What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-05-17 · 647 added, 279 removed, 600 unchanged (61% of the section changed)

3 unchanged sentences

In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

The results for the period ended March 31, 2021 are not necessarily indicative of the results of operations for the full year.

The results for the period ended June 30, 2021 are not necessarily indicative of the results of operations for the full year.

These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited consolidated financial statements for the fiscal years December 31, 2020 and 2019 included in the annual report on Form 10-K filed with the U.S.

3 unchanged sentences

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

As of March 31,

As of June 30,

2021 As of December 31,

4 unchanged sentences

Notes and other receivables 272 152

Inventory 1,492 1,243

Inventory, net of reserve of $ 138 and $ 138 , respectively

Short-term investments 45,303 7,998

4 unchanged sentences

Software development costs, net 1,658 1,721

Investments in equity securities 29,940 —

Long-term investments 2,500 2,500

7 unchanged sentences

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

As of March 31,

As of June 30,

2021 As of December 31,

4 unchanged sentences

Accrued liabilities 5,717 2,739

Income tax liabilities 6,750 —

Operating lease obligation, current 602 647

13 unchanged sentences

Series 4 Convertible Preferred Stock - 10,415 shares authorized;

1 issued, and 1 as of March 31, 2021 and December 31, 2020, respectively

1 issued, and 1 outstanding as of June 30, 2021 and December 31, 2020, respectively

Series 5 Convertible Preferred Stock - 12,000 shares authorized;

126 issued and 126 outstanding as of March 31, 2021 and December 31, 2020, respectively.

126 issued, and 126 outstanding as of June 30, 2021 and December 31, 2020, respectively.

Common Stock - $ 0.001 par value;

250,000,000 shares authorized;

101,382,448 and 53,178,462 issued and 101,382,447 and 53,178,461 outstanding as of March 31, 2021 and December 31, 2020, respectively.

116,454,028 and 53,178,462 issued and 116,454,027 and 53,178,461 outstanding as of June 30, 2021 and December 31, 2020, respectively.

Additional paid-in capital 322,196 225,613

1 unchanged sentence

( 695 ) ( 695 )

Accumulated other comprehensive (loss)/income ( 11 ) 660

Accumulated other comprehensive income 52 660

Accumulated deficit ( 178,931 ) ( 180,992 )

7 unchanged sentences

(In thousands, except per share data)

For the Three Months Ended March 31,

(Unaudited) (Unaudited)

For the Three Months Ended June 30, For the Six Months Ended

2021 2020 2021 2020

Revenues $ 3,453 1,076 6,407 $ 2,880

10 unchanged sentences

Other Income (Expense)

Interest expense, net ( 349 ) ( 621 )

Interest income (expense), net 1,555 ( 777 ) 1,206 ( 1,397 )

Loss on exchange of debt for equity — ( 47 ) ( 30 ) ( 132 )

Provision for valuation allowance on related party loan - held for sale ( 117 ) —

Other income 386 18

Total Other Expense ( 110 ) ( 689 )

Net Loss, before tax ( 12,530 ) ( 6,255 )

Benefit (provision) for valuation allowance on related party loan - held for sale 7,462 ( 835 ) 7,345 ( 835 )

Other income (expense) 125 ( 517 ) 511 ( 499 )

Gain on related party loan - held for sale 49,817 — 49,817 —

Unrealized loss on equity securities ( 28,965 ) — ( 28,965 ) —

Total Other Income (Expense) 29,994 ( 2,176 ) 29,884 ( 2,863 )

Net Income (Loss), before tax 16,701 ( 7,304 ) 4,171 ( 13,556 )

Income tax (provision) benefit ( 2,195 ) — ( 2,204 ) 87

Net Loss ( 12,539 ) ( 6,168 )

Net Income (Loss) Attributable to Non-controlling Interest 18 ( 10 )

Net Loss Attributable to Stockholders of Inpixon $ ( 12,557 ) $ ( 6,158 )

Net Loss Per Share - Basic and Diluted $ ( 0.16 ) $ ( 1.22 )

Net Income (Loss) $ 14,506 ( 7,304 ) 1,967 $ ( 13,469 )

Net (Loss) Income Attributable to Non-controlling Interest ( 253 ) 19 ( 235 ) 9

Net Income (Loss) Attributable to Stockholders of Inpixon $ 14,759 $ ( 7,323 ) 2,202 $ ( 13,478 )

Net Income (Loss) Per Share - Basic $ 0.13 $ ( 0.32 ) $ 0.02 $ ( 0.97 )

Net Income (Loss) Per Share - Diluted $ 0.13 $ ( 0.32 ) $ 0.02 $ ( 0.97 )

Weighted Average Shares Outstanding

Basic and Diluted 78,942,697 5,038,515

Basic 110,040,532 22,823,976 94,577,520 13,931,245

Diluted 110,041,378 22,823,976 94,591,619 13,931,245

The accompanying notes are an integral part of these financial statements

2 unchanged sentences

(In thousands)

For the Three Months Ended March 31,

Net Loss $ ( 12,539 ) $ ( 6,168 )

Unrealized foreign exchange loss from cumulative translation adjustments ( 671 ) ( 613 )

Comprehensive Loss $ ( 13,210 ) $ ( 6,781 )

For the Three Months Ended June 30, For the Six Months Ended

2021 2020 2021 2020

Net Income (Loss) $ 14,506 $ ( 7,304 ) $ 1,967 $ ( 13,469 )

Unrealized foreign exchange (loss) gain from cumulative translation adjustments $ 52 $ 318 $ ( 619 ) $ ( 295 )

Comprehensive Income (Loss) $ 14,558 $ ( 6,986 ) $ 1,348 $ ( 13,764 )

The accompanying notes are an integral part of these financial statements

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands, except per share data)

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

9 unchanged sentences

Balance - March 31, 2021 1 $ — 126 $ — 101,382,448 $ 101 $ 310,013 ( 1 ) $ ( 695 ) $ ( 11 ) $ ( 193,549 ) $ 59 $ 115,919

Stock options and restricted stock awards granted to employees for services — — — — — — 2,053 — — — — — 2,053

Common shares issued for Game Your Game acquisition — — — — 1,179,077 1 1,402 — — — — 2,811 4,214

Common shares issued for Visualix acquisition — — — — 369,563 — 429 — — — — — 429

Common shares issued for the CXApp — — — — 8,849,538 9 9,991 — — — — — 10,000

Common shares for cashless stock options exercised — — — — 414 — — — — — — — —

Common shares issued for restricted stock grants — — — — 4,672,988 5 ( 5 ) — — — — — —

Taxes paid on stock based compensation — — — — — — ( 1,687 ) — — — — — ( 1,687 )

Cumulative translation adjustment — — — — — — — — — 63 ( 141 ) 130 52

Net income (loss) — — — — — — — — — — 14,759 ( 253 ) 14,506

Balance - June 30, 2021 1 $ — 126 $ — 116,454,028 $ 116 $ 322,196 ( 1 ) $ ( 695 ) $ 52 $ ( 178,931 ) $ 2,748 $ 145,486

The accompanying notes are an integral part of these financial statements

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(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

Shares Amount Shares Amount Shares Amount Shares Amount

Balance - January 1, 2020 1 $ — 126 $ — 4,234,923 $ 4 $ 158,383 ( 1 ) $ ( 695 ) $ 96 $ ( 151,762 ) $ 26 $ 6,052

3 unchanged sentences

Cumulative translation adjustment — — — — — — — — — ( 613 ) — ( 1 ) ( 614 )

Net loss — — — — — — — — — — — — ( 6,158 ) ( 10 ) ( 6,168 )

Net income (loss) — — — — — — — — — — ( 6,158 ) ( 10 ) ( 6,168 )

Balance - March 31, 2020 1 $ — 126 $ — 7,068,490 $ 7 $ 164,225 ( 1 ) $ ( 695 ) $ ( 517 ) $ ( 157,920 ) $ 15 $ 5,115

Stock options granted to employees for services — — — — — — 286 — — — — — 286

Common and preferred shares issued for net cash proceeds from a public offering — — — — 29,033,036 29 40,490 — — — — — 40,519

Common shares issued for extinguishment of debt — — — — 3,889,990 4 4,588 — — — — — 4,592

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

Cumulative translation adjustment — — — — — — — — — 318 — — 318

Net income (loss) — — — — — — — — — — ( 7,322 ) 19 ( 7,303 )

Balance - June 30, 2020 1 $ — 126 $ — 40,175,002 $ 40 $ 209,789 ( 1 ) $ ( 695 ) $ ( 199 ) $ ( 165,242 ) $ 34 $ 43,727

The accompanying notes are an integral part of these financial statements

2 unchanged sentences

(In thousands)

For the Three Months Ended March 31,

Cash Flows Used in Operating Activities

Net loss $ ( 12,539 ) $ ( 6,168 )

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

For the Six Months Ended June 30,

Cash Flows Used in Operating Activities (Unaudited)

Net income (loss) $ 1,967 $ ( 13,469 )

Adjustment to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 625 384

5 unchanged sentences

Accrued interest income, related party ( 1,627 ) ( 32 )

Related party note, gain on foreign currency transaction ( 363 ) —

Provision for the valuation allowance - held for sale loan 117 —

Income tax expense (benefit) 9 ( 87 )

Other expenses — 29

Unrealized gain on note ( 490 ) —

(Recovery) provision for valuation allowance for held for sale loan ( 7,345 ) 835

Provision for valuation allowance for related party receivable — 648

Gain on settlement of related party promissory note and loan related party receivable ( 49,817 ) —

Deferred income tax ( 4,507 ) ( 87 )

Unrealized loss on equity securities 28,965 —

Changes in operating assets and liabilities:

5 unchanged sentences

Accrued liabilities 2,494 ( 593 )

Income tax liabilities 6,711 —

Deferred revenue ( 238 ) 105

1 unchanged sentence

Other liabilities 96 117

Total Adjustments 6,878 1,633

Net Cash Used in Operating Activities ( 14,163 ) ( 10,369 )

1 unchanged sentence

Purchase of property and equipment ( 149 ) ( 39 )

Capitalized software ( 253 ) ( 193 )

Investment in short term investment ( 42,059 ) —

Purchases of capitalized software ( 373 ) ( 433 )

Purchases of other short term investments ( 2,000 ) —

Purchases of treasury bills ( 63,362 ) —

Sales of treasury bills 28,000 —

Purchase of Systat licensing agreement ( 900 ) —

Net Cash Flows Used in Investing Activities ( 43,321 ) ( 209 )

Cash Flows From Financing Activities

Acquisition of Game Your Game 184 —

Acquisition of CXApp ( 15,186 ) —

Acquisition of Visualix ( 61 ) —

Net Cash Used in Investing Activities $ ( 53,847 ) ( 472 )

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

Cash From Financing Activities

Net repayments to bank facility — ( 150 )

Net proceeds from issuance of common stock and warrants 77,853 41,771

Taxes paid related to net share settlement of restricted stock units ( 1,687 ) —

Net proceeds from notes payable — 1

1 unchanged sentence

Repayments from related party — 200

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

Net proceeds from promissory notes — 5,000

Repayment of CXApp acquisition liability ( 137 ) —

Repayment of acquisition liability to Nanotron shareholders ( 467 ) —

Repayment of acquisition liability to Locality shareholders ( 500 ) ( 250 )

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Non-cash investing and financing activities

Common shares issued for extinguishment of liability $ — $ 200

Common shares issued for extinguishment of debt $ 1,500 $ 8,786

Right of use asset obtained in exchange for lease liability $ — $ 6

Settlement of Sysorex Note $ 7,462 $ —

Investment in equity securities $ 58,905 $ —

Common shares issued for CXApp acquisition $ 10,000 $ —

Common shares issued for Game Your Game acquisition $ 1,403 $ —

Common shares issued for Visualix asset acquisition $ 429 $ —

The accompanying notes are an integral part of these financial statements

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 1 - Organization and Nature of Business

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(“Inpixon Canada”) and Jibestream, Inc.

(“Jibestream”), which was amalgamated into Inpixon Canada on January 1, 2020, Inpixon 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.

("CXApp"), and its majority-owned subsidiaries Inpixon India Limited (“Inpixon India”) and Game Your Game, Inc.

("Game Your Game"), as well as Game Your Game's wholly-owned subsidiary "Active Mind Technology Ltd.

("Active Mind Technology") (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.

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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.

As of March 31, 2021, the Company has a working capital surplus of approximately $ 88.9 million and cash of of approximately $ 46.3 million.

For the three months ended March 31, 2021, the Company incurred a net loss of approximately $ 12.5 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.

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.

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 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.

Change in Segment Reporting

During the second quarter of 2021, the Company changed the level of detail at which its Chief Executive Officer (“CEO”) acting as the Chief Operating Decision Maker, or “CODM”, regularly reviews and manages certain of its businesses, resulting in the bifurcation of its former one segment into three standalone reportable segments:

Indoor Intelligence, Saves and Shoom.

The Company now manages and reports its operating results through these three reportable segments.

This change allows the Company to enhance its customer focus and better align its business models, resources, and cost structure to the specific current and future growth drivers of each business, while providing increased transparency to the Company’s shareholders.

The historical segment information has been recast to conform to the current segment structure.

As of June 30, 2021, the Company has a working capital surplus of approximately $ 54.2 million, cash of approximately $ 24.9 million and short term investments of $ 45.3 million.

For the three months ended June 30, 2021, the Company earned net income of approximately $ 14.5 million.

For the six months ended June 30, 2021, the Company earned net income of approximately $ 2.0 million.

The net income for each of these periods include a gain on the settlement of the Sysorex debt with the issuance of the Sysorex securities to the Company on April 14, 2021 offset by the unrealized loss on the related investment in equity securities as of June 30, 2021.

See further details in Note 14, 22 and 24.

On each of January 24, 2021, February 12, 2021 and February 16, 2021 the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company sold an aggregate of 15,800,000 shares of its common stock, warrants to purchase up to 44,305,088 shares of common stock at exercise prices ranging from $ 1.55 to $ 2.01 and pre-funded warrants to purchase up to 28,505,088 shares of common stock at an exercise price of $ 0.001 per share at purchase prices ranging from $ 1.549 to $ 2.009 per share.

The Company raised net proceeds of $ 77.9 million after deduction of sales commissions and other offering expenses.

See further breakdown in Note 16 - Capital Raises.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 1 - Organization and Nature of Business (continued)

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.

Risks and Uncertainties

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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.

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 and in some places continue to be, 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, we were able to realize growth in total revenue for the first and second quarters of 2021 and for the six months ended June 30, 2021 when compared to the same periods of 2020, as a result of the addition of new product lines including a full period of sales with the addition of the SAVES product lines following the second quarter of 2020, the addition of the RTLS product line in the fourth quarter of 2020, and the addition of the CXApp and Game Your Game product lines acquired during the second quarter of 2021.

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.

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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 2 - Basis of Presentation

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In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The results of the Company’s operations for the three-month period ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the years ended December 31, 2020 and 2019 included in the annual report on Form 10-K filed with the SEC on March 31, 2021.

Interim results are not necessarily indicative of the results for the full year ending December 31, 2021.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 3 - Summary of Significant Accounting Policies

The Company's complete accounting policies are describes in Note 2 to the Company's audited consolidated financial statements and notes for the years ended December 31, 2020 and 2019.

The Company's complete accounting policies are described in Note 2 to the Company's audited consolidated financial statements and notes for the years ended December 31, 2020 and 2019.

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.

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

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• the valuation of stock-based compensation;

• the valuation of the assets and liabilities acquired of Systat, Ten Degrees, and Nanotron as described in Note 4, Note 5, and Note 6 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 Systat, Ten Degrees, Nanotron, Game Your Game, Visualix, and CXApp as described in Note 5 , Note 6 , Note 7 , Note 8 , Note 9 and Note 10 , respectively, as well as the valuation of the Company’s common stock issued in the transactions;

• the allowance for doubtful accounts;

• the valuation of loans receivable;

• the valuation of equity securities;

• the valuation allowance for deferred tax assets;

• impairment of long-lived assets and goodwill.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Restricted Cash

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

As of March 31, 2021, 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.

As of June 30, 2021, 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 March 31,

As of June 30,

(in thousands) 2021 2020

1 unchanged sentence

Restricted cash — 72

Total cash, cash equivalents, and restricted cash in the balance sheet $ 46,273 $ 6,182

Total cash, cash equivalents, and restricted cash $ 24,912 $ 39,530

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 3 - Summary of Significant Accounting Policies (continued)

Short-term investments

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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 for the three months ended March 31, 2021.

No unrealized gain or loss was recorded on available for sale securities for the three months ended March 31, 2020.

Available for sale securities are carried at fair value, with an unrealized gains and losses included in the Other income (expense) line of the Condensed Consolidated Statements of Operations.

The Company recorded unrealized losses of approximately $ 64 thousand for the three months ended June 30, 2021 and an unrealized loss of approximately $ 62 thousand for the six months ended June 30, 2021.

No unrealized gain or loss was recorded on available for sale securities for the three and six month ended June 30, 2020.

Investment in equity securities- fair value

Investment securities—fair value consist primarily of investments in equity securities and are carried at fair value in accordance with Accounting Standards Codification ("ASC") 321, Investments-Equity Securities (“ASC 321”).

These securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity.

These securities transactions are recorded on a trade date basis.

Any unrealized appreciation or depreciation on investment securities is reported in the Condensed Consolidated Statement of Operations within Unrealized Loss on Equity Securities.

The Unrealized loss on equity securities for the three and six months ended June 30, 2021 was $ 29.0 million.

There were no unrealized gains or losses on equity securities during the three and six months ended June 30, 2020.

Revenue Recognition

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Software As A Service Revenue Recognition

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

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.

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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 3 - Summary of Significant Accounting Policies (continued)

Professional Services Revenue Recognition

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Anticipated losses are recognized as soon as they become known.

For the three months ended March 31, 2021 and 2020, the Company did not incur any such losses.

For the three and six months ended June 30, 2021 and 2020, the Company did not incur any such losses.

These amounts are based on known and estimated factors.

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.

License Revenue Recognition

The Company enters into contracts with its customers whereby it grants a non-exclusive on-premise license for the use of its proprietary software.

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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.

The timing of the Company's revenue recognition related to the licensing 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.

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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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

rights granted after the initial contract.

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.

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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.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 3 - Summary of Significant Accounting Policies (continued)

Contract Balances

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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 $ 1,667,000 and $ 1,922,000 as of March 31, 2021 and December 31, 2020, respectively, related to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff.

The Company had deferred revenue of approximately $ 2,780,000 and $ 1,922,000 as of June 30, 2021 and December 31, 2020, 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.

Disaggregation of Revenue

Revenues consisted of the following (in thousands):

For the Three Months Ended March 31,

Recurring revenue $ 1,409 862

Non-recurring revenue $ 1,545 942

Totals $ 2,954 $ 1,804

Stock-Based Compensation

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Forfeitures of unvested stock options are recorded when they occur.

The Company incurred stock-based compensation charges of approximately $ 5.1 million and $ 0.4 million for each of the three months ended March 31, 2021 and 2020, respectively, which are included in general and administrative expenses.

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

For the Three Months Ended March 31,

Compensation and related benefits $ 5,096 $ 399

Totals $ 5,096 $ 399

The Company incurred stock-based compensation charges of approximately $ 2.1 million and $ 0.3 million for the for the three months ended June 30, 2021 and 2020, respectively, and approximately $ 7.1 million and $ 0.7 million for the six months ended June 30, 2021 and 2020, respectively, which are included in general and administrative expenses.

Stock-based compensation charges are related to employee compensation and related benefits.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

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 three months ended March 31, 2021 and 2020:

For the Three Months Ended

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 3 - Summary of Significant Accounting Policies (continued)

Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share ("ASC 260").

ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.

Basic EPS is computed by dividing net income (loss) available to common shareholders (i.e., the numerator) by the weighted average number of shares outstanding (i.e., the denominator) during the period.

Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.

In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.

Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Net Income (loss) Attributable to Stockholders of Inpixon $ 14,759 $ ( 7,323 ) $ 2,202 $ ( 13,478 )

Weighted -average number of shares outstanding 110,040,532 22,823,976 94,577,520 13,931,245

Incremental shares from assumed conversion of options — — 382 —

Incremental shares from assumed conversion of warrants — — 12,871 —

Incremental shares from assumed conversion of convertible preferred stock 846 — 846 —

Diluted Weighted-average number of shares outstanding 110,041,378 22,823,976 94,591,619 13,931,245

Earnings (loss) per Share- Basic $ 0.13 $ ( 0.32 ) $ 0.02 $ ( 0.97 )

Earnings (loss) per Share- Dilutive $ 0.13 $ ( 0.32 ) $ 0.02 $ ( 0.97 )

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net income (loss) per common share for the three and six months ended June 30, 2021 and 2020:

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Options 6,847,877 5,662,946 1,659,366 5,662,946

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Convertible preferred stock — 846 — 846

Restricted Stock Award 5,250,000 —

ATM sales of common stock to be issued — 639,142

Totals 61,662,075 854,036

Total 56,246,305 5,757,044 46,057,794 5,757,044

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.

Financial instruments consist of cash and cash equivalents, investments in equity securities, short-term investment, accounts receivable, notes receivable, accounts payable, and short-term debt.

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 and investments in equity securities, are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature.

Investments in equity securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity, as necessary.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 3 - Summary of Significant Accounting Policies (continued)

Recently Issued and Adopted Accounting Standards

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.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 209-12 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.

ASU 2019-12 became effective for the Company beginning January 1, 2021.

The new guidance was effective upon issuance of this final accounting standards update.

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

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

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 May 2021, the FASB issued ASU 2021-04, "Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options'" ("ASU 2021-04"), which introduces a new way for companies to account for warrants either as stock compensation or derivatives.

Under the new guidance, if the modification does not change the instrument's classification as equity, the company accounts for the modification as an exchange of the original instrument for a new instrument.

In general, if the fair value of the "new" instrument is greater than the fair value of the "original" instrument, the excess is recognized based on the substance of the transaction, as if the issuer has paid cash.

The effective date of the standard is for interim and annual reporting periods beginning after December 15, 2021 for all entities, and early adoption is permitted.

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 and disclosures.

Subsequent Events

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

Note 4 - Disaggregation of Revenue

Disaggregation of Revenue

The Company recognizes revenue when control is transferred 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 recognition policy.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 4 - Disaggregation of Revenue (continued)

Revenues consisted of the following (in thousands):

For the Three Months Ended June 30 For the Six Months Ended June 30

2021 2020 2021 2020

Recurring revenue

Hardware $ — $ — $ — $ —

Software 1,662 810 3,122 1,640

Professional services — 29 35 61

Total recurring revenue $ 1,662 $ 839 $ 3,157 $ 1,701

Non-recurring revenue

Hardware $ 400 $ 1 $ 1,214 $ 119

Software 297 — 608 81

Professional services 1,094 236 1,428 979

Total non-recurring revenue $ 1,791 $ 237 $ 3,250 $ 1,179

Total Revenue $ 3,453 $ 1,076 $ 6,407 $ 2,880

For the Three Months Ended June 30 For the Six Months Ended June 30

2021 2020 2021 2020

Revenue recognized at a point in time (1)

Indoor Intelligence $ 400 $ — $ 1,214 $ 200

Saves 297 — 608 —

Shoom — — — —

Total $ 697 $ — $ 1,822 $ 200

Revenue recognized over time (2) (3)

Indoor Intelligence $ 1,869 $ 574 $ 2,672 $ 1,663

Saves 386 — 907 —

Shoom 501 502 1,006 1,017

Total $ 2,756 $ 1,076 $ 4,585 $ 2,680

Total Revenue $ 3,453 $ 1,076 $ 6,407 $ 2,880

(1) Hardware and Software's performance obligation is satisfied at a point in time where when they are shipped to the customer.

(2) 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 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, in which revenue is recognized over time.

(3) Software As A Service Revenue's performance obligation is satisfied evenly over the service period using a time-based measure because the Company is providing continuous access to its service and service is recognized overtime.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 5 - Systat Licensing Agreement

2 unchanged sentences

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

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

In accordance with Rule 11-01(d) and ASC 805 - Business Combinations ("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.

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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.

The License Grant will remain in effect for a period of 15 years following the Closing Date, unless terminated sooner upon mutual written consent of Systat Software, Inc.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 5 - Systat Licensing Agreement (continued)

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.

3 unchanged sentences

The financial data of the License Grant is included in the Company’s financial statements as of deemed acquisition date of June 30, 2020.

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 .

The Second Amendment was accounted for as a business combination in accordance with ASC 805.

In addition, the Company exercised its 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 .

The Second Amendment was accounted for as a business combination in accordance with ASC 805 Business Combinations.

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.

3 unchanged sentences

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

Fair Value Allocation

Intangible assets:

3 unchanged sentences

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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 6 - Ten Degrees Acquisition

1 unchanged sentence

(“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”), 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.

In accordance with Rule 11-01(d) and ASC 805 Business Combinations , 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.

1 unchanged sentence

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.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 6 - Ten Degrees Acquisition (continued)

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.

6 unchanged sentences

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 March 31, 2021.

The developed technology and non-compete agreements acquired are included in the consolidated balance of intangible assets as of June 30, 2021.

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

Note 7 – 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.

On October 6, 2020, the Company, through its wholly-owned subsidiary, Inpixon Germany, a limited liability company incorporated under the laws of Germany (the "Purchaser" and together with Inpixon, the "Company"), 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 (the "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 total paid to Sensera Limited 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”).

Inpixon retained $ 750,000 (the “Holdback Funds”) from the Purchase Price (the "Purchase Price") to secure Sensera Limited'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 (as described in the Purchase Agreement) versus the working capital target (as described in the Purchase Agreement) (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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 6 – Nanotron Acquisition (continued)

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.

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

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 .

1 unchanged sentence

A balance of $ 465,843 was paid to the Seller in full satisfaction of the Holdback Funds payable by the Purchaser to the Seller pursuant to the Purchase Agreement.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 7 – Nanotron Acquisition (continued)

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

20 unchanged sentences

Total liabilities assumed 1,658

Estimated fair value of net assets acquired:

Total Purchase Price $ 8,252

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 8 – Game Your Game Acquisition

On April 9, 2021, the Company acquired Game Your Game, and its wholly owned subsidiary Active Mind to further the Company's strategy to reach the end customer with apps in the growing sports analytics space.

In exchange for a purchase price of $ 3,070,035 the Company acquired 522,000 shares of the Company's common stock from Game Your Game, which represent 52.2 % of the outstanding shares of Common Stock of Game Your Game on a fully diluted basis.

The goodwill of $ 285,867 arising from the Acquisition consists of an acquired workforce, as well as synergies and economies of scale expected from combined operations of Inpixon and Game Your Game.

The following table represents the preliminary purchase price (in thousands).

Stock ( 1,179,077 number of common stock shares)

Total Purchase Price $ 3,070

The acquisition is being accounted for as a business combination in accordance with ASC 805 Business Combinations.

The Company has determined preliminary fair values of the assets acquired and liabilities assumed in the acquisition.

These values are subject to change as we perform additional reviews of our assumptions utilized.

In connection with the Acquisition, the Company recorded a non-controlling interest for the 48.8 % ownership from unrelated third parties.

The non-controlling interest was recorded at fair value on the closing date of the Acquisition.

Future net income (loss) attributable to the non-controlling interest will be allocated based on its respective ownership.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 8 – Game Your Game Acquisition (continued)

The Company has made an allocation of the purchase price of the acquisition to the assets acquired and the liabilities assumed as of the purchase date.

The following table summarizes the preliminary purchase price allocations relating to the Acquisition (in thousands):

Fair Value Allocation

Assets acquired:

Cash and cash equivalents $ 1,851

Accounts receivable 36

Inventory 144

Other current assets 37

Property and equipment 105

Other assets 3

Tradename 689

Proprietary technology 3,190

Customer relationship 933

Total assets acquired $ 7,274

Liabilities assumed:

Accounts payable $ 957

Accrued expenses and other liabilities 436

Total liabilities assumed 1,393

Estimated fair value of net assets acquired:

Non Controlling Interest ( 2,811 )

Estimated fair value of net assets acquired attributable to the Company $ 3,070

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 tax purposes.

Total acquisition-related costs for the Acquisition incurred during the period ended June 30, 2021 ended was $ 304,211 and is included in acquisition-related costs in the Purchaser’s Statements of Operations.

The below table details the acquisition-related costs for the Acquisition (in thousands):

Professional fees $ 154

Consulting fees 150

Total acquisition costs $ 304

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 9 – Visualix Acquisition

On April 23, 2021 (the “Closing Date”), the Company entered a certain asset purchase agreement by and among the Company, Visualix GmbH i.L.

(the “Visualix”), Darius Vahdat-Pajouh and Michal Bucko (each, a “Founder,” and collectively, the “Founders”), and Future Energy Ventures Management GmbH (“FEVM”).

Prior to the Closing Date, Visualix owned and operated certain computer vision, robust localization, large-scale navigation, mapping, and 3D reconstruction technologies (collectively, the “Underlying Technology”).

In accordance with the terms of the asset purchase agreement, the Company purchased from Visualix the entirety of its assets consisting primarily of intellectual property including the underlying technology.

Additionally, the Company purchased certain patent applications related to the underlying technology from FEVM.

In consideration of the transactions (the “Consideration”) contemplated by the Asset Purchase Agreement, the Company:

remitted a cash payment in the amount of Fifty Thousand Euros (EUR 50,000 ) to Visualix

issued 316,768 shares of Common Stock to Visualix;

issued 52,795 to shares of Common Stock to FEVM.

The asset purchase agreement includes customary representations and warranties, as well as certain covenants, including, inter alia, that the Founders are hired as employees of Inpixon GmbH and Visualix and the Founders shall not, for a period of two (2)

years following the Closing Date, directly or indirectly, compete with the Company in the sectors of Mapping and Localization Technology (as defined in the asset purchase agreement).

The following table represents the purchase price (in thousands).

Stock ( 316,768 number of common stock shares)

Total Purchase Price $ 490

Assets Acquired (in thousands):

Developed Technology $ 429

Non-compete Agreements 61

Total Purchase Price $ 490

Note 10 – CXApp Acquisition

On April 30, 2021, the Company acquired Design Reactor, Inc.

In exchange for the aggregate purchase price of $ 32,500,000 , the Company acquired all of the outstanding capital of the CXApp, incorporated in the State of California.

The price was subject to certain post-closing adjustments based on actual working capital as of the closing as described in the stock purchase agreement.

The goodwill of $ 17,165,938 arising from the Acquisition consists of an acquired workforce, as well as synergies and economies of scale expected from combined operations of Inpixon and the CXApp.

The following table represents the preliminary purchase price (in thousands).

Cash $ 22,500

Stock ( 8,849,538 number of common stock shares)

Total Purchase Price $ 32,500

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 10 – CXApp Acquisition (continued)

In relation to the cash payment, Inpixon retained $ 4,875,000 of Holdback Funds from the Purchase Price to secure the Seller's obligations under the stock 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.

In addition, to the Holdback Funds, the Company is to pay various costs to third parties on the Seller's behalf.

These costs consisted of Seller transaction expenses, option payouts, bonus payouts, and miscellaneous accrued expenses.

The Company retained cash for these future payments and recorded these future payments in Acquisition Liability on the closing date of the Acquisition.

The following represents the amounts that were recorded to Acquisition Liability (in thousands):

Acquisition Liability

Option payout $ 296

Bonus payout 34

Seller transaction expenses 72

Miscellaneous accrued expenses 174

Total current $ 576

Option payout $ 493

Bonus payout 57

Holdback funds 4,875

Total noncurrent 5,425

Less Payments made as of June 30, 2021 ( 136 )

Total acquisition liability $ 5,865

In connection with the Acquisition, the Company is to pay an additional amount up to $ 12,500,000 in contingent earnout payments subject to CXApp meeting certain revenue targets on the one year anniversary of the Acquisition date.

(the "Earnout Payment").

The Earnout Payment is payable to select sellers of CXApp.

The Earnout Payment is subject to and conditioned upon each individual select seller's continued active employment or service with the Company at the time of the earnout payment date.

The Earnout Payment is treated as post-combination compensation expense.

The Company recorded $ 2,058,536 of this expense for the three and six months ended June 30, 2021 which is included in the General and Administrative costs of the condensed consolidated statements of operations.

The Acquisition is being accounted for as a business combination in accordance with ASC 805 Business Combinations.

The Company has determined preliminary fair values of the assets acquired and liabilities assumed in the Acquisition.

These values are subject to change as we perform additional reviews of our assumptions utilized.

The Company has made a provisional allocation of the purchase price of the Acquisition to the assets acquired and the liabilities

assumed as of the purchase date.

The following table summarizes the preliminary purchase price allocations relating to the Acquisition (in thousands):

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 10 – CXApp Acquisition (continued)

Fair Value Allocation

Assets acquired:

Cash and cash equivalents 1,312

Trade and other receivables 1,626

Prepaid expenses and other current assets 68

Property, plant, and equipment 6

Tradename 2,170

Proprietary technology 8,740

Customer relationships 4,680

Non-compete agreements 2,690

Goodwill 17,166

Total assets acquired 38,458

Liabilities assumed:

Accounts payable 203

Deferred revenue 1,106

Accrued expenses and other liabilities 116

Deferred tax liability 4,505

Other tax liability, noncurrent 28

Total liabilities assumed 5,958

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 tax purposes.

Total acquisition-related costs for the Acquisition incurred during the period ended June 30, 2021 ended was $ 474,928 and is included in acquisition-related costs in the Company’s Statements of Operations.

The below table details the acquisition-related costs for the Acquisition (in thousands):

Accounting fees $ 115

Legal fees 360

Total acquisition costs $ 475

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 11 - Proforma Financial Information

Nanotron Proforma Financial Information

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

Nanotron Proforma and CXApp Proforma Financial Information

The following unaudited proforma financial information presents the consolidated results of operations of the Company and Nanotron for the three and six months ended June 30, 2020, 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 Three Months Ended March 31, 2020

The following unaudited proforma financial information presents the consolidated results of operations of the Company and the CXApp for the three and six months ended June 30, 2021, as if the acquisition had occurred as of the beginning of the first period presented instead of on April 30, 2021.

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 Ten Degrees, Game Your Game and Visualix have not been presented as it is deemed immaterial.

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

Nanotron is not included in 2021 proforma information as the acquisition occurred on October 6, 2020:

For the Three Months Ended June 30, 2020 For the Six Months Ended June 30, 2020

Revenues $ 2,949 $ 6,758

Net loss attributable to common stockholders $ ( 6,223 )

Net loss per basic and diluted common share $ ( 1.24 )

Net income (loss) attributable to common stockholders $ ( 8,939 ) $ ( 16,319 )

Net income (loss) per basic and diluted common share $ ( 0.28 ) $ ( 0.72 )

Weighted average common shares outstanding:

Basic and Diluted 31,673,534 22,780,803

For the Three Months Ended June 30, 2021 For the Six Months Ended June 30, 2021

Revenues $ 3,828 $ 8,257

Net income (loss) attributable to common stockholders $ 14,875 $ 1,794

Net income (loss) per basic common share $ 0.13 $ 0.02

Net income (loss) per diluted common share $ 0.13 $ 0.02

Weighted average common shares outstanding:

Basic 112,957,969 100,444,630

Diluted 112,958,815 100,458,729

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 12- Goodwill and Intangibles

The following table summarizes the changes in the carrying amount of Goodwill for the six months ended June 30, 2021 (in thousands):

Balance as of December 31, 2020 Goodwill additions through acquisitions Valuation Measurement Period Adjustments Exchange rate fluctuations as of June 30, 2021 Balance as of June 30, 2021

Systat $ 520 $ 175 $ — $ — $ 695

GTX 2 — — — 2

Nanotron 3,931 — ( 255 ) ( 126 ) 3,549

Locality 672 — — 17 689

Jibestream 1,463 — — 39 1,502

CXApp — 17,166 — — 17,166

Game Your Game — 286 — — 286

Total $ 6,588 $ 17,627 $ ( 255 ) ( 70 ) $ 23,890

Intangibles assets at June 30, 2021 and December 31, 2021 consisted of the following (in thousands):

Gross Carrying Amount Accumulated Amortization Amount Remaining Weighted Average Useful Life

June 30, December 31, June 30, December 31,

2021 2020 2021 2020

IP Agreement $ 180 $ 186 $ ( 34 ) $ ( 12 ) 0.01

Trade Name/Trademarks $ 4,266 $ 1,112 $ ( 1,071 ) $ ( 854 ) 0.38

Webstores & Websites $ 404 $ — $ ( 56 ) $ — 0.02

Customer Relationships $ 11,238 $ 5,590 $ ( 3,375 ) $ ( 2,972 ) 1.34

Developed Technology $ 38,630 $ 26,216 $ ( 17,484 ) $ ( 16,646 ) 2.35

Non-compete Agreements $ 5,227 $ 2,485 $ ( 1,395 ) $ ( 902 ) 0.3

Export License $ 14 $ — $ ( 14 ) $ — 0

Totals $ 59,959 $ 35,589 $ ( 23,429 ) $ ( 21,386 )

Amortization Expense:

Amortization expense for the three months ended June 30, 2021 and 2020 was approximately $ 1.4 million and $ 0.5 million, respectively, and approximately $ 2.0 million and $ 1.5 million for the six months ended June 30, 2021 and 2020, respectively.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 12- Goodwill and Intangibles (continued)

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

December 31, 2021 (for 6 months) 3,110

December 31, 2022 6,166

December 31, 2023 5,955

December 31, 2024 4,990

December 31, 2025 and thereafter 16,309

Note 13 - Inventory

Inventory as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

As of March 31, 2021 As of December 31, 2020

Inventory as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

As of June 30, 2021 As of December 31, 2020

Raw materials $ 532 $ 210

4 unchanged sentences

Total Inventory $ 1,919 $ 1,243

Note 14 - Investments in Equity Securities

Investment securities—fair value consist of investments in the Company’s investment in shares and rights of equity securities.

The composition of the Company’s investment securities—fair value was as follows (in thousands):

As of June 30, 2021

Cost Fair Value

Investments in equity securities- fair value

Equity shares $ 47,841 $ 24,316

Equity rights 11,064 5,624

Total investments in equity securities- fair value $ 58,905 $ 29,940

For the three and six month period ended June 30, 2021, the Company recognized a net unrealized loss on equity securities of $ 29.0 million in the other income/expense section of the condensed consolidated statements of operations.

There were no realized gains and losses on equity securities for the three and six month periods ended June 30, 2020.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 15 - Debt

Debt as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

Short-Term Debt Maturity Principal March 31, 2021 December 31, 2020

Debt as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

Short-Term Debt Maturity Principal June 30, 2021 December 31, 2020

March 2020 10 % Note

1 unchanged sentence

Unamortized Debt discount — — ( 254 )

Other short term debt — — —

Total Short-Term Debt $ 4,251 $ 5,401

(A) Notes Payable

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.

On March 18, 2020, the Company entered into a note purchase agreement with Iliad Research and Trading, L.P.

("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.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 9 - Debt (continued)

In exchange for the March 2020 10 % Note, the holder paid an aggregate purchase price of $ 5,000,000 .

8 unchanged sentences

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 10 % 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.

On March 17, 2021, we extended the maturity date of the March 2020 Note from March 18, 2021 to March 18, 2022.

On September 17, 2020, the Company 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 10 % Note balance.

On March 17, 2021, the Company extended the maturity date of the March 2020 10 % Note from March 18, 2021 to March 18, 2022.

On February 11, 2021, the Company entered into an exchange agreement with Iliad, pursuant to which the Company and Iliad agreed to:

1 unchanged sentence

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 .

The Company analyzed the exchange of the principal under the March 2020 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 approximately a $ 30,000 loss on the exchange of debt for equity as a separate item in the other income/expense section of the condensed consolidated statements of operations for the three months ended March 31, 2021.

The Company analyzed the exchange of the principal under the March 2020 10 % 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 approximately a $ 30,000 loss on the exchange of debt for equity as a separate item in the other income/expense section of the condensed consolidated statements of operations for the six months ended June 30, 2021.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 16 - Capital Raises

8 unchanged sentences

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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 10 - Capital Raises (continued)

Registered Direct Offerings

6 unchanged sentences

The First February 2021 Pre-funded warrants were exercised in full as of February 18, 2021.

On February 16, 2021, the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company sold in a registered direct offering, 3,000,000 shares of its 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.

The Second February 2021 Pre-funded warrants were exercised in full as of March 1, 2021.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 17 - Common Stock

2 unchanged sentences

During the three months ended March 31, 2021, the Company issued 15,800,000 shares of common stock in connection with registered direct offerings at per share prices between $ 1.55 and $ 2.01 , resulting in net proceeds to the Company of approximately $ 74.06 million after subtracting sales commissions and other offering expenses (See Note 16 ).

During the three months ended March 31, 2021, the Company issued 4,977 shares of common stock issued for stock options exercised.

During the three months ended March 31, 2021, the Company issued 4,977 shares of common stock issued for cashless stock options exercised.

During the three months ended March 31, 2021, the Company issued 31,505,088 shares of common stock in connection with the exchange of Pre-Funded Warrants (as defined in Note 19 ) offered under the Securities Purchase Agreement, resulting in net proceeds of $ 3,747,000 .

See Note 10 and Note 13 for further details.

During the three months ended June 30, 2021, the Company issued 1,179,077 shares of common stock in connection with the Game Your Game acquisition with a fair value of approximately $ 1,401,924 .

(See Note 8).

During the three months ended June 30, 2021, the Company issued 369,563 shares of common stock in connection with the Visualix asset purchase with a fair value of approximately $ 428,323 .

( See Note 9)

During the three months ended June 30, 2021, the Company issued 8,849,538 shares of common stock in connection with the CXApp acquisition with a fair value of approximately $ 9,991,150 .

(See Note 10).

During the three months ended June 30, 2021, the Company issued 4,672,988 shares of common stock net of 921,838 shares withheld for employee taxes for restricted stock granted in February 2021 at a par value of $ 0.001 per share.

During the three months ended June 30, 2021, the Company issued 414 shares of common stock for cashless stock options exercised .

Note 18 - Stock Award Plans and Stock-Based Compensation

2 unchanged sentences

Unless terminated sooner by the Board of Directors, this plan will terminate on August 31, 2021.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 12 - Stock Award Plans and Stock-Based Compensation (continued)

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.

3 unchanged sentences

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 under the 2011 Plan as of March 31, 2021 is 5,317,853 and awarded under the 2018 Plan as of March 31, 2021 is 15,730,073 .

As of March 31, 2021, 12,262,891 of stock options and restricted stock were granted to employees, directors and consultants of the Company (including 1 share outside of our plan) and 8,785,036 options were available for future grant under the Option Plans.

The aggregate number of shares that may be awarded under the 2011 Plan as of June 30, 2021 is 5,317,853 and awarded under the 2018 Plan as of June 30, 2021 is 17,230,073 .

As of June 30, 2021, 11,520,865 of stock options and restricted stock were granted to employees, directors and consultants of the Company (including 1 share outside of our plan) and 11,027,062 options were available for future grant under the Option Plans.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 18 - Stock Award Plans and Stock-Based Compensation (continued)

Employee Stock Options

During the three months ended March 31, 2021, the Company granted options under the 2018 Plan for the purchase of 1,600,500 shares of common stock to employees and consultants of the Company.

During the six months ended June 30, 2021, the Company granted options under the 2018 Plan for the purchase of 1,605,000 shares of common stock to employees and consultants of the Company.

These options are 100 % vested or vest pro-rata over 12 , 24 or 36 months, have a life of ten months and an exercise price of $ 1.83 per share.

2 unchanged sentences

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.

During the three months ended March 31, 2021 and 2020, the Company recorded a charge of $ 498,000 and $ 399,000 , respectively, for the amortization of employee stock options.

As of March 31, 2021, the intrinsic value of of the plan and non-plan stock options was approximately $ 529 ,000 and the fair value of non-vested stock options totaled approximately $ 2.1 million, which will be amortized to expense over the weighted average remaining term of 0.99 years.

On June 10, 2021, the Company issued 414 shares of common stock in connection with the cashless exercise of 6,111 employee stock options.

During the six months ended June 30, 2021 and 2020, the Company recorded a charge of $ 0.8 million and $ 0.7 million, respectively, for the amortization of employee stock options.

As of June 30, 2021, the intrinsic value of of the plan and non-plan stock options was approximately $ 0.4 million and the fair value of non-vested stock options totaled approximately $ 1.7 million, which will be amortized to expense over the weighted average remaining term of 0.85 years.

See below for a summary of the stock options granted under the 2011 and 2018 plans:

2011 Plan 2018 Plan Non Plan Total

Beginning balance as of January 1, 2021 89 5,449,967 1 5,450,057

Granted 1,605,000 1,605,000

Exercised ( 14,583 ) ( 14,583 )

Expired ( 5 ) ( 43,070 ) ( 43,075 )

Forfeited ( 149,522 ) ( 149,522 )

Ending balance as of June 30, 2021 84 6,847,792 1 6,847,877

There were no stock options granted from April 1, 2021 to June 30, 2021.

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 three months ended March 31, 2021 were as follows:

For the Three Months Ended March 31, 2021

Key weighted-average assumptions used to apply this pricing model during six months ended June 30, 2021 were as follows:

For the Six Months Ended June 30, 2021

Risk-free interest rate 0.59 %

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 18 - Stock Award Plans and Stock-Based Compensation (continued)

1 unchanged sentence

On February 19, 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 the one year anniversary.

During the three months ended March 31, 2021 the Company recorded a charge of $ 4.6 million for the amortization of vested restricted stock awards.

These stock awards vest either 25 % on the Grant Date and 25 % on each one year anniversary of Grant Date or 50 % on Grant Date and 50 % on the one year anniversary.

921,838 of the restricted stock awards were forfeited to the Company to pay the employee portion of the required payroll taxes.

On April 23, 2021, the Company granted 344,826 restricted stock awards to employees of the Company.

These stock awards either vest 50 % at the 6 months anniversary and 50 % on the one year anniversary or over 2 years pro rata every 6 months.

During the six months ended June 30, 2021 the Company recorded a charge of $ 6.3 million for the amortization of vested restricted stock awards.

The Company determined the fair value of these grants based on the closing price of the Company’s common stock on the respective grant dates.

1 unchanged sentence

Note 19 - Warrants

During the three months ended March 31, 2021, 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.

On January 24, 2021, 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, 5,800,000 shares of the Company’s common stock, par value $ 0.001 per share, and warrants to purchase up to 19,354,838 shares of common stock (the “Purchase Warrants”) at a combined offering price of $ 1.55 per share.

5 unchanged sentences

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 ended March 31, 2021, the Company issued 13,554,838 shares of common stock in connection with the exercise of 13,554,838 warrants at $ 0.001 per share.

During the six months ended June 30, 2021, the Company issued 13,554,838 shares of common stock in connection with the exercise of 13,554,838 Pre-Funded Warrants at $ 0.001 per share in connection with the January 24, 2021 Securities Purchase Agreement.

On February 12, 2021, 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, 7,000,000 shares of the Company’s common stock, par value $ 0.001 per share, and warrants to purchase up to 15,000,000 shares of common stock (the “Purchase Warrants”) at a combined offering price of $ 2.00 per share.

5 unchanged sentences

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 ended March 31, 2021, the Company issued 8,000,000 shares of common stock in connection with the exercise of 8,000,000 warrants at $ 0.001 per share.

During the six months ended ended June 30, 2021, the Company issued 8,000,000 shares of common stock in connection with the exercise of 8,000,000 Pre-Funded Warrants at $ 0.001 per share in connection with the February 12, 2021 Securities Purchase Agreement.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 19 - Warrants (continued)

6 unchanged sentences

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 March 31, 2021, the Company issued 6,950,250 shares of common stock in connection with the exercise of 6,950,250 pre-funded warrants at $ 0.001 per share.

During the six months ended June 30, 2021, the Company issued 6,950,250 shares of common stock in connection with the exercise of 6,950,250 pre-funded warrants at $ 0.001 per share in connection with the February 16, 2021 Securities Purchase Agreement.

Note 20- Income Taxes

There is an income tax expense of approximately $ 2.2 million for the three months ended June 30, 2021.

The income tax expense relates primarily to Inpixon and the gain on related party loan held for sale, which is offset by the release of valuation allowance attributable to acquired intangible assets from CXApp.

The Company’s effective tax rate varies from the statutory rate as a result of state taxes and release of valuation allowance.

Note 21 - Credit Risk and Concentrations

4 unchanged sentences

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 March 31, 2021 and December 31, 2020 was immaterial.

Cash in foreign financial institutions as of June 30, 2021 and December 31, 2020 was immaterial.

The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash.

The following table sets forth the percentages of revenue derived by the Company from those customers, which accounted for at least 10% of revenues during the three months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020

The following table sets forth the percentages of revenue derived by the Company from those customers, which accounted for at least 10% of revenues during the six months ended June 30, 2021 and 2020 (in thousands):

For the Three Months Ended June 30, 2021 For the Three Months Ended June 30, 2020

Customer A — — %

Customer B 316 9 % 305 28 %

As of March 31, 2021, Customer C represented approximately 10 % and Customer B represented approximately 7 % of total accounts receivable.

As of March 31, 2021, two vendors represented approximately 35 % of total gross accounts payable.

Purchases from these vendors during the three months ended March 31, 2021 was $ 478,176 .

For the three months ended March 31, 2021 three vendors represented approximately 33 %, 18 %, and 25 % of total purchases.

For the three months ended March 31, 2020, five vendors represented approximately 28 %, 21 %, 17 %, 16 %, and 15 % of total purchases.

For the Six Months Ended June 30, 2021 For the Six Months Ended June 30, 2020

Customer A — — % 500 17 %

Customer B 630 10 % 611 21 %

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 21 - Credit Risk and Concentrations (continued)

As of June 30, 2021, there were no customers that exceeded 10% of total accounts receivable.

As of June 30, 2021, two vendors represented approximately 23 % of total gross accounts payable.

Purchases from these vendors during the six months ended June 30, 2021 was $ 408,470 .

For the six months ended June 30, 2021 three vendors represented approximately 23 %, 16 %, and 12 % of total purchases.

For the six months ended June 30, 2020, five vendors represented approximately 30 %, 18 %, 15 %, 14 %, and 13 % of total purchases.

Revenue Segments

The Company’s operations consist of three reportable segments based on similar economic characteristics, the nature of products and production processes, end-use markets, channels of distribution, and regulatory environments:

Indoor Intelligence, Saves, and Shoom.

During the second quarter of 2021, the Company changed the level of detail at which its Chief Executive Officer (“CEO”) acting as the Chief Operating Decision Maker, or “CODM”) regularly reviews and manages certain of its businesses, resulting in the bifurcation of its former one segment into three standalone reportable segments:

Indoor Intelligence, Saves, and Shoom.

The Company now manages and reports its operating results through these three reportable segments.

The historical segment information has been recast to conform to the current segment structure.

Gross profit is the primary measure of segment profitability used by the Company’s CODM.

Revenues and gross profit segments consisted of the following (in thousands):

For the Three Months Ended June 30 For the Six Months Ended June 30

2021 2020 2021 2020

Revenue by Segment

Indoor Intelligence $ 2,269 $ 574 $ 3,886 $ 1,863

Saves 683 — 1,515 —

Shoom 501 502 1,006 1,017

Total segment revenue 3,453 1,076 6,407 2,880

Gross profit by Segment

Indoor Intelligence 1,662 346 2,676 1,221

Saves 466 — 1,099 —

Shoom 429 425 852 845

Gross profit by Segment 2,557 771 4,627 2,066

The reporting package provided to the Company's CODM does not include the measure of assets by segment as that information isn't reviewed by the CODM when assessing segment performance or allocating resources.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 22 - Fair Value of Financial Instruments

The Company's assets valued at fair value consisted of the following at March 31, 2021:

Fair Value at March 31, 2021

The Company's assets measured at fair value consisted of the following at June 30, 2021:

Fair Value at June 30, 2021

Total Level 1 Level 2 Level 3

Short-term investments 45,303 — 45,303 —

Investments in equity securities 29,940 — — 29,940

Total assets $ 75,243 $ — $ 45,303 $ 29,940

The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value.

Short-term investments represent treasury bills with maturities greater than three months and based off of valuation received from data such as closing market prices provided by independent pricing services after considering factors such as the yields or prices of comparable investments of comparable quality, coupon, maturity, terms and type, reported transactions, indications as to values from dealers and general market conditions.

Investments in equity securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity.

The fair value was determined using a pricing model with certain significant unobservable market data inputs.

The Company had no Level 3 investments for the twelve months ended December 31, 2020.

The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value for the six months ended June 30, 2021:

Level 3 Investments

Balance at beginning of period $ —

Transfers in- Sysorex Securities Settlement Agreement

Benefit (provision) for valuation allowance on related party loan - held for sale 7,461

Interest income (expense), net 1,627

Gain on related party loan held for sale 49,817

Unrealized loss on equity securities ( 28,965 )

Balance at end of period $ 29,940

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 23 - Foreign Operations

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

The Company’s operations are located primarily in the United States, Canada, India, Germany, Ireland, 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 Three Months Ended March 31, 2021:

States Canada India Germany United Kingdom Ireland Eliminations Total

For the Three Months Ended June 30, 2021:

Revenues by geographic area $ 2,395 $ 706 $ 223 $ 514 $ 91 $ — $ ( 476 ) $ 3,453

1 unchanged sentence

Net income (loss) by geographic area $ 16,706 $ ( 1,230 ) $ ( 63 ) $ ( 839 ) $ 14 $ ( 82 ) $ — $ 14,506

For the Year Ended Three Months Ended March 31, 2020:

For the Three Months Ended June 30, 2020:

Revenues by geographic area $ 536 $ 1,378 $ 297 $ — $ — $ — $ ( 1,135 ) $ 1,076

1 unchanged sentence

Net income (loss) by geographic area $ ( 7,503 ) $ 92 $ 107 $ — $ — $ — $ — $ ( 7,304 )

As of March 31, 2021:

For the Six Months Ended June 30, 2021:

Revenues by geographic area $ 4,056 $ 1,461 $ 664 $ 1,409 $ 169 $ — $ ( 1,352 ) $ 6,407

Operating income (loss) by geographic area $ ( 21,598 ) $ ( 2,465 ) $ 51 $ ( 1,630 ) $ 7 $ ( 78 ) $ — $ ( 25,713 )

Net income (loss) by geographic area $ 5,759 $ ( 2,189 ) $ 39 $ ( 1,564 ) $ 4 $ ( 82 ) $ — $ 1,967

For the Six Months Ended June 30, 2020:

Revenues by geographic area $ 1,715 $ 2,726 $ 425 $ — $ — $ — $ ( 1,986 ) $ 2,880

Operating income (loss) by geographic area $ ( 10,606 ) $ ( 139 ) $ 52 $ — $ — $ — $ — $ ( 10,693 )

Net income (loss) by geographic area $ ( 13,569 ) $ 48 $ 52 $ — $ — $ — $ — $ ( 13,469 )

As of June 30, 2021:

Identifiable assets by geographic area $ 173,039 $ 9,231 $ 630 $ 9,991 $ 241 $ 78 $ ( 18,796 ) $ 174,414

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 24 - Related Party Transactions

Sysorex Note Purchase Agreement

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.

Nadir Ali, the Company’s Chief Executive Officer and a member of its Board of Directors, was previously a member of the Board of Directors of Sysorex (resigned on May 14, 2021).

In addition, Nadir Ali entered into a consulting agreement with Sysorex, pursuant to which he agreed to provide certain business services specified in the agreement for the benefit of Sysorex in exchange for shares of Sysorex's common stock.

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.

8 unchanged sentences

In accordance with the terms of the Systat License Agreement (see Note 5 ), 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 March 31, 2021.

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 March 31, 2021 and accrued interest through September 30, 2019 by Sysorex to the Company as of March 31, 2021 and December 31, 2020 was approximately $ 6.8 million and $ 7.7 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.

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 was approximately $ 7.7 million.

This amount excludes $ 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.

During the three months ended March 31, 2020 an additional $ 117,000 was advanced under the Secured Note and the Company was entitled to an additional $ 251,806 of interest in accordance with the terms of the 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 $ 7.7 million valuation allowance as of December 31, 2019 due to the uncertainty of repayment.

During the three months ended March 31, 2021, the Company re-evaluated the carrying value of the note and established an additional valuation allowance of approximately $ 0.1 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 valuation allowance based on various factors, including, but not limited to, Sysorex’s performance and

As of April 14, 2021 , the Sysorex Note Purchase Agreement was settled, see Sysorex Securities Settlement Agreement below.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

collectability of the note.

Sysorex’s performance against those financial projections will directly impact future assessments of the fair value of the note.

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 24 - Related Party Transactions (continued)

Sysorex Receivable

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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 as of March 31, 2021 of $ 89,062 .

The total owed to the Company for this settlement as of March 31, 2021 and December 31, 2020 was $ 648,183 .

The Company had a full valuation allowance against this balance as of March 31, 2021.

As a result, Sysorex owes the Company $ 559,121 for the settlement plus the interest accrued as of December 31, 2020 of $ 89,062 .

The total owed to the Company for this settlement as of December 31, 2020 was $ 648,183 .

The Company had a full valuation allowance against this balance as of December 31, 2020.

As of April 14, 2021, the Sysorex Receivable was settled, see Sysorex Securities Settlement Agreement below.

Sysorex Securities Settlement Agreement

On April 14, 2021, the Company entered into a Securities Settlement Agreement (the “SSA”) and a Rights Letter Agreement (the “RLA”), each with Sysorex, whereby Sysorex agreed to satisfy in full its outstanding debt, in the aggregate amount of $ 9,088,176 as of March 31, 2021, owed to the Company under that certain secured promissory note, originally dated December 31, 2018, as amended from time to time, and in connection with that certain settlement agreement, dated February 20, 2019, by and among the Company, Sysorex and Atlas Technology Group, LLC (the “Debt Settlement”).

To effect the Debt Settlement, Sysorex agreed to issue to the Company (i) pursuant to the terms of the SSA, 12,972,189 shares of its common stock, $ 0.00001 par value per share, and (ii) rights to acquire 3,000,000 additional shares of its common stock pursuant to the terms of the RLA.

The Debt Settlement was entered into in connection with Sysorex’s closing of a reverse triangular merger with TTM Digital Assets & Technologies, Inc.

The Company recorded $ 7.5 million for the release of the previously recorded valuation allowance, $ 1.6 million of interest income, and a gain on settlement of $ 49.8 million equal to the difference in the carry value of the promissory note, including interest and value of the common stock and rights to acquire additional shares received in the settlement.

In connection with the Debt Settlement, the Company also entered into a Registration Rights Agreement, dated as of April 14, 2021 (the “RRA”), with Sysorex and certain other shareholders of Sysorex (the “Holders”).

Pursuant to the terms of the RRA, Sysorex must, subject to certain limitations, register the resale of the shares of common stock held by the Company and the Holders, with the U.S.

Securities and Exchange Commission (the “SEC”), during the period that begins on the 90th day following April 14, 2021.

In the event Sysorex fails to register such shares within that timeframe, or otherwise fails to meet its obligations under the RRA, then, subject to certain limitations, the Company and the Holders may be entitled to receive from Sysorex an amount in cash equal to the product of 1.5 % multiplied by the value of their shares (as set forth in the RRA), which amount is payable each month for so long as the failure continues.

Also, under the RRA, if Sysorex determines to prepare and file with the SEC a registration statement relating to an offering of any of its equity securities, for its own account or the account of others, then the Company and the Holders will have the right, subject to certain limitations, to require Sysorex to include in such registration statement all or any part of the shares of common stock held by them.

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.

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 prior 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, may also be deemed related parties in connection with the acquisition of the Licenses as a result of their respective employment relationships with the Systat Parties.

(See Note 5 ).

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 24 - Related Party Transactions (continued)

Inpixon Canada Promissory Note

3 unchanged sentences

This note is recorded as a current note receivable on the Company books, however, it is eliminated in the consolidated financial statements.

As of March 31, 2021, the balance of the note including principal and interest was $ 12,850,602 .

As of June 30, 2021, the principal and interest of the Jibestream note and the other amounts advanced to Inpixon Canada by the Company totaled $ 14,290,529 .

Cardinal Ventures Holdings Investment

4 unchanged sentences

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.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 25 - Leases

4 unchanged sentences

The Company has no other operating or financing leases with terms greater than 12 months.

Right-of-use assets is summarized below (in thousands):

As of March 31, 2021

Right-of-use assets are summarized below (in thousands):

As of June 30, 2021

Palo Alto, CA Office $ 631

10 unchanged sentences

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 three months ended March 31, 2021 was $ 0.3 million.

During the three months ended March 31, 2021, the Company recorded $ 165,121 as rent expense to the right-of-use assets.

Operating lease expenses, inclusive of short-term and variable lease expenses, recognized in our consolidated statement of income for the three months ended June 30, 2021 was $ 0.3 million and $ 570,828 for the six months ended June 30, 2021.

During the three-month period ended June 30, 2021, the Company recorded $ 170,824 as rent expense to the right-of-use assets.

During the six-month period ended June 30, 2021, the Company recorded $ 335,945 as rent expense to the right-of-use assets.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Note 25 - Leases (continued)

Lease liability is summarized below (in thousands):

As of March 31, 2021

As of June 30, 2021

Total lease liability $ 1,804

1 unchanged sentence

Long term portion $ 1,202

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 18 - Leases (continued)

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

9 unchanged sentences

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 March 31, 2021, the weighted average remaining lease term is 3.81 and the weighted average discount rate used to determine the operating lease liabilities was 8.0 %.

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 ASC 842, Leases ("ASC 842").

As of June 30, 2021, the weighted average remaining lease term is 3.74 and the weighted average discount rate used to determine the operating lease liabilities was 8.0 %.

Note 26 - Commitments and Contingencies

6 unchanged sentences

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.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 27 - Subsequent Events

Sysorex Securities Settlement Agreement

The Debt Settlement was entered into in connection with Sysorex’s closing of a reverse triangular merger with TTM Digital Assets & Technologies, Inc.

Pursuant to the terms of the RRA, Sysorex must, subject to certain limitations, register the resale of the shares of common stock held by the Company and the Holders, with the U.S.

Securities and Exchange Commission (the “SEC”), during the period that begins on the 90th day following April 14, 2021.

Nadir Ali, the Company’s Chief Executive Officer and a member of the Company’s board of directors, is also a director of Sysorex, although Mr.

Ali expects to resign as a director of Sysorex within thirty (30) days of April 14, 2021.

Game Your Game Acquisition

On April 9, 2021 (the “Closing Date”), the Company acquired (the “Acquisition”) 522,000 shares of common stock (the “Purchased Shares”) of Game Your Game, Inc., a Delaware corporation (“GYG”), which represent 52.2 % of the outstanding shares of common stock of GYG on a fully diluted basis, pursuant to that certain Stock Purchase Agreement, dated as of March 25, 2021 (the “Purchase Agreement”), with GYG, Rick Clemmer (“Clemmer”) and Martin Manniche (“Manniche,” and, together with Clemmer, the “Sellers”).

GYG’s business consists of developing and providing solutions using sports data and analytics.

At the closing of the Acquisition, the Company acquired the Purchased Shares from GYG and the Sellers as follows:

(i) GYG issued 283,473 Purchased Shares to the Company, and in exchange, the Company paid GYG $ 1,666,932 in cash, and (ii) the Sellers sold an aggregate of 238,527 Purchased Shares to the Company, and in exchange, the Company issued an aggregate of 1,179,077 shares of its common stock, par value $ 0.001 per share (the “Buyer Shares”), to the Sellers.

In addition, at the closing, Nadir Ali, the Company’s Chief Executive Officer and member of the Company’s board of directors, was appointed as the sole member of GYG’s board of directors.

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Visualix Asset Purchase Agreement

On April 23, 2021, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) by and among the Company, Visualix GmbH i.L.

(the “Visualix”), Darius Vahdat-Pajouh and Michal Bucko (each, a “Founder,” and collectively, the “Founders”), and Future Energy Ventures Management GmbH (“FEVM”) pursuant to which we acquired certain computer vision, robust localization, large-scale navigation, mapping, and 3D reconstruction software technologies and intellectual property (collectively, the “Visualix Assets").

In accordance with the terms of the Asset Purchase Agreement, the Company purchased the Visualix Assets and certain patent applications related to the Visualix Assets from FEVM.

In consideration of the transactions contemplated by the Asset Purchase Agreement, the Company:

(i) remitted a cash payment in the amount of Fifty Thousand Euros (EUR 50,000 ) to Visualix;

(ii) issued 316,768 shares of Common Stock to Visualix;

(iii) issued 52,795 to shares of Common Stock to FEVM.

The board of the Company approved 344,826 restricted stock grants to certain employees of the Company which vest proportionally every 6 months either over a 1 or 2 year period.

CXApp Acquisition

On April 30, 2021 (the “Closing Date”), the Company completed the acquisition (the “Acquisition”) of over 99.9 % of the outstanding capital stock of Design Reactor, Inc., dba The CXApp, a California corporation (“The CXApp”), pursuant to the terms of that certain Stock Purchase Agreement, dated as of the Closing Date (the “Purchase Agreement”), by and among the Company, The CXApp, the sellers set forth on the signature page thereto and each other person who owns outstanding capital stock of The CXApp (“CXApp Shares”) and executes a Joinder to Stock Purchase Agreement (collectively, the “Sellers”), and Leon Papkoff, as Sellers’ Representative (the “Sellers’ Representative”).

The CXApp is a leading SaaS app platform that enables corporate enterprise organizations to provide a custom-branded, location-aware employee app focused on enhancing the workplace experience and hosting virtual and hybrid events.

On the Closing Date, the Sellers sold all of their CXApp Shares to the Company in exchange for consideration of (i) approximately $ 22,500,000 in cash, minus The CXApp’s transaction expenses, plus The CXApp’s closing cash, minus stock option payouts, minus the amount that equals 70 % of deferred revenue as of the Closing Date, subject to such other adjustments set forth in the Purchase Agreement, including a post-closing working capital adjustment (such amount, the “Cash Purchase Price”), and (ii) 8,820,239 shares of common stock of the Company, which were valued at approximately $ 10,000,000 based on a share price of $ 1.13 , which was the closing price of common stock of the Company immediately prior to executing the Purchase Agreement (such shares, the “Purchaser Shares” and together with the Cash Purchase Price, the “Consideration”).

In addition, the Company agreed to pay up to $ 12,500,000 in contingent earnout payments, subject to certain adjustments (the “Earnout Payment” and together with the Cash Purchase Price and the Purchaser Shares, the “Aggregate Purchase Price”).

As of the Closing Date, there was one holder of CXApp Shares that did not sign the Purchase Agreement (the “Non-Signing Seller”).

On May 10, 2021, the Company, The CXApp and the Non-Signing Seller executed a Joinder to Stock Purchase Agreement pursuant to which the Company purchased such Non-Signing Seller's CXApp Shares in exchange for approximately $ 50,000 in cash and 29,299 shares of common stock of the Company.

As of such time, the Company now owns 100% of The CXApp.

During the quarter ending September 30, 2021, the Company exchanged approximately $ 1,000,000 of the outstanding principal and interest under the March 2020 10 % Note Purchase Agreement and Promissory Note for 877,192 shares of the Company's common stock at an exchange rate of $ 1.14 per share.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements