What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-31 compared with 2020-03-03 · 1311 added, 2151 removed, 379 unchanged (90% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TO FINANCIAL STATEMENTS

FINANCIAL INFORMATION

of Independent Registered Public Accounting Firm

Balance Sheets as of December 31, 2019 and 2018

Statements of Operations for the years ended December 31, 2019 and 2018

Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018

Statements of Changes in Stockholders’

Equity for the years ended December 31, 2019 and 2018

INDEX TO FINANCIAL STATEMENTS

ANNUAL FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Operations for the years ended December 31, 2020 and 2019

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019

to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Shareholders and Board of Directors

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Inpixon and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying

consolidated balance sheets of Inpixon and Subsidiaries (the “Company”) as of December 31, 2019 and 2018, the

related consolidated statements of operations, comprehensive loss, stockholders’

equity and cash flows for each of the

two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position

of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two

years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States

Explanatory Paragraph –

The accompanying consolidated financial

statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 1, the

Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet

its obligations and sustain its operations.

These conditions raise substantial doubt about the Company’s ability to continue as

a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

We have audited the accompanying consolidated balance sheets of Inpixon and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America .

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Intangible Assets for Business Acquisitions

Description of the Matter

During the year ended December 31, 2020 the Company completed certain business combinations and asset acquisitions for net aggregate consideration of approximately $13 million.

The transactions were accounted for as a business combination.

Accordingly, the purchase price was allocated, on a preliminary basis, to the assets acquired and liabilities assumed, based on their respective fair values identified including intangible assets with aggregate fair values of approximately $12.4 million.

The Company, with the assistance of third party valuation experts, estimated the fair values of the identified intangible assets using valuation models.

Such valuation models require significant assumptions;

these assumptions are primarily related to the complexity of the valuation models used to measure the fair values as well as the sensitivity of the fair values identified.

The significant assumptions used to estimate the fair value of the identified intangible assets included discount rates, attrition rates, economic lives and financial projections including comparable company specific data.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in our Audit

Our audit procedures related to the forecasts of future cash flows and the selection of the attrition rates, terminal growth rates and discount rates for the identified intangible assets for the acquired entities included the following:

• We assessed the reasonableness of fiscal year 2020 forecasted cash flows of revenues and operating margins by comparing them to the acquired entities actual 2020 cash flows.

• We assessed the reasonableness of the forecasted revenue growth rates and operating margins including the cash flow forecast period by comparing them to the acquired entities’ actual revenue growth rates and operating margins during the most recent historical periods.

• We performed sensitivity analyses of the significant assumptions used in the valuation model to evaluate the change in fair value resulting from changes in the significant assumptions.

• With the assistance of our value specialists, we evaluated the reasonableness of the (1) valuation methodologies;

(2) terminal growth rates by comparing them to industry growth rates and the projected nominal gross domestic product (GDP) growth rate;

(3) customer attrition rates by testing the mathematical accuracy of the rates used and comparing them to historical customer data;

and (4) discount rates, which included testing the source information underlying the determination of the discount rates, testing the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

/s/ Marcum llp

We have served as the Company’s auditor since 2012.

March 31, 2021

AND SUBSIDIARIES

BALANCE SHEETS

thousands, except number of shares and par value data)

INPIXON AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares and par value data)

As of December 31,

2020 As of December 31,

Current Assets

Cash and cash equivalents $ 17,996 $ 4,777

Accounts receivable, net

Accounts receivable, net of allowances of $ 235 and $ 646 , respectively

Notes and other receivables 152 74

Prepaid assets and other current assets

Inventory 1,243 400

Short-term investments 7,998 —

Prepaid expenses and other current assets 1,197 406

Total Current Assets 30,325 6,765

2 unchanged sentences

Software development costs, net 1,721 1,544

Long-term investments 2,500 —

Intangible assets, net 14,203 8,400

Loan to related party –

held for sale

Goodwill 6,588 2,070

Receivable from related party — 616

accompanying notes are an integral part of these financial statements

AND SUBSIDIARIES

BALANCE SHEETS (CONTINUED)

thousands, except number of shares and par value data)

Liabilities and Stockholders’

Other assets 152 94

Total Assets $ 59,011 $ 21,219

INPIXON AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands, except number of shares and par value data)

Liabilities and Stockholders’ Equity

Current Liabilities

1 unchanged sentence

Accrued liabilities 2,739 1,863

Operating lease obligation

Operating lease obligation, current 647 776

Deferred revenue 1,922 912

3 unchanged sentences

Long Term Liabilities

Long-term debt

Operating lease obligation, noncurrent 1,457 837

Other liabilities

Other liabilities, noncurrent 7 7

Deferred tax liability, noncurrent — 87

2 unchanged sentences

Commitments and Contingencies

Stockholders’

Stockholders’ Equity

Pref Stock - $ 0.001 par value;

5,000,000 shares auth, consisting

of Series 4 Convertible Pref Stock - 10,415 shares auth;

1 and 1 issued, and 1 and 1 outstanding as of Dec.

31, 2019 and Dec.

2018, respectively, Series 5 Convertible Pref Stock - 12,000 shares auth;

126 and 0 issued, and 126 and 0 outstanding as of Dec.

31, 2019 and Dec.

31, 2018, respectively.

5,000,000 shares authorized

Series 4 Convertible Pref Stock - 10,415 shares auth;

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

Series 5 Convertible Pref Stock - 12,000 shares auth;

126 and 0 issued, and 126 and 0 outstanding as of December 31, 2020 and December 31, 2019, respectively.

Common Stock - $ 0.001 par value;

3 unchanged sentences

Treasury stock, at cost, 1 share

( 695 ) ( 695 )

Accumulated other comprehensive income 660 94

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

Stockholders’

Equity Attributable to Inpixon

( 180,992 ) ( 151,763 )

Stockholders’ Equity Attributable to Inpixon 44,639 6,022

Non-controlling Interest 41 26

Total Stockholders’

Total Liabilities and Stockholders’

accompanying notes are an integral part of these financial statements

AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

thousands, except per share data)

For the Years Ended

Total Stockholders’ Equity 44,680 6,048

Total Liabilities and Stockholders’ Equity $ 59,011 $ 21,219

The accompanying notes are an integral part of these financial statements

INPIXON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

For the Years Ended December 31,

Revenues 9,297 6,301

Cost of Revenues 2,613 1,609

Gross Profit 6,684 4,692

Operating Expenses

3 unchanged sentences

Acquisition-related costs 1,057 1,277

Impairment of goodwill

Amortization of intangibles 2,306 3,629

1 unchanged sentence

Loss from Operations ( 23,794 ) ( 20,810 )

Other Income (Expense)

Other Expense

Interest expense, net ( 2,426 ) ( 2,277 )

Loss on exchange of debt for equity ( 210 ) ( 294 )

Change in fair value of derivative liability

Gain on the sale of Sysorex Arabia

Provision for valuation allowance on related party loan - held for sale ( 2,370 ) ( 10,627 )

Other income/(expense)

Total Other Income (Expense)

Net Loss from Continuing Operations, before tax

Other expense ( 470 ) ( 558 )

Total Other Expense ( 5,476 ) ( 13,756 )

Net Loss, before tax ( 29,270 ) ( 34,566 )

Income tax benefit 56 584

Net Loss from Continuing Operations

Loss from Discontinued Operations, Net of Tax

Net Income/(Loss) Attributable to Non-controlling Interest

Net Loss ( 29,214 ) ( 33,982 )

Net Income Attributable to Non-controlling Interest 15 9

Net Loss Attributable to Stockholders of Inpixon $ ( 29,229 ) $ ( 33,991 )

Deemed dividend to preferred stockholders

Deemed dividend for triggering of warrant down round feature — ( 1,250 )

1 unchanged sentence

Net Loss Per Basic and Diluted Common Share

Loss from continuing operations

$ (2,322.30 )

Loss from discontinued operations

Net Loss Per Share - Basic and Diluted $ ( 1.01 ) $ ( 47.52 )

$ (2,600.77 )

Weighted Average Shares Outstanding

Basic and Diluted 28,800,493 741,530

accompanying notes are an integral part of these financial statements

AND SUBSIDIARIES

STATEMENTS OF COMPREHENSIVE LOSS

For the Years Ended

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

The accompanying notes are an integral part of these financial statements

INPIXON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

For the Years Ended December 31,

Net Loss $ ( 29,214 ) $ ( 33,982 )

Unrealized foreign exchange gain from cumulative translation adjustments 566 68

Comprehensive Loss $ ( 28,648 ) $ ( 33,914 )

accompanying notes are an integral part of these financial statements

AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE YEARS

ENDED DECEMBER 31, 2019 AND 2018

thousands, except per share data)

Accumulated Other

Total Stockholders’

Preferred Stock

Treasury Stock

Comprehensive

Income (Loss)

The accompanying notes are an integral part of these financial statements

INPIXON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands)

Series 4 Convertible Preferred Stock Series 5 Convertible Preferred Stock Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Non-Controlling Interest Total Stockholders’ (Deficit) Equity

Shares Amount Shares Amount Shares Amount Shares Amount

Balance - January 1, 2020 1 $ — 126 $ — 4,234,922 $ 4 $ 158,382 ( 1 ) $ ( 695 ) $ 94 $ ( 151,763 ) $ 26 $ 6,048

Common shares issued for services

Stock options granted to employees for services

Fractional shares issued for stock split

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

Redemption of convertible series 3 preferred stock

Common shares issued for extinguishment of debenture liability

Sale of Sysorex Arabia

Adoption of accounting standards (Note 2)

Common Shares issued for net cash proceeds of a public offering — — — — 33,416,830 33 46,110 — — — — — $ 46,143

Common Shares issued for net cash proceeds from a registered direct offering — — — — 5,000,000 5 9,200 — — — — — $ 9,205

Common shares issued for extinguishment of debt — — — — 6,863,223 7 9,929 — — — — — $ 9,936

Common shares issued for extinguishment of liability — — — — 183,486 0.2 200 — — — — — $ 200

Common shares issued for net proceeds from warrants exercised — — — — 3,000,000 3 — — — — — — $ 3

Stock options granted to employees and consultants for services — — — — — — 1,193 — — — — — $ 1,193

Issuance of Ten Degrees Acquisition shares — — — — 480,000 0.5 599 — — — — — $ 599

Cumulative Translation Adjustment — — — — — — — — — 566 — — $ 566

Balance - March 31, 2018

Stock options granted to employees for services

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

Redemption of convertible series 3 preferred stock

Net loss — — — — — — — — — — ( 29,229 ) 15 $ ( 29,214 )

Balance - December 31, 2020 1 — 126 — 53,178,461 $ 53 $ 225,613 ( 1 ) $ ( 695 ) $ 660 $ ( 180,992 ) $ 41 $ 44,680

The accompanying notes are an integral part of these financial statements

INPIXON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

(In thousands, except per share data)

Series 4 Convertible Preferred Stock Series 5 Convertible Preferred Stock Series 6 Convertible Preferred Stock Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Non-Controlling Interest Total Stockholders’ (Deficit) Equity

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance - January 1, 2019 1 $ — — $ — — $ — 35,154 $ — $ 123,226 ( 1 ) $ ( 695 ) $ 26 $ ( 117,772 ) $ 18 $ 4,803

Common and Preferred Shares issued for net cash proceeds of a public offering — — 12,000 — 2,997 — 1,615,287 2 20,679 — — — — — 20,681

Common shares issued for extinguishment of debt — — — — — — 1,542,633 1 7,301 — — — — — 7,302

Common shares issued for net proceeds from warrants exercised — — — — — — 306 — 46 — — — — — 46

Common shares issued for warrants exercised — — — — — — 425,952 1 ( 1 ) — — — — — —

Common stock issued for stock options exercised — — — — — — 14 — — — — — — — —

Redemption of convertible Series 5 Preferred Stock — — ( 11,874 ) — — — 79,242 — — — — — — — —

Cumulative Translation Adjustment

Balance - June 30, 2018

Stock options granted to employees for services

Redemption of convertible Series 6 Preferred Stock — — — — ( 2,997 ) — 240,001 — — — — — — — —

Deconsolidation of Sysorex as a result of spin-off

Cumulative Translation Adjustment

Balance - September 30, 2018

Fractional shares issued for stock split

Common shares issued for extinguishment of liability — — — — — — 16,655 — 1,130 — — — — — 1,130

Common shares issued for services — — — — — — 4,445 — 242 — — — — — 242

Stock options granted to employees for services

Redemption of convertible series 4 preferred stock

Common shares issued for extinguishment of debt

Common shares issued for net proceeds from warrants exercised

Stock options granted to employees and consultants for services — — — — — — — — 3,247 — — — — — 3,247

Issuance of Locality Acquisition Shares — — — — — — 14,445 — 513 — — — — — — 513

Issuance of GTX Acquisition Shares — — — — — — 22,223 — 650 — — — — — — 650

Issuance of Jibestream Acquisition Shares — — — — — — 176,289 — 1,349 — — — — — — 1,349

Fractional shares issued for stock split — — — — — — 62,276 — — — — — — — — —

Cumulative Translation Adjustment — — — — — — — — — — — 68 — — 68

Net loss — — — — — — — — — — — — ( 33,991 ) 8 ( 33,983 )

Balance - December 31, 2019 1 $ — 126 $ — — $ — 4,234,922 $ 4 $ 158,382 ( 1 ) $ ( 695 ) $ 94 $ ( 151,763 ) $ 26 $ 6,048

accompanying notes are an integral part of these financial statements

AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY (CONTINUED)

INPIXON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Years Ended December 31,

thousands, except per share data)

Accumulated Other

Total Stockholders’

Comprehensive

Balance - January 1, 2019

Shares issued for net cash proceeds of a public offering

shares issued for extinguishment of debt

shares issued for net proceeds from warrants exercised

shares issued for warrants exercised

of convertible Series 5 Preferred Stock

shares issued for extinguishment of liability

shares issued for services

options granted to employees and consultants for services

Translation Adjustment

- March 31, 2019

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

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

options granted to employees and consultants for services

of Jibestream Acquisition Shares

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

shares issued for extinguishment of debt

shares issued for warrants exercised

shares issued for stock options exercised

shares issued for stock split

Translation Adjustment

- December 31, 2019

accompanying notes are an integral part of these financial statements

AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

For the Years Ended

Cash Flows Used in Operating Activities

Net loss $ ( 29,214 ) $ ( 33,982 )

Adjustment to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Amortization of intangible assets 2,545 3,633

Impairment of goodwill

Amortization of right of use asset 490 398

2 unchanged sentences

Loss on exchange of debt for equity 210 294

Change in fair value of derivative liability

Amortization of debt discount 2,594 2,221

Accrued interest income, related party ( 32 ) —

Provision for doubtful accounts 956 558

Gain on earnout

Gain on the settlement of liabilities

Provision for inventory obsolescence 138 —

Provision for the valuation allowance held for sale loan 2,370 10,627

Gain on the sale of Sysorex Arabia

Provision for the valuation allowance related party receivable 648 —

Income tax benefit ( 87 ) ( 584 )

Other expenses ( 6 ) ( 223 )

Changes in operating assets and liabilities:

Accounts receivable and other receivables ( 964 ) 46

Other current assets

Prepaid licenses and maintenance contracts

Inventory ( 117 ) 171

Prepaid expenses and other current assets ( 563 ) 156

Other assets ( 248 ) ( 412 )

Accounts payable ( 1,815 ) 1,189

1 unchanged sentence

Deferred revenue 242 ( 507 )

Operating lease obligation ( 490 ) —

Other liabilities 453 551

4 unchanged sentences

Investment in capitalized software ( 862 ) ( 927 )

Investment in Pod technology

Cash spun off as a result of de-consolidation

Investment in short term investment ( 7,998 ) —

Investment in Systat Licensing Agreement ( 2,200 ) —

Investment in Ten Degrees ( 1,500 ) —

Investment in Nanotron ( 7,786 ) —

Investment in long term investment ( 2,500 ) —

Cash paid for the acquisition of GTX — ( 250 )

Cash paid for the acquisition of Locality — ( 204 )

INPIXON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

Cash paid for the acquisition of Jibestream — ( 3,714 )

1 unchanged sentence

Cash acquired in the Jibestream acquisition — 6

Cash acquired in the Nanotron acquisition 311 —

Net Cash Flows Used in Investing Activities $ ( 23,507 ) $ ( 5,108 )

Cash Flows From Financing Activities

Net proceeds (repayments) to bank facility

Net (repayments) proceeds to bank facility ( 150 ) 127

Net proceeds from issuance of common stock, preferred stock and warrants 55,352 20,725

4 unchanged sentences

Loan to Jibestream — ( 141 )

Loan to GTX — ( 50 )

Net proceeds from promissory notes 5,000 7,500

7 unchanged sentences

Cash paid for:

Interest $ 4 $ 20

Income Taxes $ — $ —

Non-cash investing and financing activities

Common shares issued for extinguishment of debenture liability

Adjustment to opening retained earnings for the adoption of ASC 606

Deconsolidation of Sysorex as a result of spin-off

Common shares issued for extinguishment of liability $ 200 $ 1,130

4 unchanged sentences

Common shares issued for Jibestream acquisition $ — $ 1,349

See accompanying

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

1 - Organization and Nature of Business and Going Concern

Inpixon, and its wholly-owned subsidiaries,

Inpixon Canada, Inc.

(“Inpixon Canada”) and Jibestream, Inc.

(“Jibestream”), which was amalgamated into

Inpixon Canada on January 1, 2020, and its majority-owned subsidiary Inpixon India Limited (“Inpixon India”) (unless

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

“we,”

“us,”

“our”

and the “Company”

refer collectively to Inpixon and the aforementioned subsidiaries), provide Big Data analytics and

location based products and related services.

The Company is headquartered in Palo Alto, California, and has subsidiary offices

in Coquitlam, Canada, New Westminster, Canada, Toronto, Canada and Hyderabad, India.

August 31, 2018, the Company completed the spin-off of its enterprise infrastructure business from its indoor positioning

analytics business by way of a distribution of all the shares of common stock of its wholly-owned subsidiary, Sysorex, Inc.

(“Sysorex”),

to its stockholders of record as of August 21, 2018 and certain warrant holders.

On May 21, 2019, the Company acquired Locality

(“Locality”), a technology company based near Vancouver, Canada, specializing in wireless device positioning

and radio frequency augmentation of video surveillance systems (See Note 3).

On June 27, 2019, the Company acquired certain global

positioning system (“GPS”) products, software, technologies, and intellectual property from GTX Corp (“GTX”),

Common shares issued for Ten Degrees acquisition $ 600 $ —

The accompanying notes are an integral part of these financial statements

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 1 - Organization and Nature of Business

Inpixon, and its wholly-owned subsidiaries, Inpixon Canada, Inc.

(“Inpixon Canada”) and Jibestream, Inc.

(“Jibestream”), which was amalgamated into Inpixon Canada on January 1, 2020, Inipixon Limited ("Inpixon UK"), Inpixon GmbH ("Inpixon Germany"), as well as Inpixon Germany's wholly-owned subsidiary, Nanotron GmbH ("Nanotron"), and its majority-owned subsidiary Inpixon India Limited (“Inpixon India”) (unless otherwise stated or the context otherwise requires, the terms “Inpixon” “we,” “us,” “our” and the “Company” refer collectively to Inpixon and the aforementioned subsidiaries), are an indoor intelligence company.

Our business and government customers use our solutions to secure, digitize and optimize their indoor spaces with our positioning, mapping, RTLS (real time location systems) and analytics products.

Our indoor intelligence platform uses sensor technology to detect accessible cellular, Wi-Fi, Bluetooth, ultra-wide band (“UWB”) and chirp signals emitted from devices within a venue providing positional information similar to what global positioning system (“GPS”) satellite systems provide for the outdoors.

Combining this positional data with our dynamic and interactive mapping solution and a high-performance analytics engine, yields near real time insights to our customers providing them with visibility, security and business intelligence within their indoor spaces.

Our highly configurable platform can also ingest data from our customers’ and other third-party sensors, Wi-Fi access points, Bluetooth beacons, video cameras, and big data sources, among others, to maximize indoor intelligence.

The Company also offers digital tear-sheets with optional invoice integration, digital ad delivery, and an e-edition designed for reader engagement for the media, publishing and entertainment industry and a comprehensive set of data analytics and statistical visualization solutions with its SAVES product line catering to the needs of engineers and scientists.

The Company is headquartered in Palo Alto, California, and has subsidiary offices in Coquitlam, Canada, New Westminster, Canada, Toronto, Canada, Slough, United Kingdom, Ratingen, Germany, Berlin, Germany, Bangalore, India and Hyderabad, India.

On May 21, 2019, the Company acquired Locality Systems Inc.

(“Locality”), a technology company based near Vancouver, Canada, specializing in wireless device positioning and radio frequency augmentation of video surveillance systems (See Note 3 ).

On June 27, 2019, the Company acquired certain global positioning system (“GPS”) products, software, technologies, and intellectual property from GTX Corp (“GTX”), a U.S.

based company specializing in GPS technologies (See Note 4 ).

These transactions expanded our patent portfolio and included

certain granted or licensed patents and GPS and radio frequency (“RF”) technologies.

Additionally, on August 15, 2019,

the Company acquired Jibestream, a provider of indoor mapping and location technology based in Toronto, Canada (See Note 5).

Concern and Management’s Plans

As of December 31, 2019, the Company has

a working capital deficiency of approximately $7.0 million.

For the year ended December 31, 2019, the Company incurred a net loss

of approximately $34.0 million.

The aforementioned factors raise substantial doubt about the Company’s ability to continue

as a going concern.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates

the realization of assets and the satisfaction of liabilities in the normal course of business.

The financial statements do not

include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities

that might be necessary should the Company be unable to continue as a going concern within one year after the date the financial

statements are issued.

On January 15, 2019, the Company completed

a rights offering whereby it sold 12,000 units at a price to the public of $1,000 per unit for aggregate net proceeds of approximately

$10.77 million after commissions and expenses.

On August 12, 2019, the Company completed a capital raise whereby the Company

sold an aggregate of (i) 144,387 shares of our common stock, (ii) 2,997 shares of its Series 6 Convertible Preferred Stock, and

(iii) Series A warrants to purchase up to an aggregate of 384,387 shares of common stock at an exercise price per share of $12.4875,

resulting in net proceeds of approximately $4 million after deducting the underwriting discounts and offering expenses.

also raised approximately $3 million, $1.5 million, $1.5 million, $750,000 and $750,000 in net proceeds from the sale of promissory

notes on May 3, 2019, June 26, 2019, August 8, 2019, September 17, 2019 and November 22, 2019, respectively.

From October 16,

2019 through December 20, 2019 under an at-the-market (“ATM”) program, the Company sold an aggregate of 1,470,900,

shares of common stock, at a weighted average price of approximately $4.42 per share resulting in net proceeds of approximately

$5.9 million to the Company after deduction of sales commissions and other offering expenses.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

1 - Organization and Nature of Business and Going Concern (continued)

Concern and Management’s Plans (continued)

Company does not expect its capital resources as of December 31, 2019, availability on the Payplant facility to finance purchase

orders and invoices in an amount equal to 80% of the face value of purchase orders received (as described in Note 14), and

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

In addition, the Company is pursuing possible strategic transactions and may raise such additional capital as

needed, through the issuance of equity, equity-linked or debt securities.

Company’s consolidated financial statements as of December 31, 2019 have been prepared under the assumption that the Company

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

Management’s

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

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

and, ultimately, to generate sufficient levels of revenue.

The Company’s consolidated financial statements as of December

31, 2019 do not include any adjustments that might result from the outcome of this uncertainty.

2 - Summary of Significant Accounting Policies

These transactions expanded our patent portfolio and included certain granted or licensed patents and GPS and radio frequency (“RF”) technologies.

Additionally, on August 15, 2019, the Company acquired Jibestream, a provider of indoor mapping and location technology based in Toronto, Canada (See Note 5).

On June 19, 2020, the Company entered into an exclusive license with Cranes Software International Ltd.

and Systat Software, Inc.

(together the “Systat Parties”) to use, market, distribute, and develop the SYSTAT and SigmaPlot software suite of products (See Note 6).

On August 19, 2020, the Company entered into an Asset Purchase Agreement with 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 (See Note 7).

Additionally, on October 6, 2020, the Company acquired Nanotron Technologies GmbH (“Nanotron”), a manufacturer and developer of location-aware IoT systems and solutions based in Berlin, Germany (See Note 8).

As of December 31, 2020, the Company has a working capital surplus of approximately $ 18.2 million.

For the year ended December 31, 2020, the Company incurred a net loss of approximately $ 29.2 million.

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 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 the Company’s sales agent.

The Company issued 33,416,830 shares of common stock during the year ended December 31, 2020 in connection with the ATM resulting in net proceeds to the Company of approximately $ 46.1 million after deduction of sales commissions and other offering expenses.

The EDA was terminated by the parties on February 12, 2021.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

On November 25, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor, pursuant to which it sold in a registered direct offering, 5,000,000 shares of its common stock, and warrants to purchase up to 8,000,000 shares of common stock at an exercise price of $ 1.25 per share (the “2020 Purchase Warrants”) for a combined purchase price of $ 1.25 per share and pre-funded warrants to purchase up to 3,000,000 shares of common stock ("2020 Pre-funded Warrants") at an exercise price of $ 0.001 per share at a purchase price of $ 1.249 per share for net proceeds of $ 9.2 million after deduction of sales commissions and other offering expenses.

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.

Our business has been impacted by the COVID-19 pandemic and may continue to be impacted.

While we have been able to continue operations remotely, we have and continue to experience 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 were in effect, compliance with new rules and regulations resulting from the pandemic or because of the uncertainty of the customer’s financial position and ability to invest in our technology.

Despite these challenges, including a decline in revenue for certain existing product lines, we were able to realize growth in total revenue for the year ended December 31, 2020 when compared to the year ended 2019, as a result of the addition of new product lines including a full year of sales associated with our mapping product, the addition of the SAVES product lines following the second quarter of 2020 and the addition of the RTLS product line in the fourth quarter of 2020.

The total impact that COVID-19 will have on general economic conditions is continuously evolving and the impact it may continue to 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.

There are no assurances that we will be able to continue to experience the same growth or not be materially adversely affected.

Note 2 - Summary of Significant Accounting Policies

Consolidations

The consolidated financial statements have

been prepared using the accounting records of Inpixon, Inpixon Canada, Jibestream and Inpixon India.

All material inter-company

balances and transactions have been eliminated.

preparation of financial statements in conformity with generally accepted accounting principles in the United States of America

(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues

and expenses during each of the reporting periods.

The consolidated financial statements have been prepared using the accounting records of Inpixon, Inpixon Canada, Inpixon Germany, Inpixon UK, Nanotron and Inpixon India.

All material inter-company balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods.

Actual results could differ from those estimates.

The Company’s significant

estimates consist of:

The Company’s significant estimates consist of:

• the valuation of stock-based compensation;

the valuation of the assets and liabilities acquired of Locality, GTX and Jibestream as described in Notes 3, 4 and 5, respectively, as well as the valuation of the Company’s common shares issued in the transaction;

• the valuation of the assets and liabilities acquired of Locality, GTX, Jibestream, Sysat, Ten Degrees, and Nanotron as described in Note 3, Note 4, Note 5, Note 6, Note 7, and Note 8 respectively, as well as the valuation of the Company’s common shares issued in the transaction;

• the allowance for doubtful accounts;

1 unchanged sentence

• the valuation allowance for deferred tax assets;

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

• impairment of long-lived assets and goodwill.

Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) 805 “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.

Business Combinations

The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “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.

All acquisition costs are expensed as incurred.

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

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

and Cash Equivalents

and cash equivalents consist of cash, checking accounts, money market accounts and temporary investments with maturities of three

months or less when purchased.

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

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, checking accounts, money market accounts and temporary investments with maturities of three months or less when purchased.

As of December 31, 2020 and 2019, the Company had no cash equivalents.

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

Restricted Cash

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

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

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

released to the Company.

As of December 31, 2019 and 2018, 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.

Upon resolution of those contingencies or the expiration of the escrow period, some or all the escrow amounts may be used and the balance released to the Company.

As of December 31, 2019, the Company had and $ 72,000 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 of the closing date of the Shoom acquisition.

The restricted cash balance was included in Prepaid Assets and Other Current Assets on the consolidated balance sheet.

As of December 31, 2020, there was no balance of restricted cash as all amounts related to the Shoom acquisition were released from escrow and paid to the Shoom pre-acquisition stockholders prior to that date.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the balance sheets that sum to the total of the same amounts show in the statement of cash flows.

As of December 31,

2019 and 2018, $72,000 and $70,000, respectively, was current and included in Prepaid Assets and Other Current Assets on the consolidated

balance sheets.

As of December 31, 2019 and 2018, $0 and $70,000 was non-current and included in Other Assets on the consolidated

balance sheet.

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 show in the statement of cash flows.

and cash equivalents

cash included in other assets, noncurrent

cash, cash equivalents, and restricted cash in the balance sheet

Receivable, net and Allowance for Doubtful Accounts

receivables are stated at the amount the Company expects to collect.

The Company recognizes an allowance for doubtful accounts

to ensure accounts receivables are not overstated due to un-collectability.

Bad debt reserves are maintained for various customers

based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical

An additional reserve for individual accounts is recorded when the Company becomes aware of a customer’s inability

to meet its financial obligation, such as in the case of bankruptcy filings, or deterioration in such customer’s operating

results or financial position.

If circumstances related to a customer change, estimates of the recoverability of receivables would

be further adjusted.

The Company has recorded an allowance for doubtful accounts of approximately $646,000 and $464,000 as of

December 31, 2019 and 2018, respectively.

is stated at the lower of cost or net realizable value utilizing the first-in, first-out method.

The Company continually analyzes

its slow-moving, excess and obsolete inventories.

Based on historical and projected sales volumes and anticipated selling prices,

the Company establishes reserves.

(in thousands) 2020 2019

Cash and cash equivalents $ 17,996 $ 4,777

Restricted cash — 72

Total cash, cash equivalents, and restricted cash in the balance sheet $ 17,996 $ 4,849

Accounts Receivable, net and Allowance for Doubtful Accounts

Accounts receivables are stated at the amount the Company expects to collect.

The Company recognizes an allowance for doubtful accounts to ensure accounts receivables are not overstated due to un-collectability.

Bad debt reserves are maintained for various customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience.

An additional reserve for individual accounts is recorded when the Company becomes aware of a customer’s inability to meet its financial obligation, such as in the case of bankruptcy filings, or deterioration in such customer’s operating results or financial position.

If circumstances related to a customer change, estimates of the recoverability of receivables would be further adjusted.

The Company has recorded an allowance for doubtful accounts of approximately $ 235,000 and $ 646,000 as of December 31, 2020 and 2019, respectively.

Finished goods are measured at the cost of manufactured products including direct materials and subcontracted services.

The Company's latest acquisition, Nanotron, states finished goods at the lower of cost and net realizable value on an average cost basis.

As the inventory held by Nanotron is typically small dollar value items with small variances in price, an estimate or average is used to determine the balance of inventory.

All other subsidiaries of the Company state inventory utilizing the first-

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

in, first-out method.

The Company continually analyzes its slow-moving, excess and obsolete inventories.

Based on historical and projected sales volumes and anticipated selling prices, the Company establishes reserves.

If the Company does not meet its sales expectations, these reserves are increased.

that are determined to be obsolete are written down to net realizable value.

As of December 31, 2019 and 2018, the Company deemed

any such allowance nominal.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

and Equipment, net

and equipment are recorded at cost less accumulated depreciation and amortization.

The Company depreciates its property and equipment

for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range from

3 to 7 years.

Products that are determined to be obsolete are written down to net realizable value.

As of December 31, 2020 and 2019, the Company recognized inventory obsolescence of approximately $ 138,000 and $ 0 , respectively.

Short-term investments

Investments with maturities greater than 90 days but less than one year are classified as short-term investments on the consolidated balance sheets and consist of US Treasury Bills.

Accrued interest on US Treasury bills are also classified as short term investment.

Our short-term investments are considered available for use in current operations, are classified as available-for-sale securities .

Available for sale securities are carried at fair value, with an unrealized loss of approximately $ 2,000 .

Property and Equipment, net

Property and equipment are recorded at cost less accumulated depreciation and amortization.

The Company depreciates its property and equipment for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range from 3 to 10 years.

Leasehold improvements are amortized over the lesser of the useful life of the asset or the initial lease term.

Expenditures for maintenance and repairs, which do not extend the economic useful life of the related assets, are charged to operations

as incurred, and expenditures, which extend the economic life, are capitalized.

When assets are retired, or otherwise disposed

of, the costs and related accumulated depreciation or amortization are removed from the accounts and any gain or loss on disposal

is recognized.

assets primarily consist of developed technology, customer lists/relationships, non-compete agreements, export licenses and trade

names/trademarks.

They are amortized ratably over a range of 1 to 15 years, which approximates customer attrition rate and technology

obsolescence.

Expenditures for maintenance and repairs, which do not extend the economic useful life of the related assets, are charged to operations as incurred, and expenditures, which extend the economic life, are capitalized.

When assets are retired, or otherwise disposed of, the costs and related accumulated depreciation or amortization are removed from the accounts and any gain or loss on disposal is recognized.

Intangible Assets

Intangible assets primarily consist of developed technology, customer lists/relationships, non-compete agreements, intellectual property agreements, export licenses and trade names/trademarks.

They are amortized ratably over a range of 1 to 15 years, which approximates customer attrition rate and technology obsolescence.

The Company assesses the carrying value of its intangible assets for impairment each year.

Based on its assessments,

the Company did not incur any impairment charges for the years ended December 31, 2019 and 2018.

The Company tests goodwill for potential

impairment at least annually, or more frequently if an event or other circumstance indicates that the Company may not be able

to recover the carrying amount of the net assets of the reporting unit.

The Company has determined that the reporting unit

is the entire company, due to the integration of all of the Company’s activities.

In evaluating goodwill for

impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood

of more than 50%) that the fair value of a reporting unit is less than its carrying amount.

If the Company bypasses the

qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit

is less than its carrying value, then the Company performs a quantitative impairment test by comparing the fair value of a

reporting unit with its carrying amount.

The Company calculates the estimated fair

value of a reporting unit using a weighting of the income and market approaches.

For the income approach, the Company uses internally

developed discounted cash flow models that include the following assumptions, among others:

projections of revenues, expenses,

and related cash flows based on assumed long-term growth rates and demand trends;

Based on its assessments, the Company did no t incur any impairment charges for the years ended December 31, 2020 and 2019.

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

In accordance with authoritative guidance, the Company recognizes IPR&D at fair value as of the acquisition date, and subsequently accounts 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, the Company 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, the acquisition of certain assets of Ten Degrees, and the acquisition of Nanotron.

The Company's IPR&D is comprised of AirPatrol, LightMiner, Locality, Jibestream, GTX, SYSTAT, Ten Degrees, and Nanotron, which was valued on the date of the acquisition.

It will take additional financial resources to continue development of these technologies.

The Company continues to seek additional resources, through both capital raising efforts and meeting with industry experts, for further development of the AirPatrol, Locality, Jibestream, GTX, SYSTAT, Ten Degrees, and Nanotron technologies.

Through December 31, 2020, the Company has made some progress with raising capital since these acquisitions, building their pipeline and getting industry acknowledgment.

The Company has 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 and Crossfire Media.

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, Ten Degrees.

and Nanotron technologies.

Although there can be no assurance that these efforts will be successful, the Company intends to allocate financial and personnel resources when deemed

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

possible and/or necessary.

If the Company chooses to abandon these efforts, or if the Company determines that such funding is not available, the related IPR&D will be subject to significant impairment.

The Company tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the net assets of the reporting unit.

The Company has determined that the reporting unit is the entire company, due to the integration of all of the Company’s activities.

In evaluating goodwill for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount.

If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.

The Company calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches.

For the income approach, the Company uses internally developed discounted cash flow models that include the following assumptions, among others:

projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends;

expected future investments to grow new units;

1 unchanged sentence

For the market approach, the Company uses internal analyses based primarily on market comparables.

The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro

and macro general economic condition projections, and its expectations.

Company performed the annual impairment test and recorded an impairment charge for goodwill of $0 and $636,000 during the years

ended December 31, 2019 and 2018, respectively.

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 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 1 to 5 years.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

and Development

and development costs consist primarily of professional fees and compensation expense.

All research and development costs are

expensed as incurred.

The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and its expectations.

The Company performed the annual impairment test as of December 31, 2020 and did no t record impairment of goodwill during the years ended December 31, 2020 and 2019, respectively.

Other Long Term Investments

The Company invests in certain equity-method investments:

When the Company does not have a controlling financial interest in an entity but can exert significant influence over the entity’s operating and financial policies, the investment is accounted for either (i) under the equity method of accounting or (ii) at fair value by electing the fair value option available under U.S.

The Company accounted for its equity investment under the equity method of accounting, as the Company is deemed to have significant influence.

The Company generally recognizes its share of the equity method investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely from the Company’s reporting period.

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 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 1 to 5 years.

Research and Development

Research and development costs consist primarily of professional fees and compensation expense.

All research and development costs are expensed as incurred.

Research and development costs as of December 31, 2020 and 2019 were $ 6.5 million and $ 3.9 million, respectively.

Loans and Notes Receivable

The Company evaluates loans and notes receivable

that don’t qualify as securities pursuant to ASC 310 –

Receivables, wherein such loans would first be classified as

either “held for investment”

or ‘held for sale”.

Loans would be classified as “held for investment”,

if the Company has the intent and ability to hold the loan for the foreseeable future, or to maturity or pay-off.

Loans would be

classified as “held for sale”, if the Company intends to sell the loan.

Loan receivables classified as “held

for investment”

are carried on the balance sheet at their amortized cost and are periodically evaluated for impairment.

receivables classified as “held for sale”

are carried on the balance sheet at the lower of their amortized cost or

fair value, with a valuation allowance being recorded (with a corresponding income statement charge) if the amortized cost exceeds

the fair value.

For loans carried on the balance sheet at fair value, changes to the fair value amount that relate solely to the

passage of time will be recorded as interest income.

Company accounts for income taxes using the asset and liability method.

Accordingly, deferred tax assets and liabilities are recognized

for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and

liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected

to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change

is effective.

The Company evaluates loans and notes receivable that don’t qualify as securities pursuant to ASC 310 – "Receivables", wherein such loans would first be classified as either “held for investment” or ‘held for sale”.

Loans would be classified as

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

“held for investment”, if the Company has the intent and ability to hold the loan for the foreseeable future, or to maturity or pay-off.

Loans would be classified as “held for sale”, if the Company intends to sell the loan.

Loan receivables classified as “held for investment” are carried on the balance sheet at their amortized cost and are periodically evaluated for impairment.

Loan receivables classified as “held for sale” are carried on the balance sheet at the lower of their amortized cost or fair value, with a valuation allowance being recorded (with a corresponding income statement charge) if the amortized cost exceeds the fair value.

For loans carried on the balance sheet at fair value, changes to the fair value amount that relate solely to the passage of time will be recorded as interest income.

The Company accounts for income taxes using the asset and liability method.

Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective.

Income tax benefits are recognized when it is probable that the deduction will be sustained.

A valuation allowance

is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company

is able to realize the benefit, or that future deductibility is uncertain.

Non-Controlling

The Company has an 82.5% equity interest in Inpixon India as

of December 31, 2019.

The portion of the Company’s equity attributable to this third party non-controlling interest

was approximately $26,000 and $18,000 as of December 31, 2019 and 2018, respectively.

Currency Translation

and liabilities related to the Company’s foreign operations are calculated using the Indian Rupee and Canadian Dollar and

are translated at end-of-period exchange rates, while the related revenues and expenses are translated at average exchange rates

prevailing during the period.

Translation adjustments are recorded as a separate component of consolidated stockholders’

equity, totaling a gain of $68,000 and a loss of $5,000 for the years ended December 31, 2019 and 2018, respectively.

losses resulting from transactions denominated in foreign currencies are included in other income (expense) in the consolidated

statements of operations.

The Company engages in foreign currency denominated transactions with customers that operate in functional

currencies other than the U.S.

Aggregate foreign currency net transaction losses were not material for the years ended

December 31, 2019 and 2018.

Comprehensive

Income (Loss)

Company reports comprehensive income (loss) and its components in its consolidated financial statements.

Comprehensive loss consists

of net loss, foreign currency translation adjustments and unrealized gains and losses from marketable securities, affecting stockholders’

(deficit) equity that, under GAAP, are excluded from net loss.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations”, in April 2016, the FASB

issued ASU No.

2016-10, “Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing”

and in May 9, 2016, the FASB issued ASU No.

2016-12, “Revenue from Contracts with Customers (Topic 606)”, or ASU 2016-12.

This update provides clarifying guidance regarding the application of ASU No.

2014-09 - Revenue From Contracts with Customers

(Topic 606), (“ASU 2014-09”).

These new standards provide for a single, principles-based model for revenue recognition

that replaces the existing revenue recognition guidance.

In July 2015, the FASB deferred the effective date of ASU 2014-09 until

annual and interim periods beginning on or after December 15, 2017 and has replaced most existing revenue recognition guidance

ASU 2016-12 may be applied retrospectively to historical periods presented or as a cumulative-effect adjustment as

of the date of adoption.

The Company has adopted ASU 2016-12 using a modified retrospective approach and will be applied prospectively

in the Company’s financial statements from January 1, 2018 forward.

Revenues under ASU 2016-12 are required to be recognized

either at a “point in time”

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

and will be evaluated using a five-step model.

The adoption of Topic 606 did not have a material impact on the Company’s

consolidated financial statements, neither at initial implementation nor will it have a material impact on an ongoing basis.

As A Service Revenue Recognition

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

advertising and electronic services, customers pay fixed monthly fees in exchange for the Company’s service.

The Company’s

performance obligation is satisfied over time as the digital advertising and electronic services 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.

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.

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

A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain.

Non-Controlling Interest

The Company has an 82.5 % equity interest in Inpixon India as of December 31, 2020.

The portion of the Company’s equity attributable to this third party non-controlling interest was approximately $ 41,000 and $ 26,000 as of December 31, 2020 and 2019, respectively.

Foreign Currency Translation

Assets and liabilities related to the Company’s foreign operations are calculated using the Indian Rupee, Canadian Dollar, British Pound and Euro, and are translated at end-of-period exchange rates, while the related revenues and expenses are translated at average exchange rates prevailing during the period.

Translation adjustments are recorded as a separate component of consolidated stockholders’ equity, totaling a gain of approximately $ 566,000 and $ 68,000 for the years ended December 31, 2020 and 2019, respectively.

Gains or losses resulting from transactions denominated in foreign currencies are included in other income (expense) in the consolidated statements of operations.

The Company engages in foreign currency denominated transactions with customers that operate in functional currencies other than the U.S.

Aggregate foreign currency net transaction losses were not material for the years ended December 31, 2020 and 2019.

Comprehensive Income (Loss)

The Company reports comprehensive income (loss) and its components in its consolidated financial statements.

Comprehensive loss consists of net loss, foreign currency translation adjustments and unrealized gains and losses from marketable securities, affecting stockholders’ (deficit) equity that, under GAAP, are excluded from net loss.

Revenue Recognition

The Company recognizes revenue when control is transfered of the promised products or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services.

The Company derives revenue from software as a service, design and implementation services for its Indoor Intelligence systems, and professional services for work performed in conjunction with its systems.

Hardware and Software Revenue Recognition

For sales of hardware and software products, the Company’s performance obligation is satisfied at a point in time when they are shipped to the customer.

This is when the customer has title to the product and the risks and rewards of ownership.

The delivery of products to Inpixon's customers occurs in a variety of ways, including (i) as a physical product shipped from the Company’s warehouse, (ii) via drop-shipment by a third-party vendor, or (iii) via electronic delivery with respect to software licenses.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse.

In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer.

Accordingly, the Company is the principal in the transaction with the customer and records revenue on a gross basis.

The Company receives fixed consideration for sales of hardware and software products.

The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice.

The Company has elected the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the asset that otherwise would have been recognized is less than a year.

Software As A Service Revenue Recognition

With respect to sales of the Company’s maintenance, consulting and other service agreements including the Company’s digital advertising and electronic services, customers pay fixed monthly fees in exchange for the Company’s service.

The Company’s performance obligation is satisfied over time as the digital advertising and electronic services 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.

Professional Services Revenue Recognition

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

Professional services under milestone contracts are 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.

Professional services are also contracted on the fixed fee and time and materials basis.

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.

Revenue on time and material 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

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.

Anticipated losses are recognized as soon as they become known.

For the years ended December 31, 2019 and 2018, the

Company did not incur any such losses.

For the years ended December 31, 2020 and 2019, the Company did not incur any such losses.

These amounts are based on known and estimated factors.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

The timing of the

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

The Company records a receivable when

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

Alternatively, when payment precedes

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

Company had deferred revenue of approximately $912,000 and $234,000 as of December 31, 2019 and 2018, respectively, related to

cash received in advance for product maintenance services and professional services provided by the Company’s technical

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

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

and Handling Costs

and handling costs are expensed as incurred as part of cost of revenues.

These costs were deemed to be nominal during each of

the reporting periods.

costs are expensed as incurred.

Advertising costs, which are included in selling, general and administrative expenses, were deemed

to be nominal during each of the reporting periods.

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

instruments based upon the fair value of the award on the date of grant.

The fair value of that award is then ratably recognized

as an expense over the period during which the recipient is required to provide services in exchange for that award.

and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted

to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments,

as adjusted, is expensed over the related vesting period.

Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award.

The fair value of the award is measured on the grant date and recognized over the period services are required to be provided

in exchange for the award, usually the vesting period.

SAVES by Inpixon Revenue Recognition

SAVES by Inpixon ("SAVES", formerly Systat) is a comprehensive set of data analytics and statistical visualization solutions for engineers and scientists.The Company enters into contracts with its customers whereby it grants a non-exclusive on-premise license for the use of its proprietary software.

The contracts provide for either (i) a one year stated term with a one year renewal option, (ii) a perpetual term or (iii) a two year term for students with the option to upgrade to a perpetual license at the end of the term.

The contracts may also provide for yearly on-going maintenance services for a specified price, which includes maintenance services, designated support, and enhancements, upgrades and improvements to the software (the “Maintenance Services”), depending on the contract.

Licenses for on-premises software provide the customer with a right to use the software as it exists when made available to the customer.

All software provides customers with the same functionality and differ mainly in the duration over which the customer benefits from the software.

The timing of the Company's revenue recognition related to the SAVES revenue stream is dependent on whether the software licensing agreement entered into represents a good or service.

Software that relies on an entity’s IP and is delivered only through a hosting arrangement, where the customer cannot take possession of the software, is a service.

A software arrangement

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

that is provided through an access code or key represents the transfer of a good.

Licenses for on-premises software represents a good and provide the customer with a right to use the software as it exists when made available to the customer.

Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software.

Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer.

Renewals or extensions of licenses are evaluated as distinct licenses (i.e., a distinct good or service), and revenue attributed to the distinct good or service cannot be recognized until (1) the entity provides the distinct license (or makes the license available) to the customer and (2) the customer is able to use and benefit from the distinct license.

Renewal contracts are not combined with original contracts, and, as a result, the renewal right is evaluated in the same manner as all other additional rights granted after the initial contract.

The revenue is not recognized until the customer can begin to use and benefit from the license, which is typically at the beginning of the license renewal period.

Therefore, the Company recognizes revenue resulting from renewal of licensed software at a point in time, specifically, at the beginning of the license renewal period.

The Company recognizes revenue related to Maintenance Services evenly over the service period using a time-based measure because the Company is providing continuous service and the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the services are performed.

Contract Balances

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

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

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

The Company had deferred revenue of approximately $ 1,922,000 and $ 912,000 as of December 31, 2020 and 2019, respectively, related to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff.

The Company expects to satisfy its remaining performance obligations for these maintenance services and professional services, and recognize the deferred revenue and related contract costs over the next twelve months.

Shipping and Handling Costs

Shipping and handling costs are expensed as incurred as part of cost of revenues.

These costs were deemed to be nominal during each of the reporting periods.

Advertising Costs

Advertising costs are expensed as incurred.

The Company incurred advertising costs, which are included in selling, general and administrative expenses of approximately $ 1.3 million and $ 19,000 during the years ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2020, the Company initiated an advertising campaign totaling approximately $ 1.3 million, resulting in the substantial increase of advertising costs compared to the year ended December 31, 2019.

Stock-Based Compensation

The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant.

The fair value of that award is then ratably recognized as an expense over the period during which the recipient is required to provide services in exchange for that award.

Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period.

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award.

The fair value of the award is measured on the grant date and recognized over the period services are required to be provided in exchange for the award, usually the vesting period.

Forfeitures of unvested stock options are recorded when they occur.

The Company incurred stock-based compensation

charges of $3.5 million and $1.5 million for each of the years ended December 31, 2019 and 2018, respectively, which are included

in general and administrative expenses.

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

the Years Ended

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The Company incurred stock-based compensation charges of approximately $ 1.2 million and $ 3.5 million for each of the years ended December 31, 2020 and 2019, respectively, which are included in general and administrative expenses.

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

For the Years Ended

Compensation and related benefits $ 1,194 $ 3,247

Professional and legal fees — 242

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

Loss Per Share

Company computes basic and diluted earnings per share by dividing net loss by the weighted average number of common shares outstanding

during the period.

Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant

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

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 years ended December 31, 2019 and 2018:

Totals $ 1,194 $ 3,489

Net Loss Per Share

The Company computes basic and diluted earnings per share by dividing net loss by the weighted average number of common shares outstanding during the period.

Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options and warrants in the calculation of diluted net loss per common shares would have been anti-dilutive.

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the years ended December 31, 2020 and 2019:

For the Years Ended

Options 5,450,057 121,796

Warrants 8,093,250 93,252

Convertible preferred stock 846 846

Convertible note

Reserved for service providers

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

and measurement of its convertible preferred stock.

Preferred shares subject to mandatory redemption are classified as liability

instruments and are measured at fair value.

Conditionally redeemable preferred shares (including preferred shares that feature

redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events

not solely within the Company’s control) are classified as temporary equity.

At all other times, preferred shares are classified

as permanent equity.

Value of Financial Instruments

instruments consist of cash and cash equivalents, accounts receivable, notes receivable, accounts payable, and short-term debt.

The Company determines the estimated fair value of such financial instruments presented in these financial statements using available

market information and appropriate methodologies.

These financial instruments, except for short-term debt, are stated at their

respective historical carrying amounts, which approximate fair value due to their short-term nature.

Short-term debt approximates

market value based on similar terms available to the Company in the market place.

Reclassification

accounts in the prior year’s consolidated financial statements have been reclassified for comparative purposes to conform

to the presentation in the current year’s consolidated financial statements.

These reclassifications have no effect on previously

reported earnings.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

Value, Recoverability and Impairment of Long-Lived Assets

Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets.

Pursuant to ASC

Paragraph 360-10-35-17, an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group)

is not recoverable and exceeds its fair value.

The carrying amount of a long-lived asset (asset group) is not recoverable if it

exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).

Totals 13,544,153 215,894

Preferred Stock

The Company relies on the guidance provided by ASC 480, "Distinguishing Liabilities from Equity", to classify certain redeemable and/or convertible instruments.

Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value.

Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.

At all other times, preferred shares are classified as permanent equity.

The Company also follows the guidance provided by ASC 815 "Derivatives and Hedging", which states that contracts that are both, (1) indexed to its own stock and (2) classified in stockholders’ equity in its statement of financial position, are not classified as derivative instruments, and to be recorded under stockholder's equity on the balance sheet of the financial statements.

Management assessed the preferred stock and determined that it did meet the scope exception under ASC 815, and would be recorded as equity, and not a derivative instrument, on the balance sheet of the Company's financial statements.

Fair Value Measurements

ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements.

The Company follows this authoritative guidance for fair value measurements, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and expands disclosures about fair value measurements.

The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the years ended December 31, 2020 and 2019.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, accounts payable, and short-term debt.

The Company determines the estimated fair value of such financial instruments presented in these financial statements using available market information and appropriate methodologies.

These financial instruments, except for short-term debt, are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature.

Short-term debt approximates market value based on similar terms available to the Company in the market place.

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets.

Pursuant to ASC Paragraph 360-10-35-17, an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value.

The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).

That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability.

An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its

Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived

asset shall be its new cost basis.

For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over

the remaining useful life of that asset.

An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.

Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis.

For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset.

Restoration of a previously recognized impairment loss is prohibited.

to ASC Paragraph 360-10-35-21, the Company’s long-lived asset (asset group) is tested for recoverability whenever events

or changes in circumstances indicate that its carrying amount may not be recoverable.

The Company considers the following to be

some examples of such events or changes in circumstances that may trigger an impairment review:

(a) significant decrease in the

market price of a long-lived asset (asset group);

(b) a significant adverse change in the extent or manner in which a long-lived

asset (asset group) is being used or in its physical condition;

climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;

(d) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of

a long-lived asset (asset group);

(e) a current-period operating or cash flow loss combined with a history of operating or cash

flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset

and (f) a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed

of significantly before the end of its previously estimated useful life.

The Company tests its long-lived assets for potential

impairment indicators at least annually and more frequently upon the occurrence of such events.

to ASC Paragraphs 360-10-35-29 through 35-36, estimates of future cash flows used to test the recoverability of a long-lived asset

(asset group) shall include only the future cash flows (cash inflows less associated cash outflows) that are directly associated

with and that are expected to arise as a direct result of the use and eventual disposition of the asset (asset group).

of future cash flows used to test the recoverability of a long-lived asset (asset group) shall incorporate the entity’s

own assumptions about its use of the asset (asset group) and shall consider all available evidence.

The assumptions used in developing

those estimates shall be reasonable in relation to the assumptions used in developing other information used by the entity for

comparable periods, such as internal budgets and projections, accruals related to incentive compensation plans, or information

communicated to others.

However, if alternative courses of action to recover the carrying amount of a long-lived asset (asset

group) are under consideration or if a range is estimated for the amount of possible future cash flows associated with the likely

course of action, the likelihood of those possible outcomes shall be considered.

A probability-weighted approach may be useful

in considering the likelihood of those possible outcomes.

Estimates of future cash flows used to test the recoverability

of a long-lived asset (asset group) shall be made for the remaining useful life of the asset (asset group) to the entity.

long-lived assets (asset groups) that have uncertainties both in timing and amount, an expected present value technique will often

be the appropriate technique with which to estimate fair value.

to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and

used shall be included in income from continuing operations before income taxes in the income statement of a business entity.

If a subtotal such as income from operations is presented, it shall include the amount of that loss.

A gain or loss recognized

on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing

operations before income taxes in the income statement of a business entity.

If a subtotal such as income from operations is presented,

it shall include the amounts of those gains or losses.

on its assessments, the Company did not record any impairment charges for the years ended December 31, 2019 and 2018.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

Issued and Adopted Accounting Standards

In February 2016, the FASB issued ASU No.

2016-02, “Leases (Topic 842),”

(“ASU 2016-02”).

ASU 2016-02 requires an entity to recognize assets

and liabilities arising from a lease for both financing and operating leases.

ASU 2016-02 will also require new qualitative

and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and

uncertainty of cash flows arising from leases.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2018.

As a result of the new standard, all of the Company’s leases greater than one year in duration are recognized in its

balance sheets as both operating lease liabilities and right-of-use assets upon adoption of the standard.

The Company adopted

the standard using the modified-retrospective method effective January 1, 2019.

This adoption primarily affected the

Company’s consolidated balance sheet based on the recording of right-of-use assets and the lease liability, current and

noncurrent, for its operating leases.

The adoption of ASU 2016-02 did not change the Company’s historical

classification of these leases or the straight-line recognition of related expenses.

Upon adoption, the Company recorded

approximately $0.6 million in right-of-use assets and $0.7 million in operating lease liabilities on the Company’s

balance sheet.

June 2018, the FASB issued ASU No.

2018-07, “Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based

Payment Accounting,”

(“ASU 2018-07”).

ASU 2018-07 expands the scope of Topic 718 to include share-based payment

transactions for acquiring goods and services from nonemployees.

ASU 2018-07 also clarifies that Topic 718 does not apply to share-based

payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services

to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606).

ASU 2018-07 is effective

for fiscal years beginning after December 15, 2018, 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 financial statements or disclosures.

In 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,”

(“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

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

The Company has evaluated this standard and adoption does not have a material impact on its financials or disclosures.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

2 - Summary of Significant Accounting Policies (continued)

Issued and Adopted Accounting Standards (continued)

Pursuant to ASC Paragraph 360-10-35-21, the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review:

(a) significant decrease in the market price of a long-lived asset (asset group);

(b) a significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition;

(c) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;

(d) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group);

(e) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group);

and (f) a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

Based on its assessments, the Company did not record any impairment charges for the years ended December 31, 2020 and 2019.

Recently Issued and Adopted Accounting Standards

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit

Losses (Topic 326):

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

ASU 2016-13 introduces a

new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including

trade receivables.

The estimate of expected credit losses will require entities to incorporate considerations of historical information,

current information and reasonable and supportable forecasts.

ASU 2016-13 also expands the disclosure requirements to enable users

of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses.

For public business entities that meet the definition of a Securities and Exchange Commission filer and smaller reporting company,

ASU 2016-13 is effective for annual and interim reporting periods beginning after December 15, 2022, and the guidance is to be

applied using the modified retrospective approach.

Earlier adoption is permitted for annual and interim reporting periods beginning

after December 15, 2018.

The Company has evaluated this standard and adoption does not have a material impact on its financials

or disclosures.

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”).

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

statements and related disclosures.

In December 2019, the FASB issued ASU

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,”

which is intended to simplify various

aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740

and also clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 is effective for the Company beginning

in fiscal 2021.

The Company is currently assessing the impact that this pronouncement will have on its consolidated financial

On February 6, 2018, the Company effected

a 1-for-30 reverse stock split of its outstanding common stock, on November 2, 2018, the Company effected a 1-for-40 reverse stock

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

common stock.

The consolidated financial statements and accompanying notes give effect to each of these reverse stock splits as

if they occurred at the beginning of the first period presented.

Company evaluates events and/or transactions occurring after the balance sheet date and before the issue date of the consolidated

financial statements to determine if any of those events and/or transactions requires adjustment to or disclosure in the consolidated

financial statements.

3 - Locality Acquisition

On May 21, 2019, the Company, through

its wholly owned subsidiary, Inpixon Canada as purchaser, completed its acquisition of Locality in which Locality’s stockholders

sold all of their shares to the purchaser in exchange for consideration of (i) $1,500,000 (the “Aggregate Cash Consideration”)

minus a working capital adjustment equal to $39,501 calculated in accordance with the terms of the purchase agreement), and (ii)

14,445 shares of common stock of Inpixon with a fair market value of $514,000.

Locality is a technology company specializing in

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

The Locality acquisition allows us

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

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

radio frequency data concurrently.

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

is payable in installments as follows:

(i) the initial installment representing $250,000 minus $46,422 of the working capital

adjustment was paid on the closing date;

(ii) $210,499 was paid on November 21, 2019, which was comprised of a $250,000 installment

less $39,501 of the working capital adjustment;

(iii) two additional installments, each equal to $250,000, will be paid twelve

months and eighteen months after the closing date;

and (iv) one final installment representing $500,000 will be paid on the second

anniversary of the closing date, in each case minus the cash fees payable to the advisor in connection with the acquisition.

Canada will have the right to offset any loss, as defined in the purchase agreement, first, against any installment of the installment

cash consideration that has not been paid and second, against the sellers and the advisor on a several basis, in accordance with

the indemnification provisions of the purchase agreement.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

3 - Locality Acquisition (continued)

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 preliminary purchase price was

allocated and modified for measurement period adjustments due to the receipt of the valuation report and updated tax

provision estimates as follows (in thousands):

Preliminary Allocation

Valuation Measurement Period Adjustments

Tax Provision Measurement Period Adjustments

Adjusted Allocation

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

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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.

In 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,” (“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 evaluated this standard and adoption does not have a material impact on its condensed consolidated 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.

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 condensed consolidated financial statements or disclosures.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes,” (“ASU 2019-12”) 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.

In January 2020, the FASB issued ASU 2020-01, "Investments—Equity Securities, Investments—Equity Method and Joint Ventures, and Derivatives and Hedging" ("ASU 2020-01"), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.

The effective date of the standard will be for annual periods beginning after December 15, 2020, and interim periods within those fiscal years.

The Company is currently evaluating the impact of the new guidance and does not expect the adoption of this guidance will have a material impact on its condensed consolidated financial statements or disclosures.

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 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 Company has adopted this standard and the adoption did not have a material impact on its condensed consolidated financial statements or disclosures.

In October 2020, the FASB issued ASU 2020-10, "Codification Improvements" ("ASU 2020-10"), which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations.

The effective date of the standard will be for interim and annual reporting periods beginning after December 15, 2020 for public entities.

The Company will adopt ASU 2020-10 as of the reporting period beginning January 1, 2021.

The adoption of this update is not expected to have a material effect on the Company’s consolidated financial statements.

Reverse Stock Split

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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

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

Subsequent Events

The Company evaluates events and/or transactions occurring after the balance sheet date and before the issue date of the consolidated financial statements to determine if any of those events and/or transactions requires adjustment to or disclosure in the consolidated financial statements.

Note 3 - Locality Acquisition

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

The Locality acquisition allows the Company to accept wireless device positioning from third-party Wi-Fi access points as well as surveillance systems and combine that information with Inpixon's own location data into their analytics platform, providing customers with additional data and ability to see video and radio frequency data concurrently.

The Aggregate Cash Consideration, less the working capital adjustment applied against the Aggregate Cash Consideration of $ 85,923 , is payable in installments as follows:

(i) the initial installment representing $ 250,000 minus $ 46,422 of the working capital adjustment was paid on the closing date;

(ii) $ 210,499 was paid on November 21, 2019, which was comprised of a $ 250,000 installment less $ 39,501 of the working capital adjustment;

(iii) two additional installments, each equal to $ 250,000 , were paid twelve months and eighteen months after the closing date;

and (iv) one final installment representing $ 500,000 will be paid on the second anniversary of the closing date, in each case minus the cash fees payable to the advisor in connection with the acquisition.

Inpixon Canada will have the right to offset any loss, as defined in the purchase agreement, first, against any installment of the installment cash consideration that has not been paid and second, against the sellers and the advisor on a several basis, in accordance with the indemnification provisions of the purchase agreement.

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 upon closing.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The purchase price was allocated and modified for measurement period adjustments due to the receipt of the valuation report and updated tax provision estimates as follows (in thousands):

Preliminary Allocation Valuation Measurement Period Adjustments Tax Provision Measurement Period Adjustments Adjusted Allocation

Assets Acquired:

Cash $ 70 $ — $ — $ 70

Accounts receivable 7 — — 7

Other current assets 4 — — 4

Inventory 2 — — 2

Fixed assets 1 — — 1

Developed technology 1,523 ( 78 ) — 1,445

1 unchanged sentence

Non-compete agreements 49 — — 49

Goodwill 619 80 ( 46 ) 653

$ 2,491 $ ( 29 ) $ ( 46 ) $ 2,416

Liabilities Assumed:

3 unchanged sentences

Deferred tax liability 474 ( 29 ) ( 46 ) 399

563 ( 29 ) ( 46 ) 488

Total Purchase Price $ 1,928 $ — $ — $ 1,928

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 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 year ended December 31, 2019.

Proforma information has not been presented as it has been deemed

to be immaterial.

A final valuation of the assets and purchase

price allocation of Locality 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 our best estimates at the time of this

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

expects to occur during the first quarter of 2020.

4 - GTX Acquisition

On June 27, 2019, the Company completed

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

GTX allows us to seamlessly locate devices/assets/people 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 Inpixon’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.

Assets acquired (in thousands):

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 year ended December 31, 2020.

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

Note 4 - GTX Acquisition

On June 27, 2019, the Company completed its acquisition of certain assets of GTX, consisting of a portfolio of GPS technologies and intellectual property (the “Assets”) that allow Inpixon 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 Inpixon’s restricted common stock.

The 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.

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

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Fair Value Allocation

Assets Acquired:

Developed technology $ 830

1 unchanged sentence

Total Purchase Price $ 900

A final valuation of the assets and purchase

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

Consequently, the purchase price was preliminarily allocated based upon our 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 first quarter of 2020.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

4 - GTX Acquisition (continued)

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

The note accrues

interest at a rate of 5% per annum and has a maturity date of April 13, 2020.

Interest accrues beginning on the date that is the

earlier of (i) 180 days from the issue date of the note and (ii) the registration effective date as defined in the acquisition

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

December 31, 2019, the balance of the note including interest was $50,425.

5 - Jibestream Acquisition

On August 15, 2019, the Company, through

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

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

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

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

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

settle any Indebtedness (as defined in the Purchase Agreement) or other fees, minus any cash payments to the holders of outstanding

options to settle any in-the-money options, minus the deferred revenue costs of CAD $150,000, and minus the costs associated with

the audit and review of the financial statements of Jibestream required by the Purchase Agreement (collectively, the “Estimated

Cash Closing Amount”);

plus (ii) 176,289 shares of the Company’s common stock which was equal to CAD $3,000,000, converted

dollars based on the exchange rate at the time of the closing, divided by $12.4875 which was the price per share at which

shares of the Company’s common stock are issued in of the Company’s common stock the Offering on August 12, 2019 (“Inpixon

Shares”).

Jibestream, 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.

the Jibestream map allows Inpixon to offer a more intuitive interface to see its locationing data and analytics.

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

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

November 5, 2019.

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

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

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

of the Company, to secure the obligation of the Vendors’

to pay any adjustment to the Purchase Price pursuant to Section

2.5 of the Purchase Agreement.

The total recorded purchase price for the

transaction was approximately $5,062,000, which consisted of cash at closing of approximately $3,714,000 and $1,348,000 representing

the value of the stock issued upon closing determined based on the closing price of the Company’s common stock as of the

closing date on August 15, 2019.

Subsequently, the Company agreed not to enforce any right of setoff resulting from a Working

Capital Adjustment.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

5 - Jibestream Acquisition (continued)

The preliminary purchase price was

allocated and modified for measurement period adjustments due to updated tax provision estimates as follows (in

Preliminary Allocation

Tax Provision Measurement Period Adjustments

Adjusted Allocation

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

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

The note was amended on May 11, 2020 to extend the maturity date from April 13, 2020 to September 13, 2020 and require monthly payments against the outstanding balance of the note.

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 consolidated financial statements.

As of December 31, 2020, the balance of the note including interest was approximately $ 53,000 .

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

Note 5 - Jibestream Acquisition

On August 15, 2019, the Company, through its wholly owned subsidiary, Inpixon Canada as purchaser (the “Purchaser”), completed its acquisition of Jibestream, a provider of indoor mapping and location technology, for consideration consisting of:

(i) CAD $ 5,000,000 , plus an amount equal to all cash and cash equivalents held by Jibestream at the closing, minus, if a negative number, the absolute value of the Estimated Working Capital Adjustment (as defined in the acquisition agreement), minus any amounts loaned by the Purchaser to Jibestream to settle any Indebtedness (as defined in the Purchase Agreement (the "Purchase Agreement")) or other fees, minus any cash payments to the holders of outstanding options to settle any in-the-money options, minus the deferred revenue costs of CAD $ 150,000 , and minus the costs associated with the audit and review of the financial statements of Jibestream required by the Purchase Agreement (collectively, the “Estimated Cash Closing Amount”);

plus (ii) 176,289 shares of the Company’s common stock which was equal to CAD $ 3,000,000 , converted to U.S.

dollars based on the exchange rate at the time of the closing, divided by $ 12.4875 which was the price per share at which shares of the Company’s common stock are issued in of the Company’s common stock the Offering on August 12, 2019 (“Inpixon Shares”).

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.

Inpixon 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 to obtain the approval of the Company’s stockholders for the issuance of 63,645 of the Inpixon Shares (the “Excess Shares”), which was obtained on October 31, 2019 and the shares were issued on November 5, 2019.

A number of Inpixon Shares representing fifteen percent ( 15 %) of the value of the Purchase Price (the “Holdback Amount”) were subject to stop transfer restrictions and forfeiture to secure the indemnification and other obligations of the Vendors in favor of the Company arising out of or pursuant to Article VIII of the Purchase Agreement and, at the option of the Company, to secure the obligation of the Vendors’ to pay any adjustment to the Purchase Price pursuant to Section 2.5 of the Purchase Agreement.

The total recorded purchase price for the transaction was approximately $ 5,062,000 , which consisted of cash at closing of approximately $ 3,714,000 and $ 1,348,000 representing the value of the stock issued upon closing determined based on the closing price of the Company’s common stock as of the closing date on August 15, 2019.

Subsequently, the Company agreed not to enforce any right of setoff resulting from a Working Capital Adjustment.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The purchase price was allocated based on the receipt of a final valuation report and modified for measurement period adjustments due to updated tax provision estimates as follows (in thousands):

Preliminary Allocation Tax Provision Measurement Period Adjustments Adjusted Allocation

Assets Acquired:

Cash $ 5 $ — $ 5

Accounts receivable 309 — 309

Other current assets 138 — 138

Fixed assets 10 — 10

Other assets 430 — 430

Developed technology 3,193 — 3,193

1 unchanged sentence

Non-compete agreements 420 — 420

Goodwill 2,407 ( 919 ) 1,488

$ 8,165 $ ( 919 ) $ 7,246

Liabilities Assumed:

4 unchanged sentences

Deferred tax liability 1,289 ( 919 ) 370

3,103 ( 919 ) 2,184

Total Purchase Price $ 5,062 $ — $ 5,062

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 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.

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 year ended December 31, 2019.

A final valuation of the assets and purchase

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

been finalized.

Consequently, the purchase price was preliminarily allocated based upon our best estimates at the time of this

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

expects to occur during the first quarter of 2020.

6 - Proforma Financial Information

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

for the years ended December 31, 2019 and 2018, 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 Years Ended

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 year ended December 31, 2020.

Jibestream was amalgamated into Inpixon Canada on January 1, 2020.

Note 6 - Systat Licensing Agreement

On June 19, 2020, the Company entered into an exclusive license with Cranes Software International Ltd.

and Systat Software, Inc.

(together the “Systat Parties”) to use, market, distribute, and develop the SYSTAT and SigmaPlot software suite of products (the “License Grant”) pursuant to the terms and conditions of that certain Exclusive Software License and Distribution Agreement, deemed effective as of June 1, 2020 (the “Effective Date”), and amended on June 30, 2020 (as amended, the “License Agreement”).

In accordance with Rule 11-01(d) and ASC 805, the transaction was deemed to be the acquisition of a business and accounted for as a business combination with an acquisition date of June 30, 2020 (the “Closing Date”).

In accordance with the terms of the License Agreement, on the Closing Date, we partitioned a portion of that certain promissory note (the “Sysorex Note”) issued to us by Sysorex, Inc.

(“Sysorex”), into a new note in an amount equal to $ 3.0 million in principal plus accrued interest (the “Closing Note”) and assigned the Closing Note and all rights and obligations thereunder to Systat Software, Inc.

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 was partitioned and assigned to Systat Software, Inc.

as consideration payable for the rights granted under the license as follows:

(i) $ 1.3 million on the three

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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 March19, 2021.

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

In connection with the License Grant, the Systat Parties provided Inpixon with equipment to use at no additional cost for a minimum period of six months following the Closing Date.

The Company is 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 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.

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.

The total recorded purchase price for the transaction was $ 2.2 million, which consisted of the $ 2.2 million cash consideration as a full valuation allowance was retained against the Sysorex Note.

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

Fair Value Allocation

Assets Acquired:

Other receivable $ 44

Developed technology 1,200

Customer relationships 395

Tradename & Trademarks 279

Non-compete agreements 495

Liabilities Assumed:

Deferred Revenue $ 733

Total Purchase Price $ 2,200

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 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 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 first quarter of 2021.

Note 7 - Ten Degrees Acquisition

On August 19, 2020, in accordance with the terms and conditions of that certain Asset Purchase Agreement ("APA"), by and among the Company, Ten Degrees Inc.

(“TDI”), Ten Degrees International Limited (“TDIL”), mCube International Limited

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(“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”), the Company 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 “TDI Assets”).

In accordance with Rule 11-01(d) and ASC 805, the transaction was deemed to be the acquisition of a group of assets, and not to be accounted for as a business combination, with an asset acquisition date of August 19, 2020.

The TDI Assets were acquired for consideration consisting of (i) $ 1.5 million in cash and (ii) 480,000 shares of the Company's 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 TDI 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.

The total recorded purchase price for the transaction was $ 2.1 million, which consisted of the cash paid of $ 1.5 million and $ 600,000 representing the value of the stock issued upon closing.

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

Fair Value Allocation

Assets Acquired:

Developed technology $ 1,701

Non-compete agreements 399

Total Purchase Price $ 2,100

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

The developed technology and non-compete agreements acquired are included in the consolidated balance of intangible assets as of December 31, 2020.

There was no goodwill acquired or recognized as a result of the acquisition of Ten Degrees.

Note 8 – Nanotron Acquisition

On October 6, 2020, the Company, through its wholly-owned subsidiary, Inpixon GmbH, a limited liability company incorporated under the laws of Germany, completed the acquisition of all the outstanding capital stock of Nanotron, a limited liability company incorporated under the laws of Germany, pursuant to the terms and conditions of that certain Share Sale and Purchase Agreement, dated as of October 5,2020, among the Company, Nanotron and Sensera Limited (the "Seller", and the owner of all outstanding shares of Nanotron), a stock corporation incorporated under the laws of Australia and the sole shareholder of Nanotron.

As a result of the acquisition, the Company now owns 100 % of Nanotron.

Nanotron’s business consists of developing and manufacturing location-aware IoT systems and solutions.

The total paid to Nanotron was an aggregate purchase price of $ 8.7 million in cash (less the Holdback Funds (as defined below) and certain other closing adjustments) for the outstanding shares of Nanotron.

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

Inpixon retained $ 750,000 (the “Holdback Funds”) from the purchase price to secure Nanotron’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.

As discussed above, the certain adjustments to the Purchase Price are adjustments for severance payments and calculations of Net Working Capital versus the Working Capital Target (calculation defined as “Net Working Capital Adjustment”).

The adjustment for severance payments includes a $ 214,000 reduction in purchase price for severance payments due after the closing date offset by a return credit of $ 50,000 for severance payments owed by Sensera Limited.

As for Net Working Capital Adjustment, Net Working Capital was determined to be less than the Working Capital Target by an amount of $ 30,000 , resulting in a reduction in the purchase price of $ 30,000 .

Inpixon Germany paid the purchase price from funds received in connection with a capital contribution from Inpixon, and a portion of the purchase price was used by the Seller to satisfy outstanding loans payable by Sensera Limited to obtain the release of certain existing security interests on Nanotron’s assets.

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

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Fair Value Allocation

Assets acquired:

Cash and cash equivalents 301

Trade and other receivables 576

Inventory 827

Prepaid expenses and other current assets 103

Operating lease right-of-use asset 557

Property, plant, and equipment 433

Proprietary Technology 1,213

Customer Relationships 1,055

Non-compete Agreements 610

In-Process R&D 505

IP Agreement 178

Goodwill 3,755

Total assets acquired $ 10,164

Liabilities assumed:

Accounts payable 526

Lease liabilities 557

Restructuring Costs 214

Accrued Liabilities 361

Total liabilities assumed 1,658

Estimated fair value of net assets acquired:

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

The calculated goodwill is not tax deductible for local tax purposes, but will be amortizable in the computation of the shareholder’s U.S.

tax liability.

Note 9 - Proforma Financial Information

Jibestream Proforma Financial Information

The following unaudited proforma financial information presents the consolidated results of operations of the Company and Jibestream for the years ended December 31, 2020 and 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.

The proforma financial information for the Company and Jibestream is as follows (in thousands):

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

For the Years Ended December 31,

Revenues $ 9,297 7,558

Net loss attributable to common stockholders $ ( 29,229 ) ( 36,513 )

2 unchanged sentences

Basic and Diluted 28,800,493 997,856

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

7 - Inventory

as of December 31, 2019 and December 31, 2018 consisted of the following (in thousands):

As of December 31,

Nanotron Proforma Financial Information

The following unaudited proforma financial information presents the consolidated results of operations of the Company and Nanotron for the years ended December 31, 2020 and 2019, as if the acquisition had occurred as of the beginning of the first period presented instead of on October 6, 2020.

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.

The proforma financial information for the Company and Nanotron is as follows (in thousands):

For the Years Ended December 31,

Revenues $ 13,059 $ 15,044

Net loss attributable to common stockholders $ ( 29,541 ) $ ( 39,532 )

Net loss per basic and diluted common share $ ( 1.03 ) $ ( 53.31 )

Weighted average common shares outstanding:

Basic and Diluted 28,800,493 741,530

Note 10 - Inventory

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

Raw materials $ 210 $ 13

Work-in-process 137 —

Finished goods 1,033 387

Inventory obsolescence reserve ( 138 ) —

Total Inventory $ 1,243 $ 400

8 - Property and Equipment, net

and equipment as of December 31, 2019 and 2018 consisted of the following (in thousands):

Note 11 - Property and Equipment, net

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

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

As of December 31,

2 unchanged sentences

Leasehold improvements 45 25

Software 829 39

Total 2,581 1,066

accumulated depreciation and amortization ( 1,136 ) ( 921 )

Total Property and Equipment, Net $ 1,445 $ 145

Depreciation and amortization expense

were $98,000 and $355,000 for the years ended December 31, 2019 and 2018, respectively.

9 - Software Development Costs

software development costs as of December 31, 2019 and 2018 consisted of the following (in thousands):

Depreciation and amortization expense were approximately $ 128,000 and $ 98,000 for the years ended December 31, 2020 and 2019, respectively.

Note 12 - Software Development Costs, net

Capitalized software development costs as of December 31, 2020 and 2019 consisted of the following (in thousands):

As of December 31,

2 unchanged sentences

Software development costs, net $ 1,721 $ 1,544

weighted average remaining amortization period for the Company’s software development costs is 1.61 years.

Amortization expense for capitalized software

development costs was $1.025 million and $1.2 million for each of the years ended December 31, 2019 and 2018.

amortization expense on the computer software is anticipated to be as follows (in thousands):

For the Years Ending December 31,

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

10 - Intangible Assets

assets at December 31, 2019 and 2018 consisted of the following (in thousands):

Amortized Intangible Assets

Gross Carrying Amount

Accumulated Amortization

The weighted average remaining amortization period for the Company’s software development costs is 2.8 years.

Amortization expense for capitalized software development costs was $ 0.7 million and $ 1.03 million for each of the years ended December 31, 2020 and 2019.

Future amortization expense on the computer software is anticipated to be as follows (in thousands):

For the Years Ending December 31, Amount

2025 and thereafter —

Total $ 1,721

Note 13 - Intangible Assets

Intangible assets at December 31, 2020 and 2019 consisted of the following (in thousands):

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Gross Carrying Amount December 31, Accumulated Amortization December 31, Remaining Weighted Average Useful Life

2020 2019 2020 2019

Trade Name/Trademarks $ 1,112 $ 780 $ ( 854 ) $ ( 724 ) 0.03

2 unchanged sentences

Non-compete Agreements 2,485 923 ( 902 ) ( 501 ) 0.37

Export License

Amortization Expense:

amortization expense for the years ended December 31, 2019 and 2018 were $3.6 million and $3.2 million, respectively.

amortization expense on intangibles assets is anticipated to be as follows (in thousands):

For the Years Ending December 31,

IP Agreement 186 — ( 12 ) — 0.05

Totals $ 35,589 $ 27,195 $ ( 21,386 ) $ ( 18,795 )

Aggregate Amortization Expense:

Aggregate amortization expense for the years ended December 31, 2020 and 2019 were $ 2.3 million and $ 3.6 million, respectively.

Future amortization expense on intangibles assets is anticipated to be as follows (in thousands):

For the Years Ending December 31, Amount

2025 and thereafter 5,940

weighted average remaining amortization periods for the Company’s trade names/trademarks, customer relationships, developed

technology, non-compete agreements, and export license are 0, 1.41, 8.43, 0.9, and 0 years, respectively.

11 - Goodwill

Company has recorded goodwill and other indefinite-lived assets in connection with its acquisition of Shoom, Locality and Jibestream.

Goodwill, which represents the excess of acquisition cost over the fair value of the net tangible and intangible assets of the

acquired company, is not amortized.

Indefinite-lived intangible assets are stated at fair value as of the date acquired in a business

The Company’s goodwill balance and other assets with indefinite lives were evaluated for potential impairment

during the years ended December 31, 2019 and 2018, as certain indications on a qualitative and quantitative basis were identified

that an impairment exists as of the reporting date.

the years ended December 31, 2019 and 2018, the Company recognized $0 and $636,000 of impairment charges, respectively.

The impairment

charge was primarily precipitated by the continued decline in Company’s stock price during those years, accumulated losses

and the lack of required working capital to fund our continuing operations.

The Company used a market approach to determine if

the carrying amounts of the Company’s reporting units exceeded the fair value of the Company.

During the year ended December 31, 2019,

the corporate income tax returns were filed for the periods ending as of the acquisition dates of Locality and Jibestream.

reviewing those tax returns, it was determined that there were additional tax benefits the Company would receive primarily related

to net operating losses and research tax credits.

As a result, the deferred tax asset of Jibestream was increased by approximately

$1,023,000 and the deferred tax asset of Locality was increased by $48,000 with a corresponding decrease to goodwill.

Additionally,

during the year ended December 31, 2019, upon receipt of the Locality valuation report, the values of the intangibles were updated

with a corresponding $80,000 increase to goodwill.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

11 - Goodwill (continued)

following table summarizes the changes in the carrying amount of Goodwill for the year ended December 31, 2019 (in thousands):

Total $ 14,202

Note 14 - Goodwill

The Company has recorded goodwill and other indefinite-lived assets in connection with its acquisition of Shoom, Locality, GTX, Jibestream, Systat, and Nanotron.

Goodwill, which represents the excess of acquisition cost over the fair value of the net tangible and intangible assets of the acquired company, is not amortized.

Indefinite-lived intangible assets are stated at fair value as of the date acquired in a business combination.

The Company’s goodwill balance and other assets with indefinite lives were evaluated for potential impairment during the years ended December 31, 2020 and 2019, as certain indications on a qualitative and quantitative basis were identified that an impairment exists as of the reporting date.

During the years ended December 31, 2020 and 2019, the Company did not recognize any impairment on the balance of goodwill.

The Company utilized qualitative factors in determining if the carrying amounts of the Company’s reporting units exceeded the fair value of the Company, and noted that no such factors indicated impairment on any of its goodwill.

During the year ended December 31, 2019, the corporate income tax returns were filed for the periods ending as of the acquisition dates of Locality and Jibestream.

After reviewing those tax returns, it was determined that there were additional tax benefits the Company would receive primarily related to net operating losses and research tax credits.

As a result, the deferred tax asset of Jibestream was increased by approximately $ 1,023,000 and the deferred tax asset of Locality was increased by $ 48,000 with a corresponding decrease to goodwill.

Additionally, during the year ended December 31, 2019, upon receipt of the Locality valuation report, the values of the intangibles were updated with a corresponding $ 80,000 increase to goodwill.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The following table summarizes the changes in the carrying amount of Goodwill for the year ended December 31, 2020 (in thousands):

Locality Jibestream GTX Systat Nanotron Total

Balance as of January 1, 2019 — — — — — —

Goodwill impairment (level 3 fair value adjustment)

Balance as of December 31, 2018

Goodwill additions through acquisitions 619 2,407 — — — 3,026

4 unchanged sentences

Balance as of December 31, 2019 672 1,398 — — — 2,070

12 - Discontinued Operations

of Sysorex Arabia

of December 31, 2015, the Company’s management decided to close its Saudi Arabia legal entity as business activities and

operations have been strategically shifted according to the business plan of the Company.

On January 18, 2018, the Company sold

its 50.2% interest in Sysorex Arabia to SCI in consideration for SCI’s assumption of 50.2% of the assets and liabilities

of Sysorex Arabia, totaling approximately $11,500 and $1 million, respectively.

The Company did not recognize any depreciation

or amortization expense related to discontinued operations during the years ended December 31, 2019 and 2018.

There were no significant

capital expenditures or non-cash operating or investing activities of discontinued operations during the periods presented.

operations of Sysorex Arabia were insignificant for the January 1 –

18, 2018 period.

On January 18, 2018, the Company sold

its 50.2% interest in Sysorex Arabia to SCI (Abdus Salam Qureishi, the former Chairman of the Board, is the majority stockholder

of SCI and is the father in law of Nadir Ali the Company’s CEO) in consideration for SCI’s assumption of 50.2% of the

assets and liabilities of Sysorex Arabia.

of Sysorex, Inc.

and its wholly owned subsidiary, Sysorex Government Services, Inc.

August 31, 2018, the Company completed the spin-off (the “Spin-off”) of its enterprise infrastructure

business from its indoor positioning analytics business by way of a distribution of all the shares of common stock of the Company’s

wholly-owned subsidiary, Sysorex, Inc.

(“Sysorex”), to the Company’s stockholders of record as of August 21,

2018 (the “Record Date”) and certain warrant holders.

The distribution occurred by way of a pro rata stock distribution

to such common stock, preferred stock and warrant holders, each of whom received one share of Sysorex’s common stock

for every 3 shares of the Company’s common stock held on the Record Date (without taking into effect the 1-for-40 reverse

stock split) or such number of shares of common stock issuable upon complete conversion of the preferred stock or exercise of

the warrants.

a result of the Spin-off, the Company’s common stock continues trading on the Nasdaq Stock Market (“Nasdaq”),

and Sysorex is an independent public company with common stock that is quoted on the OTC Markets.

accordance with ASC 205-20, “

Discontinued Operations ,”

the results of Sysorex, including Inpixon’s

former subsidiary, Sysorex Government Services, Inc., formerly Inpixon Federal, Inc.

(“SGS”), are reflected in Inpixon’s

consolidated financial statements as discontinued operations and, therefore, are presented as loss from discontinued operations

on the consolidated statements of operations.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

12 - Discontinued Operations (continued)

the terms of the asset purchase agreement between Integrio Technologies, LLC and Emtec Federal, LLC (its wholly owned subsidiary)

(collectively, the “Seller”) and the Company and SGS, the Seller was eligible for an earnout that was included as

part of the purchase consideration.

During the year ended December 31, 2018, the Company determined that the Seller was ineligible

for a portion of the earnout as the Seller did not meet the terms of the earnout provisions under the agreement and therefore

recorded a gain on earnout of $934,000, which is included in the net loss from discontinued operations section of the consolidated

statements of operations.

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

Assets/Liabilities (In thousands)

Accounts receivable, net

Notes and other receivables

Prepaid licenses and maintenance contracts

Other current assets

Property and equipment, net

Intangible assets, net

Accounts payable

Accrued liabilities

Deferred revenue

Other liabilities

Acquisition liability - Integrio

Goodwill additions through acquisitions — 15 2 520 3,755 4,292

Exchange rate fluctuation at December 31, 2020 $ — $ 50 $ — $ — $ 176 $ 226

Balance as of December 31, 2020 672 1,463 2 520 3,931 6,588

Note 15 - Other Long Term Investments

During the fourth quarter, the Company purchased $ 2.5 million of Cardinal Ventures Holdings LLC, (“CVH”) for 600,000 Class A Units and 2,500,000 Class B Units.

CVH is a Delaware limited liability company formed to conduct any business, enterprise or activity permitted to owning certain interests in a sponsor of a special purpose acquisition company (“SPAC”).

CVH will receive distributions from the sponsor to the extent there is activity at the SPAC.

As described in Note 1, the Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income.

During the period October 6, 2020 through December 31, 2020, CVH had no operating results, as such, there were no share of earnings recognized by the Company in its statement of operations on its proportional equity investment.

The following component represents components of Other long-term investments as of December 31, 2020:

Ownership interest as of December 31,

2020 Instrument Held

CVH LLC Class A 14.1 % Units

CVH LLC Class B 28.1 % Units

The following table presents summarized financial information for Inpixon’s investment in equity method eligible entities:

As of December 31,

Balance Sheet Data

Total assets $ 6,508

Total liabilities $ —

Total Net Liabilities Deconsolidated as Result of Spin-off

13 - Deferred Revenue

revenue as of December 31, 2019 and 2018 consisted of the following (in thousands):

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

For the period from October 6 through December 31,

Income Statement Data

Note 16 - Deferred Revenue

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

As of December 31,

2 unchanged sentences

Service agreements 147 279

Deferred revenue assumed from Systat agreement 883 —

Total Deferred Revenue, Current 1,922 912

Total Deferred Revenue $ 1,922 $ 912

fair value of the deferred revenue approximates the services to be rendered.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

as of December 31, 2019 and 2018 consisted of the following (in thousands):

As of December 31,

Short-Term Debt

Notes payable, less debt discount of $628 and $752, respectively (A)

Revolving line of credit (B)

Other short term debt (C)

Total Short-Term Debt

Long-Term Debt

Notes payable

Total Long-Term Debt

2017 Note Purchase Agreement and Promissory Note

On October 5, 2018, in connection with

the issuance of exchange shares, the exercise price of the warrants issued in the Company’s public offering on April 24,

2018 (as described in Note 15) was adjusted to $486.00 per share and increased the number of shares of common stock issuable upon

exercise of such warrants to 30,315 shares of common stock.

The Company has presented a deemed dividend of $8,817,000 on the consolidated

statements of operations for this price reset.

On January 29, 2019, the Company and Chicago

Venture Partners, L.P., the holder of that certain outstanding convertible promissory note (“Chicago Venture”

“Note Holder”), issued on November 17, 2017 (as amended, supplemented or otherwise modified, the “Original Note”),

with an outstanding balance of $383,768 (the “Remaining Balance”), entered into an exchange agreement (the “Exchange

Agreement”), pursuant to which the Company and the Note Holder agreed to (i) partition a new convertible promissory note

in the form of the Original Note (the “Partitioned Note”) in the original principal amount equal to the Remaining Balance

(the “Exchange Amount”) and then cause the Remaining Balance to be reduced by the Exchange Amount;

and (ii) exchange

the Partitioned Note for the delivery of 3,842 shares of the Company’s common stock at an effective price share equal to

Following such partition of the Original Note, the Original Note was deemed paid in full, was automatically deemed cancelled,

and shall not be reissued.

2018 Note Purchase Agreement and Promissory Note

October 12, 2018, the Company entered into a note purchase agreement with Iliad Research and Trading, L.P.

(the “Holder”

or “Iliad”), which is affiliated with Chicago Venture, pursuant to which the Company agreed to issue and sell to the

Holder an unsecured promissory note in an aggregate principal amount of $2,520,000, 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 $500,000 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 note, the Holder paid an aggregate purchase price of $2,000,000.

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

as of the date that was 6 months from the issuance date and at the intervals indicated below until the note is paid in full, the

Holder has the right to redeem up to an aggregate of 1/3 of the initial principal balance of the note each month (each monthly

exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”)

to the Company;

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

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

Monthly Redemption Amount.

Upon receipt of any Monthly Redemption Notice, the Company is required to pay the applicable Monthly

Redemption Amount in cash to the Holder within 5 business days of the Company’s receipt of such Monthly Redemption Notice.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

14 - Debt (continued)

Payable (continued)

October 2018 Note Purchase Agreement

and Promissory Note (continued)

During the year ended December 31, 2019,

the Company exchanged approximately $2,729,000 of the outstanding principal and interest under the note for 92,831 shares of the

Company’s common stock at exchange prices between $22.95 and $40.45 per share.

The Company analyzed the exchange of principal

under the 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 a $188,000 loss on the exchange of debt for equity as a separate item in the

other income/expense section of the consolidated statements of operations for the year ended December 31, 2019.

These exchanges

satisfied the liability in full and the balance owed under the note was $0 as of December 31, 2019.

2018 Note Purchase Agreement and Promissory Note

December 21, 2018, the Company entered into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue

and sell to Iliad an unsecured promissory note (the “December 2018 Note”) in an aggregate principal amount of $1,895,000,

which is payable on or before December 31, 2019 (as provided in the Exchange Agreement, dated October 24, 2019, described below

(the “October 24 th Exchange Agreement”)).

The initial principal amount includes an original issue discount

of $375,000 and $20,000 that the Company agreed to pay to the Holder to cover its legal fees, accounting costs, due diligence,

monitoring and other transaction costs.

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

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 December 2018 Note.

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

provided, that

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

outstanding balance the Company elects to prepay.

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

indicated below until the December 2018 Note is paid in full, the Holder has the right to redeem up to an aggregate of 1/3 of

the initial principal balance of the December 2018 Note each month (each monthly exercise, a “Monthly Redemption Amount”)

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

provided, however, that

if any Monthly Redemption Amount is not exercised in its corresponding month then such Monthly Redemption Amount will be available

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

of any Monthly Redemption Notice, the Company shall pay the applicable Monthly Redemption Amount in cash within 5 business days

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

Pursuant to the October 24 th Exchange Agreement described

below, the Holder agreed that the exercise of any redemption rights described above would be deferred until no earlier than December

to Note Purchase Agreements

February 8, 2019, the Company entered into a global amendment (the “Global Amendment”) to the note purchase agreements

entered into on October 12, 2018 and December 21, 2018, in connection with the notes issued as of such dates, to delete the phrase

“by cancellation or exchange of the Note, in whole or in part”

from Section 8.1 of those agreements.

The Company also

agreed to pay Iliad’s fees and other expenses in an aggregate amount of $80,000 (the “Fee”) in connection with

the preparation of the Global Amendment by adding $40,000 of the Fee to the outstanding balance of each of the notes.

August 8, 2019, the Company and Iliad entered into a standstill agreement with respect to the December 2018 Note (the “Standstill

Agreement”).

Pursuant to the Standstill Agreement, Iliad agreed that it will not redeem all or any portion of the December

2018 Note for a period beginning on August 8, 2019, and ending on the date that is 90 days from August 8, 2019.

As consideration

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

The fair value of the deferred revenue approximates the services to be rendered.

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 14 - Debt (continued)

Notes Payable

Note Exchanges

During the year ended December 31, 2019,

the Company exchanged approximately $2,112,000 of the outstanding principal and interest under the note for 707,071 shares of

the Company’s common stock at exchange prices between $1.80 and $4.95 per share.

The Company analyzed the exchange of principal

under the 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 $10,000 loss on the exchange of debt for equity as a separate

item in the other income/expense section of the consolidated statements of operations for the year ended December 31, 2019.

of December 31, 2019, the outstanding balance of the December 2018 Note was approximately $28,749.

May 2019 Note Purchase Agreement

and Promissory Note

On May 3, 2019, the Company entered into

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

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

of $3,770,000, which is payable on or before the date that is 10 months from the issuance date.

The initial principal amount includes

an original issue discount of $750,000 and $20,000 that the Company agreed to pay to the holder to cover the holder’s legal

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

In exchange for the May 2019 Note, the holder paid

an aggregate purchase price of $3,000,000.

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

the maturity date or otherwise in accordance with the May 2019 Note.

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

earlier than it is due;

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

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

Beginning on the date

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

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

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

delivered to the Company;

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

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

future month’s Monthly Redemption Amount.

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

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

During the year ended December 31, 2019,

the Company exchanged approximately $2,076,000 of the outstanding principal and interest under the note for 738,889 shares of

the Company’s common stock at exchange prices between $1.80 and $3.51 per share.

The Company analyzed the exchange of principal

under the 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 $96,000 loss on the exchange of debt for equity as a separate

item in the other income/expense section of the consolidated statements of operations for the year ended December 31, 2019.

of December 31, 2019, the outstanding balance of the May 2019 Note was approximately $1,694,000.

Note 17 - Debt

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

Short-Term Debt Maturity Principal Unamortized Debt Discount 2020 2019

March 2020 10 % Note

3/18/2021 $ 5,655 $ ( 254 ) $ 5,401 —

November 2019 10 % Note

September 2019 10 % Note

August 2019 10 % Note

June 2019 10 % Note

May 2019 10 % Note

December 2018 10 % Note

Debt discount — — — ( 628 )

Revolving line of credit — — — 150

Other short term debt — — — 74

Total Short-Term Debt $ 5,401 $ 7,304

Interest expense on the short-term debt totaled approximately $ 0.7 million and $ 0.8 million and approximately $ 1.6 million and $ 1.7 million was amortized to interest expense from the combined amortization of deferred financing costs and note discounts recorded at issuance for the Short Term Debt for the periods ending December 31, 2020 and 2019, respectively.

(A) Notes Payable

March 2020 10 % 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 10 % 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.

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 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.

On September 17, 2020, we amended the one time monitoring fee applicable in the event the note was outstanding on the date that was 6 months from the issuance date, from ( 10 %) to 5% which was added to the March 2020 Note balance.

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 14 - Debt (continued)

Notes Payable (continued)

June 2019 Note Purchase Agreement

and Promissory Note

On June 27, 2019, the Company entered

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

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

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

The initial principal amount includes

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

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

In exchange for the June 2019 Note, the holder

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

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

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

The Company may pay all or any portion of the amount

owed earlier than it is due;

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

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

Beginning on the date

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

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

providing written notice delivered to the Company;

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

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

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

Upon receipt of any monthly redemption notice, the Company

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

The June 2019 Note includes

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

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

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

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

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

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

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

due and payable at the Mandatory Default Amount.

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

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

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

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

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

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

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

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.

As of December 31, 2019, the

outstanding balance of the June 2019 Note was approximately $2,086,883.

November 2019 10 % Note Purchase Agreement and Promissory Note

On November 22, 2019, we 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 10 % 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 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 note, St.

George paid an aggregate purchase price of $ 750,000 .

Under the terms of the 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 December 31, 2020 this note was re-paid in full.

September 2019 10 % 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 10 % 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 Note, the Holder paid an aggregate purchase price of $ 750,000 .

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.

As of December 31, 2020 this note was re-paid in full.

August 2019 10 % 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 10 % 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 .

As of December 31, 2020 this note was re-paid in full.

June 2019 10 % 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 10 % Note”) in an aggregate principal amount of $ 1,895,000 , which is payable on or before the date that is 9 months from the issuance date.

The initial principal amount includes an original issue discount of $ 375,000 and $ 20,000 that the Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs.

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

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.

As of December 31, 2020 this note was re-paid in full.

May 2019 10 % Note Purchase Agreement and Promissory Note

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 14 - Debt (continued)

Notes Payable (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.

As of December 31, 2019, the outstanding balance of the August 2019

Note was approximately $1,895,000.

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

In exchange for the 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

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 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%.

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 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 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

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

On May 3, 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 investor an unsecured promissory note (the “May 2019 Note”) in an aggregate principal amount of $ 3,770,000 , which is payable on or before the date that is 10 months from the issuance date.

The initial principal amount includes an original issue discount of $ 750,000 and $ 20,000 that the Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs.

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

As of December 31, 2020 this note was re-paid in full.

December 2018 10 % Note Purchase Agreement and Promissory Note

On December 21, 2018, the Company entered into a note purchase agreement with Iliad, pursuant to which the Company agreed to issue and sell to Iliad an unsecured promissory note (the “December 2018 10 % Note”) in an aggregate principal amount of $ 1,895,000 , which is payable on or before December 31, 2019 (as provided in the Exchange Agreement, dated October 24, 2019, described below (the “October 24 th Exchange Agreement”)).

The initial principal amount includes an original issue discount of $ 375,000 and $ 20,000 that the Company agreed to pay to the Holder to cover its legal fees, accounting costs, due diligence, monitoring and other transaction costs.

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

On February 8, 2019, the Company entered into a global amendment (the “Global Amendment”) to the note purchase agreements entered into on October 12, 2018 and December 21, 2018, in connection with the notes issued as of such dates, to delete the phrase “by cancellation or exchange of the Note, in whole or in part” from Section 8.1 of those agreements.

The Company also agreed to pay Iliad’s fees and other expenses in an aggregate amount of $ 80,000 (the “Fee”) in connection with the preparation of the Global Amendment by adding $ 40,000 of the Fee to the outstanding balance of each of the notes.

On August 8, 2019, the Company and Iliad entered into a standstill agreement with respect to the December 2018 Note (the “Standstill Agreement”).

Pursuant to the Standstill Agreement, Iliad agreed that it will not redeem all or any portion of the December 2018 Note for a period beginning on August 8, 2019, and ending on the date that is 90 days from August 8, 2019.

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

As of December 31, 2020 this note was re-paid in full.

November 2017 10 % Note Purchase Agreement and Promissory Note

On January 29, 2019, the Company and Chicago Venture Partners, L.P., the holder convertible promissory note (“Chicago Venture” or the “Note Holder”), issued on November 17, with an outstanding balance of $ 383,768 entered into an exchange agreement (the “Exchange Agreement”), pursuant to which the Company and the Note Holder agreed to (i) partition a new convertible promissory note in the form of the Original Note (the “Partitioned Note”) in the original principal amount equal to the Remaining Balance (the “Exchange Amount”) and then cause the Remaining Balance to be reduced by the Exchange Amount;

and (ii) exchange the Partitioned Note for the delivery of 3,842 shares of the Company’s common stock at an effective price share equal to $ 99.90 .

Following such partition of the Original Note, the Original Note was deemed paid in full, was automatically deemed cancelled, and shall not be reissued.

As of December 31, 2020 this note was re-paid in full.

Note Exchanges

The following table summarizes the Company’s exchanges of outstanding principal and interest for shares of common stock The Company analyzed the exchanges of principal as an extinguishment and compared the net carrying value of the debt being extinguished to the re-acquisition price (shares of common stock being issued) and recorded a 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.

As of and for the year ended December 31, 2020 (in thousands, except number of shares):

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 14 - Debt (continued)

Notes Payable (continued)

November 2019 Note Purchase Agreement

and Promissory Note

On November 22, 2019, we issued a promissory

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 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

In exchange for the note, St.

George 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 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 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 December 31, 2019, the outstanding balance of the November 2019 Note was approximately $952,500.

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.

Short-Term Debt Principal and Interest Shares Exchange Price Loss on Exchange

March 2020 10 % Note

$ 1,150 1,076,676 $ 1.03 to $ 1.09 $ 78

November 2019 10 % Note

1,215 894,549 1.35 to 1.36 —

September 2019 10 % Note

1,120 975,704 1.14 to 1.17 22

August 2019 10 % Note

2,034 1,832,220 1.09 to 1.13 25

June 2019 10 % Note

2,236 1,372,417 1.12 to 3.05 33

May 2019 10 % Note

1,958 524,140 3.65 to 4.05 52

December 2018 10 % Note

223 187,517 1.19 to 1.19 —

Total Short-Term Debt $ 9,936 6,863,223 $ 210

As of and for the year ended December 31, 2019 (in thousands, except number of shares):

Short-Term Debt Principal and Interest Shares Exchange Price Loss on Exchange

May 2019 10 % Note

$ 2,076 738,891 $ 1.80 to $ 3.51 $ 96

October 2018 10 % Note

2,729 92,831 $ 22.95 to $ 40.45 188

December 2018 10 % Note

2,112 707,078 $ 1.80 to $ 4.95 10

Total Short-Term Debt $ 6,917 1,538,800 $ 294

(B) Revolving Line of Credit

Payplant Accounts Receivable Bank Line

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 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 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 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.

On August 31, 2018, Inpixon, Sysorex, 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 December 31, 2019, the

outstanding balance of the revolving line of credit was approximately $150,000.

As of December 31, 2019, the Company owed approximately $74,065

to the pre-acquisition stockholders of Shoom.

Any amounts not subject to claims shall be released to the pre-acquisition stockholders

of Shoom pro-rata on the next anniversary date of the closing date of the Shoom acquisition, August 31, 2020.

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.

On August 31, 2018, Inpixon, Sysorex, 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.

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.

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

As of December 31, 2020, the Company paid the remaining $ 74,065 to the pre-acquisition stockholders of Shoom and the outstanding balance owed is $ 0 .

Note 18 - Capital Raises

January 2019 Capital Raise

On January 5, 2018, the Company entered

into that certain Securities Purchase Agreement (the “January 2018 SPA”) with certain investors (the “January

2018 Investors”) pursuant to which the Company agreed to sell an aggregate of 334 shares (the “January 2018 Shares”)

of the Company’s common stock, at a purchase price of $9,558.00 per share (the “January 2018 Offering”) and

warrants to purchase up to 334 shares (the “January 2018 Warrant Shares”) of common stock (the “January 2018

Warrants”).

The aggregate gross proceeds for the sale of the January 2018 Shares and January 2018 Warrants was approximately

$3.2 million.

After deducting placement agent fees and other expenses, the net proceeds from the offering was approximately $2.8

The January 2018 Warrants were initially exercisable at an exercise price per share equal to $11,880.00, subject to certain

adjustments, and will expire on the five year anniversary of the initial exercise date.

Following the February offering described

below, the exercise price of the January 2018 Warrants was reduced to $5,400.00 per share.

February 2018 Public Offering

On February 20, 2018, the Company completed

a public offering for approximately $18 million in securities, consisting of an aggregate of 1,848 Class A units, at a price to

the public of $4,230.00 per Class A unit, each consisting of one share of the Company’s common stock and a five-year warrant

to purchase one share of common stock at an exercise price of $6,300.00 per share (“February 2018 Warrants”), and

10,184.9752 Class B units, at a price to the public of $1,000 per Class B unit, each consisting of one share of the Company’s

newly designated Series 3 convertible preferred stock (“Series 3 Preferred”) with a stated value of $1,000 and initially

convertible into approximately 1 share of our common stock at a conversion price of $4,230.00 per share for up to an aggregate

of 2,408 shares of common stock and February 2018 Warrants exercisable for the number of shares of common stock into which the

shares of Series 3 Preferred were initially convertible.

The Company received approximately $18

million in gross proceeds from the offering, including $1 million in amounts payable to service providers that participated in

the offering, and before placement agent fees and offering expenses payable by the Company.

After satisfying the amounts due to

service providers and deducting placement agent fees, the net proceeds from the offering were approximately $15.4 million.

The embedded conversion option associated

with the Series 3 Preferred shares has a beneficial conversion feature, which has a value of $1,508,000.

The Company recorded

this amount as a deemed dividend on the consolidated statement of operations for these beneficial conversion features.

Following the April offering described

below, the exercise price of the February 2018 Warrants was reduced to the floor price of $1,141.20 and the number of shares issuable

upon exercise of such warrants was increased to 24,055 shares of common stock.

April 2018 Public Offering

On April 24, 2018, the Company completed

a public offering consisting of 10,115 units at a price to the public of $1,000 per unit, each consisting of (i) one share of

our newly designated Series 4 convertible preferred stock (the “Series 4 Preferred”) with a stated value of $1,000

and initially convertible into approximately 2 shares of common stock, at a conversion price of $828.00 per share (subject to

adjustment) and (ii) one warrant to purchase such number of shares of common stock as each share of Series 4 Preferred is convertible

The warrants are immediately exercisable at an initial exercise price of $1,206.00 per share (subject to adjustment).

Company received approximately $10.1 million in gross proceeds from this offering, before deducting placement agent fees and offering

expenses payable by the Company.

After deducting placement agent fees and expenses, the net proceeds from this offering were approximately

$9.2 million.

The embedded conversion option associated

with the Series 4 Preferred shares has a beneficial conversion feature, which has a value of $673,000.

Additionally, the embedded

conversion option had a price reset feature, which resulted in the reduction of the conversion price from $828.00 to $320.40 on

June 25, 2018, which has a value of $4,226,000.

The Company recorded $4,899,000 as a deemed dividend on the consolidated statement

of operations for these beneficial conversion features.

As described above, the April offering

reset the price of the February 2018 Warrants to the floor price of $1,141.20 and the number of shares issuable upon exercise

of such warrants was increased to 24,055 shares of common stock.

The Company has presented a deemed dividend of $4,828,000 on

the consolidated statement of operations for this price reset.

Following the rights offering in January

2019 as described below, the conversion price of the Series 4 Preferred was reduced to the floor price of $223.20 and the exercise

price of the warrants issued in the April offering were also reduced to the floor price of $223.20 and the number of shares issuable

upon exercise of such warrants was increased to 61,562 shares of common stock.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Note 15 - Capital Raises (continued)

January 2019 Capital Raise

On January 15,

2019, the Company closed a rights offering whereby it sold an aggregate of 12,000 units consisting of an aggregate of 12,000

shares of Series 5 Convertible Preferred Stock and 80,000 warrants to purchase common stock exercisable for one share of

common stock at an exercise price of $149.85 per share in accordance with the terms and conditions of a warrant agency agreement,

resulting in gross proceeds to the Company of approximately $12 million, and net proceeds of approximately

$10.77 million after deducting expenses relating to dealer-manager fees and expenses, and excluding any proceeds

received upon exercise of any warrants.

Following the rights offering, the conversion

price of the Series 4 Convertible Preferred Stock was reduced to the floor price of $223.20, the exercise price of the warrants

issued in the April 2018 public offering were also reduced to the floor price of $223.20 and the number of shares issuable upon

exercise of such warrants was increased to 61,562 shares of common stock.

The maximum deemed dividend under the Series 4 Convertible

Preferred Stock has been recognized so there is no accounting effect from the conversion price reduction of the Series 4 Convertible

Preferred Stock.

However, the Company recorded a $1.3 million deemed dividend for the reduction to the exercise price of the April

2018 warrants.

On January 15, 2019, the Company closed a rights offering whereby it sold an aggregate of 12,000 units consisting of an aggregate of 12,000 shares of Series 5 Convertible Preferred Stock and 80 warrants to purchase common stock exercisable for one share of common stock at an exercise price of $ 149.85 per share in accordance with the terms and conditions of a warrant agency agreement, resulting in gross proceeds to the Company of approximately $ 12 million, and net proceeds of approximately $ 10.77 million after deducting expenses relating to dealer-manager fees and expenses, and excluding any proceeds received upon exercise of any warrants.

Following the rights offering, the conversion price of the Series 4 Convertible Preferred Stock was reduced to the floor price of $ 223.20 , the exercise price of the warrants issued in the April 2018 public offering were also reduced to the floor price of $ 223.20 and the number of shares issuable upon exercise of such warrants was increased to 61,562 shares of common stock.

The maximum deemed dividend under the Series 4 Convertible Preferred Stock has been recognized so there is no accounting effect from the conversion price reduction of the Series 4 Convertible Preferred Stock.

However, the Company recorded a $ 1.3 million deemed dividend for the reduction to the exercise price of the April 2018 warrants.

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

August 2019 Financing

On August 12, 2019, the Company sold an

aggregate of (i) 144,387 shares of our common stock, (ii) 2,997 shares of our Series 6 Convertible Preferred Stock, with a stated

value $1,000 per share, convertible into shares of our common stock (the “Series 6 Preferred Stock”), and (iii) Series

A warrants to purchase up to an aggregate of 384,387 shares of common stock at an exercise price per share of $12.4875, resulting

in gross proceeds to the Company of approximately $4.8 million, and net proceeds of approximately $4 million after deducting the

underwriting discounts and offering expenses.

As of December 31, 2019, there were 0 shares of Series 6 Convertible Preferred

Stock outstanding.

At-The-Market Program

During the year ended December 31, 2019 under an at-the-market

(“ATM”) program, we sold an aggregate of 1,470,900 shares of common stock, at a weighted average price of approximately

$4.42 per share resulting in net proceeds of approximately $5.9 million to us after deduction of sales commissions equal to 4.5%

of the gross sales and other offering expenses.

We raised total aggregate gross proceeds of approximately $6.5 million in connection

with the ATM program.

Note 16 - Common Stock

On January 5, 2018, the Company issued

5 shares of common stock pursuant to a subscription agreement with a service provider at a purchase price of $18,360.00 per

share, in satisfaction of $80,000 payable to the provider.

On January 5, 2018, the Company entered

into a securities purchase agreement with certain investors pursuant to which the Company agreed to sell an aggregate of 334 shares

of the Company’s common stock, at a purchase price of $9,558.00 per share (see Note 15).

On February 5, 2018, the holder of the

Debenture delivered a conversion notice to the Company pursuant to which it converted $300,000 of principal of the Debenture into

28 shares of the Company’s common stock.

Such shares of common stock were issued on February 6, 2018.

On February 7, 2018, the holder of the

Debenture delivered a conversion notice to the Company pursuant to which it converted $400,000 of principal of the Debenture into

67 shares of the Company’s common stock.

On February 9, 2018, the holder of the

Debenture delivered a final conversion notice to the Company pursuant to which it converted $317,000 of principal of the Debenture

into 59 shares of the Company’s common stock, which paid the Debenture in full.

On August 12, 2019, the Company sold an aggregate of (i) 144,387 shares of our common stock, (ii) 2,997 shares of our Series 6 Convertible Preferred Stock, with a stated value $ 1,000 per share, convertible into shares of our common stock (the “Series 6 Preferred Stock”), and (iii) Series A warrants to purchase up to an aggregate of 384,387 shares of common stock at an exercise price per share of $ 12.4875 , resulting in gross proceeds to the Company of approximately $ 4.8 million, and net proceeds of approximately $ 4 million after deducting the underwriting discounts and offering expenses.

As of December 31, 2020, there were 0 shares of Series 6 Convertible Preferred Stock outstanding.

March 2020 Distribution Agreement

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 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.

The EDA will continue until the earliest of (i) December 3, 2021, (ii) the sale of shares having an aggregate offering price of $ 150 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 EDA was mutually terminated by the parties on February 12, 2021.

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 16 - Common Stock (continued)

On February 20, 2018, the Company completed

a public offering including an aggregate of 1,848 Class A units, at a price to the public of $4,230.00 per Class A unit, each

consisting of one share of the Company’s common stock and a five-year warrant to purchase one share of common stock (see

During the three months ended March 31,

2018, 9,773.7252 shares of Series 3 Preferred were converted into 2,311 shares of the Company’s common stock.

During the three months ended March 31,

2018, the Company issued 6 shares of common stock for fractional shares due to the reverse stock split effective February 6, 2018.

During the three months ended June 30,

2018, 411.25 shares of Series 3 Preferred were converted into 98 shares of the Company’s common stock.

During the three months ended June 30,

2018, 7,796.7067 shares of Series 4 Preferred were converted into 15,966 shares of the Company’s common stock.

During the three months ended September

30, 2018, 2,311.2933 shares of Series 4 Preferred were converted into 7,218 shares of the Company’s common stock.

On October 8,

2018, the Company issued 3,162 shares of the Company’s common stock at an effective price per share of $486.00 to pay $1,536,649

towards the balance of the November Note (see Note 14).

During the three months ended December

31, 2018, 6 shares of Series 4 Preferred were converted into 19 shares of the Company’s common stock.

During the three months ended December

31, 2018, the Company issued 834 shares of common stock for services, which were fully vested upon the date of issuance.

recorded an expense of approximately $465,000 for the fair value of those shares.

During the three months ended December

31, 2018, the Company issued 615 shares of common stock for fractional shares due to the reverse stock split effective November

During the three months ended December

31, 2018, the Company issued 2,056 shares of common stock in connection with the exercise of 2,056 warrants at $486.00 a share.

On January 29, 2019, the Company issued

3,842 shares of common stock under an exchange agreement to settle the outstanding balance of $383,768 under a partitioned note.

Note 18 - Capital Raises (continued)

During the year ended December 31, 2020 under an at-the-market (“ATM”) program, we sold an aggregate of 33,416,830 shares of common stock, at a weighted average price of approximately $ 1.45 per share resulting in net proceeds of approximately $ 46.1 million to us after deduction of sales commissions equal to 4.0 % of the gross sales and other offering expenses.

We raised total aggregate gross proceeds of approximately $ 48.5 million in connection with the ATM program as of December 31, 2020.

Registered Direct Offering

Each 2020 Purchase Warrant and 2020 Pre-funded warrant is exercisable for one share of common stock, is immediately exercisable and will expire five years from the issuance date.

On December 23, 2020, the 2020 Pre-funded Warrants were exercised in full.

Note 19 - Common Stock

On January 29, 2019, the Company issued 3,842 shares of common stock under an exchange agreement to settle the outstanding balance of $ 383,768 under a partitioned note.

(see Note 17)

On February 20, 2019, the Company issued

16,655 shares of common stock under a settlement agreement for an arbitration proceeding.

During the three months ended March 31,

2019, the Company issued 306 shares of common stock in connection with the exercise of 306 warrants at $149.85 per share.

During the three months ended March 31,

2019, the Company issued 27,741 shares of common stock in connection with the exercise of 46,235 warrants through cashless exercises.

During the three months ended March 31,

2019, 10,062 shares of Series 5 Convertible Preferred Stock were converted into 67,149 shares of the Company’s common stock.

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

During the three months ended March 31, 2019, the Company issued 306 shares of common stock in connection with the exercise of 306 warrants at $ 149.85 per share.

During the three months ended March 31, 2019, the Company issued 27,741 shares of common stock in connection with the exercise of 46,235 warrants through cashless exercises.

During the three months ended March 31, 2019, 10,062 shares of Series 5 Convertible Preferred Stock were converted into 67,149 shares of the Company’s common stock.

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

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

During the three months ended June 30, 2019, the Company issued 61,636 shares of common stock under an exchange agreement to settle the outstanding balance of $ 2,005,000 under a partitioned note (See Note 17).

During the three months ended June 30, 2019, the Company issued 18,572 shares of common stock in connection with the exercise of 30,954 warrants through cashless exercises.

During the three months ended June 30, 2019, 1,812 shares of Series 5 Convertible Preferred Stock were converted into 12,093 shares of the Company’s common stock.

On May 21, 2019, the Company issued 14,445 shares of common stock to Locality as part of an acquisition (See Note 3).

On June 27, 2019, the Company issued 22,223 shares of common stock to GTX as part of an acquisition (See Note 4).

On August 12, 2019, the Company issued 144,387 shares of common stock as part of a public offering (See Note 18).

INPIXON AND SUBSIDIARIES

2 unchanged sentences

Note 19 - Common Stock (continued)

During the three months ended March 31,

2019, the Company issued 4,445 shares of common stock for services, which were fully vested upon grant.

The Company recorded an

expense of approximately $242,000.

During the three months ended June 30,

2019, the Company issued 61,636 shares of common stock under an exchange agreement to settle the outstanding balance of $2,005,000

under a partitioned note (See Note 14).

During the three months ended June 30,

2019, the Company issued 18,572 shares of common stock in connection with the exercise of 30,954 warrants through cashless exercises.

During the three months ended June 30,

2019, 1,812 shares of Series 5 Convertible Preferred Stock were converted into 12,093 shares of the Company’s common stock.

On May 21, 2019, the Company issued 14,445

shares of common stock to Locality as part of an acquisition (See Note 3).

On June 27, 2019, the Company issued 22,223

shares of common stock to GTX as part of an acquisition (See Note 4).

On August 12, 2019, the Company issued

144,387 shares of common stock as part of a public offering (See Note 15).

On August 15, 2019, the Company issued

112,644 shares of common stock to security holders of Jibestream as part of an acquisition (See Note 5).

During the three months ended September

30, 2019, the Company issued 31,195 shares of common stock under an exchange agreement to settle the outstanding balance of approximately

$725,000 under a partitioned note (See Note 14).

During the three months ended September

30, 2019, the Company issued 310,154 shares of common stock in connection with the exercise of 310,154 warrants through cashless

During the three months ended September

30, 2019, 2,997 shares of Series 6 Convertible Preferred Stock were converted into 240,001 shares of the Company’s common

On November 5, 2019, the Company issued

63,645 shares of common stock to security holders of Jibestream as part of an acquisition (See Note 5).

During the three months ended December

31, 2019, the Company issued 1,470,900 shares of common stock as part of an ATM program (See Note 15).

During the three months ended December

31, 2019, the Company issued 1,445,960 shares of common stock under an exchange agreement to settle the outstanding balance of

approximately $4.2 million under a partitioned note (See Note 14).

During the three months ended December

31, 2019, the Company issued 69,485 shares of common stock in connection with the exercise of 69,485 warrants through cashless

During the three months ended December

31, 2019, the Company issued 14 shares of common stock in connection with the exercise of 14 employee stock options.

On August 15, 2019, the Company issued 112,644 shares of common stock to security holders of Jibestream as part of an acquisition (See Note 5).

During the three months ended September 30, 2019, the Company issued 31,195 shares of common stock under an exchange agreement to settle the outstanding balance of approximately $ 725,000 under a partitioned note (See Note 17).

During the three months ended September 30, 2019, the Company issued 310,154 shares of common stock in connection with the exercise of 310,154 warrants through cashless exercises.

During the three months ended September 30, 2019, 2,997 shares of Series 6 Convertible Preferred Stock were converted into 240,001 shares of the Company’s common stock.

On November 5, 2019, the Company issued 63,645 shares of common stock to security holders of Jibestream as part of an acquisition (See Note 5).

During the three months ended December 31, 2019, the Company issued 1,470,900 shares of common stock as part of an ATM program (See Note 18).

During the three months ended December 31, 2019, the Company issued 1,445,960 shares of common stock under an exchange agreement to settle the outstanding balance of approximately $ 4.2 million under a partitioned note (See Note 17).

During the three months ended December 31, 2019, the Company issued 69,485 shares of common stock in connection with the exercise of 69,485 warrants through cashless exercises.

During the three months ended December 31, 2019, the Company issued 14 shares of common stock in connection with the exercise of 14 employee stock options.

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 $ 1.25 million after subtracting sales commissions and other offering expenses (See Note 18 ).

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 $ 40.52 million after subtracting sales commissions and other offering expenses (See Note 18 ).

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 .

On 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 7).

During 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 18).

During the three months ended December 31, 2020, the Company issued 1,842,472 shares of common stock in connection with the ATM at per share prices between $ 1.0706 and $ 1.1793 , resulting in net proceeds to the Company of approximately $ 2.1 million after subtracting sales commissions and other offering expenses (See Note 18).

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 19 - Common Stock (continued)

During the three months ended December 31, 2020, the Company issued 1,076,676 shares of common stock under exchange agreements to settle outstanding balances totaling approximately $ 1.2 million under partitioned notes.

During the three months ended December 31, 2020, the Company issued 5,000,000 shares of common stock in connection with the an offering of common stock and warrants pursuant to a Securities Purchase Agreement which resulted in net proceeds of $ 9.2 million.

(See Note 23)

During the three months ended December 31, 2020, the Company issued 3,000,000 shares of common stock in connection with the exchange of Pre-Funded Warrants (as defined in Note 23) offered under the Securities Purchase Agreement, resulting in net proceeds of $ 3,000 .

See Note Note 18 and Note 23 for further details.

Note 20 - 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 3 Convertible Preferred Stock

On February 15, 2018, the Company filed

with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 3 Convertible Preferred Stock

(“Series 3 Preferred”), authorized 10,184.9752 shares of Series 3 Preferred and designated the preferences, rights

and limitations of the Series 3 Preferred.

The Series 3 Preferred is non-voting (except to the extent required by law).

3 Preferred was convertible into the number of shares of Common Stock, determined by dividing the aggregate stated value of the

Series 3 Preferred of $1,000 per share to be converted by $4,230.00.

On February 20, 2018, the Company completed

a public offering including an aggregate of 10,184.9752 Class B units, at a price to the public of $1,000 per Class B unit, each

consisting of 1 share of the Series 3 Preferred with a stated value of $1,000 and initially convertible into approximately 1 share

of our common stock at a conversion price of $4,230.00 per share (See Note 15).

During the three months ended March 31,

2018, 9773.7252 shares of Series 3 Preferred were converted into 2,311 shares of the Company’s common stock.

During the three

months ended June 30, 2018, 411.25 shares of Series 3 Preferred were converted into 98 shares of the Company’s common stock.

As of December 31, 2019 and 2018, there are no Series 3 Preferred shares outstanding.

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 (the “Conversion Price”).

On April 24, 2018, the Company completed

a public offering consisting of 10,115 units at a price to the public of $1,000 per unit, each consisting of (i) one share of

our newly designated Series 4 Preferred and (ii) one warrant to purchase such number of shares of common stock as each share of

Series 4 Preferred is convertible into (see Note 15).

On June 25, 2018, in accordance with the

terms of the price reset provisions described in the Certificate of Designations the Conversion Price of the Series 4 Preferred

was adjusted to $320.40.

On January 15, 2019, following the rights offering described above (See Note 15), the Conversion Price

of the Series 4 Preferred was reduced to the floor price of $223.20.

During the three months ended June 30,

2018, 7,796.7067 shares of Series 4 Preferred were converted into 15,966 shares of the Company’s common stock.

three months ended September 30, 2018, 2,311.2933 shares of Series 4 Preferred were converted into 7,218 shares of the Company’s

common stock.

During the three months ended December 31, 2018, 6 shares of Series 4 Preferred were converted into 19 shares of

the Company’s common stock.

As of December 31, 2019 and 2018, there was 1 share of Series 4 Preferred outstanding.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Note 17 - Preferred Stock (continued)

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 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.

On January 15, 2019, the Company closed

a rights offering whereby it sold an aggregate of 12,000 units consisting of an aggregate of 12,000 shares of Series

5 Convertible Preferred Stock and 80,000 warrants to purchase common stock exercisable for one share of common stock at an exercise

price of $149.85 per share.

During the three months ended March 31,

2019, 10,062 shares of Series 5 Convertible Preferred Stock were converted into 67,149 shares of the Company’s common stock.

During the three months ended June 30,

2019, 1,812 shares of Series 5 Convertible Preferred Stock were converted into 12,093 shares of the Company’s common stock.

As of December 31, 2019, there were 126

shares of Series 5 Convertible Preferred Stock outstanding.

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 December 31, 2020, there was one share of Series 4 Preferred outstanding.

Series 5 Convertible Preferred Stock

On August 13,

2019, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series 6 Convertible Preferred

Stock (the “Series 6 Preferred Certificate of Designation”) with the Secretary of State of Nevada, establishing the

rights, preferences, privileges, qualifications, restrictions, and limitations relating to the Series 6 Convertible Preferred

Stock with a stated value of $1,000 and convertible into a number of shares of the Company’s common stock equal to $1,000

divided by $12.4875.

On August 12, 2019, the Company closed

a public offering whereby it sold an aggregate of 2,997 shares of Series 6 Convertible Preferred Stock, 144,387 shares

of our common stock and 384,387 warrants to purchase common stock exercisable for one share of common stock at an exercise price

of $12.4875 per share.

During the three months ended September

30, 2019, 2,997 shares of Series 6 Convertible Preferred Stock were converted into 240,001 shares of the Company’s common

As of December 31, 2019, there were

0 shares of Series 6 Convertible Preferred Stock outstanding.

Note 18 - Authorized Share Increase

and Reverse Stock Split

On February 2, 2018, the Company filed

a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada to increase the

total number of authorized shares of common stock from 50,000,000 to 250,000,000, as approved by the Company’s stockholders

at a special meeting held on February 2, 2018.

On February 2, 2018, 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-30

reverse stock split of the Company’s issued and outstanding shares of common stock, effective as of February 6, 2018.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Note 18 - Authorized Share Increase

and Reverse Stock Split (continued)

On October 31, 2018, 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-40

reverse stock split of the Company’s issued and outstanding shares of common stock, effective as of November 2, 2018.

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 consolidated financial statements

and accompanying notes give effect to the 1-for-30, 1-for-40 and 1-for-45 reverse stock splits and increase in authorized shares

as if they occurred at the first period presented.

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 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 .

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

Note 21 - Authorized Share Increase and 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 consolidated financial statements and accompanying notes give effect to the 1-for-45 reverse stock split and increase in authorized shares as if they occurred at the first period presented.

Note 22 - 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.

In September 2011, the Company adopted the 2011 Employee Stock Incentive Plan (the “2011 Plan”) which provides for the granting of incentive and non-statutory common stock options and stock based incentive awards to employees, non-employee directors, consultants and independent contractors.

The plan was amended and restated in May 2014.

Unless terminated sooner by the Board of Directors, this plan will terminate on

August 31, 2021.

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.

The aggregate number of shares that may be awarded as of December

31, 2019 under the 2011 Plan and the 2018 Plan were 3,521 and 8,316,376, respectively.

As of December 31, 2019, 121,796 of options

were granted to employees, directors and consultants of the Company (including 1 share outside of our plan) and 8,198,102 options

were available for future grant under the Option Plans.

During the year ended December 31, 2018,

the Company granted options under the 2018 Plan for the purchase of 1,690 shares of common stock to employees and consultants

of the Company.

These options are 100% vested or vest pro-rata over 48 months, have a life of ten years and an exercise price

between $288.90 and $570.60 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 $428,000.

The fair value of the common stock as of the grant date was determined

to be between $288.90 and $570.60 per share.

During the year ended December 31, 2019, the Company granted

options under the 2018 Plan for the purchase of 130,651 shares of common stock to employees and consultants of the Company.

options are 100% vested or vest pro-rata over 12, 36, 40 or 48 months, have a life of ten years and an exercise price between $6.30

and $101.70 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 $4,364,000.

The fair value of the common stock as of the grant date was determined to be between

$6.30 and $101.70 per share.

During the year ended December 31, 2019

and 2018, the Company recorded a charge of $3,247,000 and $949,000, respectively, for the amortization of employee stock options.

Unless terminated sooner by the Board of Directors, this plan will terminate on August 31, 2021.

INPIXON AND SUBSIDIARIES

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Note 22 - Stock Options (continued)

As of December 31, 2019, the fair value

of non-vested options totaled approximately $1,010,000, which will be amortized to expense over the weighted average remaining

term of 0.81 years.

The fair value of each employee option

grant is estimated on the date of the grant using the Black-Scholes option-pricing model.

Key weighted-average assumptions used

to apply this pricing model during the years ended December 31, 2019 and 2018 were as follows:

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 under the 2011 Plan as of December 31, 2020 is 417,270 and awarded under the 2018 Plan as of December 31, 2020 is 14,230,073 .

As of December 31, 2020, 5,450,057 of options were granted to employees, directors and consultants of the Company (including one share outside of our plan) and 9,197,287 options were available for future grant under the Option Plans.

During the year ended December 31, 2019, the Company granted options under the 2018 Plan for the purchase of 130,651 shares of common stock to employees and consultants of the Company.

These options are 100 % vested or vest pro-rata over 12 , 24 , 36 , 40 or 48 months, have a life of ten years and an exercise price between $ 6.30 and $ 101.70 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 $ 4,364,000 .

The fair value of the common stock as of the grant date was determined to be between $ 6.30 and $ 101.70 per share.

During the year ended December 31, 2020, the Company granted options under the 2018 Plan for the purchase of 5,567,500 shares of common stock to employees and consultants of the Company.

These options are 100 % vested or vest pro-rata over 24 , 36 or 48 months, have a life of ten years and an exercise price between $ 1.10 and $ 1.29 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 $ 1,911,000 .

The fair value of the common stock as of the grant date was determined to be between $ 1.10 and $ 1.29 per share.

During the year ended December 31, 2020 and 2019, the Company recorded a charge of $ 1,194,000 and $ 3,247,000 , respectively, for the amortization of employee stock options.

As of December 31, 2020, the fair value of non-vested options totaled approximately $ 1,626,000 , which will be amortized to expense over the weighted average remaining term of 0.86 years.

The fair value of each employee option grant is estimated on the date of the grant using the Black-Scholes option-pricing model.

Key weighted-average assumptions used to apply this pricing model during the years ended December 31, 2020 and 2019 were as follows:

For the Years Ended December 31,

Risk-free interest rate 0.33 - 0.35 %

Expected life of option grants

Expected volatility of underlying stock

1.77 - 2.66 %

Expected life of option grants 5 years 7 years

Expected volatility of underlying stock 34.43 %

49.48 - 106.16 %

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 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.

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Treasury rates for the applicable periods.

The dividends assumptions was $0 as

the Company historically has not declared any dividends and does not expect to.

The following table summarizes the changes

in options outstanding during the years ended December 31, 2018 and 2019:

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

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 22 - Stock Options (continued)

The following table summarizes the changes in options outstanding during the years ended December 31, 2020 and 2019:

Options Weighted

Price Aggregate

(in thousands)

Outstanding at January 1, 2019 1,624 $ 5,229.00 —

Granted 130,651 61.79 —

Exercised ( 14 ) — —

Expired ( 2,106 ) 353.19 —

Forfeitures ( 8,359 ) 91.67 —

Outstanding at December 31, 2019 121,796 $ 123.66 —

Granted 5,567,500 1.10 —

Exercised — — —

Expired ( 37,404 ) 272.92 —

Forfeitures ( 201,835 ) 1.26 —

Outstanding at December 31, 2020 5,450,057 $ 23.76 —

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Exercisable at December 31, 2020 1,752,968 $ 70.84 —

Note 23 - Warrants

On January 15, 2019, the Company issued warrants for the purchase of 80,000 shares of common stock in connection with a rights offering more fully described in Note 18.

The warrants are exercisable for 5 years at an exercise price of $ 149.85 per share.

Following the rights offering on January 15, 2019, the exercise price of the warrants issued in the April 2018 public offering were reduced to the floor price of $ 223.20 and the number of shares issuable upon exercise of such warrants was increased by 33,366 shares of common stock.

On August 12, 2019, the Company issued Series A warrants to purchase up to an aggregate of 384,387 shares of common stock in connection with the August 2019 capital raise more fully described in Note 18.

The warrants are exercisable for five years at an exercise price per share of $ 12.4875 .

During the three months ended March 31, 2019, the Company issued 306 shares of common stock in connection with the exercise of 306 warrants at $ 149.85 per share.

During the twelve months ended December 31, 2019, the Company issued 425,952 shares of common stock in connection with the exercise of 456,826 warrants through cashless exercises.

On November 25, 2020, Inpixon entered into a Securities Purchase Agreement with an institutional investor named therein (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering, 5,000,000 shares of the Company’s common stock, par value $ 0.001 per share, and warrants to purchase up to 8,000,000 shares of common stock (the “Purchase Warrants”) at a combined offering price of $ 1.25 per share.

The Purchase Warrants have an exercise price of $ 1.25 per share.

Each Purchase Warrant is exercisable for one share of common stock and will be immediately exercisable and will expire five years from the issuance date.

INPIXON AND SUBSIDIARIES

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FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 20 - Warrants

During the three months ended December

31, 2018, the Company issued 2,056 shares of common stock in connection with the exercise of 2,056 warrants at $12.15 a share.

On January 15, 2019, the Company issued

warrants for the purchase of 80,000 shares of common stock in connection with a rights offering more fully described in Note 15.

The warrants are exercisable for 5 years at an exercise price of $149.85 per share.

Following the rights offering, the exercise

price of the warrants issued in the April 2018 public offering were reduced to the floor price of $223.20 and the number of shares

issuable upon exercise of such warrants was increased by 33,366 shares of common stock.

On August 12, 2019, the Company issued

Series A warrants to purchase up to an aggregate of 384,387 shares of common stock in connection with the August 2019 capital raise

more fully described in Note 15.

The warrants are exercisable for 5 years at an exercise price per share of $12.4875.

During the three months ended March 31,

2019, the Company issued 306 shares of common stock in connection with the exercise of 306 warrants at $149.85 per share.

During the three months ended March 31,

2019, the Company issued 27,741 shares of common stock in connection with the exercise of 46,235 warrants through cashless exercises.

During the three months ended June 30, 2019, the Company issued

18,572 shares of common stock in connection with the exercise of 30,952 warrants through cashless exercises.

During the three months ended September

30, 2019, the Company issued 310,154 shares of common stock in connection with the exercise of 310,154 warrants through cashless

During the three months ended December

31, 2019, the Company issued 69,485 shares of common stock in connection with the exercise of 69,485 warrants through cashless

The following table summarizes the changes

in warrants outstanding during the years ended December 31, 2018 and 2019:

The Company also offered and sold to the Purchaser pre-funded warrants to purchase up to 3,000,000 shares of common stock (the “Pre-Funded Warrants” and, together with the 5,000,000 shares and the Purchase Warrants, the “Securities”), in lieu of shares of common stock at the Investor’s election.

Each Pre-Funded Warrant is exercisable for one share of common stock.

The purchase price of each Pre-Funded Warrant is $ 1.249 , and the exercise price of each Pre-Funded Warrant is $ 0.001 per share.

The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

During the three months ended December 31, 2020, the Company issued 3,000,000 shares of common stock in connection with the exercise of 3,000,000 warrants at $ 0.001 per share .

The following table summarizes the changes in warrants outstanding during the years ended December 31, 2020 and 2019:

Options Weighted

Price Aggregate

(in thousands)

Outstanding at January 1, 2018

Exercisable at January 1, 2019 52,632 $ 866.70 $ —

Granted 497,753 48.66 —

Exercised ( 457,132 ) 35.78 —

Expired ( 1 ) 6,075,000.00 —

Cancelled — — —

Outstanding at December 31, 2019 93,252 $ 503.09 $ —

Granted 11,000,000 $ 0.91 —

Exercised ( 3,000,000 ) — —

Expired ( 2 ) 1,336,500.00 —

Cancelled — — —

Outstanding at December 31, 2020 8,093,250 $ 6.70 $ —

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Exercisable at December 31, 2020 8,093,250 $ 6.70 —

Note 24 - Income Taxes

The domestic and foreign components of loss before income taxes for the years ended December 31, 2020 and 2019 are as follows (in thousands):

For the Years Ended December 31,

Domestic $ ( 24,387 ) $ ( 32,116 )

Foreign ( 4,883 ) ( 2,450 )

Loss from Continuing Operations before Provision for Income Taxes $ ( 29,270 ) $ ( 34,566 )

INPIXON AND SUBSIDIARIES

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FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 21 - Income Taxes

The domestic and foreign components of

income (loss) before income taxes from continuing operations for the years ended December 31, 2019 and 2018 are as follows (in

For the Years Ended

Loss from Continuing Operations before Provision for Income Taxes

The income tax provision (benefit) for

the years ended December 31, 2019 and 2018 consists of the following (in thousands):

For the Years Ended

The income tax benefit for the years ended December 31, 2020 and 2019 consists of the following (in thousands):

For the Years Ended December 31,

Current $ 31 $ —

Deferred ( 1,815 ) ( 844 )

Deferred ( 5,367 ) ( 5,177 )

State and local — —

Deferred ( 1,181 ) ( 898 )

( 8,329 ) ( 6,919 )

Change in valuation allowance 8,273 6,335

Income Tax Provision

Income Tax Benefit $ ( 56 ) $ ( 584 )

The reconciliation between the U.S.

federal income tax rate and the Company’s effective rate for the years ended December 31, 2019 and 2018 is as follows:

For the Years Ended

statutory federal income tax rate and the Company’s effective rate for the years ended December 31, 2020 and 2019 is as follows:

For the Years Ended December 31,

federal statutory rate 21.0 % 21.0 %

State income taxes, net of federal benefit 3.2 % 2.0 %

Impairment of goodwill

Impairment of net operating loss

Incentive stock options ( 0.4 ) % ( 0.7 ) %

Additional Beneficial Conversion Feature

Federal and state rate change and other

US-Foreign income tax rate difference 1.0 % 0.4 %

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Provision to return adjustments ( 0.8 ) % — %

Deferred rate change

Deferred only adjustment 4.5 % ( 2.7 ) %

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FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 21 - Income Taxes (continued)

As of December 31, 2019 and 2018, the

Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following:

of December 31,

As of December 31, 2020 and 2019, the Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following:

As of December 31,

(in 000s) 2020 2019

Deferred Tax Asset

Net operating loss carryovers $ 30,731 $ 8,918

Deferred revenue

Stock based compensation 1,253 1,114

Debt debenture

Research credits 138 135

Accrued compensation 86 36

Reserves 151 242

Intangibles 7,411 2,361

Fixed assets 471 39

Other 3,349 3,046

Total Deferred Tax Asset 43,590 15,891

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Deferred Tax Asset, Net of Valuation Allowance $ 5,303 $ 1,989

of December 31,

As of December 31,

Deferred Tax Liabilities 2020 2019

Intangible assets $ ( 4,362 ) $ ( 1,671 )

Prepaid maintenance

Fixed assets ( 135 ) —

Other ( 440 ) ( 53 )

Capitalized research ( 366 ) ( 352 )

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Net Deferred Tax Asset (Liability) $ — $ ( 87 )

The transition tax is based on total post-1986

earnings and profits which were previously deferred from U.S.

The transition tax is based on total post-1986 earnings and profits which were previously deferred from U.S.

income taxes.

At December 31, 2019, the Company did not have any

undistributed earnings of our foreign subsidiaries.

At December 31, 2020, the Company did not have any undistributed earnings of our foreign subsidiaries.

As a result, no additional income or withholding taxes have been provided for.

The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse

tax (“BEAT) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.

The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.

In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOL carryover is subject to an annual limitation in the event of a change of control, as defined by the regulations.

The Company performed an analysis to determine the annual limitation as a result of the changes in ownership that occurred during 2019 and 2020.

Based on the Company’s analysis, the NOL available to offset future taxable income after these ownership changes was approximately $ 16.3 million and $ 35.2 million, respectively.

The NOLs generated in 2017, $ 1.5 million, will expire beginning in December 31, 2037 if not utilized.

The remaining NOLs were generated after 2017 have an indefinite life and do not expire.

As of December 31, 2020 and 2019, Inpixon Canada, which was acquired on April 18, 2014 as part of the AirPatrol Merger Agreement, had approximately $ 16.8 million and $ 12.0 million, respectively, of Canadian NOL carryovers available to offset future taxable income.

These NOLs, if not utilized, begin expiring in the year 2023.

The NOLs as of December 31, 2020 include Jibestream, which was acquired on August 15, 2019 and amalgamated with Inpixon Canada effective January 1, 2020.

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 21 - Income Taxes

In accordance with Section 382 of the Internal

Revenue Code, deductibility of the Company’s NOL carryover is subject to an annual limitation in the event of a change of

control, as defined by the regulations.

The Company performed an analysis to determine the annual limitation as a result of the

changes in ownership that occurred during 2018 and 2019.

Based on the Company’s analysis, the NOL available to offset future

taxable income after these ownership changes was approximately $6.2 million and $16.3 million, respectively.

These NOLs, if not

utilized, expire beginning in December 31, 2037.

As of December 31, 2019 and 2018, Inpixon

Canada, which was acquired on April 18, 2014 as part of the AirPatrol Merger Agreement, had approximately $12.0 million and $10.9

million, respectively, of Canadian NOL carryovers available to offset future taxable income.

These NOLs, if not utilized, begin

expiring in the year 2026.

As of December 31, 2019, Jibestream,

which was acquired on August 15, 2019, had approximately $4.3 million Canadian NOL carryovers available to offset future

taxable income.

These NOLs, if not utilized, begin expiring in the year 2033.

Deferred income taxes reflect the net tax

effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the

amounts used for income tax purposes.

In assessing the realization of deferred tax assets, management considers, whether it is

“more likely than not”, that some portion or all of the deferred tax assets will not be realized.

The ultimate realization

of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences

representing net future deductible amounts become deductible.

ASC 740, “Income Taxes”

that a valuation allowance be established when it is “more likely than not”

that all, or a portion of, deferred tax

assets will not be realized.

A review of all available positive and negative evidence needs to be considered, including the scheduled

reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.

After consideration of all

the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets

with respect to Inpixon and Inpixon Canada and has, therefore, established a full valuation allowance as of December 31, 2019 and

As of December 31, 2019 and December 31, 2018, the change in valuation allowance was $6.3 million and $(1.0) million, respectively.

ASC 740 also clarifies the accounting for

uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and

measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax

For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing

ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim

periods, disclosure and transition.

The Company is required to file income tax returns in the United States (federal), Canada,

India, and in various state jurisdictions in the United States.

Based on the Company’s evaluation, it has been concluded

that there are no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements

for the years ended December 31, 2019 and 2018.

The Company’s policy for recording

interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and

as a component of selling, general and administrative expense, respectively.

There were no amounts accrued for interest or

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

Management does not expect any material changes in its unrecognized

tax benefits in the next year.

Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination

by various taxing authorities.

As of December 31, 2020, Nanotron GmbH, which was acquired on October 5, 2020, had approximately $ 53.1 million German NOL carryovers available to offset future taxable income.

Although these NOLs do not expire, minimum taxation restrictions apply such that only a percentage of taxable income may be offset by NOL carryovers.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

In assessing the realization of deferred tax assets, management considers, whether it is “more likely than not”, that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.

ASC 740, “Income Taxes” requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized.

A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.

After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets with respect to Inpixon, Inpixon Canada and Nanotron GmbH and has, therefore, established a full valuation allowance as of December 31, 2020 and 2019.

As of December 31, 2020 and 2019, the change in valuation allowance was $ 9.1 million and $ 6.3 million, respectively.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The Company is required to file income tax returns in the United States (federal), Canada, India, Germany, United Kingdom and in various state jurisdictions in the United States.

Based on the Company’s evaluation, it has been concluded that there are no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements for the years ended December 31, 2020 and 2019.

The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of selling, general and administrative expense, respectively.

There were no amounts accrued for interest or penalties for the years ended December 31, 2020 and 2019.

Management does not expect any material changes in its unrecognized tax benefits in the next year.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities.

Such examinations may result in future assessments by these taxing authorities.

The Company is subject

to examination by U.S.

The Company is subject to examination by U.S.

tax authorities beginning with the year ended December 31, 2016.

In general, the Canadian Revenue Authority

may reassess taxes four years from the date the original notice of assessment was issued.

The tax years that remain open and subject

to Canadian reassessment are 2015 –

The tax years that remain open and subject to Indian reassessment are tax years

beginning March 31, 2014.

In general, the Canadian Revenue Authority may reassess taxes four years from the date the original notice of assessment was issued.

The tax years that remain open and subject to Canadian reassessment are 2016 – 2020.

The tax years that remain open and subject to India reassessment are tax years beginning March 31, 2015.

The German tax authorities may reassess taxes four years generally four years from the end of the calendar year in which the return is filed.

The tax years that remain open and subject to German reassessment are 2014 – 2020.

On March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic.

Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted.

The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits.

The CARES Act did not have a material impact on the Company.

Note 25 - Credit Risk and Concentrations

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 22 - 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

December 31, 2019 and 2018 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 years ended December

31, 2019 and 2018 (in thousands):

December 31, 2019

December 31, 2018

As of December 31, 2019, Customer C represented

approximately 29%, Customer A represented approximately 14%, and Customer D represented approximately 10 % of total accounts receivable.

As of December 31, 2018, Customer E represented approximately 30%, Customer C represented approximately 26%, Customer F represented

approximately 13%, Customer D represented approximately 10% and Customer G represented approximately 10% of total accounts receivable.

As of December 31, 2019, three vendors

represented approximately 36%, 12%, and 10% of total gross accounts payable.

Purchases from these vendors during the year ended

December 31, 2019 was $0.

Note 25 - Credit Risk and Concentrations (continued)

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, UK subsidiary, German subsidiaries and its majority-owned India subsidiary.

Cash in foreign financial institutions as of December 31, 2020 and 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 years ended December 31, 2020 and 2019 (in thousands):

For the Year Ended December 31, 2020 For the Year Ended December 31, 2019

Customer A 2,460 26 % 2,661 42 %

Customer B 1,221 13 % 1,224 19 %

As of December 31, 2020, Customer C represented approximately 18 % and Customer D represented approximately 11 % of total accounts receivable.

As of December 31, 2019, Customer D represented approximately 29 %, Customer A represented approximately 14 %, and Customer E represented approximately 10 % of total accounts receivable.

As of December 31, 2020, one vendor represented approximately 19 % of total gross accounts payable.

Purchases from this vendor during the year ended December 31, 2020 was $ 154,000 .

For the year ended December 31, 2019,

three vendors represented approximately 32%, 27%, and 21% of total purchases.

For the year ended December 31, 2018, one vendor

represented approximately 97% of total purchases.

As of December 31, 2019, three vendors represented approximately 36 %, 12 %, and 10 % of total gross accounts payable.

Purchases from these vendors during the year ended December 31, 2019 was $ 0 .

For the year ended December 31, 2020, three vendors represented approximately 30 %, 14 %, and 13 % of total purchases.

For the year ended December 31, 2019, three vendors represented approximately 32 %, 27 %, and 21 % of total purchases.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Note 26 - Foreign Operations

The Company’s operations are located

primarily in the United States, Canada, and India.

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

Revenues by geographic area are attributed by country of domicile of our subsidiaries.

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

States Canada India Germany United Kingdom Eliminations Total

For the Year Ended December 31, 2020:

9 unchanged sentences

Long lived assets by geographic area $ 7,755 $ 6,775 $ 280 $ 4,610 $ 25 $ — $ 19,445

Goodwill by geographic area $ 522 $ 2,135 $ — $ 3,931 $ — $ — $ 6,588

As of December 31, 2019:

1 unchanged sentence

Long lived assets by geographic area $ 4,348 $ 6,981 $ 345 $ — $ — $ — $ 11,674

Goodwill by geographic area $ — $ 2,070 $ — $ — $ — $ — $ 2,070

INPIXON AND SUBSIDIARIES

2 unchanged sentences

Note 27 - 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.

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.

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.

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.

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.

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.

The amount owed for principal and accrued

interest by Sysorex to the Company as of December 31, 2018 was $2.2 million and as of December 31, 2019 was approximately

$10.6 million.

The Secured Note has been classified as “held for sale”

and the Company, with the assistance of a third-party

valuation firm, estimated the fair value of such using Sysorex financial projections, a discounted cash flow model and a 12.3%

discount rate.

As a result, the Company established a full valuation allowance as of December 31, 2019.

We are 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.

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 $559,121 for the settlement plus the interest accrued

during the fiscal year ended December 31, 2019 of $57,238.

The total owed to the Company for this settlement as of December 31,

2019 was $616,359.

On February 4, 2019, April 2, 2019, and May 22, 2019, the Secured Note was amended to increase the Principal Amount 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 6), on June 30, 2020, the Company partitioned a portion of the outstanding balance 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 ("Assignment Agreement").

An additional $ 2.3 million of the principal balance underlying the Sysorex Note was partitioned into a new note and assigned to Systat as consideration payable for the rights granted under the license as of December 31, 2020.

During the year ended December 31, 2020, an additional amount of approximately $ 2.6 million was advanced under the Secured Note and approximately $ 200,000 was repaid.

The amount owed for principal as of December 31, 2020 and accrued interest through September 30, 2019 by Sysorex to the Company as of December 31, 2020 and 2019 was approximately $ 7.7 million and $ 10.6 million, respectively.

These amounts exclude $ 275,000 of additional interest that the Company is contractually entitled to accrue from October 1, 2019 through December 31, 2019 and approximately $ 1.1 million of additional interest from January 1, 2020 through December 31, 2020 in accordance with the terms of the Sysorex Note, but did not accrue due to the uncertainty of repayment.

An additional $ 1 million of the principal balance under the Secured Note was assigned to Systat on March 19, 2021, as the final portion of the total consideration due in connection with the license.

The Secured Note has been classified as “held for sale” and the Company, with the assistance of a third party valuation firm, the Company estimated the fair value of the Secured Note as of December 31, 2019, using Sysorex financial projections, a discounted cash flow model and a 12.3 % discount rate.

Following such valuation, the Company established a $ 10.6 million valuation allowance as of December 31, 2019 due to the uncertainty of repayment.

During the year ended December 31, 2020, the Company re-evaluated the carrying value of the note and established an additional valuation allowance of approximately $ 2.4 million for the net increase to the note during the year.

We are required to periodically re-evaluate the carrying value of the note and the related

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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 $ 559,121 for the settlement plus the interest accrued during the fiscal year ended December 31, 2019 of $ 57,238 and interest accrued during the fiscal year ended December 31, 2020 of $ 31,824 .

The total owed to the Company for this settlement as of December 31, 2020 and 2019 was $ 648,183 and $ 616,359 , respectively.

The Company established a full valuation allowance against this balance as of December 31, 2020.

Systat License Agreement

Nadir Ali, our Chief Executive Officer and a member of our Board, is a related party in connection with the acquisition of the Licenses as a result of his service as a director of Sysorex, the issuer of the Sysorex Note that was assigned in accordance with the terms and conditions of the License Agreement.

In addition, Tanveer Khader and Kareem Irfan, members of our Board, are also related parties in connection with the acquisition of the Licenses as a result of their respective employment relationships with the Systat Parties.

(See Note 6).

Jibestream Promissory Note

On August 12, 2019, prior to the acquisition

of Jibestream, the Company loaned Jibestream $140,600 for operating expenses.

The note accrues interest at a rate of 5% per annum

and has a maturity date of December 31, 2019.

This note is recorded as a current note receivable on the Company books, however,

it is eliminated in the consolidated financial statements.

As of December 31, 2019, the balance of the note including principal

and interest was approximately $143,000.

On August 12, 2019, prior to the acquisition of Jibestream, the Company loaned Jibestream $ 140,600 for operating expenses.

The note accrues interest at a rate of 5 % per annum and has a maturity date of December 31, 2020.

However, upon the acquisition of Jibestream by Inpixon Canada, Inpixon Canada assumed the loan through consolidation.

This note is recorded as a current note receivable on the Company books, however, it is eliminated in the consolidated financial statements.

As of December 31, 2020, the balance of the note including principal and interest was approximately $ 151,000 .

Cardinal Health Ventures Investment

Nadir Ali, our Chief Executive Officer and director, is also a member in CVH through 3AM, which may, in certain circumstances, be entitled to manage the affairs of CVH.

Ali’s relationship may create conflicts of interest between Mr.

Ali’s obligations to our company and its shareholders and his economic interests and possible fiduciary obligations in CVH through 3AM.

For example, Mr.

Ali may be in a position to influence or manage the affairs of CVH in a manner that may be viewed as contrary to the best interests of either the Company or CVH and their respective stakeholders.

(See Note 15).

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 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.

Note 28 - 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.

This lease was effective June 1, 2014 and will end on July 31, 2021.

The current lease rate is $6,984 per

month and $276 per month for the common area maintenance.

Additionally, the Company has an operating lease for its administrative

office in Coquitlam, Canada, from October 1, 2016 through September 30, 2021.

The initial lease rate was $8,931 CAD per month with

escalating payments.

In connection with the lease, the Company is obligated to pay $6,411 CAD monthly for operating

expenses for building repairs and maintenance.

The Company has an operating lease for its administrative office in Toronto,

Canada, from August 15, 2019 through July 31, 2021.

The current lease rate is $ 6,984 per month and $ 276 per month for the common area maintenance.

Additionally, the Company has an 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 payments.

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 $9,651 CAD monthly for operating expenses for building repairs and maintenance.

Additionally, the Company has an operating lease for its administrative office in New Westminster, Canada, from August 1, 2019

through July 31, 2021.

In connection with the lease, the Company is obligated to pay CAD $ 9,561 monthly for operating expenses for building repairs and maintenance.

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

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

Additionally, the Company has an operating lease for its administrative office in New Westminster, Canada, from August 1, 2019 through July 31, 2021.

The initial lease rate was 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

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 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 payments.

As part of the acquisition of Nanotron on October 5, 2020, the Company acquired right-of-use assets and lease liabilities related to an operating lease for an office suite (the Nanotron office) located in Berlin, Germany.

The office space leased by Nanotron occupies one floor of the building with a predetermined fixed annual increase to the monthly payment, effective on June 1 of every year.

The initial lease rate was € 7,118 per month for the first year prior to annual rent increases.

The lease was effective on June 1, 2020, and expires May 31, 2026.

There are three lease extension options, on June 1, 2023, June 1, 2024 and June 1, 2025.

The Company anticipates extending the lease on each date.

As a result, the Company will evaluate the lease under the expected lease term through May 31, 2026.

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 consolidated

statements of income on a straight-line basis over the lease term.

All of the Company’s leases were previously classified

as operating and are similarly classified as operating lease under the new standard.

On January 1, 2019, upon adoption of ASC

Topic 842, the Company recorded right-of-use asset of $641,992, lease liability of $683,575 and eliminated deferred rent of $41,583.

The adoption of ASC 842 did not have a material impact to prior year comparative periods and a result, a cumulative-effect adjustment

was not required.

The Company determined the lease liability using the Company’s estimated incremental borrowing rate of

8.0% to estimate the present value of the remaining monthly lease payments.

With the Locality acquisition, the Company adopted

ASC Topic 842 effective May 21, 2019 for the Westminster, Canada office operating lease.

With the Jibestream acquisition, the Company

adopted ASC Topic 842 effective August 15, 2019 for the Toronto, Canada office operating lease.

With the India acquisition, the

Company adopted ASC Topic 842 effective January 1, 2019 for the Hyderabad, India office operating lease.

Right-of-use assets is summarized below

(in thousands):

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 consolidated statements of income on a straight-line basis over the lease term.

All of the Company’s leases were previously classified as operating and are similarly classified as operating lease under the new standard.

On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use asset of $ 641,992 , lease liability of $ 683,575 and eliminated deferred rent of $ 41,583 .

The adoption of ASC 842 did not have a material impact to prior year comparative periods and a result, a cumulative-effect adjustment was not required.

The Company determined the lease liability using the Company’s estimated incremental borrowing rate of 8.0 % to estimate the present value of the remaining monthly lease payments.

With the Locality acquisition, the Company adopted ASC Topic 842 effective May 21, 2019 for the Westminster, Canada office operating lease.

With the Jibestream acquisition, the Company adopted ASC Topic 842 effective August 15, 2019 for the Toronto, Canada office operating lease.

With the India acquisition, the Company adopted ASC Topic 842 effective January 1, 2019 for the Hyderabad, India office operating lease.

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.

In regards to the Nanotron acquisition, Nanotron had adopted IFRS 16, which is the new leasing standard that parallels ASC 842, effective January 1, 2019.

Per ASC 805 - " Business Combinations", lease assets and liabilities acquired as part of a business combination should be remeasured at their present value, as if the lease were a new lease as of the acquisition date.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 28 - Leases (continued)

a result, the Company recalculated the present value of the lease as of the acquisition date, which will represent the balance of the operating lease right-of-use asset and operating lease liability moving forward.

Right-of-use assets is summarized below (in thousands):

As of December 31,

2020 As of December 31, 2019

Palo Alto, CA Office $ 630 $ 808

4 unchanged sentences

Toronto, Canada Office 949 405

Ratingen, Germany Office 18 —

Berlin, Germany Office 583 —

Slough, United Kingdom Office 34 —

Less accumulated amortization ( 802 ) ( 474 )

Right-of-use asset, net $ 2,077 $ 1,585

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 our consolidated statement of income for the period ended December 31, 2019 was $839,000.

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Leases (continued)

During the year ended December 31,

2019, the Company recorded $568,715 as rent expense to the right-of-use assets.

Lease liability is summarized below (in

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 our consolidated statement of income for the period ended December 31, 2020 was $ 1.1 million.

During the year ended December 31, 2020, the Company recorded $ 656,110 as rent expense to the right-of-use assets.

Lease liability is summarized below (in thousands):

As of December 31, 2020 As of December 31, 2019

Total lease liability $ 2,104 $ 1,613

1 unchanged sentence

Long term portion $ 1,457 $ 837

Maturity analysis under the lease agreement

is as follows (in thousands):

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

Year ending December 31, 2021 $ 694

3 unchanged sentences

Year ending December 31, 2025 261

Year ending December 31, 2026 109

Total $ 2,327

Present value discount ( 223 )

Lease liability $ 2,104

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 842.

As of December 31, 2019, the weighted average remaining lease term is 2.61 years and the weighted average discount rate used to

determine the operating lease liabilities was 8.0%.

Note 26 - Commitments and Contingencies

Certain conditions may exist as of the

date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved

when one or more future events occur or fail to occur.

The Company assesses such contingent liabilities, and such assessment inherently

involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company,

or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings

or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates

that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated

liability would be accrued in the Company’s consolidated financial statements.

If the assessment indicates that a potentially

material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature

of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are

generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

There can be no assurance

that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations

or cash flows.

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

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 28 - Leases (continued)

available at the date of adoption of Topic 842.

As of December 31, 2020, the weighted average remaining lease term is 3.92 and the weighted average discount rate used to determine the operating lease liabilities was 8.0 %.

Note 29 - Commitments and Contingencies

Atlas Settlement

On February 20, 2019, the Company,

Sysorex and Atlas Technology Group, LLC (“Atlas”) entered into a settlement agreement (the “Settlement

Agreement”) in connection with the satisfaction of an arbitration award granted to Atlas in an aggregate amount of

$1,156,840 plus pre-judgment interest equal to an aggregate of $59,955 (the “Award”) arising out of an

engagement agreement, dated September 8, 2016, by and between Atlas and the Company as well as its subsidiaries, including

the predecessor to Sysorex (the “Engagement Agreement”).

Pursuant to the Settlement Agreement, Atlas agreed to

(a) reduce the Award by $275,000 resulting in a net award of $941,796 (the “Net Award”) and (b) accept an

aggregate of 16,655 shares of freely-tradable common stock of the Company (the “Settlement Shares”), in full

satisfaction of the Award.

Atlas also agreed to apply an amount equal to the difference between the proceeds received from

the sale of the Settlement Shares and the Net Award, against legal fees incurred by the Company and Sysorex in connection

with the Settlement Agreement.

In connection with the Spin-off, pursuant

to the terms and conditions of that certain Separation and Distribution Agreement, dated August 7, 2018, 50% of the costs and liabilities

related to the arbitration action arising from the Engagement Agreement are required to be shared by Sysorex.

Compliance with Nasdaq Continued

Listing Requirement

On May 30, 2019, we received a deficiency

letter from Nasdaq indicating that, based on our closing bid price for the last 30 consecutive business days, we

do 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 our 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 has advised us that our history of non-compliance with Nasdaq’s minimum

bid price requirement, the corresponding history of reverse stock splits, the dilutive effect of the Offering and an inability

to cure the bid price deficiency organically without effecting a reverse stock split prior to November 26, 2019 would raise public

interest concerns under Nasdaq Listing Rule 5101 and could result in the Nasdaq Staff issuing a delisting determination with respect

to our 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 our 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 will have an opportunity to appeal, the Company cannot assure that Nasdaq will

not exercise such discretionary authority or that the Company will be successful if such discretion is exercised and the Company

On November 27, 2019, we received notice from the Nasdaq Listing

Qualifications Department of the Nasdaq Stock Market LLC that based upon our continued non-compliance with the minimum $1.00 bid

price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2), our common stock would be subject to delisting

from the Nasdaq Capital Market (the “Staff Delisting Determination”), unless we timely requested an appeal hearing

before the Nasdaq Hearings Panel.

The Company requested such hearing which was held on January 23, 2020, following the Company’s

implementation of a reverse stock split effective on January 7, 2020.

On February 5, 2020, we received a letter

from the Office of General Counsel of Nasdaq informing us that the Nasdaq Hearings Panel (the “Panel”) granted our

request to continue the listing of our 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 we have 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, we are obligated to notify the Panel immediately, in writing, in

the event our bid price falls below the minimum requirement for any reason, or if we fall out of compliance with any applicable

listing requirement.

The Nasdaq Listing and Hearing Review Council

(the “Listing Council”) may, on its own motion, determine to review any Panel decision within 45 days.

If the Listing

Council determines to review the Panel’s decision, it may affirm, modify, reverse, dismiss or remand the decision to the

Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.

The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Compliance 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.

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, subject to a “Panel Monitor” period pursuant to Nasdaq Listing Rule 5815(d)(4)(A) which expired on February 5, 2021.

Note 30 - Subsequent Events

Capital Raises

On January 24, 2021, the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which it sold in a registered direct offering, 5,800,000 shares of its common stock, and warrants to purchase up to 19,354,838 shares of common stock at an exercise price of $ 1.55 per share (the “January 2021 Purchase Warrants”) for a combined purchase price of $ 1.55 per share and pre-funded warrants to purchase up to 13,554,838 shares of common stock ("January 2021 Pre-funded Warrants") at an exercise price of $ 0.001 per share, at a purchase price of $ 1.549 per share for net proceeds of approximately $ 27.8 million.

Each January 2021 Purchase Warrant and January 2021 Pre-funded Warrant is exercisable for

INPIXON AND SUBSIDIARIES

1 unchanged sentence

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Note 27 - Subsequent Events

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.

Exchange Agreements

On January 14, 2020, the Company exchanged

approximately $1,500,000 of the outstanding principal and interest under the May 2019 Note for 410,958 shares of the Company’s

common stock at an exchange price of $3.65 per share.

On January 16, 2020, the Company exchanged

approximately $458,000 of the outstanding principal and interest under the May 2019 Note for 113,182 shares of the Company’s

common stock at an exchange price of $4.05 per share.

On February 7, 2020, the Company exchanged

approximately $300,290 of the outstanding principal and interest under the June 2019 Note for 115,000 shares of the Company’s

common stock at an exchange price of $3.046 per share.

On February 12, 2020, the Company exchanged

approximately $490,000 of the outstanding principal and interest under the June 2019 Note for 175,000 shares of the Company’s

common stock at an exchange price of $2.80 per share.

Sysorex Note Amendment

2020, the Company amended the Secured Note to extend the maturity date from December 31, 2020 to December 31,

2022, 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.

Equity Distribution Agreement

On March 3, 2020, the Company

entered into an Equity Distribution Agreement (the “Sales Agreement”) with Maxim Group LLC (“Maxim”)

under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $50 million

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

“Offering”).

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

general corporate purposes.

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

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

agreements with respect to any acquisitions as of the date of this Annual Report on Form 10-K.

Any Shares offered and sold in

the Offering will be issued pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-223960) filed

with the Securities and Exchange Commission on March 27, 2018, as amended on May 15, 2018 and declared effective on June 5,

2018 (the “Form S-3”), the base prospectus dated June 5, 2018 included in the Form S-3 and the prospectus

supplement relating to the Offering to be filed with the SEC on or about March 3, 2020.

Maxim will be entitled to compensation at

a fixed commission rate of 4.0% of the gross sales price per Share sold.

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 Sales Agreement and no assurance can be given that the Company will sell any Shares under

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

such sales will take place.

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

of the Sales Agreement, (ii) the sale of Shares having an aggregate offering price of $50 million, and (iii) the termination

by either the Agent or the Company upon the provision of 15 days written notice or otherwise pursuant to the terms of the

Sales Agreement.

one share of common stock, is immediately exercisable and will expire 5 years from the issuance date.

The January 2021 Pre-funded Warrants were exercised in full as of February 8, 2021.

In addition, the investor exercised its purchase rights for 3,000,000 shares of common stock pursuant to the the January 2021 Purchase Warrant on February 11, 2021.

On February 12, 2021, the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which it sold in a registered direct offering, 7,000,000 shares of its common stock, and warrants to purchase up to 15,000,000 shares of common stock at an exercise price of $ 2.00 per share (the “First February 2021 Purchase Warrants”) for a combined purchase price of $ 2.00 per share and pre-funded warrants to purchase up to 8,000,000 shares of common stock ("First February 2021 Pre-funded Warrants") at an exercise price of $ 0.001 per share, at a purchase price of $ 1.999 per share for net proceeds of approximately $ 27.8 million.

Each First February 2021 Purchase Warrant and First February 2021 Pre-funded Warrant is exercisable for one share of common stock, is immediately exercisable and will expire 5 years from the issuance date.

The First February 2021 Pre-funded warrants were exercised in full as of February 18, 2021.

On February 16, 2021, we entered into a Securities Purchase Agreement with an institutional investor, pursuant to which we sold in a registered direct offering, 3,000,000 shares of our common stock, and warrants to purchase up to 9,950,250 shares of common stock at an exercise price of $ 2.01 per share (the “Second February 2021 Purchase Warrants”) for a combined purchase price of $ 2.01 per share and pre-funded warrants to purchase up to 6,950,250 shares of common stock ("Second February 2021 Pre-funded Warrants") at an exercise price of $ 0.001 per share, at a purchase price of $ 2.009 per share for net proceeds of $ 18.5 million after deducting placement agent commissions and offering expenses.

Each Second February 2021 Purchase Warrant and Second February 2021 Pre-funded Warrant is exercisable for one share of common stock, is immediately exercisable and will expire five years from the issuance date.

The Second February 2021 Pre-funded warrants were exercised in full as of March 1, 2021.

Termination of Equity Distribution Agreement (ATM)

On February 12, 2021, we terminated that certain Equity Distribution Agreement, dated March 3, 2020, with Maxim Group LLC.

Stock Option Exercises

On February 5, 2021, the Company issued 4,977 shares of common stock in connection with the cashless exercise of 14,583 employee stock options.

On February 11, 2021, the Company entered into an exchange agreement (the “Exchange Agreement”) with the holder of that certain outstanding unsecured promissory note, issued on March 18, 2020 in an aggregate initial principal amount of $ 6,465,000 (the “Original Note”), pursuant to which the Company and the holder agreed to:

(i) partition a new promissory note in the form of the Original Note equal to $ 1.5 million and then cause the outstanding balance of the Original Note to be reduced by $ 1.5 million;

and (ii) exchange the partitioned note for the delivery of 893,921 shares of the Company’s Common Stock, at an effective price per share equal to $ 1.678 .

Stock Option and Restricted Stock Awards

On February 18, 2021, the Company granted 1,480,500 stock options to employees of the Company.

These options vest pro-rata over 12 , 24 , or 36 months, have a life of ten years and an exercise price of $ 1.78 per share.

On February 18, 2021, the Company granted 120,000 stock options to the directors of the Company.

These options vest upon grant, have a life of ten years and an exercise price of $ 1.78 per share.

On February 18, 2021, the Company granted 5,250,000 restricted stock awards to employees of the Company.

These stock awards vest either 25 % on the Grant Gate and 25 % on each one year anniversary of Grant Date or 50 % on Grant Gate and 50 % on one year anniversary.

Systat License Agreement

INPIXON AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

On February 22, 2021, the Company entered into a Second Amendment to the License Agreement to allow for the exercise of the purchase option in whole or in part anytime during the Purchase Option Period and to provide for cash consideration in lieu of an assignment of the Note at our option.

In addition, we exercised our option to purchase a portion of the underlying assets, including certain software, trademarks, solutions, domain names and websites from Systat in exchange for consideration in an amount equal to $ 900,000 .

Nanotron Purchase Agreement

On February 24, 2021, the Company entered into an amendment to the Nanotron share sale and purchase agreement pursuant to which we agreed to the early release of the Holdback Funds, in exchange for a reduction in the total amount payable to the Seller by $ 225,000 .

In addition, the amount payable was further reduced by $ 59,156.74 in connection with a post closing working capital adjustment and the satisfaction of a claim related to a customer dispute.

A balance of $ 465,843.26 was paid to the Seller in full satisfaction of the Holdback Funds payable by the Purchaser to the Seller pursuant to the Purchase Agreement.

Game Your Game Purchase Agreement

On March 25, 2021, we entered into a Stock Purchase Agreement (the “GYG Purchase Agreement”) with Game Your Game, Inc., a Delaware corporation (“GYG”), and certain selling shareholders (the "Selling Shareholders"), pursuant to which we will acquire an aggregate of 522,000 shares of common stock of GYG (the “GYG Shares”), representing 52.2 % of the outstanding shares of common stock of GYG on a fully diluted basis, in exchange for $ 1,666,932 in cash (the “Cash Consideration”), and a number of shares of our common stock equal to $ 1,403,103 divided by the lesser of (A) the closing price per share of our common stock, as reported by the Nasdaq Stock Market, immediately prior to the closing of the transaction and (B) the average closing price of our common stock, as reported by the Nasdaq Stock Market, for the 5 trading days immediately preceding the closing date.

The Cash Consideration will be used for working capital purposes and to satisfy certain outstanding payroll obligations of GYG.

The closing of the transaction is subject to the terms and satisfaction of the conditions set forth in the GYG Purchase Agreement.

GYG’s business consists of developing and providing solutions using sports data and analytics.

Iliad Note Extension

On March 17, 2021, we extended the maturity date of the March 2020 Note with Iliad from March 18, 2021 to March 18, 2022.

GTX Note Extension

On February 28, 2021 we agreed to extend the maturity date of the GTX Note to December 31, 2021.

In addition, we agreed that from June 1, 2020 until the earlier of the maturity date, the date on which the outstanding balance is paid in full or the date on which certain property is removed from GTX premises an amount equal to $ 585 per month would be offset as payment against the outstanding balance, applied first against the interset amount and then against the principal amount.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data