What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-14 · 1809 added, 1824 removed, 692 unchanged (84% of the section changed)

7 unchanged sentences

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.

results for the period ended September 30, 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.

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

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

thousands, except number of shares and par value data)

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares

and par value data)

September 30,

Current Assets

9 unchanged sentences

Receivable from related party

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

thousands, except number of shares and par value data)

The accompanying notes are an integral part of these financial

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE

SHEETS (CONTINUED)

(In thousands, except number of

shares and par value data)

September 30,

Liabilities and Stockholders’

16 unchanged sentences

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.

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

September 30, 2020 and December 31, 2019, respectively, Series 5 Convertible Preferred Stock - 12,000 shares authorized;

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

Common Stock - $0.001 par value;

250,000,000 shares authorized;

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.

42,259,314 and 4,234,923 issued and 42,259,313 and 4,234,922 outstanding as of September 30, 2020 and December 31, 2019, respectively.

Additional paid-in capital

7 unchanged sentences

Total Liabilities and Stockholders’

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

thousands, except per share data)

The accompanying notes are an integral part of these financial

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

(In thousands, except per share data)

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of Revenues

15 unchanged sentences

Income tax benefit

Income Attributable to Non-controlling Interest

Net Income Attributable to Non-controlling Interest

Net Loss Attributable to Stockholders of Inpixon

4 unchanged sentences

Basic and Diluted

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

The accompanying notes are an integral part of these financial

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE LOSS

(In thousands)

For the Three Months Ended

For the Six Months Ended

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

For the Nine Months Ended

September 30,

Unrealized foreign exchange loss from cumulative translation adjustments

Comprehensive Loss

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)

The accompanying notes are an integral part of these financial

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’

FOR THE NINE MONTHS ENDED SEPTEMBER

30, 2020 AND 2019

(In thousands, except per share data)

Series 4 Convertible

Series 5 Convertible

Stockholders’

Series 6 Convertible

Accumulated Other

Total Stockholders’

Preferred Stock

Treasury Stock

2 unchanged sentences

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

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

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

Stock options granted to employees

Common and preferred shares

issued for net cash proceeds from a public offering

Common shares issued for extinguishment

Cumulative Translation Adjustment

Balance - June 30, 2020

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

Stock options granted to employees

and consultants for services

Common shares issued for net

cash proceeds from a public offering

Issuance of Ten Degrees Acquisition

Cumulative Translation Adjustment

Balance - September 30, 2020

The accompanying notes are an integral part of these financial

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’

EQUITY (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER

30, 2020 AND 2019

(In thousands, except per share data)

4 Convertible

5 Convertible

6 Convertible

Stockholders’

Preferred Stock

Treasury Stock

Comprehensive

Income (Loss)

- January 1, 2019

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

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

shares issued for extinguishment of debt

shares issued for warrants exercised

of convertible Series 5 Preferred Stock

options granted to employees and consultants for services

of Locality Acquisition Shares

of GTX Acquisition Shares

Translation Adjustment

- June 30, 2019

accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

shares issued for extinguishment of debt

shares issued for warrants exercised

options granted to employees and consultants for services

of Jibestream Acquisition Shares

and Preferred Shares issued for net cash proceeds of a public offering

of convertible Series 6 Preferred Stock

Translation Adjustment

- September 30, 2019

The accompanying notes are an integral part of these financial

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

(In thousands)

For the Nine Months Ended

September 30,

Cash Flows (Used In) from Operating Activities

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Provision for doubtful accounts

Provision for the valuation allowance for held for sale loan

Provision for the valuation allowance for related party receivable

Provision for the valuation allowance held for sale loan

Provision for the valuation allowance related party receivable

Income tax benefit

12 unchanged sentences

Investment in capitalized software

Investment in GTX

Investment in Locality

Cash paid for the acquisition of Jibestream

Cash paid for the acquisition of GTX

Cash paid for the acquisition of Locality

Cash paid for the Systat Licensing Agreement

Cash paid for the acquisition of Ten Degrees

Net Cash Flows Used in Investing Activities

Cash Flows From Financing Activities

Net repayments to bank facility

Net (repayments) proceeds to bank facility

Net proceeds from issuance of common stock, preferred stock and warrants

Net proceeds from issuance of common stock

Net proceeds from notes payable

Repayment of notes payable

Net repayments of notes payable

Loans to related party

Advances to related party

Repayments from related party

Loan to Jibestream

Net proceeds from promissory notes

2 unchanged sentences

Effect of Foreign Exchange Rate on Changes on Cash

Net Increase in Cash, Cash Equivalents and Restricted Cash

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash - Beginning of period

8 unchanged sentences

Common shares issued for Locality acquisition

accompanying notes are an integral part of these financial statements.

Common shares issued for Jibestream acquisition

Common shares issued for Ten Degrees acquisition

The accompanying

notes are an integral part of these financial statements.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

1 - Organization and Nature of Business

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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 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.

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

Canada, Slough, United Kingdom, Ratingen, Germany, Bangalore, India and Hyderabad, India.

As of September 30, 2020, the Company has

a working capital total of approximately $23.2 million and cash of $31.4 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”)

$7.5 million and $6.6 million for the three months ended September 30, 2020 and 2019, respectively, and a net loss of $20.9

million and $17.0 million for the nine months ended September 30, 2020 and 2019, respectively.

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 its 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.

to the EDA, from time to time through Maxim, acting exclusively as the Company’s sales agent.

The Company issued 31,574,358

shares of common stock during the nine months ended September 30, 2020 in connection with the ATM resulting in net proceeds to

the Company of approximately $44.0 million.

Subsequent to the quarter ended September 30, 2020, the Company issued an additional

213,474 shares of common stock in connection with the ATM, resulting in net proceeds to the Company of approximately $230,000.

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.

The impact of the COVID-19 pandemic on our business and results of operations

continues to remain 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

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.

Despite these

challenges, we were able to realize growth in revenue during the first and third quarters of 2020 and for the first nine

months of 2020 when compared to the same periods of 2019 as a result of an increase in sales associated with our indoor

intelligence platform, including our sensors, in addition to additional revenue from the sale of Systat software licenses.

The impact that COVID-19 will have on general economic conditions is continuously evolving and the ultimate impact the

pandemic will have on our results of operations continues to remain uncertain.

There are no assurances that we will be able

to continue to experience the same growth or not be materially adversely effected.

our cash balances and our budgeted cash flow requirements, the Company believes such funds are sufficient to support ongoing

operations for 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.

Note 2 - Basis of Presentation

The accompanying unaudited condensed consolidated

financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“GAAP”),

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 nine-month period ended September 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.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies

8 unchanged sentences

valuation of stock-based compensation;

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;

the valuation of the assets and liabilities acquired in connection

with certain recent acquisitions as described in Notes 4, 5, 6, 7 and 8, as well as the valuation of the Company’s common

stock issued in the transactions, as applicable;

allowance for doubtful accounts;

1 unchanged sentence

valuation allowance for deferred tax assets;

of long-lived assets and goodwill.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

the impairment of long-lived assets and goodwill.

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

3 unchanged sentences

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.

As of September 30, 2020 and 2019, the Company had $0 and $71,000, respectively, deposited in escrow as restricted

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

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

As of September 30, 2019, $71,000 was

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

As of September 30,

2020, the final escrowed amount had been released and the restricted cash balance was $0.

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,

As of September 30,

(in thousands)

1 unchanged sentence

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

The Company reports revenues under Accounting

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

and all the related amendments

Company reports revenues under Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”

and all the related amendments (Topic 606).

The Company recognizes revenue after applying the following five steps:

4 unchanged sentences

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

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Recognition (continued)

As A Service Revenue Recognition

5 unchanged sentences

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 SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Recognition (continued)

Services Revenue Recognition

22 unchanged sentences

Anticipated losses are recognized as soon as they become known.

For the three and six months ended June 30, 2020

For the three and nine months ended September 30,

2020 and 2019, the Company did not incur any such losses.

4 unchanged sentences

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.

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.

revenue of approximately $1,842,000 and $912,000 as of September 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.

The Company expects to satisfy its remaining performance obligations for these product 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 September 30, 2020 and December 31, 2019 were deemed immaterial.

Disaggregation

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Recurring revenue

Non-recurring revenue

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity

6 unchanged sentences

Forfeitures of unvested stock options are recorded when they occur.

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):

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Compensation (continued)

Company incurred stock-based compensation charges of $256,000 and $871,000 for the three months ended September 30, 2020 and 2019,

respectively, and $941,000 and $2,618,000 for the nine months ended September 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

September 30,

For the Nine Months Ended

September 30,

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.

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

following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net

loss per common share for the nine months ended September 30, 2020 and 2019:

For the Nine Months Ended

September 30,

Convertible preferred stock

Reserved for service providers

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Common stock issuable pursuant to Jibestream acquisition share purchase agreement

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

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Issued and Adopted Accounting Standards

In June 2016, the Financial Accounting

Standards Board (“FASB”) issued Accounting Standards Update (“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.

In November 2019, the FASB issued ASU No.

2019-10 Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging

(Topic 815), and Leases (Topic 842) clarifying effective dates for the impacted ASUs.

For public business entities that meet the

definition of an SEC 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 condensed consolidated financial statements or disclosures.

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.

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.

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.

2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic

825, Financial Instruments (“ASU 2019-04”) and in May 2019, the FASB issued Accounting Standards Update 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 these

ASU’s and the adoption of these ASU’s did not have a material impact on its condensed consolidated financial

statements or disclosures.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

3 - Summary of Significant Accounting Policies (continued)

Issued and Adopted Accounting Standards (continued)

April 2019, the FASB issued ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic

815, Derivatives and Hedging, and Topic 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”).

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 has

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

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 has adopted this standard and the adoption of this standard did not have a material impact

on its condensed consolidated financial statements or disclosures.

In December 2019, the FASB issued ASU 2019-12,

1 unchanged sentence

Simplifying the Accounting for Income Taxes,”

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.

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.

ASU 2019-12 is effective for the

Company beginning January 1, 2021.

The Company does not expect this ASU will have a material effect on its condensed consolidated

financial statements or disclosures.

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 No.

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)

(“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 ASU did not have a material impact on our condensed consolidated financial statements or disclosures.

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

6 unchanged sentences

4 - Locality Acquisition

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 $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.

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 $85,923, and (ii) 14,445 shares of the Company’s common stock with a fair market value of $514,000.

Locality was a technology

company specializing in wireless device positioning and radio frequency augmentation of video surveillance systems.

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,

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the indemnification provisions of the purchase agreement.

total recorded purchase price for the transaction was approximately $1,928,000, which consisted of cash at closing of $204,000,

approximately $1,210,000 of cash that will be paid in installments as discussed above and $514,000 representing the value of the

stock issued upon closing.

The total recorded purchase price for the

transaction was approximately $1,928,000, which consisted of cash at closing of $204,000, approximately $1,210,000 of cash that

will be paid in installments as discussed above and $514,000 representing the value of the stock issued at closing.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

4 - Locality Acquisition (continued)

17 unchanged sentences

Total Purchase Price

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.

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 period ended September 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 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.

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.

June 27, 2019, the Company completed 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 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

the value of the stock issued upon closing.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

5 - GTX Acquisition (continued)

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

7 unchanged sentences

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.

The note was amended on October 28, 2020 to extend the maturity date from September 13, 2020 to December 31, 2020 and waive the

requirement for the monthly repayment installment obligation provided for in the May 11, 2020 amendment.

This note is included

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

As of September 30, 2020, the

balance of the note including interest was $52,381.

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

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

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 Inc.

On August 15, 2019, the Company, through

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

(“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”),

$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

7 unchanged sentences

common stock offering on August 12, 2019 (“Inpixon Shares”).

provides a dynamic interactive map that allows customers to put their digitized map into their mobile app or provide the map on

a kiosk or other interface.

Using the Jibestream map allows Inpixon to offer a more intuitive interface to see its locationing

data and analytics.

Jibestream provided a dynamic interactive

map that allowed customers to put their digitized map into their mobile app or provide the map on a kiosk or other interface.

can now utilize the Jibestream map to offer a more intuitive interface to see its locationing data and analytics.

The Nasdaq listing rules required the Company

12 unchanged sentences

of setoff resulting from a Working Capital Adjustment.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

6 - Jibestream Acquisition (continued)

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

16 unchanged sentences

Total Purchase Price

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 condensed consolidated financial statements is the expected liability to service the projects.

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.

As part of the acquisition, the Company acquired a lease obligation with an operating lease right of use asset

of approximately $371,000 and an operating lease obligation of approximately $371,000 which are included in other assets and other

liabilities, respectively, in the purchase price allocation.

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

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

The calculated goodwill is not deductible for tax purposes.

As part of the acquisition, the Company acquired a lease obligation

with an operating lease right of use asset of approximately $371,000 and an operating lease obligation of approximately $371,000

which are included in other assets and other liabilities, respectively, in the purchase price allocation.

The financial data of

Jibestream is included in the Company’s financial statements starting on the acquisition date through the period ended September

was amalgamated into Inpixon Canada on January 1, 2020.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Note 7 - Systat Licensing Agreement

3 unchanged sentences

(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

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”).

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 Software,

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 Software, Inc.

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.

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.

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.

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 Software, Inc.

and us or upon termination by either for the other party’s specified breach.

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.

The 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):

8 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 condensed consolidated financial statements is the

expected liability to service the projects.

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 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.

The calculated goodwill is not deductible

for tax purposes.

The financial data of the License Grant is included in the Company’s financial statements as of deemed

acquisition date of June 30, 2020.

A final valuation of the assets and purchase

price allocation of the License 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 fourth quarter of 2020.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

8 - Ten Degrees Acquisition

On August 19, 2020, in accordance with

the terms and conditions of that certain Asset Purchase Agreement, by and among the Company, Ten Degrees Inc.

(“TDI”),

Ten Degrees International Limited (“TDIL”), mCube International Limited (“MCI”), and the holder of a majority

of the outstanding capital of TDIL and mCube, Inc., and the sole shareholder of 100% of the outstanding capital stock of MCI (“mCube,”

together with TDI, TDIL, and MCI collectively, the “Transferors”), we acquired a suite of on-device “blue-dot”

indoor location and motion technologies, including patents, trademarks, software and related intellectual property from the Transferors

(collectively, the “Assets”).

The Assets were acquired for consideration consisting of (i) $1,500,000 in cash and (ii)

480,000 shares of our common stock.

In accordance with the terms of the APA, commencing as of the date of the APA, the Transferors,

and their affiliates, have agreed to not compete with our business associated with the Assets for a period of five years from the

closing date.

In addition, each party agreed to not solicit any employees from the other party for a period of one year from the

closing date, subject to certain exceptions.

total recorded purchase price for the transaction was $2,100,000, which consisted of the cash paid of $1,500,000 and $600,000

representing the value of the stock issued upon closing.

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

Developed technology

Non-compete agreements

Total Purchase Price

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

of the Company.

A final valuation of the assets and purchase price allocation 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 fourth quarter of 2020.

9 - Proforma Financial Information

The following unaudited proforma financial

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.

following unaudited proforma financial information presents the condensed consolidated results of operations of the Company and

Jibestream for the three and nine months ended September 30, 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.

(in thousands, except per share data)

For the Three

June 30, 2019

September 30,

Net loss attributable to common stockholders

3 unchanged sentences

10 - Inventory

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

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

September 30,

Raw materials

1 unchanged sentence

Total Inventory

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

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

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

September 30,

Short-Term Debt

3 unchanged sentences

Total Short-Term Debt

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

10 - Debt (continued)

Notes Payable

46 unchanged sentences

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

707,078 shares of the Company’s common stock at exchange prices between $1.80 and $4.95 per share.

As of March 31, 2020,

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

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 707,078 shares of the Company’s common stock at exchange prices between $1.80 and $4.95

As of March 31, 2020, the outstanding principal balance of the December 2018 Note was approximately $28,749.

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

2 unchanged sentences

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

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

11 - Debt (continued)

2019 Note Purchase Agreement and Promissory Note

34 unchanged sentences

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 September 30, 2020, the outstanding balance of the May 2019 Note was $0 and the note was fully satisfied.

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.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

11 - Debt (continued)

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 $2,236,000 of the outstanding principal and interest

under the June 2019 Note for 1,372,417 shares of the Company’s common stock at exchange prices between $1.12 and $3.05 per

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 September 30, 2020, the outstanding balance of the June 2019 Note was $0 and the note was fully satisfied.

2019 Note Purchase Agreement and Promissory Note

August 8, 2019, the Company entered into a note purchase agreement with Chicago Venture, pursuant to which the Company agreed

to issue and sell to the holder an unsecured promissory note (the “August 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.

2 unchanged sentences

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

In exchange for the June 2019 Note, the holder

In exchange for the August 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;

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

maturity date or otherwise in accordance with the August 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,

1 unchanged sentence

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.

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.

The June 2019 Note includes

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

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.

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

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.

of September 30, 2020, the outstanding balance of the August 2019 Note was $0 and the note was fully satisfied.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

11 - Debt (continued)

2019 Note Purchase Agreement and Promissory Note

September 17, 2019, the Company entered into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue

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

$952,500, 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 $187,500 and $15,000 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 September 2019 Note, the holder

paid an aggregate purchase price of $750,000.

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

date or otherwise in accordance with the September 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 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;

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

The September 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,

2020, the Company exchanged approximately $2,236,000 of the outstanding principal and interest under the June 2019 Note for 1,372,417

shares of the Company’s common stock at exchange prices between $1.12 and $3.05 per share.

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.

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

into a note purchase agreement with Chicago Venture, pursuant to which the Company agreed to issue and sell to the holder an unsecured

promissory note (the “August 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 August 2019 Note, the holder paid an aggregate purchase price of $1,500,000.

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

August 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 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

and Promissory Note

On September 17, 2019, the Company entered

into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue and sell to the holder an unsecured promissory

note (the “September 2019 Note”) in an aggregate principal amount of $952,500, 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 $187,500 and $15,000

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 September 2019 Note, the holder paid an aggregate purchase price of $750,000.

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

September 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 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.

The September 2019 Note

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

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

(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 September

2019 Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the September 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 September 2019 Note will become immediately due and payable

at the Mandatory Default Amount.

Under the terms of the September 2019 Note, since it was still outstanding on December 17, 2019,

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

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

and Promissory Note

On November 22, 2019, the Company issued

a promissory note to St.

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

of the September 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 September 2019 Note will

become immediately due and payable at the Mandatory Default Amount.

Under the terms of the September 2019 Note, since it was still

outstanding on December 17, 2019, a one-time monitoring fee equal to ten percent (10%) of the then outstanding balance, or $97,661,

was added to the September 2019 Note.

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

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.

of September 30, 2020, the outstanding balance of the September 2019 Note was $0 and the note was fully satisfied.

2019 Note Purchase Agreement and Promissory Note

November 22, 2019, the Company issued a promissory note to St.

George Investments LLC (“St.

George”), an affiliate of Iliad and Chicago Venture, pursuant

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

in the initial principal amount of $952,500, which is payable on or before the date that is 6 months from the issuance date, subject

to extension in accordance with the terms of the November 2019 Note.

The initial principal amount includes an original issue discount

of $187,500 and $15,000 that the Company agreed to pay to St.

George to cover its legal fees, accounting costs, due diligence,

monitoring and other transaction costs.

George”), an affiliate

of Iliad and Chicago Venture, pursuant to which the Company agreed to issue and sell to the holder an unsecured promissory note

(the “November 2019 Note”) in the initial principal amount of $952,500, which is payable on or before the date that

is 6 months from the issuance date, subject to extension in accordance with the terms of the November 2019 Note.

The initial principal

amount includes an original issue discount of $187,500 and $15,000 that the Company agreed to pay to St.

George to cover its legal

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

In exchange for the November 2019 Note, St.

George paid an aggregate purchase price of

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

in accordance with the 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.

The November 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 November

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.

Under the terms of the November 2019 Note, since it was still outstanding on February 22, 2020, a one-time monitoring fee equal

to ten percent (10%) of the then-current outstanding balance, or approximately $97,688, was added to the note.

As of March 31,

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

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

into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue and sell to the holder an unsecured promissory

note (the “March 2020 Note”) in an aggregate initial principal amount of $6,465,000, which is payable on or before

the date that is 12 months from the issuance date.

The initial principal amount includes an original issue discount of $1,450,000

and $15,000 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 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.

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;

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

paid an aggregate purchase price of $750,000.

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

on the maturity date or otherwise in accordance with the 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.

The November 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 November 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.

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”).

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

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 $1.3 million after subtracting sales commissions and other offering expenses.

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 totaling approximately

$4,194,000 under partitioned notes.

During the three months ended March 31,

2020, the Company issued 937,010 shares of common stock in connection with the ATM at per share prices between $1.23 and $2.11,

resulting in net proceeds to the Company of approximately $1,300,000 after subtracting sales commissions and other offering expenses

(see Note 11).

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

Under the terms of the November 2019 Note, since it was still outstanding on February 22, 2020,

a one-time monitoring fee equal to ten percent (10%) of the then-current outstanding balance, or approximately $97,688, was added

As of March 31, 2020, the outstanding balance of the November 2019 Note was approximately $1,050,188.

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

of September 30, 2020, the outstanding balance of the November 2019 Note was $0 and the note was fully satisfied.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

11 - Debt (continued)

2020 Note Purchase Agreement and Promissory Note

March 18, 2020, the Company entered into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue and

sell to the holder an unsecured promissory note (the “March 2020 Note”) in an aggregate initial principal amount of

$6,465,000, which is payable on or before the date that is 12 months from the issuance date.

The initial principal amount includes

an original issue discount of $1,450,000 and $15,000 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 March 2020 Note, the

holder paid an aggregate purchase price of $5,000,000.

Interest 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.

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 of 22%.

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.

of September 30, 2020, the outstanding principal balance of the March 2020 Note was approximately $6,805,000.

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.

August 31, 2018, Inpixon, Sysorex, Sysorex Government Services, Inc.

(“SGS”), and Payplant executed Amendment 1 to

Payplant Client Agreement (the “Amendment”).

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 September 30, 2020, the outstanding balance on the

revolving line of credit is $0.

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

of September 30, 2020, the Company owed $0 to the pre-acquisition stockholders of Shoom.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

12 - Capital Raises

At-The-Market

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.

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.

The EDA will 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.

Company 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 $1.25 million after subtracting sales

commissions and other offering expenses.

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

$40.52 million after subtracting sales commissions and other offering expenses.

Company issued 1,604,312 shares of common stock during the quarter ended September 30, 2020, in

connection with the ATM at per share prices between $1.5064 and $1.5134, resulting in net proceeds to the Company of approximately

$2.27 million after subtracting sales commissions and other offering expenses.

13 - Common Stock

the three months ended March 31, 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.

the three months ended March 31, 2020, the Company issued 937,010 shares of common stock in connection with the ATM at per share

prices between $1.23 and $2.11, resulting in net proceeds to the Company of approximately $1.25 million after subtracting sales

commissions and other offering expenses (see Note 12).

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.

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 $40.52 million after subtracting

sales commissions and other offering expenses (see Note 12).

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.

the three months ended 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 $2.27 million after

subtracting sales commissions and other offering expenses (see Note 12).

August 19, 2020, the Company issued 480,000 shares of common stock to the security holders of Ten Degrees as part of an acquisition

(See Note 8).

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.

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.

14 - 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.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

14 - Preferred Stock (continued)

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.

of September 30, 2020, there was 1 share of Series 4 Preferred outstanding.

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 September 30, 2020, there were 126 shares of Series 5 Convertible Preferred Stock outstanding.

15 - 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.

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.

16 - 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.

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.

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 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.

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.

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

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.

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.

aggregate number of shares that may be awarded as of September 30, 2020 under the 2011 Plan and the 2018 Plan were 417,270 and

12,730,073, respectively.

As of September 30, 2020, 5,544,594 of options were granted to employees, directors and consultants

of the Company (including 1 share outside of the Company’s Option Plans) and 7,602,750 options were available for future

grant under the Option Plans.

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 Company.

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.

the three months ended September 30, 2020 and 2019, the Company recorded a charge for the amortization of employee stock options

of approximately $256,000 and $871,000, respectively, and $941,000 and $2,376,000 for the nine months ended September 30,2020

and 2019, respectively.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

16 - Stock Options (continued)

of September 30, 2020, the fair value of non-vested options totaled approximately $1,907,000, which will be amortized to expense

over the weighted average remaining term of 0.985 years.

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 nine months ended September 30, 2020 were as follows:

Nine Months Ended

September 30,

Risk-free interest rate

2 unchanged sentences

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.

expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry

peers and used an average of those volatilities.

The Company attributes the value of stock-based compensation to operations on

the straight-line single option method.

Risk free interest rates were obtained from U.S.

Treasury rates for the applicable periods.

The dividends 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):

The dividends assumption was $0 as the Company historically has not declared and does not expect to declare any dividends.

17 - 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 September 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.

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 September 30, 2020 and 2019 (in thousands):

For the Three Months Ended

June 30, 2020

September 30,

For the Three Months Ended

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

primarily in the United States, Canada, and India.

Revenues by geographic area are attributed by country of domicile of the Company’s

subsidiaries.

The financial data by geographic area are as follows (in thousands):

For the Three Months Ended June 30, 2020:

September 30,

following table sets forth the percentages of revenue derived by the Company from those customers, which accounted for at least

10% of revenues during the nine-month period ended September 30, 2020 and 2019 (in thousands):

For the Nine Months Ended

September 30,

For the Nine Months Ended

September 30,

of September 30, 2020, Customer A represented approximately 44% of total accounts receivable.

As of September 30, 2019, Customer

A represented approximately 59%, and Customer C represented approximately 17% of total accounts receivable.

of September 30, 2020, two vendors represented approximately 19% and 11% of total gross accounts payable.

Purchases from

these vendors during the three and nine months ended September 30, 2020 was $0.

As of September 30, 2019, two vendors

represented approximately 41% and 14% of total gross accounts payable.

Purchases from these vendors during the three

and nine months ended September 30, 2019 was $0.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

17 - Credit Risk and Concentrations (continued)

the three months ended September 30, 2020, four vendors represented approximately 21%, 19%, 15%, and 14% of total purchases.

For the three months ended September 30, 2019, five vendors represented approximately 23%, 19%, 13%, 12% and 10% of total purchases.

the nine months ended September 30, 2020, four vendors represented approximately 24%, 13%, 11%, and 10% of total

For the nine months ended September 30, 2019, three vendors represented approximately 25%, 19% and 13% of total purchases.

18 - Foreign Operations

Company’s operations are located primarily in the United States, Canada, United Kingdom, Germany and India.

geographic area are attributed by country of domicile of the Company’s subsidiaries.

The financial data by geographic area

are as follows (in thousands):

United States

United Kingdom

For the Three Months Ended September 30, 2020:

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

For the Three Months Ended June 30, 2019:

For the Three Months Ended September 30, 2019:

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

For the Six Months Ended June 30, 2020:

For the Nine Months Ended September 30, 2020:

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

For the Six Months Ended June 30, 2019:

For the Nine Months Ended September 30, 2019:

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

As of June 30, 2020:

As of September 30, 2020:

Identifiable assets by geographic area

3 unchanged sentences

Long lived assets by geographic area

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 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.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

19 - 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.

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.

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.

An additional $1.3 million of the principal balance underlying

the Sysorex Note was partitioned and assigned to Systat as consideration payable for the rights granted under the license as of

September 30, 2020.

The amount owed for principal and accrued interest by Sysorex to the Company as of September 30, 2020 and

December 31, 2019 was approximately $7.8 million and $10.6 million, respectively.

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

As a result, the Company established a full valuation allowance as of September 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.

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 September 30, 2020 of approximately $83,105.

owed to the Company for this settlement as of September 30, 2020 was approximately $648,183.

The Company established a full

valuation allowance against this balance as of September 30, 2020.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

The 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.

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.

The current 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 May 1, 2020 through September 30, 2022.

The initial lease rate was CAD $4,479 per month with escalating

In connection with the lease, the Company is obligated to pay CAD $2,566 monthly for operating expenses for

building repairs and maintenance.

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 CAD $24,506 per month with no escalating payments.

connection with the lease, the Company is obligated to pay CAD $9,651 monthly for operating expenses for building repairs and

Starting in January 2021, the lease rate for the Toronto office space will be reduced due to a smaller leased office

The extension agreement for the reduced office space is through June 30, 2026 with escalating payments.

Additionally, the

1 unchanged sentence

The initial lease rate was CAD $575 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.

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.

connection with the lease, the Company is obligated to pay 68,960 INR monthly for operating expenses for building repairs and

The Company has an operating lease for its administrative office in Ratingen, Germany, from July 1, 2020 through

June 30, 2022 with an initial lease rate of 641 EUR per month.

The Company has an operating lease for its administrative office

in Slough, United Kingdom, from July 1, 2020 through October 31, 2021.

The monthly lease rate is 1,600 GBP per month with 4% escalating

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

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

10 unchanged sentences

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):

With the Systat license

agreement, the Company adopted ASC Topic 842 effective July 1, 2020 for the Ratingen, Germany and Slough, United Kingdom office

operating leases.

assets is summarized below (in thousands):

September 30,

Palo Alto, CA Office

4 unchanged sentences

Toronto, Canada Office

Ratingen, Germany Office

Slough, United Kingdom Office

Less accumulated amortization

Right-of-use asset, net

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

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 September 30, 2020 was $279,000 and $802,000 for the nine-month period ended September

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

20 - Leases (continued)

the three-month period ended September 30, 2020, the Company recorded $175,736 as rent expense to the right-of-use assets.

the nine-month period ended September 30, 2020, the Company recorded $460,913 as rent expense to the right-of-use assets.

liability is summarized below (in thousands):

September 30,

Total lease liability

1 unchanged sentence

Long term portion

Maturity analysis under the lease agreement

is as follows (in thousands):

analysis under the lease agreement is as follows (in thousands):

Year ending December 31, 2020

3 unchanged sentences

Year ending December 31, 2024

Year ending December 31, 2025 and thereafter

Present value discount

Lease liability

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

failure to comply with the minimum bid price rule or any subsequent price-based market value requirement or the dilutive effect

of the an offering, constitutes a public interest concern and while the Company would have an opportunity to appeal, the Company

cannot assure that Nasdaq would not exercise such discretionary authority or that the Company would be successful if such discretion

is exercised and the Company appeals.

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

At-The-Market Program

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

the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial

statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements included

in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC.

In addition to our historical

condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans,

estimates, and beliefs.

Our actual results could differ materially from those discussed in the forward-looking statements.

that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q, particularly

in Part II, Item 1A, “Risk Factors.”

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

We 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.

We also offer digital tear-sheets with optional

invoice integration, digital ad delivery, and an e-edition designed for reader engagement for the media, publishing and entertainment

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 global positioning system, and browser-like intelligence

for the indoors.

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

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 September 30, 2020, the weighted average remaining lease term is 3.21 years and the weighted

average discount rate used to determine the operating lease liabilities was 8.0%.

21 - 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.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

21 - Commitments and Contingencies (continued)

with Nasdaq Continued Listing Requirement

Between November

2015 and May 2018, we received four deficiency letters from Nasdaq indicating that we did not comply with certain Nasdaq continued

listing requirements.

Such deficiencies were later cured.

However, on May 30, 2019, we received another deficiency letter from

Nasdaq indicating that, based on our closing bid price for the last 30 consecutive business days, we 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 the Nasdaq Listing Rules, the Company was provided with a 180 calendar day period, through November 26, 2019 (the “Compliance

Deadline”), to regain compliance with the Minimum Bid Price Requirement.

On November 27, 2019, the Company received notice

from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”)

that based upon the Company’s continued non-compliance with the Minimum Bid Price Requirement (as defined below), the Company’s

common stock would be subject to delisting from Nasdaq (the “Staff Delisting Determination”), unless the Company timely

requested an appeal hearing before the Nasdaq Hearings Panel (the “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.

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

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.

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

22 - Subsequent Events

At-The-Market

the quarter ending December 31, 2020, the Company issued 213,474 shares of common stock in connection with the ATM, at per share

prices between $1.1206 and $1.1209, resulting in net proceeds to the Company of approximately $230,000 after subtracting sales

commissions and other offering expenses.

Nanotron Acquisition

October 6, 2020, we acquired, through our wholly-owned subsidiary Inpixon GmbH, all of the outstanding capital stock (the “Nanotron

Shares”) of Nanotron Technologies GmbH, a limited liability company incorporated under the laws of Germany (“Nanotron”),

pursuant to the terms and conditions of that certain Share Sale and Purchase Agreement, dated as of October 5, 2020 (the “Purchase

Agreement”), among the Purchaser, Nanotron and Sensera Limited, a stock corporation incorporated under the laws of Australia

and the sole shareholder of Nanotron (the “Seller”).

a result of the acquisition, we now own 100% of Nanotron.

Nanotron’s business consists of developing and manufacturing location-aware

IoT systems and solutions.

the closing, the Purchaser paid to the Seller an aggregate purchase price of $8,700,000 (less the Holdback Funds (as defined below)

and certain other closing adjustments) for the Nanotron Shares (“Purchase Price”).

The Purchase Price may be subject

to certain post-Closing adjustments based on actual working capital as of the closing as described in the Purchase Agreement.

The Purchaser retained $750,000 (the “Holdback Funds”) from the Purchase Price to secure the Seller’s obligations

under the Purchase Agreement, with any unused portion of the Holdback Funds to be released to the Seller on the date that is 18

months after the closing date.

The Purchaser paid the Purchase Price from funds received in connection with a capital contribution

from us, and a portion of the Purchase Price was used by the Seller to satisfy outstanding loans payable by the Seller to obtain

the release of certain existing security interests on Nanotron’s assets.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

22 - Subsequent Events (continued)

of Units of Cardinal Venture Holdings

September 30, 2020, we entered into a Subscription Agreement (the “Subscription Agreement”) with Cardinal Venture Holdings

LLC, a Delaware limited liability company (“CVH”), pursuant to which we agreed to (i) contribute up to $1,800,000 (the

“Contribution”) to CVH and (ii) purchase up to 599,999 Class A Units of CVH (the “Class A Units”) and up

to 1,800,000 Class B Units of CVH (the “Class B Units,”

and, together with the Class A Units, the “Units”).

The aggregate purchase price of $1,800,000 for the Units is deemed to be satisfied through the Contribution.

The $1,800,000 purchase

price was paid on October 12, 2020 and therefore that is the date the purchase of the Units was closed.

owns certain interests in the sponsor entity (the “Sponsor”) to a special purpose acquisition company formed for the

purpose of pursuing an initial public offering of its securities followed by effecting a merger, capital stock exchange, asset

acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “SPAC”).

It is anticipated that the Contribution will be used by CVH to fund the Sponsor’s purchase of securities in the SPAC.

Ali, our Chief Executive Officer, beneficially owns membership interests in CVH through 3AM LLC, a Delaware limited liability

company and a founding member of CVH (“3AM”).

with our entry into the Subscription Agreement, we entered into the Amended and Restated Limited Liability Company Agreement of

CVH (the “LLC Agreement”), dated as of September 30, 2020.

Under the terms of the LLC Agreement, in the event the

Managing Member (as defined in the LLC Agreement) can no longer manage CVH’s affairs due to his death, disability or incapacity,

3AM will serve as CVH’s replacement Managing Member.

Except as may be required by law, the Company, as a non-managing member

under the LLC Agreement, does not have any voting rights and generally cannot take part in the management or control of CVH’s

business and affairs.

LLC Agreement provides that each Class A Unit and each Class B Unit represents the right of the Company to receive any distributions

made by the Sponsor on account of the Class A Interests and Class B Interests, respectively, of the Sponsor.

are not required to make additional capital contributions to CVH, unless any such capital contribution is approved by all of CVH’s

In addition, the LLC Agreement contains terms and conditions that provide for limitations on liability, restrictions

on rights to distributions and certain indemnification rights for CVH’s members.

Management’s

Discussion and Analysis of Financial Condition and Results of Operations

should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated

financial statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements

included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC.

to our historical condensed consolidated financial information, the following discussion contains forward-looking statements that

reflect our plans, estimates, and beliefs.

Our actual results could differ materially from those discussed in the forward-looking

Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form

10-Q, particularly 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.

of Our Business

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.

We also offer 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 global positioning system, and browser-like intelligence for the indoors.

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 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 $7.5 million and $6.6 million for the three months ended September 30, 2020 and 2019, respectively, and a net loss of $20.9

million and $17.0 million for the nine months ended September 30, 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.

During the first quarter of 2020, we raised $5 million in gross proceeds in connection

with a debt financing and during the nine months ended September 30, 2020, we raised net proceeds of approximately $44.0 million,

in connection with sales under our at-the-market equity facility (the “ATM”).

In addition, we may raise additional

capital under the ATM facility up to a maximum gross proceeds of $150 million, 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

2 unchanged sentences

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.

The impact of the COVID-19

pandemic on our business and results of operations continues to remain 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 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.

Despite these challenges, we were able to realize growth in revenue during the first and third quarters of 2020 and for the nine

months of 2020 when compared to the same periods of 2019 as a result of an increase in sales associated with our indoor intelligence

platform, including our sensors, in addition to additional revenue from the sale of Systat software licenses.

The impact that COVID-19

will have on general economic conditions is continuously evolving and the ultimate impact the pandemic will have on our results

of operations continues to remain uncertain and there are no assurances that we will be able to continue to experience the same

growth or not be materially adversely effected.

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

from the collection of data to delivering insights from that data to our customers with a focus on securing, digitizing and optimizing

premises with our indoor positioning, mapping and analytics solutions for businesses and governments.

In connection with such strategy

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.

further discussion of the impact of the COVID-19 pandemic on our business is set forth below in Part II, Item 1A.

Risk Factors.

Strategy Update

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 premises with our indoor positioning, mapping and analytics solutions for businesses and governments.

In connection

with such strategy 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.

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.

joint 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

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, (2) Jibestream Inc.

(“Jibestream”), a provider of a highly configurable

intelligent indoor mapping platform to expand our suite of products, (3) certain GPS products, software, technologies, and intellectual

property from GTX Corp (“GTX”), a U.S.

based company specializing in GPS technologies, (4) an exclusive, worldwide

license to market, distribute and develop the SYSTAT and SigmaPlot software suite of products from Systat Software, Inc., (5)

Recent Events

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 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

Our consolidated financial

statements are prepared in accordance with U.S.

a suite of on-device “blue dot”

indoor location and motion technologies, including patents, trademarks, software and

related intellectual property (IP), from Ten Degrees, Inc., Ten Degrees International and certain other affiliated parties and

(6) Nanotron Technologies GmbH, a global location awareness technology company to strengthen and expand our product portfolio

and capabilities for UWB, RTLS, and 2.4 GHz CSS.

Technology Acquisition

August 19, 2020, in accordance with the terms and conditions of that certain Asset Purchase Agreement, by and among us, Ten Degrees

Inc., a Delaware corporation (“TDI”), Ten Degrees International Limited, a Cayman Islands exempted company limited

by shares and the sole shareholder of 100% of the outstanding capital stock of TDI (“TDIL”), mCube International Limited,

a Cayman Island company (“MCI”), and the holder of a majority of the outstanding capital of TDIL and mCube, Inc.,

a Delaware corporation, and the sole shareholder of 100% of the outstanding capital stock of MCI (“mCube”, together

with TDI, TDIL, and MCI collectively, the “Transferors”), dated August 19, 2020 (the “APA”), we acquired

a suite of on-device “blue-dot”

indoor location and motion technologies, including patents, trademarks, software and

related intellectual property from the Transferors (collectively, the “Assets”).

Assets were acquired for consideration consisting of (i) $1.5 million in cash and (ii) 480,000 shares of our common stock.

accordance with the terms of the APA, commencing as of the date of the APA, the Transferors, and their affiliates, have agreed

to not compete with our business associated with the Assets for a period of five years from the closing date.

In addition, each

party agreed to not solicit any employees from the other party for a period of one year from the closing date, subject to certain

of Transferors’

right, title and interest in and to the Assets were sold, conveyed, transferred, assigned, and delivered

to us in accordance with a Bill of Sale and Assignment executed by the Transferors, dated as of the closing date.

Nanotron Acquisition

October 6, 2020, we acquired, through our wholly-owned subsidiary Inpixon GmbH, a limited liability company incorporated under

the laws of Germany (the “Purchaser), all of the outstanding capital stock (the “Nanotron Shares”) of Nanotron

Technologies GmbH, a limited liability company incorporated under the laws of Germany (“Nanotron”), pursuant to the

terms and conditions of that certain Share Sale and Purchase Agreement, dated as of October 5, 2020 (the “Purchase Agreement”),

among the Purchaser, Nanotron and Sensera Limited, a stock corporation incorporated under the laws of Australia and the sole shareholder

of Nanotron (the “Seller”).

a result of the acquisition, we now own 100% of Nanotron.

Nanotron’s business consists of developing and manufacturing location-aware

IoT systems and solutions.

the closing, the Purchaser paid to the Seller an aggregate purchase price of $8,700,000 (less the Holdback Funds (as defined below)

and certain other closing adjustments) for the Nanotron Shares (“Purchase Price”).

The Purchase Price may be subject

to certain post-Closing adjustments based on actual working capital as of the closing as described in the Purchase Agreement.

The Purchaser retained $750,000 (the “Holdback Funds”) from the Purchase Price to secure the Seller’s obligations

under the Purchase Agreement, with any unused portion of the Holdback Funds to be released to the Seller on the date that is 18

months after the closing date.

The Purchaser paid the Purchase Price from funds received in connection with a capital contribution

from us, and a portion of the Purchase Price was used by the Seller to satisfy outstanding loans payable by the Seller to obtain

the release of certain existing security interests on Nanotron’s assets.

of Units of Cardinal Venture Holdings

September 30, 2020, we entered into a Subscription Agreement (the “Subscription Agreement”) with Cardinal Venture Holdings

LLC, a Delaware limited liability company (“CVH”), pursuant to which we agreed to (i) contribute up to $1,800,000 (the

“Contribution”) to CVH and (ii) purchase up to 599,999 Class A Units of CVH (the “Class A Units”) and up

to 1,800,000 Class B Units of CVH (the “Class B Units,”

and, together with the Class A Units, the “Units”).

The $1,800,000 purchase price was paid on October 12, 2020 and therefore that is the date the purchase of the Units was closed.

owns certain interests in the sponsor entity (the “Sponsor”) to a special purpose acquisition company formed for the

purpose of pursuing an initial public offering of its securities followed by effecting a merger, capital stock exchange, asset

acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “SPAC”).

It is anticipated that the Contribution will be used by CVH to fund the Sponsor’s purchase of securities in the SPAC.

Ali, our Chief Executive Officer, beneficially owns membership interests in CVH through 3AM LLC, a Delaware limited liability

company and a founding member of CVH (“3AM”).

with our entry into the Subscription Agreement, we entered into the Amended and Restated Limited Liability Company Agreement of

CVH (the “LLC Agreement”), dated as of September 30, 2020.

Under the terms of the LLC Agreement, in the event the

Managing Member (as defined in the LLC Agreement) can no longer manage CVH’s affairs due to his death, disability or incapacity,

3AM will serve as CVH’s replacement Managing Member.

Except as may be required by law, the Company, as a non-managing member

under the LLC Agreement, does not have any voting rights and generally cannot take part in the management or control of CVH’s

business and affairs.

LLC Agreement provides that each Class A Unit and each Class B Unit represents the right of the Company to receive any distributions

made by the Sponsor on account of the Class A Interests and Class B Interests, respectively, of the Sponsor.

are not required to make additional capital contributions to CVH, unless any such capital contribution is approved by all of CVH’s

In addition, the LLC Agreement contains terms and conditions that provide for limitations on liability, restrictions

on rights to distributions and certain indemnification rights for CVH’s members.

Distribution Agreement

entered into an Equity Distribution Agreement, dated March 3, 2020,with Maxim Group LLC (“Maxim”) under which we may

offer and sell shares of our common stock in connection with an at-the-market equity facility (“ATM”) from time to

time through Maxim, acting exclusively as our sales agent.

The ATM had an initial aggregate offering amount of up to $50.0 million,

which we increased to $150.0 million pursuant to Amendment No.

1 to Equity Distribution, dated as of June 19, 2020 (the “Amendment”).

The Amendment also provided that Maxim will receive a reduced commission of 3.25%, down from 4.0%, from any sales in excess of

the initial $50.0 million offering amount.

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.

issued and sold 31,574,358 shares of common stock during the nine months ended September 30, 2020, in connection with the ATM

at per share prices between $1.13 and $2.11, resulting in net proceeds to the Company of approximately $44 million, after subtracting

sales commissions and other offering expenses.

to the quarter ended September 30, 2020, the Company issued 213,474 shares of common stock in connection with the ATM, at per

share prices between $1.1206 and $1.1209, resulting in net proceeds to the Company of approximately $230,000 after subtracting

sales commissions and other offering expenses.

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 supplements relating to the ATM filed with the SEC on March 3, 2020 and June 22, 2020.

Accounting Policies and Estimates

consolidated financial statements are prepared in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”).

In connection with

the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events,

and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.

base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes

to be relevant at the time our consolidated financial statements are prepared.

On a regular basis, we review the accounting policies,

assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance

However, because future events and their effects cannot be determined with certainty, actual results could differ from

our assumptions and estimates, and such differences could be material.

Our significant accounting

policies are discussed in Note 3 of the condensed consolidated financial statements.

We believe that the following accounting estimates

are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult,

subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates

about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related

We base our assumptions, estimates and judgments on historical experience, current trends and other factors that

management believes to be relevant at the time our consolidated financial statements are prepared.

On a regular basis, we review

the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented

fairly and in accordance with GAAP.

However, because future events and their effects cannot be determined with certainty, actual

results could differ from our assumptions and estimates, and such differences could be material.

significant accounting policies are discussed in Note 3 of the condensed consolidated financial statements.

We believe that the

following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results,

and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect

of matters that are inherently uncertain.

There have been no changes to estimates during the periods presented in the filing.

Historically changes in management estimates

have not been material.

Revenue Recognition

The Company records

revenue according to “Revenue from Contracts with Customers (Topic 606)”, or ASU 2016-12, which requires revenue to

be recognized either at a “point in time”

or “over time”, depending on the facts and circumstances of the

arrangement, and is evaluated using a five-step model.

Software As A Service Revenue Recognition

With respect to sales

of our maintenance, consulting and other service agreements including our digital tear-sheets, customers pay fixed monthly fees

in exchange for the Company’s service.

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 service.

Historically changes in management estimates have not been material.

Company records revenue according to “Revenue from Contracts with Customers (Topic 606)”, or ASU 2016-12, which requires

revenue to be recognized either at a “point in time”

or “over time”, depending on the facts and circumstances

of the arrangement, and is evaluated using a five-step model.

As A Service Revenue Recognition

respect to sales of our maintenance, consulting and other service agreements including our digital tear-sheets, customers pay

fixed monthly fees in exchange for the Company’s service.

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 service.

Mapping Services Revenue Recognition

Mapping 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 consolidated statement of operations in proportion to the stage of completion of the 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

Professional Services Revenue Recognition

The Company’s

professional services include fixed fee and time and materials contracts.

Fixed fees are paid monthly, in phases, or upon acceptance

of deliverables.

The Company’s time and materials contracts are paid weekly or monthly based on hours worked.

time and materials contracts is recognized based on a fixed hourly rate as direct labor hours are expended.

Materials, or other

specified direct costs, are reimbursed as actual costs and may include markup.

The Company has elected the practical expedient

to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the

value to the customer of the performance completed to date.

For fixed fee contracts including maintenance service provided by in

house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is

providing continuous service.

Because the Company’s contracts have an expected duration of one year or less, the Company

has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.

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 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

Services Revenue Recognition

Company’s professional services include fixed fee and time and materials contracts.

Fixed fees are paid monthly, in phases,

or upon acceptance of deliverables.

The Company’s time and materials contracts are paid weekly or monthly based on hours

Revenue on time and materials contracts is recognized based on a fixed hourly rate as direct labor hours are expended.

Materials, or other specified direct costs, are reimbursed as actual costs and may include markup.

The Company has elected the

practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds

directly with the value to the customer of the performance completed to date.

For fixed fee contracts including maintenance service

provided by in house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because

the Company is providing continuous service.

Because the Company’s contracts have an expected duration of one year or less,

the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance

Anticipated losses are recognized as soon as they become known.

For the three and six months ended June 30, 2020 and 2019, the

Company did not incur any such losses.

For the three and nine months ended September 30,

2020 and 2019, the Company did not incur any such losses.

These amounts are based on known and estimated factors.

Contract Balances

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

We account for our

long-lived assets in accordance with Accounting Standards Codification (“ASC”) 360, “Accounting for the Impairment

or Disposal of Long-Lived Assets”

(“ASC 360”), which requires that long-lived assets be evaluated whenever events

or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.

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.”

Long-lived assets are

grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent

of the cash flows of other assets.

The impairment test for long-lived assets requires us to assess the recoverability of our long-lived

assets by comparing their net carrying value to the sum of undiscounted estimated future cash flows directly associated with and

arising from our use and eventual disposition of the assets.

If the net carrying value of a group of long-lived assets exceeds

the sum of related undiscounted estimated future cash flows, we would be required to record an impairment charge equal to the excess,

if any, of net carrying value over fair value.

When assessing the

recoverability of our long-lived assets, which include property and equipment and finite-lived intangible assets, we make assumptions

regarding estimated future cash flows and other factors.

Some of these assumptions involve a high degree of judgment and also bear

a significant impact on the assessment conclusions.

Included among these assumptions are estimating undiscounted future cash flows,

including the projection of comparable sales, operating expenses, capital requirements for maintaining property and equipment and

residual value of asset groups.

We formulate estimates from historical experience and assumptions of future performance, based

on business plans and forecasts, recent economic and business trends, and competitive conditions.

In the event that our estimates

or related assumptions change in the future, we may be required to record an impairment charge.

Based on our evaluation we did

not record a charge for impairment for the three and six months ended June 30, 2020 and 2019.

The benefits to be

derived from our acquired intangibles, will take additional financial resources to continue the development of our technology.

Management believes our technology has significant long-term profit potential, and to date, management continues to allocate existing

resources to the develop products and services to seek returns on its investment.

We continue to seek additional resources, through

both capital raising efforts and meeting with industry experts, as part of our continued efforts.

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 development of our technology

(resulting in our lack of ability to expand our business), may be subject to significant impairment.

As described previously,

we continue to experience weakness in market conditions, a depressed stock price, and challenges in executing our business plans.

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 September 30, 2020, the Company had deferred revenue of approximately $1,761,000 related to software license agreements and

approximately $81,000 related to cash received in advance for product maintenance services provided by the Company’s technical

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.

account for our long-lived assets in accordance with Accounting Standards Codification (“ASC”) 360, “Accounting

for the Impairment or Disposal of Long-Lived Assets”

(“ASC 360”), which requires that long-lived assets be evaluated

whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.

Some of the 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;

of transactions involving the sale of similar property at amounts below our carrying value;

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.”

assets are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely

independent of the cash flows of other assets.

The impairment test for long-lived assets requires us to assess the recoverability

of our long-lived assets by comparing their net carrying value to the sum of undiscounted estimated future cash flows directly

associated with and arising from our use and eventual disposition of the assets.

If the net carrying value of a group of long-lived

assets exceeds the sum of related undiscounted estimated future cash flows, we would be required to record an impairment charge

equal to the excess, if any, of net carrying value over fair value.

assessing the recoverability of our long-lived assets, which include property and equipment and finite-lived intangible assets,

we make assumptions regarding estimated future cash flows and other factors.

Some of these assumptions involve a high degree of

judgment and also bear a significant impact on the assessment conclusions.

Included among these assumptions are estimating undiscounted

future cash flows, including the projection of comparable sales, operating expenses, capital requirements for maintaining property

and equipment and residual value of asset groups.

We formulate estimates from historical experience and assumptions of future

performance, based on business plans and forecasts, recent economic and business trends, and competitive conditions.

that our estimates or related assumptions change in the future, we may be required to record an impairment charge.

evaluation we did not record a charge for impairment for the three and nine months ended September 30, 2020 and 2019.

benefits to be derived from our acquired intangibles, will take additional financial resources to continue the development of

our technology.

Management believes our technology has significant long-term profit potential, and to date, management continues

to allocate existing resources to the develop products and services to seek returns on its investment.

We continue to seek additional

resources, through both capital raising efforts and meeting with industry experts, as part of our continued efforts.

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 development of our technology (resulting in our lack of ability to expand our business), may be subject to significant

described previously, we continue to experience weakness in market conditions, a depressed stock price, and challenges in executing

our business plans.

The Company will continue to monitor these uncertainties in future periods, to determine the impact.

We evaluate the remaining

useful lives of long-lived assets and identifiable intangible assets whenever events or circumstances indicate that a revision

to the remaining period of amortization is warranted.

Such events or circumstances may include (but are not limited to):

of obsolescence, demand, competition, and/or other economic factors including the stability of the industry in which we operate,

known technological advances, legislative actions, or changes in the regulatory environment.

If the estimated remaining useful

lives change, the remaining carrying amount of the long-lived assets and identifiable intangible assets would be amortized prospectively

over that revised remaining useful life.

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

Development (“IPR&D”)

In accordance with

authoritative guidance, we recognize IPR&D at fair value as of the acquisition date, and subsequently account for it as an

indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts.

Once an IPR&D

project has been completed, the useful life of the IPR&D asset is determined and amortized accordingly.

If the IPR&D asset

is abandoned, the remaining carrying value is written off.

During fiscal year 2014, we acquired IPR&D through the acquisition

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, 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, 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.

evaluate the remaining useful lives of long-lived assets and identifiable intangible assets whenever events or circumstances indicate

that a revision to the remaining period of amortization is warranted.

Such events or circumstances may include (but are not limited

the effects of obsolescence, demand, competition, and/or other economic factors including the stability of the industry in

which we operate, known technological advances, legislative actions, or changes in the regulatory environment.

If the estimated

remaining useful lives change, the remaining carrying amount of the long-lived assets and identifiable intangible assets would

be amortized prospectively over that revised remaining useful life.

We have determined that there were no events or circumstances

during the three and nine months ended September 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.

In-Process Research and Development (“IPR&D”)

accordance with authoritative guidance, we recognize IPR&D at fair value as of the acquisition date, and subsequently account

for it as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts.

Once an IPR&D project has been completed, the useful life of the IPR&D asset is determined and amortized accordingly.

If the IPR&D asset is abandoned, the remaining carrying value is written off.

During fiscal year 2014, we acquired IPR&D

through the acquisition 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 and the acquisition of assets

of Ten Degrees.

Our IPR&D is comprised of AirPatrol, LightMiner, Locality, Jibestream, GTX, SYSTAT and Ten Degrees technology,

which was valued on the date of the acquisition.

It will take additional financial resources to continue development of these

technologies.

continue to seek additional resources, through both capital raising efforts and meeting with industry experts, for further development

of the AirPatrol, Locality, Jibestream, GTX, SYSTAT and Ten Degrees technologies.

Through September 30, 2020, we have made some

progress with raising capital since these acquisitions, building our pipeline and getting industry acknowledgment.

recognized by leading industry analysts in a report on leading indoor positioning companies and were 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, Locality, Jibestream, GTX, SYSTAT and Ten Degrees 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

assets with finite lives over their estimated useful lives and review them for impairment whenever an impairment indicator exists.

We continually monitor events and changes in circumstances that could indicate carrying amounts of our long-lived assets, including

our intangible assets, may not be recoverable.

When such events or changes in circumstances occur, we assess recoverability by

determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows.

the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on

the excess of the carrying amount over the fair value of the assets.

We did not recognize any intangible asset impairment charges

for the three and six months ended June 30, 2020 and 2019.

See “Acquired In-Process Research and Development (“IPR&D”)”

amortize intangible assets with finite lives over their estimated useful lives and review them for impairment whenever an impairment

indicator exists.

We continually monitor events and changes in circumstances that could indicate carrying amounts of our long-lived

assets, including our intangible assets, may not be recoverable.

When such events or changes in circumstances occur, we assess

recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future

If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment

loss based on the excess of the carrying amount over the fair value of the assets.

We did not recognize any intangible asset impairment

charges for the three and nine months ended September 30, 2020 and 2019.

See “Acquired In-Process Research and Development

(“IPR&D”)”

for further information.

Software Development Costs

The Company develops

and utilizes internal software for the processing of data provided by its customers.

Costs incurred in this effort are accounted

for under the provisions of FASB ASC 350-40, Internal Use Software and ASC 985-20, Software –

Cost of Software to be Sold,

Leased or Marketed, whereby direct costs related to development and enhancement of internal use software is capitalized, and costs

related to maintenance are expensed as incurred.

The Company capitalizes its direct internal costs of labor and associated employee

benefits that qualify as development or enhancement.

These software development costs are amortized over the estimated useful life

which management has determined ranges from one to five years.

Allowance for Doubtful Accounts

We maintain our reserves

for credit losses at a level believed by management to be adequate to absorb potential losses inherent in the respective balances.

We assign an internal credit quality rating to all new customers and update these ratings regularly, but no less than annually.

Management’s determination of the adequacy of the reserve for credit losses for our accounts and notes receivable is based

on the age of the receivable balance, the customer’s credit quality rating, an evaluation of historical credit losses, current

economic conditions, and other relevant factors.

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,

respectively, due to the aging of the items greater than 120 days outstanding and other potential non-collections.

Business Combinations

We account for business

combinations using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are

recorded at their fair values at the date of acquisition.

The excess of the purchase price over the estimated fair value is recorded

Any changes in the estimated fair values of the net assets recorded for acquisitions prior to the finalization of

more detailed analysis, but not to exceed one year from the date of acquisition, will change the amount of the purchase price allocable

Any subsequent changes to any purchase price allocations that are material to our consolidated financial results will

All acquisition costs are expensed as incurred and in-process research and development costs are recorded at fair

value as an indefinite-lived intangible asset and assessed for impairment thereafter until completion, at which point the asset

is amortized over its expected useful life.

Separately recognized transactions associated with business combinations are generally

expensed subsequent to the acquisition date.

The application of business combination and impairment accounting requires the use

of significant estimates and assumptions.

Upon acquisition, the

accounts and results of operations are consolidated as of and subsequent to the acquisition date and are included in our Consolidated

Financial Statements from the acquisition date.

Development Costs

Company develops and utilizes internal software for the processing of data provided by its customers.

Costs incurred in this effort

are accounted for under the provisions of FASB ASC 350-40, Internal Use Software and ASC 985-20, Software –

Cost of Software

to be Sold, Leased or Marketed, whereby direct costs related to development and enhancement of internal use software is capitalized,

and costs related to maintenance are expensed as incurred.

The Company capitalizes its direct internal costs of labor and associated

employee benefits that qualify as development or enhancement.

These software development costs are amortized over the estimated

useful life which management has determined ranges from one to four years.

for Doubtful Accounts

maintain our reserves for credit losses at a level believed by management to be adequate to absorb potential losses inherent in

the respective balances.

We assign an internal credit quality rating to all new customers and update these ratings regularly,

but no less than annually.

Management’s determination of the adequacy of the reserve for credit losses for our accounts

and notes receivable is based on the age of the receivable balance, the customer’s credit quality rating, an evaluation

of historical credit losses, current economic conditions, and other relevant factors.

of September 30, 2020 and December 31, 2019, reserves for credit losses included a reserve for doubtful accounts of approximately

$ 467,000 and $646,000, respectively, due to the aging of the items greater than 120 days outstanding and other potential non-collections.

account for business combinations using the acquisition method of accounting, and accordingly, the assets and liabilities of the

acquired business are recorded at their fair values at the date of acquisition.

The excess of the purchase price over the estimated

fair value is recorded as goodwill.

Any changes in the estimated fair values of the net assets recorded for acquisitions prior

to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will change the amount

of the purchase price allocable to goodwill.

Any subsequent changes to any purchase price allocations that are material to our

consolidated financial results will be adjusted.

All acquisition costs are expensed as incurred and in-process research and development

costs are recorded at fair value as an indefinite-lived intangible asset and assessed for impairment thereafter until completion,

at which point the asset is amortized over its expected useful life.

Separately recognized transactions associated with business

combinations are generally expensed subsequent to the acquisition date.

The application of business combination and impairment

accounting requires the use of significant estimates and assumptions.

acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date and are included

in our Consolidated Financial Statements from the acquisition date.

Stock-Based Compensation

We account for equity

instruments issued to non-employees in accordance with accounting guidance, which requires that such equity instruments are recorded

at their fair value on the measurement date, which is typically the date the services are performed.

We account for equity

instruments issued to employees in accordance with accounting guidance that requires that awards are recorded at their fair value

on the date of grant and are amortized over the vesting period of the award.

We recognize compensation costs over the requisite

service period of the award, which is generally the vesting term of the equity instrument issued.

The Black-Scholes option

valuation model is used to estimate the fair value of the options or the equivalent security granted.

The model includes subjective

input assumptions that can materially affect the fair value estimates.

The model was developed for use in estimating the fair value

of traded options or warrants.

The expected volatility is estimated based on the average of historical volatilities for industry

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.

Key weighted-average assumptions used to apply this pricing model during the six months ended June 30, 2020 were as follows:

Six Months Ended

account for equity instruments issued to non-employees in accordance with accounting guidance, which requires that such equity

instruments are recorded at their fair value on the measurement date, which is typically the date the services are performed.

account for equity instruments issued to employees in accordance with accounting guidance that requires that awards are recorded

at their fair value on the date of grant and are amortized over the vesting period of the award.

We recognize compensation costs

over the requisite service period of the award, which is generally the vesting term of the equity instrument issued.

Black-Scholes option valuation model is used to estimate the fair value of the options or the equivalent security granted.

model includes subjective input assumptions that can materially affect the fair value estimates.

The model was developed for use

in estimating the fair value of traded options or warrants.

The expected volatility is estimated based on the average of historical

volatilities for industry peers.

Company incurred stock-based compensation charges of $256,000 and $871,000 for the three months ended September 30, 2020 and 2019,

respectively, and $941,000 and $2,618,000 for the nine months ended September 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 nine months ended September 30, 2020 were as follows:

Nine Months Ended

September 30,

Risk-free interest rate

3 unchanged sentences

of Operations

Three months ended June 30, 2020

compared to three months ended June 30, 2019

months ended September 30, 2020 compared to three months ended September 30, 2019

For the Three Months Ended

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

(in thousands, except percentages)

3 unchanged sentences

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 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

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

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.

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 September 30, 2020 were $2,554,000 compared to $1,534,000 for the comparable period in the prior year

for an increase of $1,020,000, or approximately 66%.

Revenues increased in the third quarter of 2020 over the prior period in

2019 primarily attributable to an increase in sales in our Aware and Mapping product lines and the addition of sales from the

new Systat licensing product line.

of revenues for the three months ended September 30, 2020 were $645,000 compared to $382,000 for the comparable period in the

This increase of $263,000, or approximately 69%, was primarily attributable the increased sales during the quarter.

gross profit margin for the three months ended September 30, 2020 and 2019 was 75%.

expenses for the three months ended September 30, 2020 were $8.2 million and $6.8 million for the comparable period in the prior

This increase of approximately $1.4 million is primarily attributable to the increased operating expenses of the Systat

licensing product line, increased professional fees and marketing expenses offset by a decrease in travel expenses, stock based

compensation and amortization of intangibles.

From Operations

from operations for the three months ended September 30, 2020 was $6.2 million as compared to $5.7 million for the comparable

period in the prior year.

This increase in loss of approximately $0.5 million was primarily attributable to higher operating expenses

offset by the increase in revenue for the quarter ended September 30, 2020.

Income/Expense

Other income/expense

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.

Net Loss Attributable

To Stockholders of Inpixon

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

for the three months ended September 30, 2020 was a loss of $1,205,000 compared to a loss of $928,000 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

This increase in loss of $277,000 is primarily attributable to a $648,000 valuation allowance adjustment on

held for sale loan offset by a reduction in interest expense due to the pay down of notes payable.

for Income Taxes

was no provision for corporate income taxes for the three months ended September 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 September 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.

Income Attributable to Non-Controlling Interest

income attributable to non-controlling interest for the three months ended September 30, 2020 was $16,000 compared to net

income of $5,000 for the comparable period in the prior year.

This increase in income of $11,000 was attributable to

the gain from Inpixon India and is immaterial.

Loss Attributable To Stockholders of Inpixon

loss attributable to stockholders of Inpixon for the three months ended September 30, 2020 was $7.5 million compared to $6.6 million

for the comparable period in the prior year.

The higher loss of approximately $0.9 million was primarily attributable the higher

operating expenses offset by the increased revenue during the three months ended September 30, 2020.

months ended September 30, 2020 compared to nine months ended September 30, 2019

For the Nine Months Ended

September 30, 2020

September 30, 2019

(in thousands, except percentages)

3 unchanged sentences

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

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 nine months ended September 30, 2020 were $5,434,000 compared to $4,387,000 for the comparable period in the prior year

for an increase of $1,047,000, or approximately 24%, which was primarily attributable to additional mapping revenues due to a

full nine months of sales during 2020, the addition of sales from the new Systat licensing product line offset by a decline in

Aware product line sales (in the second quarter) during the 2020 period.

of revenues for the nine months ended September 30, 2020 were $1,459,000 compared to $1,109,000 for the comparable period in the

This increase of $350,000, or approximately 32%, was primarily attributable to the increased sales during the quarter.

gross profit margin for the nine months ended September 30, 2020 was 73% compared to 75% for the nine months ended September 30,

This decrease in margin is primarily due to the addition of the Systat licensing product line sales at a lower margin.

expenses for the nine months ended September 30, 2020 were $20.9 million and $18.6 million for the comparable period

ended September 30, 2019.

This increase of approximately $2.3 million is primarily attributable to increased operating expenses

of the Systat licensing product line, increased operating expenses of the Jibestream division as it was included for a full nine

months during 2020, increased professional fees and marketing expenses offset by a decrease in travel expenses, stock based compensation

and amortization of intangibles.

From Operations

from operations for the nine months ended September 30, 2020 was $16.9 million as compared to $15.3 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

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.

This increase in loss of approximately $1.6 million was primarily attributable to higher operating expenses

offset by the increase in revenue for the nine months ended September 30, 2020.

Income/Expense

income/expense for the nine months ended September 30, 2020 was a loss of $4,068,000 compared to a loss of $1,723,000 for

the comparable period in the prior year.

This increase in loss of approximately $2,345,000 is primarily attributable to the

additional expense of the $1,514,000 valuation allowance adjustment due to the uncertainty of being repaid in connection with

note receivable from Sysorex and a $648,000 valuation allowance for related party receivable from a settlement agreement in the

nine months ended September 30, 2020.

for Income Taxes

was no provision for corporate income taxes for the nine months ended September 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 September 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 nine months ended September 30, 2020 for the reduction

of the deferred tax liability related to the amortization of the Locality and Jibestream intangibles.

Income Attributable To Non-Controlling Interest

income attributable to non-controlling interest for the nine months ended September 30, 2020 was $25,000 compared to net

income of $9,000 for the comparable period in the prior year.

This increase in income of $16,000 was attributable to

the gain from Inpixon India and is immaterial.

Loss Attributable To Stockholders of Inpixon

loss attributable to stockholders of Inpixon for the nine months ended September 30, 2020 was $20.9 million compared to $17.0

million for the comparable period in the prior year.

The higher loss of approximately $3.9 million was primarily attributable

to the higher operating expenses to include the expenses of the new Systat division and a full nine months of the Jibestream division,

the $1,514,000 valuation allowance adjustment on held for sale loan and the $648,000 valuation allowance on related party receivable

offset by the increased revenue during the nine ended September 30, 2020.

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 September 30, 2020 was a loss of $4.6 million compared to a loss of $2.4 million for the

prior period in 2019.

Adjusted EBITDA for the nine months ended September 30, 2020 was a loss of $12.4 million compared

to a loss of $7.0 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 and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended

Six Months Ended

performance measure, to Adjusted EBITDA for the three and nine months ended September 30, 2020 and 2019 (in thousands):

the Three Months Ended

September 30,

the Nine Months Ended

September 30,

Net loss attributable to common stockholders

6 unchanged sentences

Costs associated with public offering

Provision for doubtful accounts

Bad debts expense/provision

Deemed dividend for triggering of warrant down round feature

4 unchanged sentences

Adjusted EBITDA

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;

to compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

as a basis for allocating resources to various projects;

as a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions;

to evaluate internally the performance of our personnel.

We have presented Adjusted

EBITDA above because we believe it conveys useful information to investors regarding our operating results.

We believe it provides

an additional way for investors to view our operations, when considered with both our GAAP results and the reconciliation to net

income (loss).

By including this information, we can provide investors with a more complete understanding of our business.

rely on Adjusted EBITDA, which is a non-GAAP financial measure for the following:

review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment

compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

a basis for allocating resources to various projects;

a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions;

evaluate internally the performance of our personnel.

have presented Adjusted EBITDA above because we believe it conveys useful information to investors regarding our operating results.

We believe it provides an additional way for investors to view our operations, when considered with both our GAAP results and

the reconciliation to net income (loss).

By including this information, we can provide investors with a more complete understanding

of our business.

Specifically, we present Adjusted EBITDA as supplemental disclosure because of the following:

we believe Adjusted EBITDA is a useful tool for investors to assess the operating performance of our business without the effect of interest, income taxes, depreciation and amortization and other non-cash items including stock based compensation, amortization of intangibles, change in the fair value of shares to be issued, change in the fair value of derivative liability, impairment of goodwill and one time charges including gain/loss on the settlement of obligations, severance costs, provision for doubtful accounts, acquisition costs and the costs associated with public offerings;

we believe that it is useful to provide to investors with a standard operating metric used by management to evaluate our operating performance;

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.

believe Adjusted EBITDA is a useful tool for investors to assess the operating performance of our business without the effect

of interest, income taxes, depreciation and amortization and other non-cash items including stock based compensation, amortization

of intangibles, change in the fair value of shares to be issued, change in the fair value of derivative liability, impairment

of goodwill and one time charges including gain/loss on the settlement of obligations, severance costs, provision for doubtful

accounts, acquisition costs and the costs associated with public offerings;

believe that it is useful to provide to investors with a standard operating metric used by management to evaluate our operating

believe that the use of Adjusted EBITDA is helpful to compare our results to other companies.

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;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

Adjusted EBITDA does not reflect income or other taxes or the cash requirements to make any tax payments;

other companies in our industry may calculate Adjusted EBITDA differently than we do, thereby potentially limiting its usefulness as a comparative measure.

Because of these limitations,

Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business

or as a measure of performance in compliance with GAAP.

We compensate for these limitations by relying primarily on our GAAP results

and providing Adjusted EBITDA only as supplemental information.

Proforma Non-GAAP Net Loss per Share

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.

EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments

depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced

in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

EBITDA does not reflect income or other taxes or the cash requirements to make any tax payments;

companies in our industry may calculate Adjusted EBITDA differently than we do, thereby potentially limiting its usefulness as

a comparative measure.

of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the

growth of our business or as a measure of performance in compliance with GAAP.

We compensate for these limitations by relying

primarily on our GAAP results and providing Adjusted EBITDA only as supplemental information.

Non-GAAP Net Loss per Share

and diluted net loss per share for the three months ended September 30, 2020 was ($0.18) compared to ($12.68) for the prior period

Basic and diluted net loss per share for the nine months ended September 30, 2020 was ($0.90) compared to ($65.89) 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.

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

loss per basic and diluted common share for the three months ended September 30, 2020 was ($0.13) compared to a loss of ($7.44)

per share for the prior period in 2019.

Proforma non-GAAP net loss per basic and diluted common share for the nine months ended

September 30, 2020 was ($0.64) compared to a loss of ($35.45) 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):

the Three Months Ended

September 30,

the Nine Months Ended

September 30,

Net loss attributable to common stockholders

2 unchanged sentences

Provision for valuation allowance for held for sale loan

Provision for the valuation allowance for related party

Provision for the valuation allowance for related party receivable

Settlement of litigation

1 unchanged sentence

Costs associated with public offering

Provision for doubtful accounts

Bad debts expense/provision

Deemed dividend for triggering of warrant down round feature

4 unchanged sentences

Weighted average basic and diluted common shares outstanding

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;

to compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

as a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions;

to evaluate internally the performance of our personnel.

We have presented proforma

non-GAAP net loss per share above because we believe it conveys useful information to investors regarding our operating results.

We believe it provides an additional way for investors to view our operations, when considered with both our GAAP results and the

reconciliation to net income (loss), and that by including this information we can provide investors with a more complete understanding

of our business.

Specifically, we present proforma non-GAAP net loss per share as supplemental disclosure because:

we believe proforma non-GAAP net loss per share is a useful tool for investors to assess the operating performance of our business without the effect of 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, change in the fair value of shares to be issued, acquisition costs and the costs associated with public offerings;

we believe that it is useful to provide to investors a standard operating metric used by management to evaluate our operating performance;

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 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 $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.

The breakdown of our

overall working capital deficit is as follows (in thousands):

rely on proforma non-GAAP net loss per share, which is a non-GAAP financial measure:

review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment

compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions;

evaluate internally the performance of our personnel.

have presented proforma non-GAAP net loss per share above because we believe it conveys useful information to investors regarding

our operating results.

We believe it provides an additional way for investors to view our operations, when considered with both

our GAAP results and the reconciliation to net income (loss), and that by including this information we can provide investors

with a more complete understanding of our business.

Specifically, we present proforma non-GAAP net loss per share as supplemental

disclosure because:

believe proforma non-GAAP net loss per share is a useful tool for investors to assess the operating performance of our business

without the effect of 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, change in the fair value of shares to

be issued, acquisition costs and the costs associated with public offerings;

believe that it is useful to provide to investors a standard operating metric used by management to evaluate our operating performance;

believe that the use of proforma non-GAAP net loss per share is helpful to compare our results to other companies.

and Capital Resources as of September 30, 2020

current capital resources and operating results as of and through September 30, 2020, consist of:

overall working capital of $23.2 million;

of approximately $31.4 million;

ATM equity facility in an aggregate offering amount of up to $150 million of which we have raised approximately $44.0 million of net proceeds after subtracting sales commissions and other offering costs as of September 30, 2020;

cash used by operating activities for the period of $15.6 million.

breakdown of our overall working capital deficit is as follows (in thousands):

Working Capital

5 unchanged sentences

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.

cash used in operating activities during the nine months ended September 30, 2020 of $15.6 million consists of net loss of $20.9

million offset by non-cash adjustments of $8.3 million less net cash changes in operating assets and liabilities of approximately

$2.9 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.

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.

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

of 2020, we raised $5 million in gross proceeds in connection with a debt financing and during the nine months ended September

30, 2020 we raised net proceeds of approximately $44 million in connection with sales under the ATM.

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 from the issuance date of the financial statements.

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.

In addition, the impact of the COVID-19 pandemic on our business and results of operations continues to remain

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 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.

If we are successful in growing our revenues as we did in the first and third quarters of 2020 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.

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.

and Capital Resources as of September 30, 2020 Compared to September 30, 2019

Company’s net cash flows used in operating, investing and financing activities for the nine months ended September 30, 2020

and 2019 and certain balances as of the end of those periods are as follows (in thousands):

For the Nine Months Ended

September 30,

Net cash used in operating activities

3 unchanged sentences

Net increase in cash

September 30,

As of December 31,

Cash and cash equivalents

Working capital (deficit)

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):

Working capital surplus (deficit)

Activities for the nine months ended September 30, 2020

cash used in operating activities during the nine months ended September 30, 2020 was $15.6 million.

The cash flows related to

the nine months ended September 30, 2020 consisted of the following (in thousands):

Non-cash income and expenses

1 unchanged sentence

Net cash used in operating activities

The non-cash income and expense of $6.4 million consisted primarily

of the following (in thousands):

Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, and Jibestream, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, and August 15, 2019, respectively.

non-cash income and expense of $8.3 million consisted primarily of the following (in thousands):

Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, Jibestream, Systat and Ten Degrees, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, August 15, 2019, June 30, 2020 and August 19, 2020, respectively.

Amortization of right of use asset

7 unchanged sentences

Total non-cash income

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):

net use of cash in the change in operating assets and liabilities aggregated a decrease of approximately $2.9 million and consisted

primarily of the following (in thousands):

Increase in accounts receivable and other receivables

5 unchanged sentences

Net cash used in the changes in operating assets and liabilities

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):

Activities for the nine months ended September 30, 2019

cash used in operating activities during the nine months ended September 30, 2019 was $9.1 million.

The cash flows related to

the nine months ended September 30, 2019 consisted of the following (in thousands):

Non-cash income and expenses

1 unchanged sentence

Net cash used in operating activities

The non-cash income and expense of $5.2 million consisted primarily

of the following (in thousands):

non-cash income and expense of $8.4 million consisted primarily of the following (in thousands):

5 unchanged sentences

Provision for doubtful accounts

Income tax benefit

Total non-cash income

use of cash in the change in operating assets and liabilities aggregated $1.4 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 $537,000 and consisted primarily of the

following (in thousands):

Increase in accounts receivable and other receivables

1 unchanged sentence

Increase in accounts payable

Decrease in accrued liabilities and other liabilities

Increase in accrued liabilities and other liabilities

Decrease in deferred revenue

Net cash used in the changes in operating assets and liabilities

Cash Flows from Investing Activities

as of June 30, 2020 and 2019

Flows from Investing Activities as of September 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

in investing activities during the nine months ended September 30, 2020 was approximately $4.9 million compared to net cash flows

used in investing activities during the nine months ended September 30, 2019 of approximately $4.9 million.

Cash flows related

to investing activities during the nine months ended September 30, 2020 include $2.2 million payment for the Systat Licensing Agreement,

$1.5 million payment for the Ten Degrees acquisition, $688,000 investment in capitalized software and $546,000 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 from Financing Activities

as of June 30, 2020 and 2019

Net cash flows provided

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

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.

Cash flows related to investing activities during the nine months ended September 30, 2019 include $3.7

million payment for the Jibestream acquisition, $658,000 investment in capitalized software, $250,000 investment in GTX, $204,000

investment in Locality, and $58,000 for the purchase of property and equipment.

Flows from Financing Activities as of September 30, 2020 and 2019

cash flows provided by financing activities during the nine months ended September 30, 2020 was approximately $47.1 million.

the nine months ended September 30, 2020, the Company received incoming cash flows of $44 million from the issuance of common

stock, $5.0 million of proceeds from promissory notes, and $292,000 of repayments from related parties, offset by $1.8 million

of loans to related party, $250,000 of acquisition liability repayments, $150,000 of net repayments to bank facility and $74,000

of notes payable repayments.

Net cash flows provided by financing activities during the nine months ended September 30, 2019 was

$13.3 million.

During the nine months ended September 30, 2019, the Company received incoming cash flows of $14.8 million from

the issuance of common stock, preferred stock and warrants, $6.8 million of net proceeds from promissory notes, $1.7 million of

repayments from a related party, and $237,000 net proceeds from bank facility offset by $9.9 million of loans to related parties,

$141,000 loan to Jibestream, $71,000 notes payable repayment, $50,000 loan to GTX, and $15,000 advances to related party.

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.

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.

and Qualitative Disclosures About Market Risk

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