jibestream Acquisition

On August 15, 2019, the Company, through

its wholly owned subsidiary, Inpixon Canada as purchaser (the “Purchaser”), completed its acquisition of Jibestream,

a provider of indoor mapping and location technology, for consideration consisting of:

(i) CAD $5,000,000, plus an amount equal

to all cash and cash equivalents held by Jibestream at the closing, minus, if a negative number, the absolute value of the Estimated

Working Capital Adjustment (as defined in the acquisition agreement), minus any amounts loaned by the Purchaser to Jibestream to

settle any Indebtedness (as defined in the applicable purchase agreement (the “Purchase Agreement”)) or other fees,

minus any cash payments to the holders of outstanding options to settle any in-the-money options, minus the deferred revenue costs

of CAD $150,000, and minus the costs associated with the audit and review of the financial statements of Jibestream required by

the Purchase Agreement (collectively, the “Estimated Cash Closing Amount”);

On August 15, 2019, the Company, through its

wholly owned subsidiary, Inpixon Canada as purchaser (the “Purchaser”), completed its acquisition of Jibestream Inc.

(“Jibestream”), a provider of indoor mapping and location technology, for consideration consisting of:

(i) CAD $5,000,000,

plus an amount equal to all cash and cash equivalents held by Jibestream at the closing, minus, if a negative number, the absolute

value of the Estimated Working Capital Adjustment (as defined in the purchase agreement (the “Purchase Agreement”),

minus any amounts loaned by the Purchaser to Jibestream to settle any Indebtedness (as defined in the Purchase Agreement) or other

fees, minus any cash payments to the holders of outstanding options to settle any in-the-money options, minus the deferred revenue

costs of CAD $150,000, and minus the costs associated with the audit and review of the financial statements of Jibestream required

by the Purchase Agreement (collectively, the “Estimated Cash Closing Amount”);

plus (ii) 176,289 shares of the Company’s

7 unchanged sentences

data and analytics.

Nasdaq listing rules required the Company to obtain the approval of the Company’s stockholders for the issuance of 63,645

of the Inpixon Shares (the “Excess Shares”), which was obtained on October 31, 2019 and the shares were issued on

November 5, 2019.

A number of Inpixon Shares representing fifteen percent (15%) of the value of the Purchase Price (the “Holdback

Amount”) were subject to stop transfer restrictions and forfeiture to secure the indemnification and other obligations of

the Vendors in favor of the Company arising out of or pursuant to Article VIII of the Purchase Agreement and, at the option of

the Company, to secure the obligation of the Vendors’

to pay any adjustment to the Purchase Price pursuant to Section 2.5

of the Purchase Agreement.

The Nasdaq listing rules required the Company

to obtain the approval of the Company’s stockholders for the issuance of 63,645 of the Inpixon Shares (the “Excess

Shares”), which was obtained on October 31, 2019 and the shares were issued on November 5, 2019.

A number of Inpixon Shares

representing fifteen percent (15%) of the value of the purchase price (the “Holdback Amount”) were subject to stop

transfer restrictions and forfeiture to secure the indemnification and other obligations of the Vendors in favor of the Company

arising out of or pursuant to Article VIII of the Purchase Agreement and, at the option of the Company, to secure the obligation

of the Vendors’

to pay any adjustment to the purchase price pursuant to Section 2.5 of the Purchase Agreement.

total recorded purchase price for the transaction was approximately $5,062,000, which consisted of cash at closing of approximately

5 unchanged sentences

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

6 - Jibestream Acquisition (continued)

preliminary purchase price was allocated and modified for measurement period adjustments due to updated tax provision estimates

as follows (in thousands):

purchase price was allocated based on the receipt of a final valuation report and modified for measurement period adjustments

due to updated tax provision estimates as follows (in thousands):

Preliminary Allocation

24 unchanged sentences

The financial data of Jibestream is included in the Company’s

financial statements starting on the acquisition date through the three months ended March 31, 2020.

A final valuation of the assets and purchase

price allocation of Jibestream has not been completed as of the end of this reporting period as the third party valuation has

not been finalized.

Consequently, the purchase price was preliminarily allocated based upon the Company’s best estimates

at the time of this filing.

These amounts are subject to revision upon the completion of formal studies and valuations, as needed,

which the Company expects to occur during the second quarter of 2020.

Jibestream was amalgamated into Inpixon

Canada on January 1, 2020.

financial statements starting on the acquisition date through the period ended June 30, 2020.

was amalgamated into Inpixon Canada on January 1, 2020.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Note 7 - Systat Licensing Agreement

On June 19, 2020, the Company entered into

an exclusive license with Cranes Software International Ltd.

and Systat Software, Inc.

(together the “Systat Parties”)

to use, market, distribute, and develop the SYSTAT and SigmaPlot software suite of products (the “License Grant”)

pursuant to the terms and conditions of that certain Exclusive Software License and Distribution Agreement, deemed effective as

of June 1, 2020 (the “Effective Date”), and amended on June 30, 2020 (as amended, the “License Agreement”).

In accordance with Rule 11-01(d) and ASC 805, the transaction was deemed to be the acquisition of a business, and accounted

for as a business combination with an acquisition date of June 30, 2020 (the “Closing Date”).

In accordance with the

terms of the License Agreement, on the Closing Date, we partitioned a portion of that certain promissory note (the “Sysorex

Note”) issued to us by Sysorex, Inc.

(“Sysorex”), into a new note in an amount equal to $3 million in principal

plus accrued interest (the “Closing Note”) and assigned the Closing Note and all rights and obligations thereunder

to Systat in accordance with the terms and conditions of that certain Promissory Note Assignment and Assumption Agreement.

additional $3.3 million of the principal balance underlying the Sysorex Note will be partitioned and assigned to Systat as consideration

payable for the rights granted under the license as follows:

(i) $1.3 million on the three month anniversary of the Closing Date;

(ii) $1.0 million on the six month anniversary of the Closing Date;

and (iii) $1.0 million on the nine month anniversary of the

Closing Date.

In addition, the cash consideration of $2.2 million was delivered on July 8, 2020.

connection with the License Grant, the Systat Parties provided us with equipment for us to use at no additional cost for a minimum

period of six months following the Closing Date.

We are also entitled to any customer maintenance revenue, new license fees, or

license renewal fees, received by any of the Systat Parties after June 1, 2020 in connection with the Systat Customer Contracts

and/or Systat Distribution Agreements (as such terms are defined in the License Agreement) assigned to and assumed by us in connection

with the License Agreement.

The net amount owed to the Company for this period is included in the Other Receivable line item listed

in the assets acquired below.

The License Grant will remain in effect for a period of 15 years following the Closing Date, unless

terminated sooner upon mutual written consent of Systat and us or upon termination by either for the other party’s specified

In connection with the License Grant, the Company

expanded its operations into the United Kingdom and Germany.

As a result of such expansion, the Company formed Inpixon Limited,

a new wholly owned subsidiary in the United Kingdom, and established Inpixon GmbH, a wholly owned subsidiary incorporated under

the laws of Germany.

total recorded purchase price for the transaction was $2,200,000 which consisted of the $2,200,000 cash consideration as a full

valuation allowance was retained against the Sysorex note.

preliminary purchase price is allocated as follows (in thousands):

Assets Acquired:

Other receivable

Developed technology

Customer relationships

Tradename & Trademarks

Non-compete agreements

Liabilities Assumed:

Deferred Revenue

Total Purchase Price

value of the intangibles and goodwill were calculated by a third party valuation firm based on projections and financial data

provided by management of the Company.

The deferred revenue included in the condensed consolidated financial statements is the

expected liability to service the projects.

The goodwill represents the excess fair value after the allocation to the intangibles.

The calculated goodwill is not deductible for tax purposes.

The financial data of the Licensing Grant is included in the Company’s

financial statements as of deemed acquisition date of June 30, 2020.

final valuation of the assets and purchase price allocation of the Licensing Grant has not been completed as of the end of this

reporting period as the third party valuation has not been finalized.

Consequently, the purchase price was preliminarily allocated

based upon the Company’s best estimates at the time of this filing.

These amounts are subject to revision upon the completion

of formal studies and valuations, as needed, which the Company expects to occur during the third quarter of 2020.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

8 - Proforma Financial Information

The following unaudited proforma financial

information presents the condensed consolidated results of operations of the Company and Jibestream for the three months ended

March 31, 2019, as if the acquisition had occurred as of the beginning of the first period presented instead of on August 15, 2019.

The proforma information does not necessarily reflect the results of operations that would have occurred had the entities been

a single company during those periods.

information presents the condensed consolidated results of operations of the Company and Jibestream for the three and six months

ended June 30, 2019, as if the acquisition had occurred as of the beginning of the first period presented instead of on August

The proforma information does not necessarily reflect the results of operations that would have occurred had the entities

been a single company during those periods.

(in thousands, except per share data)

For the Three

June 30, 2019

Net loss attributable to common stockholders

3 unchanged sentences

9 - Inventory

as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):

as of June 30, 2020 and December 31, 2019 consisted of the following (in thousands):

Raw materials

1 unchanged sentence

Total Inventory

as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):

as of June 30, 2020 and December 31, 2019 consisted of the following (in thousands):

Short-Term Debt

5 unchanged sentences

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

10 - Debt (continued)

Notes Payable

2018 Note Purchase Agreement and Promissory Note

On December 21, 2018, the Company entered into a note purchase

agreement with Iliad Research and Trading, L.P.

December 21, 2018, the Company entered into a note purchase agreement with Iliad Research and Trading, L.P.

(“Iliad”

or the “Holder”), pursuant to which the Company

agreed to issue and sell to Iliad an unsecured promissory note (the “December 2018 Note”) in an aggregate principal

amount of $1,895,000, which is payable on or before December 31, 2019 (as provided in the Exchange Agreement, dated October 24,

2019, described below (the “October 24 th Exchange Agreement”)).

The initial principal amount includes an

original issue discount of $375,000 and $20,000 that the Company agreed to pay to the Holder to cover its legal fees, accounting

costs, due diligence, monitoring and other transaction costs.

In exchange for the December 2018 Note, the Holder paid an aggregate

purchase price of $1,500,000.

Interest on the December 2018 Note accrues at a rate of 10% per annum and is payable on the maturity

date or otherwise in accordance with the December 2018 Note.

The Company may pay all or any portion of the amount owed earlier

than it is due;

provided, that in the event the Company elects to prepay all or any portion of the outstanding balance, it will

pay 115% of the portion of the outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the

issuance date and at the intervals indicated below until the December 2018 Note is paid in full, the Holder has the right to redeem

up to an aggregate of 1/3 of the initial principal balance of the December 2018 Note each month (each monthly exercise, a “Monthly

Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”) delivered to the Company;

provided, however, that if any Monthly Redemption Amount is not exercised in its corresponding month then such Monthly Redemption

Amount will be available for the Holder to redeem in any future month in addition to such future month’s Monthly Redemption

Upon receipt of any Monthly Redemption Notice, the Company shall pay the applicable Monthly Redemption Amount in cash within

5 business days of the Company’s receipt of such Monthly Redemption Notice.

Pursuant to the October 24 th Exchange

Agreement described below, the Holder agreed that the exercise of any redemption rights described above would be deferred until

no earlier than December 31, 2019.

or the “Holder”), pursuant to which the Company agreed to issue and sell to Iliad an unsecured promissory note (the

“December 2018 Note”) in an aggregate principal amount of $1,895,000, which is payable on or before December 31, 2019

(as provided in the Exchange Agreement, dated October 24, 2019, described below (the “October 24 th Exchange Agreement”)).

The initial principal amount includes an original issue discount of $375,000 and $20,000 that the Company agreed to pay to the

Holder to cover its legal fees, accounting costs, due diligence, monitoring and other transaction costs.

In exchange for the December

2018 Note, the Holder paid an aggregate purchase price of $1,500,000.

Interest on the December 2018 Note accrues at a rate of

10% per annum and is payable on the maturity date or otherwise in accordance with the December 2018 Note.

The Company may pay

all or any portion of the amount owed earlier than it is due;

provided, that in the event the Company elects to prepay all or

any portion of the outstanding balance, it will pay 115% of the portion of the outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the December 2018 Note

is paid in full, the Holder has the right to redeem up to an aggregate of 1/3 of the initial principal balance of the December

2018 Note each month (each monthly exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly

Redemption Notice”) delivered to the Company;

provided, however, that if any Monthly Redemption Amount is not exercised

in its corresponding month then such Monthly Redemption Amount will be available for the Holder to redeem in any future month

in addition to such future month’s Monthly Redemption Amount.

Upon receipt of any Monthly Redemption Notice, the Company

shall pay the applicable Monthly Redemption Amount in cash within 5 business days of the Company’s receipt of such Monthly

Redemption Notice.

Pursuant to the October 24 th Exchange Agreement described below, the Holder agreed that the exercise

of any redemption rights described above would be deferred until no earlier than December 31, 2019.

to Note Purchase Agreements

12 unchanged sentences

for this, the outstanding balance of the December 2018 Note was increased by $206,149.

The Company and

Iliad entered into an amendment to the December 2018 Note pursuant to which the maturity date of the note was further extended

from December 31, 2019 to March 31, 2020.

In addition, Iliad agreed to further extend the standstill previously agreed to pursuant

to the terms of that certain Standstill Agreement, dated as of August 8, 2019, whereby Iliad will not be entitled to redeem all

or any portion of the principal amount of the Note until March 31, 2020.

From October 15, 2019 through March 31,

Company and Iliad entered into an amendment to the December 2018 Note pursuant to which the maturity date of the note was further

extended from December 31, 2019 to March 31, 2020.

In addition, Iliad agreed to further extend the standstill previously agreed

to pursuant to the terms of that certain Standstill Agreement, dated as of August 8, 2019, whereby Iliad will not be entitled

to redeem all or any portion of the principal amount of the Note until March 31, 2020.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

10 - Debt (continued)

From October 15, 2019 through December 31,

2019, the Company exchanged approximately $2,112,000 of the outstanding principal and interest under the December 2018 Note for

2 unchanged sentences

the outstanding principal balance of the December 2018 Note was approximately $28,749.

On April 1, 2020, the Company exchanged

approximately $223,146 of the remaining outstanding principal and interest under the December 2018 Note for 187,517 shares of the

Company’s common stock at an exchange price of $1.19 per share.

After this exchange the balance owed under the December 2018

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

9 - Debt (continued)

April 1, 2020, the Company exchanged approximately $223,000 of the remaining outstanding principal and interest under the December

2018 Note for 187,517 shares of the Company’s common stock at an exchange price of $1.19 per share.

After this exchange

the balance owed under the December 2018 Note was $0.

2019 Note Purchase Agreement and Promissory Note

On May 3, 2019, the Company entered into

a note purchase agreement (the “Purchase Agreement”) with Chicago Venture Partners, L.P.

(“Chicago Venture”),

an affiliate of Iliad, pursuant to which the Company agreed to issue and sell to the investor an unsecured promissory note (the

“May 2019 Note”) in an aggregate principal amount of $3,770,000, which is payable on or before the date that is 10

months from the issuance date.

The initial principal amount includes an original issue discount of $750,000 and $20,000 that the

Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other

transaction costs.

In exchange for the May 2019 Note, the holder paid an aggregate purchase price of $3,000,000.

Interest on the

May 2019 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the May 2019

May 3, 2019, the Company entered into a note purchase agreement (the “Purchase Agreement”) with Chicago Venture Partners,

(“Chicago Venture”), an affiliate of Iliad, pursuant to which the Company agreed to issue and sell to the investor

an unsecured promissory note (the “May 2019 Note”) in an aggregate principal amount of $3,770,000, which is payable

on or before the date that is 10 months from the issuance date.

The initial principal amount includes an original issue discount

of $750,000 and $20,000 that the Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs,

due diligence, monitoring and other transaction costs.

In exchange for the May 2019 Note, the holder paid an aggregate purchase

price of $3,000,000.

Interest on the May 2019 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise

in accordance with the May 2019 Note.

The Company may pay all or any portion of the amount owed earlier than it is due;

provided, that in the event the Company

elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of the outstanding

balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the intervals indicated

below until the May 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3 of the initial

principal balance of the May 2019 Note each month (each monthly exercise, a “Monthly Redemption Amount”) by providing

written notice (each, a “Monthly Redemption Notice”) delivered to the Company;

provided, however, that if the holder

does not exercise any Monthly Redemption Amount in its corresponding month then such Monthly Redemption Amount shall be available

for the holder to redeem in any future month in addition to such future month’s Monthly Redemption Amount.

Upon receipt of

any Monthly Redemption Notice, the Company shall pay the applicable Monthly Redemption Amount in cash to the holder within five

business days of the Company’s receipt of such Monthly Redemption Notice.

that in the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115%

of the portion of the outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance

date and at the intervals indicated below until the May 2019 Note is paid in full, the holder shall have the right to redeem up

to an aggregate of 1/3 of the initial principal balance of the May 2019 Note each month (each monthly exercise, a “Monthly

Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”) delivered to the Company;

provided, however, that if the holder does not exercise any Monthly Redemption Amount in its corresponding month then such Monthly

Redemption Amount shall be available for the holder to redeem in any future month in addition to such future month’s Monthly

Redemption Amount.

Upon receipt of any Monthly Redemption Notice, the Company shall pay the applicable Monthly Redemption Amount

in cash to the holder within five business days of the Company’s receipt of such Monthly Redemption Notice.

the year ended December 31, 2019, the Company exchanged approximately $2,076,000 of the outstanding principal and interest under

4 unchanged sentences

ended December 31, 2019.

During the three months ended March 31,

2020, the Company exchanged approximately $1,958,000 of the outstanding principal and interest under the May 2019 Note for 524,140

shares of the Company’s common stock at exchange prices between $3.65 and $4.05 per share.

The Company analyzed the exchange

of principal under the May 2019 Note as an extinguishment and compared the net carrying value of the debt being extinguished to

the reacquisition price (shares of common stock being issued) and recorded an approximately $53,000 loss on the exchange of debt

for equity as a separate item in the other income/expense section of the condensed consolidated statements of operations for the

three months ended March 31, 2020.

of March 31, 2020, the outstanding balance of the May 2019 Note was $0.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

9 - Debt (continued)

2019 Note Purchase Agreement and Promissory Note

June 27, 2019, the Company entered into a note purchase agreement (the “Purchase Agreement”) with Chicago Venture,

pursuant to which the Company agreed to issue and sell to the holder an unsecured promissory note (the “June 2019 Note”)

in an aggregate principal amount of $1,895,000, which is payable on or before the date that is 9 months from the issuance date.

The initial principal amount includes an original issue discount of $375,000 and $20,000 that the Company agreed to pay to the

holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs.

for the June 2019 Note, the holder paid an aggregate purchase price of $1,500,000.

Interest on the June 2019 Note accrues at a

rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the June 2019 Note.

The Company may

pay all or any portion of the amount owed earlier than it is due;

provided, that in the event the Company elects to prepay all

or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of the outstanding balance the Company

elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the

June 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance

of the June 2019 Note each month by providing written notice delivered to the Company;

provided, however, that if the holder does

not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for

the holder to redeem in any future month in addition to such future month’s monthly redemption amount.

Upon receipt of any

monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to the holder within five business

The June 2019 Note includes customary event of default provisions, subject to certain cure periods, and provides for a default

interest rate of 22%.

Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency

proceedings (the “Bankruptcy-Related Event of Default”)), the holder may, by written notice, declare all unpaid principal,

plus all accrued interest and other amounts due under the June 2019 Note to be immediately due and payable at an amount equal

to 115% of the outstanding balance of the June 2019 Note (the “Mandatory Default Amount”).

Upon the occurrence of

a Bankruptcy-Related Event of Default, without notice, all unpaid principal, plus all accrued interest and other amounts due under

the June 2019 Note will become immediately due and payable at the Mandatory Default Amount.

Pursuant to the terms of the

Purchase Agreement, if the Company consummates an offering of its equity securities, the Company is required to make a cash payment

to the holder in the following amount:

(a) twenty-five percent (25%) of the outstanding balance of the June 2019 Note if the Company

receives net proceeds equal to $2,500,000.00 or less;

(b) fifty percent (50%) of the outstanding balance of the June 2019 Note

if the Company receives net proceeds of more than $2,500,000.00 but less than $5,000,000.00;

and (c) one hundred percent (100%)

of the outstanding balance of the June 2019 Note if the Company receives net proceeds equal to $5,000,000.00 or more.

as of August 12, 2019, the Company and Chicago Venture entered into an amendment agreement, dated as of August 14, 2019, to provide

that the Company’s obligation to repay all or a portion of the outstanding balance of the June 2019 Note upon the completion

of any offering of equity securities of the Company would not apply or be effective until December 27, 2019.

As consideration

for the amendment, a fee of $191,883 was added to the outstanding balance of the June 2019 Note.

the three months ended March 31, 2020, the Company exchanged approximately $1,958,000 of the outstanding principal and interest

under the May 2019 Note for 524,140 shares of the Company’s common stock at exchange prices between $3.65 and $4.05 per

The Company analyzed the exchange of principal under the May 2019 Note as an extinguishment and compared the net carrying

value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and recorded an approximately

$53,000 loss on the exchange of debt for equity as a separate item in the other income/expense section of the condensed consolidated

statements of operations for the three months ended March 31, 2020.

As of June 30, 2020, the outstanding balance of the May 2019

Note was $0 and the note was fully satisfied.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 10 - Debt (continued)

June 2019 Note Purchase Agreement

and Promissory Note

On June 27, 2019, the Company entered

into a note purchase agreement (the “Purchase Agreement”) with Chicago Venture, pursuant to which the Company agreed

to issue and sell to the holder an unsecured promissory note (the “June 2019 Note”) in an aggregate principal amount

of $1,895,000, which is payable on or before the date that is 9 months from the issuance date.

The initial principal amount includes

an original issue discount of $375,000 and $20,000 that the Company agreed to pay to the holder to cover the holder’s legal

fees, accounting costs, due diligence, monitoring and other transaction costs.

In exchange for the June 2019 Note, the holder

paid an aggregate purchase price of $1,500,000.

Interest on the June 2019 Note accrues at a rate of 10% per annum and is payable

on the maturity date or otherwise in accordance with the June 2019 Note.

The Company may pay all or any portion of the amount

owed earlier than it is due;

provided, that in the event the Company elects to prepay all or any portion of the outstanding balance,

it shall pay to the holder 115% of the portion of the outstanding balance the Company elects to prepay.

Beginning on the date

that is 6 months from the issuance date and at the intervals indicated below until the June 2019 Note is paid in full, the holder

shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the June 2019 Note each month by

providing written notice delivered to the Company;

provided, however, that if the holder does not exercise any monthly redemption

amount in its corresponding month then such monthly redemption amount shall be available for the holder to redeem in any future

month in addition to such future month’s monthly redemption amount.

Upon receipt of any monthly redemption notice, the Company

shall pay the applicable monthly redemption amount in cash to the holder within five business days.

The June 2019 Note includes

customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%.

the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings (the “Bankruptcy-Related

Event of Default”)), the holder may, by written notice, declare all unpaid principal, plus all accrued interest and other

amounts due under the June 2019 Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of

the June 2019 Note (the “Mandatory Default Amount”).

Upon the occurrence of a Bankruptcy-Related Event of Default,

without notice, all unpaid principal, plus all accrued interest and other amounts due under the June 2019 Note will become immediately

due and payable at the Mandatory Default Amount.

Pursuant to the terms of the Purchase Agreement, if the Company consummates

an offering of its equity securities, the Company is required to make a cash payment to the holder in the following amount:

twenty-five percent (25%) of the outstanding balance of the June 2019 Note if the Company receives net proceeds equal to $2,500,000.00

(b) fifty percent (50%) of the outstanding balance of the June 2019 Note if the Company receives net proceeds of more

than $2,500,000.00 but less than $5,000,000.00;

and (c) one hundred percent (100%) of the outstanding balance of the June 2019

Note if the Company receives net proceeds equal to $5,000,000.00 or more.

Effective as of August 12, 2019, the Company

and Chicago Venture entered into an amendment agreement, dated as of August 14, 2019, to provide that the Company’s obligation

to repay all or a portion of the outstanding balance of the June 2019 Note upon the completion of any offering of equity securities

of the Company would not apply or be effective until December 27, 2019.

As consideration for the amendment, a fee of $191,883

was added to the outstanding balance of the June 2019 Note.

During the three months ended March 31,

2 unchanged sentences

The Company analyzed the exchange

of principal under the June 2019 Note as an extinguishment and compared the net carrying value of the debt being extinguished to

the reacquisition price (shares of common stock being issued) and recorded an approximately $33,000 loss on the exchange of debt

for equity as a separate item in the other income/expense section of the condensed consolidated statements of operations for the

three months ended March 31, 2020.

of March 31, 2020, the outstanding balance of the June 2019 Note was $0.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

9 - Debt (continued)

2019 Note Purchase Agreement and Promissory Note

of principal under the June 2019 Note as an extinguishment and compared the net carrying value of the debt being extinguished

to the reacquisition price (shares of common stock being issued) and recorded an approximately $33,000 loss on the exchange of

debt for equity as a separate item in the other income/expense section of the condensed consolidated statements of operations

for the three months ended March 31, 2020.

As of June 30, 2020, the outstanding balance of the June 2019

Note was $0 and the note was fully satisfied.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 10 - Debt (continued)

August 2019 Note Purchase Agreement

and Promissory Note

On August 8, 2019, the Company entered

10 unchanged sentences

provided, that in the event

the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of the

outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the intervals

indicated below until the August 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3

of the initial principal balance of the August 2019 Note each month by providing written notice to the Company;

provided, however,

that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount

shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption amount.

Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to the holder

within five business days of the Company’s receipt of such monthly redemption notice.

The August 2019 Note includes customary

event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%.

Upon the occurrence

of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings (the “Bankruptcy-Related

Event of Default”)), the holder may, by written notice, declare all unpaid principal, plus all accrued interest and other

amounts due under the August 2019 Note to be immediately due and payable at an amount equal to 115% of the outstanding balance

of the Note (the “Mandatory Default Amount”).

Upon the occurrence of a Bankruptcy-Related Event of Default, without

notice, all unpaid principal, plus all accrued interest and other amounts due under the Note will become immediately due and payable

at the Mandatory Default Amount.

As of March 31, 2020, the outstanding principal balance of the August 2019 Note was approximately

the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of

the outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the

intervals indicated below until the August 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate

of 1/3 of the initial principal balance of the August 2019 Note each month by providing written notice to the Company;

however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption

amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption

Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash

to the holder within five business days of the Company’s receipt of such monthly redemption notice.

The August 2019 Note

includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%.

Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings (the

“Bankruptcy-Related Event of Default”)), the holder may, by written notice, declare all unpaid principal, plus all

accrued interest and other amounts due under the August 2019 Note to be immediately due and payable at an amount equal to 115%

of the outstanding balance of the Note (the “Mandatory Default Amount”).

Upon the occurrence of a Bankruptcy-Related

Event of Default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the Note will become

immediately due and payable at the Mandatory Default Amount.

During the three months ended June 30,

2020, the Company exchanged approximately $2,034,000 of the outstanding principal and interest under the August 2019 Note for

1,832,220 shares of the Company’s common stock at exchange prices between $1.09 and $1.128 per share.

The Company analyzed

the exchange of principal under the August 2019 Note as an extinguishment and compared the net carrying value of the debt being

extinguished to the reacquisition price (shares of common stock being issued) and recorded an approximately $25,000 loss on the

exchange of debt for equity as a separate item in the other income/expense section of the condensed consolidated statements of

operations for the three months ended June 30, 2020.

As of June 30, 2020, the outstanding balance of the August 2019

Note was $0 and the note was fully satisfied.

September 2019 Note Purchase Agreement

12 unchanged sentences

provided, that in the event

the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of the

outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the intervals

indicated below until the September 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate of

1/3 of the initial principal balance of the September 2019 Note each month by providing written notice to the Company;

the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of

the outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the

intervals indicated below until the September 2019 Note is paid in full, the holder shall have the right to redeem up to an aggregate

of 1/3 of the initial principal balance of the September 2019 Note each month by providing written notice to the Company;

however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption

amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption

Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to

the holder within five business days of the Company’s receipt of such monthly redemption notice.

Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash

to the holder within five business days of the Company’s receipt of such monthly redemption notice.

The September 2019 Note

includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

9 - Debt (continued)

2019 Note Purchase Agreement and Promissory Note (continued)

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 10 - Debt (continued)

September 2019 Note Purchase Agreement

and Promissory Note (continued)

Upon the occurrence of an event of default

8 unchanged sentences

a one-time monitoring fee equal to ten percent (10%) of the then outstanding balance, or $97,661, was added to the September 2019

As of March 31, 2020, the outstanding principal balance of the September 2019 Note was approximately $1,050,161.

During the three months ended June 30,

2020, the Company exchanged approximately $1,120,000 of the outstanding principal and interest under the September 2019 Note for

975,704 shares of the Company’s common stock at exchange prices between $1.136 and $1.17 per share.

The Company analyzed

the exchange of principal under the September 2019 Note as an extinguishment and compared the net carrying value of the debt being

extinguished to the reacquisition price (shares of common stock being issued) and recorded an approximately $22,000 loss on the

exchange of debt for equity as a separate item in the other income/expense section of the condensed consolidated statements of

operations for the three months ended June 30, 2020.

As of June 30, 2020, the outstanding balance of the September

2019 Note was $0 and the note was fully satisfied.

November 2019 Note Purchase Agreement

16 unchanged sentences

The Company may pay all or any portion of the amount owed earlier than it is due;

provided, that in

the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion

of the outstanding balance the Company elects to prepay.

provided, that

in the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the

portion of the outstanding balance the Company elects to prepay.

The November 2019 Note includes customary event of default provisions,

11 unchanged sentences

2020, the outstanding balance of the November 2019 Note was approximately $1,050,188.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

9 - Debt (continued)

2020 Note Purchase Agreement and Promissory Note

During the three months ended June 30,

2020, the Company exchanged approximately $1,215,000 of the outstanding principal and interest under the November 2019 Note for

894,549 shares of the Company’s common stock at exchange prices between $1.354 and $1.362 per share.

As of June 30, 2020, the outstanding balance of the November

2019 Note was $0 and the note was fully satisfied.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 10 - Debt (continued)

March 2020 Note Purchase Agreement

and Promissory Note

On March 18, 2020, the Company entered

6 unchanged sentences

In exchange for the March 2020 Note, the holder paid an aggregate purchase price of $5,000,000.

on the March 2020 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the

March 2020 Note.

on the March 2020 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with

the March 2020 Note.

The Company may pay all or any portion of the amount owed earlier than it is due;

provided, that in the event

the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of the

outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the intervals

indicated below until the March 2020 Note is paid in full, the holder shall have the right to redeem up to an aggregate of 1/3

of the initial principal balance of the March 2020 Note each month by providing written notice delivered to the Company;

however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption

amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption

Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to

the holder within five business days of the Company’s receipt of such Monthly Redemption Notice.

The March 2020 Note includes

customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%.

occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings, the holder may,

by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the March 2020 Note to be

immediately due and payable.

Upon the occurrence of a bankruptcy-related event of default, without notice, all unpaid principal,

plus all accrued interest and other amounts due under the March 2020 Note will become immediately due and payable at the mandatory

default amount.

If the March 2020 Note is still outstanding on the date that is six (6) months from the issuance date, then a one-time

monitoring fee equal to ten percent (10%) of the then-current outstanding balance shall be added to the March 2020 Note.

March 31, 2020, the outstanding principal balance of the March 2020 Note was approximately $6,465,000.

Line of Credit

Accounts Receivable Bank Line

accordance with the Payplant Loan and Security Agreement, dated as of August 14, 2017 (the “Loan Agreement”), the

Loan Agreement allows the Company to request loans from the Lender (in the manner provided therein) with a term of no greater

than 360 days in amounts that are equivalent to 80% of the face value of purchase orders received.

The Lender is not obligated

to make the requested loan, however, if the Lender agrees to make the requested loan, before the loan is made, the Company must

provide Lender with (i) one or more promissory notes for the amount being loaned in favor of Lender, (ii) one or more guaranties

executed in favor of Lender and (iii) other documents and evidence of the completion of such other matters as Lender may request.

The principal amount of each loan shall accrue interest at a 30 day rate of 2% (the “Interest Rate”), calculated per

day on the basis of a year of 360 days and, when combined with all fees that may be characterized as interest will not exceed

the maximum rate allowed by law.

Upon the occurrence and during the continuance of any event of default, interest shall accrue

at a rate equal to the Interest Rate plus 0.42% per 30 days.

All computations of interest shall be made on the basis of a year

The promissory note is subject to the interest rates described in the Loan Agreement and is secured by the assets

of the Company pursuant to the Loan Agreement and will be satisfied in accordance with the terms of the Payplant Client Agreement.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

9 - Debt (continued)

Accounts Receivable Bank Line (continued)

On August 31, 2018, Inpixon, Sysorex, Sysorex Government Services,

the Company elects to prepay all or any portion of the outstanding balance, it shall pay to the holder 115% of the portion of

the outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the

intervals indicated below until the March 2020 Note is paid in full, the holder shall have the right to redeem up to an aggregate

of 1/3 of the initial principal balance of the March 2020 Note each month by providing written notice delivered to the Company;

provided, however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly

redemption amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly

redemption amount.

Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount

in cash to the holder within five business days of the Company’s receipt of such Monthly Redemption Notice.

The March 2020

Note includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate

Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings,

the holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the March

2020 Note to be immediately due and payable.

Upon the occurrence of a bankruptcy-related event of default, without notice, all

unpaid principal, plus all accrued interest and other amounts due under the March 2020 Note will become immediately due and payable

at the mandatory default amount.

If the March 2020 Note is still outstanding on the date that is six (6) months from the issuance

date, then a one-time monitoring fee equal to ten percent (10%) of the then-current outstanding balance shall be added to the

March 2020 Note.

As of June 30, 2020, the outstanding principal

balance of the March 2020 Note was approximately $6,465,000.

Revolving Line of Credit

Payplant Accounts Receivable Bank

In accordance with the Payplant Loan and

Security Agreement, dated as of August 14, 2017 (the “Loan Agreement”), the Loan Agreement allows the Company to request

loans from the Lender (in the manner provided therein) with a term of no greater than 360 days in amounts that are equivalent

to 80% of the face value of purchase orders received.

The Lender is not obligated to make the requested loan, however, if the

Lender agrees to make the requested loan, before the loan is made, the Company must provide Lender with (i) one or more promissory

notes for the amount being loaned in favor of Lender, (ii) one or more guaranties executed in favor of Lender and (iii) other

documents and evidence of the completion of such other matters as Lender may request.

The principal amount of each loan shall

accrue interest at a 30 day rate of 2% (the “Interest Rate”), calculated per day on the basis of a year of 360 days

and, when combined with all fees that may be characterized as interest will not exceed the maximum rate allowed by law.

occurrence and during the continuance of any event of default, interest shall accrue at a rate equal to the Interest Rate plus

0.42% per 30 days.

All computations of interest shall be made on the basis of a year of 360 days.

The promissory note is subject

to the interest rates described in the Loan Agreement and is secured by the assets of the Company pursuant to the Loan Agreement

and will be satisfied in accordance with the terms of the Payplant Client Agreement.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 10 - Debt (continued)

Payplant Accounts Receivable Bank

Line (continued)

On August 31, 2018, Inpixon, Sysorex,

Sysorex Government Services, Inc.

(“SGS”), and Payplant executed Amendment 1 to Payplant Client Agreement (the “Amendment”).

to the Amendment, Sysorex and SGS are no longer parties to the Payplant Client Agreement, originally entered into on August 14,

2017, and have been released from any and all obligations and liabilities arising under the Payplant Client Agreement, whether

such obligations and liabilities were in existence prior to or on the date of the Amendment or arise after the date of the Amendment.

As of March 31, 2020, the outstanding balance on the revolving line of credit is $0.

Short-Term Debt

of March 31, 2020, the Company owed approximately $75,000 to the pre-acquisition stockholders of Shoom.

Any amounts not subject

to claims shall be released to the pre-acquisition stockholders of Shoom pro-rata on the next anniversary date of the closing

date of the Shoom acquisition, August 31, 2020.

10 - Capital Raises

At-The-Market

On March 3, 2020, the Company entered into

an Equity Distribution Agreement (the “Sales Agreement”) with Maxim Group LLC (“Maxim”) under which the

Company may offer and sell shares of its common stock having an aggregate offering price of up to $50 million (the “Shares”)

from time to time through Maxim, acting exclusively as the Company’s sales agent (the “Offering”).

intends to use the net proceeds of the Offering primarily for working capital and general corporate purposes.

The Company may also

use a portion of the net proceeds to invest in or acquire businesses or technologies that it believes are complementary to its

own, although the Company has no current plans, commitments or agreements with respect to any acquisitions as of the date of this

Maxim will be entitled to compensation at a fixed commission rate of 4.0% of the gross sales price per Share sold.

the Company has agreed to reimburse Maxim for its costs and out-of-pocket expenses incurred in connection with its services, including

the fees and out-of-pocket expenses of its legal counsel.

Company is not obligated to make any sales of the Shares under the Sales Agreement and no assurance can be given that the Company

will sell any Shares under the Sales Agreement, or if it does, as to the price or amount of Shares that the Company will sell,

or the dates on which any such sales will take place.

The Sales Agreement will continue until the earliest of (i) twelve (12)

months following the date of the Sales Agreement, (ii) the sale of Shares having an aggregate offering price of $50 million, and

(iii) the termination by either the Agent or the Company upon the provision of 15 days written notice or otherwise pursuant to

the terms of the Sales Agreement.

Pursuant to the Amendment, Sysorex and SGS are no longer parties to the Payplant Client Agreement, originally entered into on

August 14, 2017, and have been released from any and all obligations and liabilities arising under the Payplant Client Agreement,

whether such obligations and liabilities were in existence prior to or on the date of the Amendment or arise after the date of

the Amendment.

As of June 30, 2020, the outstanding balance on the revolving line of credit is $0.

On August 13, 2020, we provided Payplant a

Notice of Termination (the “Notice”) of (i) that certain Loan and Security Agreement, dated as of August 14, 2017 (the

“Loan Agreement”), by and among the Company, Payplant and Lender and (ii) that certain Payplant Client Agreement, dated

as of August 14, 2017, as amended (the “Client Agreement”), by and between the Company and Payplant, pursuant to which

we are able to request loans from the Lender.

In accordance with Section 14 and Section 27 of the Loan Agreement and the Client

Agreement, respectively, we terminated each agreement as the Company has fully satisfied all obligations under the Loan Agreement

and will not incur any additional obligations thereunder.

As a result of the termination, the security interest we previously granted

under the Loan Agreement was terminated and we paid a corresponding UCC termination fee of $150 to Payplant in accordance with

Section 27 of the Client Agreement.

Other Short-Term Debt

As of June 30, 2020, the Company owed

approximately $75,000 to the pre-acquisition stockholders of Shoom.

Any amounts not subject to claims shall be released to the

pre-acquisition stockholders of Shoom pro-rata on the next anniversary date of the closing date of the Shoom acquisition, August

Note 11 - Capital Raises

At-The-Market Program

On March 3, 2020, the Company entered into an Equity Distribution

Agreement (“EDA”) with Maxim Group LLC (“Maxim”) under which the Company may offer and sell shares of our

common stock in connection with an at-the-market equity facility (“ATM”) in an aggregate offering amount of up to $50

million, which was increased on June 19, 2020 to $150 million pursuant to an amendment to the EDA, from time to time through

Maxim, acting exclusively as our sales agent.

The Company intends to use the net proceeds of the ATM primarily for working capital

and general corporate purposes.

The Company may also use a portion of the net proceeds to invest in or acquire businesses or technologies

that it believes are complementary to its own, although the Company has no current plans, commitments or agreements with respect

to any acquisitions as of the date of this filing.

Maxim will be entitled to compensation at a fixed commission rate of 4.0% of

the gross sales price per share sold for the initial $50.0 million of shares and 3.25% for any sales in excess of such amount.

In addition, the Company has agreed to reimburse Maxim for its costs and out-of-pocket expenses incurred in connection with its

services, including the fees and out-of-pocket expenses of its legal counsel.

The Company is not obligated to make any

sales of the shares under the EDA and no assurance can be given that the Company will sell any shares under the EDA, or if it does,

as to the price or amount of shares that the Company will sell, or the dates on which any such sales will take place.

continue until the earliest of (i) December 3, 2021, (ii) the sale of shares having an aggregate offering price of $150.0 million,

and (iii) the termination by either Maxim or the Company upon the provision of 15 days written notice or otherwise pursuant to

the terms of the EDA.

The Company issued 937,010 shares of common

1 unchanged sentence

in net proceeds to the Company of approximately $1.3 million after subtracting sales commissions and other offering expenses.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

11 - Common Stock

January 29, 2019, the Company issued 3,842 shares of common stock under an exchange agreement to settle the outstanding balance

of $383,768 under a partitioned note.

February 20, 2019, the Company issued 16,655 shares of common stock under a settlement agreement for an arbitration proceeding.

the three months ended March 31, 2019, the Company issued 306 shares of common stock in connection with the exercise of 306 warrants

at $149.85 per share.

the three months ended March 31, 2019, the Company issued 27,741 shares of common stock in connection with the exercise of 46,235

warrants through cashless exercises.

the three months ended March 31, 2019, 10,062 shares of Series 5 Convertible Preferred Stock were converted into 67,149 shares

of the Company’s common stock.

the three months ended March 31, 2019, the Company issued 4,445 shares of common stock for services, which were fully vested upon

The Company recorded an expense of approximately $242,000.

The Company issued 29,033,036 shares

of common stock during the quarter ended June 30, 2020, in connection with the ATM at

per share prices between $1.13 and $2.02, resulting in net proceeds to the Company of approximately $40.5 million after subtracting

sales commissions and other offering expenses.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 12 - Common Stock

During the three months ended March 31,

2020, the Company issued 1,896,557 shares of common stock under exchange agreements to settle outstanding balances totalling $4,194,030

2020, the Company issued 1,896,557 shares of common stock under exchange agreements to settle outstanding balances totaling approximately

$4,194,000 under partitioned notes.

3 unchanged sentences

(see Note 11).

12 - Preferred Stock

Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001 per share with rights, preferences,

privileges and restrictions as to be determined by the Company’s Board of Directors.

4 Convertible Preferred Stock

April 20, 2018, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created

the Series 4 Convertible Preferred Stock (“Series 4 Preferred”), authorized 10,415 shares of Series 4 Preferred and

designated the preferences, rights and limitations of the Series 4 Preferred.

The Series 4 Preferred is non-voting (except to

the extent required by law) and was convertible into the number of shares of common stock, determined by dividing the aggregate

stated value of the Series 4 Preferred of $1,000 per share to be converted by $828.00 (the “Conversion Price”).

of March 31, 2020, there was 1 share of Series 4 Preferred outstanding.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

12 - Preferred Stock (continued)

5 Convertible Preferred Stock

January 14, 2019, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created

the Series 5 Convertible Preferred Stock, authorized 12,000 shares of Series 5 Convertible Preferred Stock and designated the

preferences, rights and limitations of the Series 5 Convertible Preferred Stock.

The Series 5 Convertible Preferred Stock is non-voting

(except to the extent required by law).

The Series 5 Convertible Preferred Stock is convertible into the number of shares of Common

Stock, determined by dividing the aggregate stated value of the Series 5 Convertible Preferred Stock of $1,000 per share to be

converted by $149.85.

of March 31, 2020, there were 126 shares of Series 5 Convertible Preferred Stock outstanding.

13 - Authorized Share Increase and Reverse Stock Split

January 3, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of

the State of Nevada to effect a 1-for-45 reverse stock split of the Company’s issued and outstanding shares of common stock,

effective as of January 7, 2020.

During the three months ended June 30,

2020, the Company issued 3,889,990 shares of common stock under exchange agreements to settle outstanding balances totaling

approximately $4,592,000 under partitioned notes.

During the three months ended June 30, 2020,

the Company issued 29,033,036 shares of common stock in connection with the ATM at per share prices between $1.13 and $2.02,

resulting in net proceeds to the Company of approximately $40,500,000 after subtracting sales commissions and other offering expenses

(see Note 11).

During the three months ended June 30,

2020, the Company issued 183,486 shares of common stock for the extinguishment of liability totaling approximately $200,000.

Note 13 - Preferred Stock

The Company is authorized to issue up

to 5,000,000 shares of preferred stock with a par value of $0.001 per share with rights, preferences, privileges and restrictions

as to be determined by the Company’s Board of Directors.

Series 4 Convertible Preferred Stock

On April 20, 2018, the Company filed with the Secretary of State

of the State of Nevada the Certificate of Designation that created the Series 4 Convertible Preferred Stock (“Series 4 Preferred”),

authorized 10,415 shares of Series 4 Preferred and designated the preferences, rights and limitations of the Series 4 Preferred.

The Series 4 Preferred is non-voting (except to the extent required by law) and was convertible into the number of shares of common

stock, determined by dividing the aggregate stated value of the Series 4 Preferred of $1,000 per share to be converted by $828.00.

As of June 30, 2020, there was 1 share

of Series 4 Preferred outstanding.

Series 5 Convertible Preferred Stock

On January 14, 2019, the Company filed

with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 5 Convertible Preferred

Stock, authorized 12,000 shares of Series 5 Convertible Preferred Stock and designated the preferences, rights and limitations

of the Series 5 Convertible Preferred Stock.

The Series 5 Convertible Preferred Stock is non-voting (except to the extent required

The Series 5 Convertible Preferred Stock is convertible into the number of shares of Common Stock, determined by dividing

the aggregate stated value of the Series 5 Convertible Preferred Stock of $1,000 per share to be converted by $149.85.

As of June 30, 2020, there were 126 shares

of Series 5 Convertible Preferred Stock outstanding.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 14 - Reverse Stock Split

On January 3, 2020, the Company filed

a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada to effect a 1-for-45

reverse stock split of the Company’s issued and outstanding shares of common stock, effective as of January 7, 2020.

The condensed consolidated financial statements

and accompanying notes give effect to 1-for-45 reverse stock split as if it occurred at the first period presented.

14 - Stock Options

September 2011, the Company adopted the 2011 Employee Stock Incentive Plan (the “2011 Plan”) which provides for the

granting of incentive and non-statutory common stock options and stock based incentive awards to employees, non-employee directors,

consultants and independent contractors.

Note 15 - Stock Options

In September 2011, the Company adopted

the 2011 Employee Stock Incentive Plan (the “2011 Plan”) which provides for the granting of incentive and non-statutory

common stock options and stock based incentive awards to employees, non-employee directors, consultants and independent contractors.

The plan was amended and restated in May 2014.

Unless terminated sooner by the Board

of Directors, this plan will terminate on August 31, 2021.

February 2018, the Company adopted the 2018 Employee Stock Incentive Plan (the “2018 Plan”

and together with the 2011

Plan, the “Option Plans”), which will be utilized with the 2011 Plan for employees, corporate officers, directors,

consultants and other key persons employed.

The 2018 Plan will provide for the granting of incentive stock options, NQSOs, stock

grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan).

stock options granted under the Option Plans are granted at exercise prices not less than 100% of the estimated fair market value

of the underlying common stock at date of grant.

The exercise price per share for incentive stock options may not be less than

110% of the estimated fair value of the underlying common stock on the grant date for any individual possessing more that 10%

of the total outstanding common stock of the Company.

Options granted under the Option Plans vest over periods ranging from immediately

to four years and are exercisable over periods not exceeding ten years.

Unless terminated sooner by the Board of Directors, this plan will terminate on

August 31, 2021.

In February 2018, the Company adopted

the 2018 Employee Stock Incentive Plan (the “2018 Plan”

and together with the 2011 Plan, the “Option Plans”),

which will be utilized with the 2011 Plan for employees, corporate officers, directors, consultants and other key persons employed.

The 2018 Plan will provide for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including

Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan).

Incentive stock options granted under

the Option Plans are granted at exercise prices not less than 100% of the estimated fair market value of the underlying common

stock at date of grant.

The exercise price per share for incentive stock options may not be less than 110% of the estimated fair

value of the underlying common stock on the grant date for any individual possessing more that 10% of the total outstanding common

stock of the Company.

Options granted under the Option Plans vest over periods ranging from immediately to four years and are

exercisable over periods not exceeding ten years.

On August 10, 2020, our Board of Directors approved an amendment

to the Company’s 2018 Plan to remove the limit on the amount of non-qualified stock options that can be issued under the

2018 Plan to any one individual.

The aggregate number of shares that may

be awarded as of March 31, 2020 under the 2011 Plan and the 2018 Plan were 417,270 and 11,230,073, respectively.

As of March 31,

be awarded as of June 30, 2020 under the 2011 Plan and the 2018 Plan were 417,270 and 11,230,073, respectively.

As of June 30,

2020, 5,662,946 of options were granted to employees, directors and consultants of the Company (including 1 share outside of the

Company’s Option Plans) and 5,984,398 options were available for future grant under the Option Plans.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

14 - Stock Options (continued)

During the three months ended March 31,

2020, no stock options were granted to consultants or employees of the Company.

During the three months ended March 31,

2020 and 2019, the Company recorded a charge of approximately $399,000 and $648,000, respectively, for the amortization of employee

stock options.

As of March 31, 2020, the fair value of

non-vested options totalled approximately $496,000, which will be amortized to expense over the weighted average remaining term

During the three months ended June 30,

2020, the Company granted stock options for the purchase of 5,567,500 shares of common stock to employees and directors of the

These stock options are 100% vested at grant or vest pro-rata over 12 to 48 months, have a life of ten years and an exercise

price of $1.10 per share.

The Company valued the stock options using the Black-Scholes option valuation model and the fair value

of the awards was determined to be approximately $1,911,000.

The fair value of the common stock as of the grant date was determined

to be $1.10 per share.

During the three months ended June 30,

2020 and 2019, the Company recorded a charge for the amortization of employee stock options of approximately $286,000 and $858,000,

respectively, and $685,000 and $1,506,000 for the six months ended June 30,2020 and 2019, respectively.

As of June 30, 2020, the fair value of

non-vested options totaled approximately $2,198,000, which will be amortized to expense over the weighted average remaining term

of 1.12 years.

15 - Credit Risk and Concentrations

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

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, consequently, believes that its accounts receivable credit risk exposure beyond such allowances is limited.

Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits.

is also maintained at foreign financial institutions for its Canadian subsidiary and its majority-owned India subsidiary.

in foreign financial institutions as of March 31, 2020 and December 31, 2019 was immaterial.

The Company has not experienced any

losses and believes it is not exposed to any significant credit risk from cash.

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-month period ended March 31, 2020 and 2019 (in thousands):

The fair value of each employee stock 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 six months ended June 30, 2020 were as follows:

Six Months Ended

June 30, 2020

Risk-free interest rate

Expected life of stock option grants

Expected volatility of underlying stock

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.

interest rates were obtained from U.S.

Treasury rates for the applicable periods.

The dividends assumption was $0 as the Company

historically has not declared and does not expect to declare any dividends.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 16 - 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, consequently, 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 India subsidiary.

Cash in foreign financial institutions as of

June 30, 2020 and December 31, 2019 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 three-month period

ended June 30, 2020 and 2019 (in thousands):

For the Three Months Ended

March 31, 2020

June 30, 2020

For the Three Months Ended

March 31, 2019

of March 31, 2020, Customer C represented approximately 32% and Customer A represented approximately 27 % of total accounts receivable.

As of March 31, 2019, Customer A represented approximately 37%, Customer C represented approximately 22%, Customer D represented

approximately 11%, and Customer E represented approximately 11% of total accounts receivable.

of March 31, 2020, two vendors represented approximately 41% and 16% of total gross accounts payable.

Purchases from these vendors

during the three months ended March 31, 2020 was $0.

As of March 31, 2019, one vendor represented approximately 43% of total

gross accounts payable.

Purchases from this vendor during the three months ended March 31, 2019 was $0.

the three months ended March 31, 2020, five vendors represented approximately 28%, 21%, 17%, 16%, and 15% of total purchases.

For the three months ended March 31, 2019, two vendors represented approximately 44% and 56% of total purchases.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

16 - Foreign Operations

June 30, 2019

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 six-month period

ended June 30, 2020 and 2019 (in thousands):

For the Six Months Ended

June 30, 2020

For the Six Months Ended

June 30, 2019

As of June 30, 2020, Customer B represented

approximately 32% and Customer C represented approximately 27 % of total accounts receivable.

As of June 30, 2019, Customer

B represented approximately 57%, and Customer C represented approximately 19% of total accounts receivable.

As of June 30, 2020, two vendors represented approximately

18% and 12% of total gross accounts payable.

Purchases from these vendors during the three and six months ended

June 30, 2020 was $0.

As of June 30, 2019, two vendors represented approximately 43% and 14% of

total gross accounts payable.

Purchases from these vendors during the three and six months ended June 30, 2019 was

For the three months ended June 30,

2020, three vendors represented approximately 54%, 20%, and 14% of total purchases.

For the three months ended June 30,

2019, two vendors represented approximately 81% and 12% of total purchases.

For the six months ended June 30,

2020, five vendors represented approximately 30%, 18%, 15%, 14% and 13% of total purchases.

For the six months

ended June 30, 2019, two vendors represented approximately 80% and 11% of total purchases.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 17 - Foreign Operations

The Company’s operations are located

3 unchanged sentences

The financial data by geographic area are as follows (in thousands):

For the Three Months Ended March 31, 2020:

For the Three Months Ended June 30, 2020:

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

For the Three Months Ended March 31, 2019:

For the Three Months Ended June 30, 2019:

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

As of March 31, 2020:

For the Six Months Ended June 30, 2020:

Revenues by geographic area

Operating income (loss) by geographic area

Net income (loss) by geographic area

For the Six Months Ended June 30, 2019:

Revenues by geographic area

Operating income (loss) by geographic area

Net income (loss) by geographic area

As of June 30, 2020:

Identifiable assets by geographic area

3 unchanged sentences

Long lived assets by geographic area

17 - Related Party Transactions

Ali, the Company’s Chief Executive Officer and a member of its Board of Directors, is also a member of the Board of Directors

Note Purchase Agreement

December 31, 2018, the Company and Sysorex entered into a note purchase agreement (the “Note Purchase Agreement”)

pursuant to which the Company agreed to purchase from Sysorex at a purchase price equal to the Loan Amount (as defined below),

a secured promissory note (the “Secured Note”) for up to an aggregate principal amount of $3 million (the “Principal

Amount”), including any amounts advanced through the date of the Secured Note (the “Prior Advances”), to be

borrowed and disbursed in increments (such borrowed amount, together with the Prior Advances, collectively referred to as the

“Loan Amount”), with interest to accrue at a rate of 10% percent per annum on all such Loan Amounts, beginning as

of the date of disbursement with respect to any portion of such Loan Amount.

In addition, Sysorex agreed to pay $20,000 to the

Company to cover the Company’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred

in connection with the purchase and sale of the Secured Note (the “Transaction Expense Amount”), all of which amount

is included in the Principal Amount.

Sysorex may borrow repay and borrow under the Secured Note, as needed, for a total outstanding

balance, exclusive of any unpaid accrued interest, not to exceed the Principal Amount at any one time.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

17 - Related Party Transactions (continued)

Note Purchase Agreement (continued)

sums advanced by the Company to the Maturity Date (as defined below) pursuant to the terms of the Note Purchase Agreement will

become part of the aggregate Loan Amount underlying the Secured Note.

All outstanding principal amounts and accrued unpaid interest

owing under the Secured Note shall become immediately due and payable on the earlier to occur of (i) 24 month anniversary of the

date the Secured Note is issued (the “Maturity Date”), (ii) at such date when declared due and payable by the Company

upon the occurrence of an Event of Default (as defined in the Secured Note), or (iii) at any such earlier date as set forth in

the Secured Note.

All accrued unpaid interest shall be payable in cash.

On February 4, 2019, April 2, 2019, and May 22, 2019,

the Secured Note was amended to increase the Principal Amount that may be outstanding at any time from $3 million to $5 million,

$5 million to $8 million and $8 million to $10 million, respectively.

On March 1, 2020, the Company extended the maturity date

of the Secured Note to December 31, 2022.

In addition, the Secured Note was amended to increase the default interest rate from

18% to 21% or the maximum rate allowable by law and to require a cash payment to the Company by Sysorex against the Loan Amount

in an amount equal to no less than 6% of the aggregate gross proceeds raised following the completion of any financing, or series

of related financings, in which Sysorex raises aggregate gross proceeds of at least $5 million.

The amount owed for principal and accrued

interest by Sysorex to the Company as of March 31, 2020 and December 31, 2019 was approximately $10.6 million.

The Secured Note

has been classified as “held for sale”

and the Company, with the assistance of a third-party valuation firm, estimated

the fair value of such using Sysorex financial projections, a discounted cash flow model and a 12.3% discount rate.

the Company established a full valuation allowance as of March 31, 2020.

The Company is required to periodically re-evaluate the

carrying value of the note and the related valuation allowance based on various factors, including, but not limited to, Sysorex’s

performance and collectability of the note.

Sysorex’s performance against those financial projections will directly impact

future assessments of the fair value of the note.

February 20, 2019, the Company, Sysorex and Atlas Technology Group, LLC (“Atlas”) entered into a settlement agreement

resulting in a net award of $941,796 whereby Atlas agreed to accept an aggregate of 16,655 shares of freely-tradable common stock

of the Company in full satisfaction of the award.

The Company and Sysorex each agreed pursuant to the terms and conditions

of that certain Separation and Distribution Agreement, dated August 7, 2018, as amended, that 50% of the costs and liabilities

related to the arbitration action would be shared by each party following the Spin-off.

As a result, Sysorex owes the Company

$559,121 for the settlement plus the interest accrued through March 31, 2020 of approximately $72,949.

The total owed to the Company

for this settlement as of March 31, 2020 was $632,070.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

Company has an operating lease for its administrative office in Palo Alto, California, effective October 1, 2014, for 8.3 years.

The initial lease rate was $14,225 per month with escalating payments.

In connection with the lease, the Company

is obligated to pay $8,985 monthly for operating expenses for building repairs and maintenance.

The Company also has an

operating lease for its administrative office in Encino, CA.

This lease was effective June 1, 2014 and will end on July 31, 2021.

The current lease rate is $6,984 per month and $276 per month for the common area maintenance.

Additionally, the Company has an

operating lease for its administrative office in Coquitlam, Canada, from October 1, 2016 through September 30, 2021.

lease rate was $8,931 CAD per month with escalating payments.

In connection with the lease, the Company is obligated

to pay $6,411 CAD monthly for operating expenses for building repairs and maintenance.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 18 - Related Party Transactions

Nadir Ali, the Company’s Chief Executive

Officer and a member of its Board of Directors, is also a member of the Board of Directors of Sysorex.

Sysorex Note Purchase Agreement

On December 31, 2018, the Company and

Sysorex entered into a note purchase agreement (the “Note Purchase Agreement”) pursuant to which the Company agreed

to purchase from Sysorex at a purchase price equal to the Loan Amount (as defined below), a secured promissory note (the “Secured

Note”) for up to an aggregate principal amount of $3 million (the “Principal Amount”), including any amounts

advanced through the date of the Secured Note (the “Prior Advances”), to be borrowed and disbursed in increments (such

borrowed amount, together with the Prior Advances, collectively referred to as the “Loan Amount”), with interest to

accrue at a rate of 10% percent per annum on all such Loan Amounts, beginning as of the date of disbursement with respect to any

portion of such Loan Amount.

In addition, Sysorex agreed to pay $20,000 to the Company to cover the Company’s legal fees,

accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the

Secured Note (the “Transaction Expense Amount”), all of which amount is included in the Principal Amount.

may borrow repay and borrow under the Secured Note, as needed, for a total outstanding balance, exclusive of any unpaid accrued

interest, not to exceed the Principal Amount at any one time.

All sums advanced by the Company to the

Maturity Date (as defined below) pursuant to the terms of the Note Purchase Agreement will become part of the aggregate Loan Amount

underlying the Secured Note.

All outstanding principal amounts and accrued unpaid interest owing under the Secured Note shall

become immediately due and payable on the earlier to occur of (i) 24 month anniversary of the date the Secured Note is issued

(the “Maturity Date”), (ii) at such date when declared due and payable by the Company upon the occurrence of an Event

of Default (as defined in the Secured Note), or (iii) at any such earlier date as set forth in the Secured Note.

All accrued unpaid

interest shall be payable in cash.

On February 4, 2019, April 2, 2019, and May 22, 2019, the Secured Note was amended to increase

the Principal Amount that may be outstanding at any time from $3 million to $5 million, $5 million to $8 million and $8 million

to $10 million, respectively.

On March 1, 2020, the Company extended the maturity date of the Secured Note to December 31, 2022.

In addition, the Secured Note was amended to increase the default interest rate from 18% to 21% or the maximum rate allowable

by law and to require a cash payment to the Company by Sysorex against the Loan Amount in an amount equal to no less than 6% of

the aggregate gross proceeds raised following the completion of any financing, or series of related financings, in which Sysorex

raises aggregate gross proceeds of at least $5 million.

In accordance with the terms of the Systat License Agreement

(see Note 7), on June 30, 2020, the Company partitioned a portion of the Secured Note into a new note in an amount equal to $3

million in principal plus accrued interest (the “Closing Note”) and assigned the Closing Note and all rights and obligations

thereunder to Systat in accordance with the terms and conditions of that certain Promissory Note Assignment and Assumption Agreement.

The amount owed for principal and accrued interest by Sysorex to the Company as of June 30, 2020 and December 31, 2019 was approximately

$8.5 million and $10.6 million, respectively.

The Secured Note has been classified as “held for sale”

and the Company, with the assistance of a third-party

valuation firm, estimated the fair value of such using Sysorex financial projections, a discounted cash flow model and a 12.3%

discount rate.

As a result, the Company established a full valuation allowance as of June 30, 2020.

The Company is required to

periodically re-evaluate the carrying value of the note and the related valuation allowance based on various factors, including,

but not limited to, Sysorex’s performance and collectability of the note.

Sysorex’s performance against those financial

projections will directly impact future assessments of the fair value of the note.

Sysorex Receivable

On February 20, 2019, the Company, Sysorex and Atlas Technology

Group, LLC (“Atlas”) entered into a settlement agreement resulting in a net award of $941,796 whereby Atlas agreed

to accept an aggregate of 16,655 shares of freely-tradable common stock of the Company in full satisfaction of the award.

The Company and Sysorex each agreed pursuant to the terms and conditions of that certain Separation and Distribution Agreement,

dated August 7, 2018, as amended, that 50% of the costs and liabilities related to the arbitration action would be shared by each

party following the Spin-off.

As a result, Sysorex owes the Company approximately $565,078 for the settlement plus the interest

accrued through June 30, 2020 of approximately $83,105.

The total owed to the Company for this settlement as of June 30, 2020 was

approximately $648,183.

The Company established a full valuation allowance against this balance as of June 30, 2020.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 19 - Leases

The Company has an operating lease

for its administrative office in Toronto, Canada, from August 15, 2019 through July 31, 2021.

The monthly lease rate is $24,506

CAD per month with no escalating payments.

In connection with the lease, the Company is obligated to pay $9,651 CAD

for its administrative office in Palo Alto, California, effective October 1, 2014, for 8.3 years.

The initial lease

rate was $14,225 per month with escalating payments.

In connection with the lease, the Company is obligated to pay

$8,985 monthly for operating expenses for building repairs and maintenance.

Additionally, the Company has an operating lease for

its administrative office in New Westminster, Canada, from August 1, 2019 through July 31, 2021.

The initial lease rate was $575

CAD per month.

The Company has an operating lease for its administrative office in Hyderabad, India, from January 1, 2019 through

February 28, 2024.

The monthly lease rate is 482,720 INR per month with 5% escalating payments.

In connection with

the lease, the Company is obligated to pay 68,960 INR monthly for operating expenses for building repairs and maintenance.

The Company has no other operating or financing leases with terms greater than 12 months.

Company adopted ASC Topic 842, Leases (“ASC Topic 842”) effective January 1, 2019 using the modified-retrospective

method, and thus, the prior comparative period continues to be reported under the accounting standards in effect for that period.

Company elected to use the package of practical expedients permitted which allows (i) an entity not to reassess whether any

expired or existing contracts are or contain leases;

(ii) an entity need not reassess the lease classification for any

expired or existing leases;

and (iii) an entity need not reassess any initial direct costs for any existing leases.

time of adoption, the Company did not have any leases with terms of 12 months or less, which would have resulted in

short-term lease payments being recognized in the condensed consolidated statements of income on a straight-line basis over

the lease term.

All of the Company’s leases were previously classified as operating and are similarly classified as

operating lease under the new standard.

January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use asset of $641,992, lease liability of $683,575

and eliminated deferred rent of $41,583.

The adoption of ASC 842 did not have a material impact to prior year comparative periods

and a result, a cumulative-effect adjustment was not required.

The Company determined the lease liability using the Company’s

estimated incremental borrowing rate of 8.0% to estimate the present value of the remaining monthly lease payments.

With the Locality

acquisition, the Company adopted ASC Topic 842 effective May 21, 2019 for the Westminster, Canada office operating lease.

the Jibestream acquisition, the Company adopted ASC Topic 842 effective August 15, 2019 for the Toronto, Canada office operating

With the India acquisition, the Company adopted ASC Topic 842 effective January 1, 2019 for the Hyderabad, India office

operating lease.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

18 - Leases (continued)

assets is summarized below (in thousands):

The Company also has an operating lease for

its administrative office in Encino, CA.

This lease was effective June 1, 2014 and will end on July 31, 2021.

lease rate is $6,984 per month and $276 per month for the common area maintenance.

Additionally, the Company has an

amended operating lease for its administrative office in Coquitlam, Canada, from May1, 2020 through September 30, 2022.

The initial lease rate was $4,479 CAD per month with escalating payments.

In connection with the lease, the

Company is obligated to pay $2,566 CAD monthly for operating expenses for building repairs and maintenance.

has an operating lease for its administrative office in Toronto, Canada, from August 15, 2019 through July 31, 2021.

monthly lease rate is $24,506 CAD per month with no escalating payments.

In connection with the lease, the Company

is obligated to pay $9,651 CAD monthly for operating expenses for building repairs and maintenance.

Additionally, the

Company has an operating lease for its administrative office in New Westminster, Canada, from August 1, 2019 through July 31,

The initial lease rate was $575 CAD per month.

The Company has an operating lease for its administrative office in

Hyderabad, India, from January 1, 2019 through February 28, 2024.

The monthly lease rate is 482,720 INR per month with 5%

escalating payments.

In connection with the lease, the Company is obligated to pay 68,960 INR monthly for

operating expenses for building repairs and maintenance.

The Company has no other operating or financing leases with

terms greater than 12 months.

The Company adopted ASC Topic 842, Leases

(“ASC Topic 842”) effective January 1, 2019 using the modified-retrospective method, and thus, the prior comparative

period continues to be reported under the accounting standards in effect for that period.

The Company elected to use the package

of practical expedients permitted which allows (i) an entity not to reassess whether any expired or existing contracts are or

contain leases;

(ii) an entity need not reassess the lease classification for any expired or existing leases;

and (iii) an entity

need not reassess any initial direct costs for any existing leases.

At the time of adoption, the Company did not have any leases

with terms of 12 months or less, which would have resulted in short-term lease payments being recognized in the condensed consolidated

statements of income on a straight-line basis over the lease term.

All of the Company’s leases were previously classified

as operating and are similarly classified as operating lease under the new standard.

On January 1, 2019, upon adoption of ASC

Topic 842, the Company recorded right-of-use asset of $641,992, lease liability of $683,575 and eliminated deferred rent of $41,583.

The adoption of ASC 842 did not have a material impact to prior year comparative periods and a result, a cumulative-effect adjustment

was not required.

The Company determined the lease liability using the Company’s estimated incremental borrowing rate of

8.0% to estimate the present value of the remaining monthly lease payments.

With the Locality acquisition, the Company adopted

ASC Topic 842 effective May 21, 2019 for the Westminster, Canada office operating lease.

With the Jibestream acquisition, the

Company adopted ASC Topic 842 effective August 15, 2019 for the Toronto, Canada office operating lease.

With the India acquisition,

the Company adopted ASC Topic 842 effective January 1, 2019 for the Hyderabad, India office operating lease.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 19 - Leases (continued)

Right-of-use assets is summarized below

(in thousands):

Palo Alto, CA Office

6 unchanged sentences

Right-of-use asset, net

expense for operating leases recorded in the balance sheet is included in operating costs and expenses and is based on the future

minimum lease payments recognized on a straight-line basis over the term of the lease plus any variable lease costs.

lease expenses, inclusive of short-term and variable lease expenses, recognized in the Company’s condensed consolidated

statement of income for the three-month period ended March 31, 2020 was $271,000.

the three-month period ended March 31, 2020, the Company recorded $124,264 as rent expense to the right-of-use assets.

liability is summarized below (in thousands):

Lease expense for operating leases recorded

in the balance sheet is included in operating costs and expenses and is based on the future minimum lease payments recognized

on a straight-line basis over the term of the lease plus any variable lease costs.

Operating lease expenses, inclusive of short-term

and variable lease expenses, recognized in the Company’s condensed consolidated statement of income for the three-month

period ended June 30, 2020 was $253,000 and $524,000 for the six-month period ended June 30, 2020.

During the three-month period ended June

30, 2020, the Company recorded $160,913 as rent expense to the right-of-use assets.

During the six-month period

ended June 30, 2020, the Company recorded $285,178 as rent expense to the right-of-use assets.

Lease liability is summarized below (in

Total lease liability

1 unchanged sentence

Long term portion

analysis under the lease agreement is as follows (in thousands):

Maturity analysis under the lease agreement

is as follows (in thousands):

Year ending December 31, 2020

5 unchanged sentences

Lease liability

lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term.

In determining

the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the

date of adoption of Topic 842.

As of March 31, 2020, the weighted average remaining lease term is 2.51 years and the weighted

average discount rate used to determine the operating lease liabilities was 8.0%.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

19 - Commitments and Contingencies

conditions may exist as of the date the condensed 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.

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 condensed 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.

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.

with Nasdaq Continued Listing Requirement

On May 30, 2019, the Company received a

deficiency letter from Nasdaq indicating that, based on the Company’s closing bid price for the last 30 consecutive

business days, the Company did not comply with the minimum bid price requirement of $1.00 per share, as set forth

in Nasdaq Listing Rule 5550(a)(2).

In accordance with Nasdaq listing Rule 5810(c)(3)(A), the Company was provided a period of 180

calendar days, or until November 26, 2019, in which to regain compliance.

In order to regain compliance with the minimum bid price requirement,

the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of ten

consecutive business days without effecting a reverse split.

In addition to the failure to comply with

Nasdaq Listing Rule 5550(a)(2), the Nasdaq Staff advised us that the Company’s history of non-compliance with Nasdaq’s

minimum bid price requirement, the corresponding history of reverse stock splits, the dilutive effect of the Offering and an inability

to cure the bid price deficiency organically without effecting a reverse stock split prior to November 26, 2019 could raise public

interest concerns under Nasdaq Listing Rule 5101 and could result in the Nasdaq Staff issuing a delisting determination with respect

to the Company’s common stock (subject to any appeal the Company may file).

Nasdaq rules provide that Nasdaq may suspend

or delist particular securities based on any event, condition or circumstance that exists or occurs that makes continued listing

of the securities on Nasdaq inadvisable or unwarranted in the opinion of the Nasdaq Staff, even though the securities meet all

enumerated criteria for continued listing on Nasdaq.

Operating lease liabilities are based

on the net present value of the remaining lease payments over the remaining lease term.

In determining the present value of lease

payments, the Company used its incremental borrowing rate based on the information available at the date of adoption of Topic

As of June 30, 2020, the weighted average remaining lease term is 2.41 years and the weighted average discount rate used

to determine the operating lease liabilities was 8.0%.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Note 20 - Commitments and Contingencies

Certain conditions may exist as of the

date the condensed 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 condensed 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

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.

Compliance with Nasdaq Continued

Listing Requirement

On May 30, 2019, the Company received

a deficiency letter from Nasdaq indicating that, based on the Company’s closing bid price for the last 30

consecutive business days, the Company did not comply with the minimum bid price requirement of $1.00 per share,

as set forth in Nasdaq Listing Rule 5550(a)(2).

In accordance with Nasdaq listing Rule 5810(c)(3)(A), the Company was provided

a period of 180 calendar days, or until November 26, 2019, in which to regain compliance.

In order to regain compliance with the

minimum bid price requirement, the closing bid price of the Company’s common stock must be

at least $1.00 per share for a minimum of ten consecutive business days without effecting a reverse split.

In addition to the failure to comply with Nasdaq Listing Rule

5550(a)(2), the Nasdaq Staff advised us that the Company’s history of non-compliance with Nasdaq’s minimum bid price

requirement, the corresponding history of reverse stock splits, the dilutive effect of certain offerings and an inability to cure

the bid price deficiency organically without effecting a reverse stock split prior to November 26, 2019 could raise public interest

concerns under Nasdaq Listing Rule 5101 and could result in the Nasdaq Staff issuing a delisting determination with respect to

the Company’s common stock (subject to any appeal the Company may file).

Nasdaq rules provide that Nasdaq may suspend or

delist particular securities based on any event, condition or circumstance that exists or occurs that makes continued listing of

the securities on Nasdaq inadvisable or unwarranted in the opinion of the Nasdaq Staff, even though the securities meet all enumerated

criteria for continued listing on Nasdaq.

In that regard, the Nasdaq Staff has discretion to determine that the Company’s

3 unchanged sentences

is exercised and the Company appeals.

On November 27, 2019, the Company received

notice from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC that based upon the Company’s continued

non-compliance with the minimum $1.00 bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2),

the Company’s common stock would be subject to delisting from the Nasdaq Capital Market (the “Staff Delisting Determination”),

unless the Company timely requested an appeal hearing before the Nasdaq Hearings Panel.

The Company requested such hearing which

was held on January 23, 2020, following the Company’s implementation of a reverse stock split effective on January 7, 2020.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

19 - Commitments and Contingencies (continued)

with Nasdaq Continued Listing Requirement (continued)

On February 5, 2020, the Company received

a letter from the Office of General Counsel of Nasdaq informing us that the Nasdaq Hearings Panel (the “Panel”) granted

the Company’s request to continue the listing of the Company’s common stock on Nasdaq.

The Panel also determined to

impose a Panel Monitor pursuant to Nasdaq Listing Rule 5815(d)(4)(A) to last until February 5, 2021 (“Panel Monitor Period”).

If at any time before February 5, 2021, the Staff or the Panel determines that the Company has failed to meet the minimum bid price

requirement for a period of 30 consecutive trading days or any other requirement for continued listing on Nasdaq, the Panel will

direct the Staff to issue a Staff Delisting Determination and the Hearings Department will promptly schedule a new hearing, with

the initial Panel or a newly convened Panel if the initial Panel is unavailable.

During the monitor period, the Company is obligated

to notify the Panel immediately, in writing, in the event the Company’s bid price falls below the minimum requirement for

any reason, or if the Company falls out of compliance with any applicable listing requirement.

On February 5, 2020, the Company

received a letter from the Office of General Counsel of Nasdaq informing us that the Nasdaq Hearings Panel (the “Panel”)

granted the Company’s request to continue the listing of the Company’s common stock on Nasdaq.

The Panel also determined

to impose a Panel Monitor pursuant to Nasdaq Listing Rule 5815(d)(4)(A) to last until February 5, 2021 (“Panel Monitor Period”).

If at any time before February 5, 2021, the Staff or the Panel determines that the Company has failed to meet the minimum bid

price requirement for a period of 30 consecutive trading days or any other requirement for continued listing on Nasdaq, the Panel

will direct the Staff to issue a Staff Delisting Determination and the Hearings Department will promptly schedule a new hearing,

with the initial Panel or a newly convened Panel if the initial Panel is unavailable.

During the monitor period, the Company is

obligated to notify the Panel immediately, in writing, in the event the Company’s bid price falls below the minimum requirement

for any reason, or if the Company falls out of compliance with any applicable listing requirement.

Note 21 - Subsequent Events

On April 13, 2020, the Company entered

into a subscription agreement with a provider in connection with the issuance by the Company of an aggregate of 183,486 shares

of the Company’s common stock at a purchase price of $1.09 per share in satisfaction of an aggregate of $200,000 payable

to the provider by the Company for legal services rendered.

At-The-Market Program

During the quarter ending June 30, 2020,

the Company issued 9,551,636 shares of common stock in connection with the ATM, at per share prices between $1.13 and $1.28, resulting

in net proceeds to the Company of approximately $10,623,000 after subtracting sales commissions of 4% of gross proceeds.

During the quarter ending June 30, 2020,

the Company exchanged approximately $2,257,000 of the outstanding principal and interest under notes for 2,019,737 shares of the

Company’s common stock at exchange prices between $1.09 and $1.19 per share.

Stock Option Grants

During the quarter ending June 30, 2020,

the Company granted options under the 2018 Plan for the purchase of 5,567,500 shares of common stock to employees and consultants

of the Company.

These options are 100% vested or vest pro-rata over 12 to 48 months, have a life of ten years and an exercise price

of $1.10 per share.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

During the quarter ending September 30,

2020, the Company issued 1,604,312 shares of common stock in connection with the ATM, at per share prices between $1.5064 and

$1.5134, resulting in net proceeds to the Company of approximately $2,324,000 after subtracting sales commissions of 4% of gross

On August 13, 2020, we provided Payplant a

Notice of Termination (the “Notice”) of (i) that certain Loan and Security Agreement, dated as of August 14, 2017 (the

“Loan Agreement”), by and among the Company, Payplant and Lender and (ii) that certain Payplant Client Agreement, dated

as of August 14, 2017, as amended (the “Client Agreement”), by and between the Company and Payplant, pursuant to which

we are able to request loans from the Lender.

In accordance with Section 14 and Section 27 of the Loan Agreement and the Client

Agreement, respectively, we terminated each agreement as the Company has fully satisfied all obligations under the Loan Agreement

and will not incur any additional obligations thereunder.

As a result of the termination, the security interest we previously granted

under the Loan Agreement was terminated and we paid a corresponding UCC termination fee of $150 to Payplant in accordance with

Section 27 of the Client Agreement.

Management’s Discussion

and Analysis of Financial Condition and Results of Operations

You should read

8 unchanged sentences

in Part II, Item 1A, “Risk Factors.”

where indicated, all share and per share data in this section, as well as the condensed consolidated financial statements, reflect

the 1-for-45 reverse split of our common stock effective on January 7, 2020.

Except where indicated,

all share and per share data in this section, as well as the condensed consolidated financial statements, reflect the 1-for-45

reverse split of our common stock effective on January 7, 2020.

Overview of Our Business

3 unchanged sentences

Our indoor intelligence platform uses sensor technology to detect accessible cellular, Wi-Fi, Bluetooth, ultra-wide band (“UWB”)

and radio frequency identification “RFID”

signals emitted from devices within a venue providing positional information

and radio frequency identification (“RFID”) signals emitted from devices within a venue providing positional information

similar to what global positioning system (“GPS”) satellite systems provide for the outdoors.

11 unchanged sentences

for the indoors.

Revenues increased

in the three months ended March 31, 2020 over the same period in 2019 by approximately 32% primarily due to an increase in revenue

from mapping services.

The Indoor Intelligence product line does have long sales cycles, which result from customer-related issues

such as budget and procurement processes but also because of the early stages of indoor-positioning technology and the learning

curve required for customers to implement such solutions.

Customers also often engage in a pilot program first which prolongs sales

cycles and is typical of most emerging technology adoption curves.

Indoor Intelligence sales can be licensed-based with government

customers but commercial customers may prefer a SaaS or subscription model.

Our other digital solutions are also delivered on a

SaaS model and allow us to generate industry analytics that complement our indoor-positioning solutions.

We experienced a net

loss of approximately $6.2 million and $5.2 million for the three months ended March 31, 2020 and 2019, respectively.

assure you that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable.

continue our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities

and proceeds from loans and bank credit lines.

While we believe that our recent debt financing in which we raised aggregate gross

proceeds of $5 million, in addition to the capital raised or that may be raised in connection with sales under our at-the-market

equity facility (the “ATM”) in an aggregate amount of up to $50 million, in addition to the availability on the purchase

order and receivables financing facility with Payplant, LLC (“Payplant”) to finance purchase orders and invoices in

an amount equal to 80% of the face value of purchase orders received and funds from revenue may be sufficient to fund planned operations

for the next 12 months from the date the financial statements are issued, the impact of the COVID-19 pandemic on our business and

results of operations is uncertain at this time.

We have been able to continue operations remotely and have not seen a significant

impact in the demand for certain products including our SaaS or subscription based services and products, certain projects and

customer requests have had to be delayed either because they require onsite services which could not be performed while shelter

in place orders have been in effect or because of the uncertainty of the customer’s financial position and ability to invest

in our technology.

However, we have also seen an increase in interest in our indoor intelligence solutions for workplace readiness

which is directed at enterprise organizations and government agencies to assist them in optimizing the use of their facilities

as well as in developing and monitoring compliance with corporate policies and government regulations for physical distancing,

exposure notification, and the identification of high traffic areas for sanitizing and cleaning in order to keep their employees

healthier and safer within the workplace.

If we are successful in expanding the adoption of our products and services for this

solution, we may be able to offset any revenue loss that may be experienced, however, there are no assurances that we will be successful

or that we will be able to offset any losses, if realized.

In addition, if general economic or other conditions resulting from

COVID 19 or other events materiality impact the liquidity of our common stock or ability to access capital from the ATM in addition

to our ability to generate revenue from the sales of our products and services, we will not have sufficient funds to support our

operations for the next 12 months.

The Company is also pursuing possible strategic transactions and may raise such additional

capital as needed, using our equity securities, an assignment of our note receivable from Sysorex, Inc.

(“Sysorex”)

and/or cash and debt financings in combinations appropriate for each acquisition.

We cannot assure that we will be able to raise

sufficient capital as and when we need it to continue our operations.

If we cannot raise funds as and when we need them, we may

be required to scale back our business operations by reducing expenditures for employees, consultants, business development and

marketing efforts, selling assets or one or more products in our business, or otherwise severely curtailing our operations.

Our Indoor Intelligence

product line has long sales cycles, which result from customer-related issues such as budget and procurement processes but also

because of the early stages of indoor-positioning technology and the learning curve required for customers to implement such solutions.

Customers also often engage in a pilot program first which prolongs sales cycles and is typical of most emerging technology adoption

Indoor Intelligence sales can be licensed-based with government customers but commercial customers may prefer a SaaS or

subscription model.

Our other digital solutions are also delivered on a SaaS model and allow us to generate industry analytics

that complement our indoor-positioning solutions.

We experienced a net loss

of approximately $7.3 million and $5.2 million for the three months ended June 30, 2020 and 2019, respectively, and a net loss of $13.5

million and $10.4 million for the six months ended June 30, 2020 and 2019, respectively.

We cannot assure

you that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable.

In order to continue

our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds

from loans and bank credit lines.

During the first quarter of 2020, we raised $5 million in gross proceeds in connection with a

debt financing and during the quarter ended June 30, 2020, we raised net proceeds of approximately $40 million, in connection with

sales under our at-the-market equity facility (the “ATM”) In addition, we may raise approximately $110 million of additional

capital resulting in aggregate gross proceeds of $150 million under the ATM, however, general economic or other conditions resulting

from COVID-19 or other events materially may impact the liquidity of our common stock or our ability to continue to access

capital from the ATM to support our growth plans.

Given our cash balances and budgeted cash flow requirements, we believe we have

sufficient funds to support ongoing operations for the next twelve months.

Effects of COVID-19

impact of the COVID-19 pandemic on our business and results of operations continues to remain uncertain at this time.

have been able to continue operations remotely, we have experienced supply chain constraints and delays in the receipt of certain

components of our products impacting delivery times for our products.

We have also seen some impact in the demand of certain products

and delays in certain projects and customer orders either because they require onsite services which could not be performed while

shelter in place orders have been in effect or because of the uncertainty of the customer’s financial position and ability

to invest in our technology.

These factors have resulted in a decrease in our revenue during the quarter ended June 30, 2020, when

compared to the same period of last year.

However, due to the growth in revenue experienced in the first quarter of 2020, revenue

growth during the first six months of 2020 is substantially the same when compared to the same six month period of 2019.

while certain anticipated second quarter projects were initially delayed by customers, following the end of the quarter we received

a substantial purchase order for our sensors from a significant customer and have also secured certain reseller partnerships focused

on increasing interest in our indoor intelligence solutions for workplace readiness which is directed at enterprise organizations

and government agencies to assist them in optimizing the use of their facilities as well as in developing and monitoring compliance

with corporate policies and government regulations for physical distancing, exposure notification, and the identification of high

traffic areas for sanitizing and cleaning in order to keep their employees healthier and safer within the workplace .

If we are successful in expanding the adoption of our products and services for this and or other solutions, and are able to add

to our revenue growth through the completion of strategic transactions, we may be able to offset any revenue loss that may be experienced

due to any constraints resulting from the pandemic or other general economic conditions, however, there are no assurances that

we will be successful or that we will be able to offset any losses, if realized.

A further discussion of the impact of the COVID-19 pandemic

on our business is set forth below in Part II, Item 1A.

Risk Factors.

Corporate Strategy Update

Management continues

to pursue a corporate strategy that is focused on building and developing our business as a provider of end-to-end solutions ranging

Management continues to

pursue a corporate strategy that is focused on building and developing our business as a provider of end-to-end solutions ranging

from the collection of data to delivering insights from that data to our customers with a focus on securing, digitizing and optimizing

1 unchanged sentence

In connection with such strategy

and to facilitate our long-term growth, we continue to evaluate various strategic transactions and acquisitions of companies with

technologies and intellectual property (“IP”) that complement those goals by adding technology, differentiation, customers

and/or revenue.

We are primarily looking for accretive acquisitions that have business value and operational synergies, but will

be opportunistic for other strategic and/or attractive transactions.

We believe these complementary technologies will add value

to the Company and allow us to provide a comprehensive indoor intelligence platform, offering a one-stop shop to our customers.

Candidates with proven technologies that complement our overall strategy may come from anywhere in the world, as long as there

are strategic and financial reasons to make the acquisition.

In addition, we are also exploring opportunities that will supplement

our revenue growth.

If we make any acquisitions in the future, we expect that we may pay for such acquisitions using our equity

securities, an assignment of our note receivable from Sysorex Inc.

(“Sysorex”) and/or cash and debt financings in combinations

appropriate for each acquisition.

In furtherance of this strategy, over the last year, we enhanced our product offerings and expanded

our intellectual property portfolio by completing several strategic transactions, including, the acquisition of (1) Locality Systems,

(“Locality”), a technology company based near Vancouver, Canada, specializing in wireless device positioning and

radio frequency (“RF”) augmentation of video surveillance systems and (2) Jibestream Inc.

(“Jibestream”),

a provider of a highly configurable intelligent indoor mapping platform to expand our suite of products.

In addition, we acquired

certain GPS products, software, technologies, and intellectual property from GTX Corp (“GTX”), a U.S.

based company

specializing in GPS technologies.

and to facilitate our long-term growth, we continue to evaluate various strategic transactions including acquisitions of companies

with technologies and intellectual property (“IP”) that complement those goals by adding technology, differentiation,

customers and/or revenue.

Some of these opportunities may offer us the ability to enhance our technology and product offerings,

expand our verticals and/or our international presence and global footprint.

We believe these complementary technologies will add

value to the Company and allow us to provide a comprehensive indoor intelligence platform, offering a one-stop shop to our customers.

In addition, we may seek to expand our capabilities around security, artificial intelligence, augmented reality and virtual reality

or other high growth sectors.

Candidates with proven technologies that complement our overall strategy may come from anywhere in

the world, as long as there are strategic and financial reasons to make the acquisition.

In addition, we are also exploring opportunities

that will supplement our revenue growth.

We are primarily looking for accretive acquisitions that have business value and operational

synergies, but will be opportunistic for other strategic and/or attractive transactions that we believe may increase overall shareholder

value, which may include, but not be limited to other alternative investment opportunities, such as minority investments.

ventures or special purpose acquisition companies.

If we make any acquisitions in the future, we expect that we may pay for such

acquisitions with cash, equity securities and/or debt in combinations appropriate for each acquisition.

In addition, we may consider

an assignment of our remaining note receivable from Sysorex Inc.

(“Sysorex”).

In furtherance of this strategy,

over the last year, we enhanced our product offerings and expanded our intellectual property portfolio by completing several strategic

transactions, including, the acquisition of (1) Locality Systems, Inc.

(“Locality”), a technology company based near

Vancouver, Canada, specializing in wireless device positioning and radio frequency (“RF”) augmentation of video surveillance

systems and (2) Jibestream Inc.

(“Jibestream”), a provider of a highly configurable intelligent indoor mapping platform

to expand our suite of products.

In addition, we acquired certain GPS products, software, technologies, and intellectual property

from GTX Corp (“GTX”), a U.S.

based company specializing in GPS technologies.

Recently, we acquired an exclusive, worldwide

license to market, distribute and develop the SYSTAT and SigmaPlot software suite of products from Systat Software, Inc.

Recent Events

Reverse Stock Split

During the first quarter

ended March 31, 2020, on January 7, 2020, we effected a 1-for-45 reverse split of our outstanding common stock.

Equity Distribution

On March 3, 2020, we

entered into an Equity Distribution Agreement with Maxim Group LLC (“Maxim”) under which we may offer and sell shares

of our common stock in connection with the ATM in an aggregate offering amount of up to $50 million from time to time through Maxim,

acting exclusively as our sales agent (the “Offering”).

We intend to use the net proceeds of the Offering primarily

for working capital and general corporate purposes.

We may also use a portion of the net proceeds to invest in or acquire businesses

or technologies that we believe are complementary to our own.

We issued 937,010 shares of common stock during the quarter ended

March 31, 2020, in connection with the ATM at per share prices between $1.23 and $2.11, resulting in net proceeds to the Company

of approximately $1,328,096, after paying Maxim compensation of approximately $55,337, based on a rate of 4% of the gross sales.

Subsequent to the

quarter ended March 31, 2020, we have issued 9,551,636 shares of common stock in connection with the ATM, at per share prices

between $1.13 and $1.28, resulting in net proceeds to the Company of approximately $10,622,893 after paying Maxim compensation

of approximately $442,621, based on a rate of 4% of the gross sales.

Such sales were made

pursuant to the Company’s effective shelf registration statement on Form S-3 (File No.

333-223960), which was filed with

the Securities and Exchange Commission (the “SEC”) on March 27, 2018, as amended on May 15, 2018, and declared effective

on June 5, 2018 (the “Registration Statement”), and a base prospectus dated as of June 5, 2018 included in the Registration

Statement and the prospectus supplement relating to the offering filed with the SEC on March 3, 2020.

Note Exchanges

During the first

quarter ended March 31, 2020, we entered into exchange agreements with a noteholder pursuant to which we issued an aggregate

of 1,896,557 shares of common stock in exchange for the satisfaction of an aggregate amount of approximately $4,194,030 of

the outstanding balance of promissory notes issued on May 3, 2019 and June 27, 2019 to the holders of such notes at exchange

prices between $1.12 and $4.05 per share, in each case at a price per share equal to Nasdaq’s “minimum

as defined by Nasdaq Listing Rule 5635(d).

Systat License Acquisition

On June 19, 2020, we entered into an exclusive license to market,

distribute, and develop the SYSTAT and SigmaPlot software suite of products (the “License Grant”) pursuant to the terms

and conditions of that certain Exclusive Software License and Distribution Agreement, as amended on June 30, 2020 (as amended,

the “License Agreement”), with Cranes Software International Ltd.

(“Cranes”) and Systat Software, Inc.

(“Systat,”

and together with Cranes, the “Systat Parties”).

In accordance with the terms of the License

Agreement, on June 30, 2020 (the “Closing Date”), we acquired the License Grant, effective as of June 1, 2020, and

we partitioned a portion of that certain promissory note (the “Sysorex Note”) issued to us by Sysorex, Inc.

(“Sysorex”),

into a new note in an amount equal to $3 million in principal plus accrued interest (the “Closing Note”) and assigned

the Closing Note and all rights and obligations thereunder to Systat in accordance with the terms and conditions of that certain

Promissory Note Assignment and Assumption Agreement.

An additional $3.3 million of the principal balance underlying the Sysorex

Note will be partitioned and assigned to Systat as consideration payable for the rights granted under the license as follows:

$1.3 million on the three month anniversary of the Closing Date;

(ii) $1.0 million on the six month anniversary of the Closing

and (iii) $1.0 million on the nine month anniversary of the Closing Date.

Each assignment under the Sysorex Note will be

represented by new secured promissory notes and our right to any repayment under the Sysorex Note will be subordinate and junior

to Sysorex’s obligation to make any payment to Systat unless we have exercised our right to offset any losses against such

assigned notes as permitted in the License Agreement.

In addition, we paid the remaining cash consideration of $2.2 million for

the License Grant on July 8, 2020.

In connection with

the License Grant, the Systat Parties provided us with equipment for us to use at no additional cost for a minimum period of six

months following the Closing Date.

In addition, we have the right, but not the obligation, to assume all of the Systat Parties’

rights, interests, and obligations under the Systat Customer Contracts and the Systat Distribution Agreements (as such terms are

defined in the License Agreement).

We are also entitled to any customer maintenance revenue, new license fees, or license renewal

fees, received by any of the Systat Parties after June 1, 2020 in connection with the Systat Customer Contracts and/or Systat Distribution

Agreements assigned to and assumed by us in connection with the License Agreement.

The License Grant will remain in effect for

a period of 15 years following the Closing Date (the “Term”), unless terminated sooner upon mutual written consent

of Systat and us or upon termination by either for the other party’s specified breach.

At any time during

the first 5-year period of the Term, we may exercise our option to purchase the Software, Software Source, User Documentation,

Systat Intellectual Property, Customer Information and Equipment (as such terms are defined in the License Agreement) from the

Systat Parties in exchange for an assignment of our right to receive an additional $1.0 million in principal under the Sysorex

In connection with the License Grant, the Company expanded its

operations into the United Kingdom and Germany.

As a result of such expansion, the Company formed Inpixon Limited, a new wholly

owned subsidiary in the United Kingdom, and established Inpixon GmbH, a wholly owned subsidiary incorporated under the laws of

The Company determined

that the License Grant does not constitute an acquisition of a significant amount of assets and, as such, financial statements

related to the License Agreement, including pro forma financial statements are not required to be reported with respect to such

License Grant.

Equity Distribution Agreement

On March 3, 2020, we entered into an Equity Distribution Agreement

with Maxim Group LLC (“Maxim”) under which we may offer and sell shares of our common stock in connection with the

ATM in an aggregate offering amount of up to $50 million, which was increased on June 19, 2020 to $150 million pursuant to an amendment

to the EDA, from time to time through Maxim, acting exclusively as our sales agent (the “ATM”).

We intend to use the

net proceeds of the ATM primarily for working capital and general corporate purposes.

We may also use a portion of the net proceeds

to invest in or acquire businesses or technologies that we believe are complementary to our own.

We issued 29,033,036 shares of

common stock during the quarter ended June 30, 2020, in connection with the ATM at per share prices between $1.13 and $2.02, resulting

in net proceeds to the Company of approximately $40.5 million, after paying offering expenses and Maxim compensation of approximately

$1.7 million, which is based on a rate of 4% of the gross sales of each sale for the first $50 million of shares and 3.25% for

any remaining sales.

Subsequent to the quarter

ended March 31, 2020, we entered into exchange agreements pursuant to which we issued an aggregate of 2,019,737 shares of common

stock in exchange for the satisfaction of an aggregate amount of approximately $2,256,790 of the outstanding balance of promissory

notes issued on December 21, 2018 and August 8, 2019 to the holders of such notes at exchange prices between $1.09 and $1.19 per

Promissory Note

On March 18, 2020,

we entered into a note purchase agreement (the “Purchase Agreement”) with Iliad Research & Trading, L.P.

(the “Holder”),

pursuant to which we issued and sold to the Holder an unsecured promissory note (the “Note”) in an aggregate initial

principal amount of $6,465,000.00 (the “Initial Principal Amount”), which is payable on or before the date that is

12 months from the issuance date (the “Maturity Date”).

The Initial Principal Amount includes an original issue discount

of $1,450,000.00 and $15,000.00 that we agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due

diligence, monitoring and other transaction costs.

In exchange for the Note, the Holder paid an aggregate purchase price of $5,000,000.00

(the “Transaction”).

The Note is payable on or before the date that is 12 months from the issuance date.

the note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the note.

pay all or any portion of the amount owed earlier than it is due in an amount equal to 115% of the portion of the outstanding balance

the Company elects to prepay.

on the date that is 6 months from the issuance date and at the intervals indicated below until the Note is paid in full, the Holder

has the right to redeem up to an aggregate of 1/3 of the initial principal balance of the Note each month (each monthly exercise,

a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”);

however, that if the Holder does not exercise any Monthly Redemption Amount in its corresponding month then such Monthly Redemption

Amount shall be available for the Holder to redeem in any future month in addition to such future month’s Monthly Redemption

Upon receipt of Monthly Redemption Notice, we are required to the applicable Monthly Redemption Amount in cash to the Holder

within five business days of receipt.

Monitoring Fee .

If the Note is still outstanding on the date that is six (6) months from the issuance date, then a one-time monitoring fee equal

to ten percent (10%) of the then-current outstanding balance shall be added to the Note.

In addition, at any

time while the Note is outstanding, if we intend to enter into a financing pursuant to which we will issue securities that (A)

have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be

issued pursuant to such conversion right varies with the market price of the Company’s common stock, or (B) are or may become

convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a

conversion price that varies with the market price of the common stock, even if such security only becomes convertible following

an event of default, the passage of time, or another trigger event or condition (a “Future Offering”), then we must

first offer such opportunity to the Holder on the same terms no later than five (5) trading days immediately prior to the trading

day of the expected announcement of the Future Offering (the “Right of First Refusal”).

If the Holder is unwilling

or unable to provide such financing then we may obtain such financing upon the exact same terms and conditions offered to the Holder,

which must be completed within 30 days after the date of the notice.

If we do not receive the financing within 30 days after the

date of the notice, then we must again offer the financing opportunity to the Holder as described above, and the process detailed

above will be repeated.

The Right of First Refusal does not apply to an Exempt Issuance (as defined in the Purchase Agreement)

or to a registered offering made pursuant to a registration statement on Form S-1 or Form S-3.

ended June 30, 2020, we have issued 1,604,312 shares of common stock in connection with the ATM, at per share prices between $1.5064

and $1.5134, resulting in net proceeds to the Company of approximately $2.3 million after paying offering expenses and Maxim compensation

of approximately $97,000, which is based on a rate of 4% of the gross sales of each sale for the first $50 million of shares and

3.25% for any remaining sales.

Such sales were made pursuant to the Company’s effective

shelf registration statement on Form S-3 (File No.

333-223960), which was filed with the Securities and Exchange Commission (the

“SEC”) on March 27, 2018, as amended on May 15, 2018, and declared effective on June 5, 2018 (the “Registration

Statement”), and a base prospectus dated as of June 5, 2018 included in the Registration Statement and the prospectus supplement

relating to the ATM filed with the SEC on March 3, 2020, as supplemented by the prospectus supplement filed with the SEC on June

Note Exchanges

During the quarter ended June 30, 2020, we entered into

exchange agreements with noteholders pursuant to which we issued an aggregate of 3,889,990 shares of common stock in exchange for

the satisfaction of an aggregate amount of approximately $4.6 million of the outstanding balance of promissory notes issued on

December 21, 2018, August 8, 2019, September 17, 2019 and November 22, 2019 to the holders of such notes at exchange prices between

$1.09 and $1.362 per share, in each case at a price per share equal to Nasdaq’s “minimum price”

as defined by

Nasdaq Listing Rule 5635(d).

Critical Accounting Policies and Estimates

59 unchanged sentences

Anticipated losses are recognized as soon as they become known.

For the three months ended March 31, 2020 AND 2019, the Company

did not incur any such losses.

For the three and six months ended June 30, 2020 and 2019, the

Company did not incur any such losses.

These amounts are based on known and estimated factors.

Contract Balances

timing of our revenue recognition may differ from the timing of payment by our customers.

The Company records a receivable when

revenue is recognized prior to payment and the Company has an unconditional right to payment.

Alternatively, when payment precedes

the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.

of March 31, 2020, the Company had deferred revenue of approximately $692,000 related to software license agreements and approximately

$185,000 related to cash received in advance for product maintenance services provided by the Company’s technical staff.

The Company expects to satisfy its remaining performance obligations for these maintenance services and recognize the deferred

revenue and related contract costs over the next twelve months.

The timing of our revenue

recognition may differ from the timing of payment by our customers.

The Company records a receivable when revenue is recognized

prior to payment and the Company has an unconditional right to payment.

Alternatively, when payment precedes the provision of the

related services, the Company records deferred revenue until the performance obligations are satisfied.

As of June 30, 2020, the

Company had deferred revenue of approximately $1,446,000 related to software license agreements and approximately $63,000 related

to cash received in advance for product maintenance services provided by the Company’s technical staff.

The Company expects

to satisfy its remaining performance obligations for these maintenance services and recognize the deferred revenue and related

contract costs over the next twelve months.

Long-lived Assets

5 unchanged sentences

events or changes in circumstances that would trigger an impairment test include, but are not limited to:

significant under-performance relative to expected and/or historical results (negative comparable sales growth or operating cash flows for two consecutive years);

significant negative industry or economic trends;

knowledge of transactions involving the sale of similar property at amounts below our carrying value;

our expectation to dispose of long-lived assets before the end of their estimated useful lives, even though the assets do not meet the criteria to be classified as “held for sale.”

● significant under-performance

relative to expected and/or historical results (negative comparable sales growth or operating cash flows for two consecutive years);

● significant negative industry

or economic trends;

● knowledge of transactions

involving the sale of similar property at amounts below our carrying value;

● our expectation to dispose

of long-lived assets before the end of their estimated useful lives, even though the assets do not meet the criteria to be classified

as “held for sale.”

Long-lived assets are

20 unchanged sentences

Based on our evaluation we did

not record a charge for impairment for the three months ended March 31, 2020.

not record a charge for impairment for the three and six months ended June 30, 2020 and 2019.

The benefits to be

20 unchanged sentences

over that revised remaining useful life.

We have determined that there were no events or circumstances during the three months

ended March 31, 2020 and 2019, which would indicate a revision to the remaining amortization period related to any of our long-lived

Accordingly, we believe that the current estimated useful lives of long-lived assets reflect the period over which they

are expected to contribute to future cash flows and are therefore deemed appropriate.

We have determined that there were no events or circumstances during the three and six

months ended June 30, 2020 and 2019, which would indicate a revision to the remaining amortization period related to any of our

long-lived assets.

Accordingly, we believe that the current estimated useful lives of long-lived assets reflect the period over

which they are expected to contribute to future cash flows and are therefore deemed appropriate.

Acquired In-Process Research and

8 unchanged sentences

During fiscal year 2014, we acquired IPR&D through the acquisition

of AirPatrol, in 2015 through the acquisition of the assets of LightMiner and in 2019 through the acquisitions of Locality, Jibestream

and certain assets of GTX.

Our IPR&D is comprised of AirPatrol, LightMiner, Locality, Jibestream and GTX technology, which

was valued on the date of the acquisition.

It will take additional financial resources to continue development of these technologies.

of AirPatrol, in 2015 through the acquisition of the assets of LightMiner, in 2019 through the acquisitions of Locality, Jibestream

and certain assets of GTX and in 2020 through the SYSTAT licensing agreement.

Our IPR&D is comprised of AirPatrol, LightMiner,

Locality, Jibestream, GTX and SYSTAT technology, which was valued on the date of the acquisition.

It will take additional financial

resources to continue development of these technologies.

We continue to seek

additional resources, through both capital raising efforts and meeting with industry experts, for further development of the AirPatrol,

Locality, Jibestream and GTX technologies.

Through March 31, 2020, we have made some progress with raising capital since these

acquisitions, building our pipeline and getting industry acknowledgment.

We have been recognized by leading industry analysts in

a report on leading indoor positioning companies and was also awarded the IoT Security Excellence award by TMC.

Locality, Jibestream, GTX and SYSTAT technologies.

Through June 30, 2020, we have made some progress with raising capital since

these acquisitions, building our pipeline and getting industry acknowledgment.

We have been recognized by leading industry analysts

in a report on leading indoor positioning companies and was also awarded the IoT Security Excellence award by TMC.

Management remains

focused on growing revenue from these products and continues to pursue efforts to recognize the value of the AirPatrol, LightMiner,

Locality, Jibestream and GTX technologies.

Although there can be no assurance that these efforts will be successful, we intend

to allocate financial and personnel resources when deemed possible and/or necessary.

If we choose to abandon these efforts, or

if we determine that such funding is not available, the related IPR&D will be subject to significant impairment.

Impairment of Long-Lived Assets

Subject to Amortization

Locality, Jibestream, GTX and SYSTAT technologies.

Although there can be no assurance that these efforts will be successful, we

intend to allocate financial and personnel resources when deemed possible and/or necessary.

If we choose to abandon these efforts,

or if we determine that such funding is not available, the related IPR&D will be subject to significant impairment.

Impairment of Long-Lived Assets Subject to Amortization

We amortize intangible

7 unchanged sentences

We did not recognize any intangible asset impairment charges

for the three months ended March 31, 2020.

for the three and six months ended June 30, 2020 and 2019.

See “Acquired In-Process Research and Development (“IPR&D”)”

19 unchanged sentences

economic conditions, and other relevant factors.

As of March 31, 2020

As of June 30, 2020

and December 31, 2019, reserves for credit losses included a reserve for doubtful accounts of approximately $ 467,000 and $646,000,

35 unchanged sentences

The Company incurred

stock-based compensation charges of $399,000 and $890,000 for the three months ended March 31, 2020 and 2019, respectively, which

are included in general and administrative expenses.

The following table summarizes the nature of such charges for the periods

then ended (in thousands):

For the Three Months Ended March 31,

Compensation and related benefits

Professional and legal fees

During the three months

ended March 31, 2020 there were no stock options granted to consultants or employees of the Company.

stock-based compensation charges of $286,000 and $858,000 for the three months ended June 30, 2020 and 2019, respectively, and $685,000 and $1,748,000 for

the six months ended June 30, 2020 and 2019 respectively, which are included in general and administrative expenses.

Key weighted-average assumptions used to apply this pricing model during the six months ended June 30, 2020 were as follows:

Six Months Ended

Risk-free interest rate

Expected life of stock option grants

Expected volatility of underlying stock

Dividends assumption

of Operations

ended March 31, 2020 compared to three months ended March 31, 2019

The following table

sets forth selected condensed consolidated financial data as a percentage of our revenue and the percentage of period-over-period

Three months ended June 30, 2020

compared to three months ended June 30, 2019

For the Three Months Ended

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

(in thousands, except percentages)

3 unchanged sentences

Net loss attributable to stockholders of Inpixon

used to calculate dollar and percentage changes are based on numbers in the thousands.

Accordingly, calculations in this item,

which may be rounded to the nearest hundred thousand, may not produce the same results.

for the three months ended March 31, 2020 were $1,804,000 compared to $1,363,000 for the comparable period in the prior year for

an increase of $441,000, or approximately 32%.

Revenues increased in the first quarter of 2020 over the prior period in 2019 primarily

due to an increase in revenue from mapping services, which we did not have in 2019.

of revenues for the three months ended March 31, 2020 were $510,000 compared to $337,000 for the comparable period in the prior

This increase of $173,000, or approximately 51%, was primarily attributable to the increase in mapping revenue during the

first quarter ended March 31, 2020.

gross profit margin for the three months ended March 31, 2020 was 72% compared to 75% for the first quarter ended March 31, 2019.

This decrease in margin is primarily due to lower margins associated with our mapping services during the first quarter ended March

* Amounts used to calculate

dollar and percentage changes are based on numbers in the thousands.

Accordingly, calculations in this item, which may be rounded

to the nearest hundred thousand, may not produce the same results.

Revenues for the three

months ended June 30, 2020 were $1,076,000 compared to $1,491,000 for the comparable period in the prior year for a decrease of

$415,000, or approximately 28%.

Revenues decreased in the second quarter of 2020 over the prior period in 2019 primarily attributable

to a delay in an anticipated customer order for our sensors from a significant customer that resulted from office closures in connection

with responding to government imposed “shelter-in place”

orders in connection with the COVID-19 pandemic.

Cost of revenues for the

three months ended June 30, 2020 were $305,000 compared to $391,000 for the comparable period in the prior year.

This decrease

of $86,000, or approximately 22%, was primarily attributable to the lower sales described above.

The gross profit margin

for the three months ended June 30, 2020 was 72% compared to 74% for the second quarter ended June 30, 2019.

This decrease in margin

is primarily due to lower margins associated with our mapping services during the second quarter ended June 30, 2020.

Operating Expenses

expenses for the three months ended March 31, 2020 were $6.9 million and $5.9 million for the comparable period ended March 31,

This increase of approximately $1.0 million is primarily attributable to the additional operating expenses from the Jibestream

acquisition and increase in professional fees.

Operating expenses

for the three months ended June 30, 2020 were $5.9 million and $5.8 million for the comparable period ended June 30, 2019.

increase of approximately $0.1 million is primarily attributable to the increased operating expenses from the Jibestream acquisition.

Loss From Operations

from operations for the three months ended March 31, 2020 was $5.6 million as compared to $4.9 million for the comparable period

in the prior year.

This increase of approximately $0.7 million was primarily attributable to the higher gross margin offset by

higher operating expenses during the three months ended March 31, 2020 as discussed in the reporting caption above.

Loss from operations for

the three months ended June 30, 2020 was $5.1 million as compared to $4.7 million for the comparable period in the prior year.

This increase in loss of approximately $0.4 million was primarily attributable to the lower revenues during the second quarter

of 2020 as compared to the same period of last year.

Other Income/Expense

income/expense for the three months ended March 31, 2020 was a loss of $689,000 compared to a loss of $287,000 for the comparable

period in the prior year.

This increase in loss of $402,000 is primarily attributable to the increase in interest expense and debt

discount on promissory notes in the first quarter ended March 31, 2020.

Provision for

was no provision for corporate income taxes for the three months ended March 31, 2020 and 2019 as the Company was in a net taxable

loss position.

Deferred tax assets resulting from such losses are fully reserved as of March 31, 2020 and 2019 since, at present,

the Company has no history of taxable income and it is more likely than not that such assets will not be realized.

recorded an income tax benefit of approximately $87,000 during the three months ended March 31, 2020 for the reduction of the deferred

tax liability related to the amortization of the Locality and Jibestream intangibles.

Net Loss Attributable

To Non-Controlling Interest

loss attributable to non-controlling interest for the three months ended March 31, 2020 was $10,000 compared to net loss of $5,000

for the comparable period in the prior year.

This increase in loss of $5,000 was attributable to the gain from Inpixon India and

Other income/expense for

the three months ended June 30, 2020 was a loss of $2,176,000 compared to a loss of $506,000 for the comparable period in the prior

This increase in loss of $1,670,000 is primarily attributable to the increase in interest expense and debt discount on promissory

notes, a $835,000 valuation allowance adjustment due to the uncertainty of being repaid in connection with note receivable from

Sysorex and a $628,000 valuation allowance for related party receivable in connection with obligations from a settlement agreement

related to our spin-off of Sysorex in 2018.

Provision for Income Taxes

There was no provision

for corporate income taxes for the three months ended June 30, 2020 and 2019 as the Company was in a net taxable loss position.

Deferred tax assets resulting from such losses are fully reserved as of June 30, 2020 and 2019 since, at present, the Company has

no history of taxable income and it is more likely than not that such assets will not be realized.

Net Income Attributable To Non-Controlling

Net income attributable

to non-controlling interest for the three months ended June 30, 2020 was $19,000 compared to net income of $9,000 for the

comparable period in the prior year.

This increase in income of $10,000 was attributable to the gain from Inpixon India and

is immaterial.

1 unchanged sentence

To Stockholders of Inpixon

loss attributable to stockholders of Inpixon for the three months ended March 31, 2020 was $6.2 million compared to $5.2 million

for the comparable period in the prior year.

The higher loss of approximately $1.0 million was primarily attributable to higher

gross margin offset by higher operating and interest expense during the first quarter ended March 31, 2020.

Net loss attributable to

stockholders of Inpixon for the three months ended June 30, 2020 was $7.3 million compared to $5.2 million for the comparable period

in the prior year.

The higher loss of approximately $2.1 million was primarily attributable to the lower revenues received this

quarter as compared to the same period of last year, additional interest expense and debt discount on promissory notes, a $835,000

valuation allowance adjustment due to the uncertainty of being repaid in connection with note receivable from Sysorex and a $628,000

valuation allowance for related party receivable from a settlement agreement.

Six months ended June 30, 2020

compared to six months ended June 30, 2019

For the Six Months Ended

June 30, 2020

June 30, 2019

(in thousands, except percentages)

Cost of revenues

Operating expenses

Loss from operations

Net loss attributable to stockholders of Inpixon

* Amounts used to calculate

dollar and percentage changes are based on numbers in the thousands.

Accordingly, calculations in this item, which may be rounded

to the nearest hundred thousand, may not produce the same results.

Revenues for the six

months ended June 30, 2020 were $2,880,000 compared to $2,854,000 for the comparable period in the prior year for an increase of

$26,000, or only approximately 1%, which was primarily attributable to the impact of the COVID-19 pandemic on our business.

Cost of Revenues

Cost of revenues for

the six months ended June 30, 2020 were $814,000 compared to $727,000 for the comparable period in the prior year.

This increase

of $87,000, or approximately 12%, was primarily attributable to the increase in lower margin mapping revenue in 2020.

The gross profit margin

for the six months ended June 30, 2020 was 72% compared to 75% for the six months ended June 30, 2019.

This decrease in margin

is primarily due to lower margins associated with our mapping services during the six months ended June 30, 2020.

Operating Expenses

Operating expenses

for the six months ended June 30, 2020 were $12.8 million and $11.7 million for the comparable period ended June

This increase of approximately $1.1 million is primarily attributable to the increased operating expenses from the

Jibestream acquisition.

Loss From Operations

Loss from operations for

the six months ended June 30, 2020 was $10.7 million as compared to $9.6 million for the comparable period in the prior year.

increase in loss of approximately $1.1 million was primarily attributable to the lower revenues in the second quarter of 2020 as

compared to the same period in 2019 and the increased operating expenses from the Jibestream acquisition.

Other Income/Expense

Other income/expense for the six months ended June 30, 2020

was a loss of $2,863,000 compared to a loss of $793,000 for the comparable period in the prior year.

This increase in loss

of approximately $2,070,000 is primarily attributable to the increase in interest expense and debt discount on promissory

notes, a $835,000 valuation allowance adjustment due to the uncertainty of being repaid in connection with note receivable from

Sysorex and a $628,000 valuation allowance for related party receivable from a settlement agreement.

Provision for Income Taxes

There was no provision

for corporate income taxes for the six months ended June 30, 2020 and 2019 as the Company was in a net taxable loss position.

tax assets resulting from such losses are fully reserved as of June 30, 2020 and 2019 since, at present, the Company has no history

of taxable income and it is more likely than not that such assets will not be realized.

The Company recorded an income tax benefit

of approximately $87,000 during the six months ended June 30, 2020 for the reduction of the deferred tax liability related

to the amortization of the Locality and Jibestream intangibles.

Net Income Attributable To Non-Controlling

Net income attributable

to non-controlling interest for the six months ended June 30, 2020 was $9,000 compared to net income of $4,000 for the

comparable period in the prior year.

This increase in income of $5,000 was attributable to the gain from Inpixon India and

is immaterial.

Net Loss Attributable To Stockholders

Net loss attributable to

stockholders of Inpixon for the six months ended June 30, 2020 was $13.5 million compared to $10.4 million for the comparable

period in the prior year.

The higher loss of approximately $3.1 million was primarily attributable to the lower revenues received

this quarter as compared to the same period last year, additional interest expense and debt discount on promissory notes, a $835,000

valuation allowance adjustment due to the uncertainty of being repaid in connection with note receivable from Sysorex and a $628,000

valuation allowance for related party receivable from a settlement agreement.

Non-GAAP Financial information

is defined as net income (loss) before interest, provision for (benefit from) income taxes, and depreciation and amortization.

Adjusted EBITDA is used by our management as the matrix in which it manages the business.

It is defined as EBITDA plus adjustments

for other income or expense items, non-recurring items and non-cash stock-based compensation.

EBITDA for the three months ended March 31, 2020 was a loss of $3.9 million compared to a loss of $2.6 million for the prior

EBITDA is defined as

net income (loss) before interest, provision for (benefit from) income taxes, and depreciation and amortization.

Adjusted EBITDA

is used by our management as the matrix in which it manages the business.

It is defined as EBITDA plus adjustments for other income

or expense items, non-recurring items and non-cash stock-based compensation.

EBITDA for the three months ended June 30, 2020 was a loss of $3.9 million compared to a loss of $1.9 million for the prior

period in 2019.

Adjusted EBITDA for the six months ended June 30, 2020 was a loss of $7.8 million compared to a loss

of $4.5 million for the prior period in 2019.

following table presents a reconciliation of net income/loss attributable to stockholders of Inpixon, which is our GAAP operating

performance measure, to Adjusted EBITDA for the three months ended March 31, 2020 and 2019 (in thousands):

For the Three Months Ended

performance measure, to Adjusted EBITDA for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended

Six Months Ended

Net loss attributable to common stockholders

1 unchanged sentence

Loss on exchange of debt for equity

Provision for valuation allowance for held for sale loan

Provision for the valuation allowance for related party receivable

Settlement of litigation

Acquisition transaction/financing costs

Costs associated with public offering

Provision for doubtful accounts

2 unchanged sentences

Interest expense, net

Income tax benefit

Depreciation and amortization

Income tax benefit

Adjusted EBITDA

rely on Adjusted EBITDA, which is a non-GAAP financial measure for the following:

We rely on Adjusted

EBITDA, which is a non-GAAP financial measure for the following:

to review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment Reporting;

13 unchanged sentences

we believe that the use of Adjusted EBITDA is helpful to compare our results to other companies.

Even though we

believe Adjusted EBITDA is useful for investors, it does have limitations as an analytical tool.

Thus, we strongly urge

investors not to consider this metric in isolation or as a substitute for net income (loss) and the other condensed

consolidated statement of operations data prepared in accordance with GAAP.

Some of these limitations include the fact

Even though we believe

Adjusted EBITDA is useful for investors, it does have limitations as an analytical tool.

Thus, we strongly urge investors not to

consider this metric in isolation or as a substitute for net income (loss) and the other condensed consolidated statement of operations

data prepared in accordance with GAAP.

Some of these limitations include the fact that:

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

10 unchanged sentences

Proforma Non-GAAP Net Loss per Share

Basic and diluted net

loss per share for the three months ended March 31, 2020 was ($1.22) compared to ($64.01) for the prior period in 2019.

non-GAAP net income (loss) per share is used by our Company’s management as an evaluation tool as it manages the business

and is defined as net income (loss) per basic and diluted share adjusted for non-cash items including stock based compensation,

amortization of intangibles and one time charges including gain on the settlement of obligations, severance costs, provision for

doubtful accounts, acquisition costs and the costs associated with public offerings.

non-GAAP net loss per basic and diluted common share for the three months ended March 31, 2020 was ($0.92) compared to a loss of

($31.98) per share for the prior period in 2019.

following table presents a reconciliation of net loss per basic and diluted share, which is our GAAP operating performance measure,

to proforma non-GAAP net loss per share for the periods reflected (in thousands, except per share data):

For the Three Months Ended

(thousands, except per share data)

Basic and diluted net loss per share for the three months ended

June 30, 2020 was ($0.32) compared to ($25.47) for the prior period in 2019.

Basic and diluted net loss per share for the six months

ended June 30, 2020 was ($0.97) compared to ($75.99) for the prior period in 2019.

Proforma non-GAAP net

income (loss) per share is used by our Company’s management as an evaluation tool as it manages the business and is defined

as net income (loss) per basic and diluted share adjusted for non-cash items including stock based compensation, amortization of

intangibles and one time charges including gain on the settlement of obligations, severance costs, provision for doubtful accounts,

acquisition costs and the costs associated with public offerings.

Proforma non-GAAP net

loss per basic and diluted common share for the three months ended June 30, 2020 was ($0.21) compared to a loss of ($13.33) per

share for the prior period in 2019.

Proforma non-GAAP net loss per basic and diluted common share for the six months ended June

30, 2020 was ($0.68) compared to a loss of ($38.76) per share for the prior period in 2019.

The following table

presents a reconciliation of net loss per basic and diluted share, which is our GAAP operating performance measure, to proforma

non-GAAP net loss per share for the periods reflected (in thousands, except per share data):

Three Months Ended

Six Months Ended

Net loss attributable to common stockholders

Non-recurring one-time charges:

Loss on the exchange of debt for equity

Loss on exchange of debt for equity

Provision for valuation allowance for held for sale loan

Provision for the valuation allowance for related party

Settlement of litigation

Acquisition transaction/financing costs

Costs associated with public offering

Provision for doubtful accounts

5 unchanged sentences

Weighted average basic and diluted common shares outstanding

rely on proforma non-GAAP net loss per share, which is a non-GAAP financial measure:

We rely on proforma

non-GAAP net loss per share, which is a non-GAAP financial measure:

to review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment Reporting;

11 unchanged sentences

we believe that the use of proforma non-GAAP net loss per share is helpful to compare our results to other companies.

Liquidity and Capital Resources

as of March 31, 2020

current capital resources and operating results as of and through March 31, 2020, consist of:

an overall working capital deficit of $6.2 million;

Liquidity and Capital Resources as of June 30, 2020

Our current capital

resources and operating results as of and through June 30, 2020, consist of:

an overall working capital of $30.0 million;

cash of approximately $39.5 million;

ATM equity facility in an aggregate offering amount of up to $50 million of which we have raised approximately $1.4 million of gross proceeds as of March 31, 2020;

the Payplant credit facility which we may borrow against based on eligible assets with a balance of $0 as of March 31, 2020;

ATM equity facility in an aggregate offering amount of up to $150 million of which we have raised approximately $42 million of net proceeds as of June 30, 2020;

the Payplant credit facility which we may borrow against based on eligible assets with a balance of $0 as of June 30, 2020;

net cash used by operating activities for the period of $10.4 million.

7 unchanged sentences

Notes and other receivables / Short-term debt

Net cash used in operating

activities during the three months ended March 31, 2020 of $4.5 million consists of net loss of $6.2 million offset by non-cash

adjustments of $2.7 million less net cash changes in operating assets and liabilities of $1.0 million.

While the Company believes

that its recent debt financing, access to capital in connection with the sale of its securities under the ATM, availability on

the Payplant facility to finance purchase orders and invoices in an amount equal to 80% of the face value of purchase orders received,

and funds from revenue may be sufficient to fund planned operations for the next 12 months from the date the financial statements

are issued, the impact of the COVID-19 pandemic on our business and results of operations is uncertain at this time.

While we have

been able to continue operations remotely and have not seen a significant impact in certain products including our SaaS or subscription

based services and products, certain projects and customer requests have had to be delayed either because they require onsite services

which could not be performed while shelter in place orders have been in effect or because of the uncertainty of the customer’s

financial position and ability to invest in our technology.

However, we have also seen an increase in interest in our indoor intelligence

solutions for workplace readiness which is directed at enterprise organizations and government agencies to assist them in optimizing

the use of their facilities as well as in developing and monitoring compliance with corporate policies and government regulations

for physical distancing, exposure notification, and the identification of high traffic areas for sanitizing and cleaning in order

to keep their employees healthier and safer within the workplace.

If we are successful in expanding the adoption of our products

and services for this solution, we may be able to offset any revenue loss that may be experienced, however, there are no assurances

Acquisition liability

Net cash used in operating activities during the six months

ended June 30, 2020 of $10.4 million consists of net loss of $13.5 million offset by non-cash adjustments of $6.4 million less

net cash changes in operating assets and liabilities of approximately $3.3 million.

During the first quarter

of 2020, we raised $5 million in gross proceeds in connection with a debt financing and during the quarter ended June 30, 2020,

we raised net proceeds of approximately $40 million during the quarter ended June 30, 2020, in connection with sales under the

Given our current cash balances and budgeted cash flow requirements, the Company believes such funds are sufficient to support

ongoing operations for the next 12 months.

In addition, we may continue to raise up to an aggregate of $150 million in gross proceeds

under the ATM, however, general economic or other conditions resulting from COVID 19 or other events materially may impact

the liquidity of our common stock or our ability to continue to access capital from the ATM to support our growth plans.

the impact of the COVID-19 pandemic on our business and results of operations continues to remain uncertain at this time.

we have been able to continue operations remotely we have experienced supply chain constraints and delays in the receipt of certain

components of our products impacting delivery times for our products, we have also seen some impact in the demand of certain products

including our SaaS or subscription based services and products, delays in certain projects and customer requests either because

they require onsite services which could not be performed while shelter in place orders have been in effect or because of the uncertainty

of the customer’s financial position and ability to invest in our technology, which resulted in a decrease in our revenue

during the quarter ended June 30, 2020, when compared to the same period of last year.

However, due to the growth in revenue experienced

in the first quarter of 2020, revenue growth during the six months of 2020 is substantially the same when compared to the six month

period of 2019.

In addition, while certain anticipated second quarter projects were initially delayed by customers, we recently

received a substantial purchase order for our sensors from a significant customer and have also seen an increase in interest in

our indoor intelligence solutions for workplace readiness which is directed at enterprise organizations and government agencies

to assist them in optimizing the use of their facilities as well as in developing and monitoring compliance with corporate policies

and government regulations for physical distancing, exposure notification, and the identification of high traffic areas for sanitizing

and cleaning in order to keep their employees healthier and safer within the workplace.

If we are successful in expanding the adoption

of our products and services for this and or other solutions, we may be able to offset any revenue loss that may be experienced

due to any constraints that may result from the pandemic or other general economic conditions, however, there are no assurances

that we will be successful or that we will be able to offset any losses, if realized.

In addition, if general economic or other

conditions resulting from COVID 19 or other events materiality impact the liquidity of our common stock or ability to access capital

from the ATM in addition to our ability to generate revenue from the sales of our products and services, there are no assurances

that we will have sufficient funds to support our operations for the next 12 months.

The Company is also pursuing

possible strategic transactions and may raise such additional capital as needed, using our equity securities, an assignment

of our note receivable from Sysorex, Inc.

(“Sysorex”) and/or cash and debt financings in combinations appropriate for

each acquisition.

Going Concern and Management Plans

Our condensed consolidated

financial statements as of March 31, 2020 have been prepared under the assumption that we will continue as a going concern for

the next twelve months from the date the financial statements are issued.

Footnote 1 to the notes to our condensed consolidated

financial statements as of March 31, 2020 include language referring to our recurring and continuing losses from operations and

expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available.

Management’s

plans and assessment of the probability that such plans will mitigate and alleviate any substantial doubt about the Company’s

ability to continue as a going concern, is dependent upon the ability to obtain additional equity or debt financing, attain further

operating efficiency, reduce expenditures, and, ultimately, to generate sufficient levels of revenue, which together represent

the principal conditions that raise substantial doubt about our ability to continue as a going concern.

Our condensed consolidated

financial statements as of March 31, 2020 do not include any adjustments that might result from the outcome of this uncertainty.

and Capital Resources –

As of March 31, 2020,

The Company is also pursuing possible strategic

transactions and may raise such additional capital as needed, using our equity securities, an assignment of the remaining

note receivable from Sysorex and/or cash and debt financings in combinations appropriate for each acquisition.

Liquidity and Capital Resources –

As of June 30, 2020,

the principal amount outstanding under the Payplant Loan Agreement was $0.

and Capital Resources as of March 31, 2020 Compared to March 31, 2019

Company’s net cash flows used in operating, investing and financing activities for the three months ended March 31, 2020

and 2019 and certain balances as of the end of those periods are as follows (in thousands):

For the Three Months

Liquidity and Capital Resources as

of June 30, 2020 Compared to June 30, 2019

The Company’s

net cash flows used in operating, investing and financing activities for the six months ended June 30, 2020 and 2019 and certain

balances as of the end of those periods are as follows (in thousands):

For the Six Months Ended

Net cash used in operating activities

6 unchanged sentences

Working capital (deficit)

Operating Activities

for the three months ended March 31, 2020

cash used in operating activities during the three months ended March 31, 2020 was $4.5 million.

The cash flows related to the

three months ended March 31, 2020 consisted of the following (in thousands):

Operating Activities for the six months

ended June 30, 2020

Net cash used in operating

activities during the six months ended June 30, 2020 was $10.4 million.

The cash flows related to the six months ended June 30,

2020 consisted of the following (in thousands):

Non-cash income and expenses

8 unchanged sentences

Amortization of debt discount

Provision for the valuation allowance for held for sale loan

Provision for the valuation allowance for related party receivable

Accrued interest income, related party

Income tax benefit

Total non-cash income

net use of cash in the change in operating assets and liabilities aggregated $1.0 million and consisted primarily of the following

(in thousands):

The net use of cash in the change in operating assets and liabilities

aggregated a decrease of approximately $3.3 million and consisted primarily of the following (in thousands):

Increase in accounts receivable and other receivables

Decrease in inventory, other current assets and other assets

Increase in inventory, other current assets and other assets

Decrease in accounts payable

Decrease in accrued liabilities and other liabilities

Increase in accrued liabilities and other liabilities

Decrease in operating lease liabilities

Decrease in deferred revenue

Increase in deferred revenue

Net cash used in the changes in operating assets and liabilities

Operating Activities

for the three months ended March 31, 2019

cash used in operating activities during the three months ended March 31, 2019 was $3.5 million.

The cash flows related to the

three months ended March 31, 2019 consisted of the following (in thousands):

Operating Activities for the six months

ended June 30, 2019

Net cash used in operating

activities during the six months ended June 30, 2019 was $6.6 million.

The cash flows related to the six months ended June 30,

2019 consisted of the following (in thousands):

Non-cash income and expenses

6 unchanged sentences

Stock-based compensation expense attributable to warrants and options issued as part of Company operations

Loss on exchange of debt for equity

Amortization of technology

2 unchanged sentences

Total non-cash income

net use of cash in the change in operating assets and liabilities aggregated $0.8 million and consisted primarily of the following

use of cash in the change in operating assets and liabilities aggregated $1.4 million and consisted primarily of the following

(in thousands):

1 unchanged sentence

Increase in inventory, other current assets and other assets

Decrease in accounts payable

Increase in accrued liabilities and other liabilities

Increase in accounts payable

Decrease in accrued liabilities and other liabilities

Decrease in deferred revenue

Net cash used in the changes in operating assets and liabilities

from Investing Activities as of March 31, 2020 and 2019

cash flows used in investing activities during the three months ended March 31, 2020 was $0.2 million compared to net cash flows

used in investing activities during the three months ended March 31, 2019 of $0.3 million.

Cash flows related to investing activities

during the three months ended March 31, 2020 include $193,000 investment in capitalized software and $16,000 for the purchase of

Cash Flows from Investing Activities

as of June 30, 2020 and 2019

Net cash flows used

in investing activities during the six months ended June 30, 2020 was approximately $0.5 million compared to net cash flows used

in investing activities during the six months ended June 30, 2019 of approximately $1.0 million.

Cash flows related to investing

activities during the six months ended June 30, 2020 include $433,000 investment in capitalized software and $39,000 for the purchase

of property and equipment.

Cash flows related to investing activities during the six months ended June 30, 2019 include $465,000

investment in capitalized software, $250,000 investment in GTX, $204,000 investment in Locality, and $44,000 for the purchase of

property and equipment.

Cash flows related to investing activities during the three months ended March 31, 2019 include $239,000

investment in capitalized software and $16,000 for the purchase of property and equipment.

from Financing Activities as of March 31, 2020 and 2019

cash flows provided by financing activities during the three months ended March 31, 2020 was $6.1 million.

Cash Flows from Financing Activities

as of June 30, 2020 and 2019

Net cash flows provided

by financing activities during the three months ended March 31, 2019 was $6.6 million.

During the three months ended March 31,

2020, the Company received incoming cash flows of $1.3 million from the issuance of common stock, $5.0 million of proceeds from

promissory notes, and $0.2 million of repayments from related parties offset by $0.2 million of loans to related party, and $150,000 of net repayments to bank facility.

During the three months ended March 31, 2019, the

Company received incoming cash flows of $10.9 million from the issuance of common stock, preferred stock and warrants and $652,000

of repayments from a related party offset by $4.9 million of loans to related parties and $23,000 of repayments to bank facility.

by financing activities during the six months ended June 30, 2020 was approximately $47.7 million.

During the six months ended

June 30, 2020, the Company received incoming cash flows of $41.8 million from the issuance of common stock, $5.0 million of proceeds

from promissory notes, $2.0 million of acquisition liability repayments, $0.2 million of repayments from related parties, and $1,000

from notes payable proceeds offset by $1.0 million of loans to related party and $150,000 of net repayments to bank facility.

cash flows provided by financing activities during the six months ended June 30, 2019 was $8.1 million.

During the six months ended

June 30, 2019, the Company received incoming cash flows of $10.9 million from the issuance of common stock, preferred stock and

warrants, $4.5 million of net proceeds from promissory notes and $1.7 million of repayments from a related party offset by $8.9

million of loans to related parties, $23,000 of repayments to bank facility, and $1,000 of notes payable repayment.

Off-Balance Sheet Arrangements

do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.

We do not engage in

trading activities involving non-exchange traded contracts.

Recently Issued

Accounting Standards

a discussion of recently issued accounting pronouncements, please see Note 3 to our financial statements, which are included in

this Form 10-Q in Item 1.

Quantitative and Qualitative Disclosures About Market Risk

We do not have any

off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.

We do not engage in trading activities

involving non-exchange traded contracts.

Recently Issued Accounting Standards

For a discussion of

recently issued accounting pronouncements, please see Note 3 to our financial statements, which are included in this Form 10-Q

Quantitative and Qualitative

Disclosures About Market Risk

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements