What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-16 compared with 2022-11-14 · 182 added, 260 removed, 199 unchanged (69% of the section changed)

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Inpixon is the Indoor Intelligence™ company.

Our solutions and technologies help organizations create and redefine exceptional workplace experiences that enable smarter, safer and more secure environments.

We leverage our positioning, mapping, analytics and app technologies to achieve higher levels of productivity and performance, increase safety and security, improve worker and employee satisfaction rates and drive a more connected workplace.

We have focused our corporate strategy on being the primary provider of the full range of foundational technologies needed in order to offer a comprehensive suite of solutions that make indoor data available and meaningful to organizations and their employees.

Our Indoor Intelligence solutions are used by our customers for a variety of use cases including, but not limited to, employee and visitor experience enhancement through a customer branded app with features such as desk booking, wayfinding and navigation, and the delivery of content to tens of thousands of attendees in hybrid events.

Our real time location (RTLS) and asset tracking products offer manufacturing and warehouse logistics optimization and automation, increase workforce productivity, and enhance worker safety and security.

Our solutions and technologies help organizations create and redefine exceptional experiences that enable smarter, safer and more secure environments.

Inpixon customers can leverage our real-time positioning, mapping and analytics technologies to achieve higher levels of productivity and performance, increase safety and security, improve worker and employee satisfaction rates and drive a more connected work environment.

We have focused our corporate strategy on being the primary provider of the full range of foundational technologies needed to form a comprehensive suite of solutions that make indoor data available and actionable to organizations and their employees.

Together, our technologies allow organizations to create and utilize the digital twin of a physical location and to deliver enhanced experiences in their current environment and in the metaverse.

Inpixon specializes in providing real-time location systems (RTLS) for the industrial sector.

As the manufacturing industry has evolved, RTLS technology has become a crucial aspect of Industry 4.0.

Our RTLS solution leverages cutting-edge technologies such as IoT, AI, and big data analytics to provide real-time tracking and monitoring of assets, machines, and people within industrial environments.

With our RTLS, businesses can achieve improved operational efficiency, enhanced safety and reduced costs.

By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and ensure compliance with industry regulations.

With our RTLS, industrial businesses can transform their operations and stay ahead of the curve in the digital age.

Inpixon's full-stack industrial IoT solution provides end-to-end visibility and control over a wide range of assets and devices.

It's designed to help organizations optimize their operations and gain a competitive edge in today's data-driven world.

The turn-key platform integrates a range of technologies, including RTLS, sensor networks, edge computing, and big data analytics, to provide a comprehensive view of an organization's operations.

We help organizations to track the location and status of assets in real-time, identify inefficiencies, and make decisions that drive business growth.

Our IoT stack covers all the technology layers, from the edge devices to the cloud.

It includes hardware components such as sensors and gateways, a robust software platforms for data management and analysis, and a user-friendly dashboard for real-time monitoring and control.

Our solutions also offer robust security features, to help ensure the protection of sensitive data.

Additionally, Inpixon's RTLS provides scalability and flexibility, allowing organizations to easily integrate it with their existing systems and add new capabilities as their needs evolve.

In addition to our Indoor Intelligence technologies and solutions, we also offer:

• Digital solutions (eTearsheets;

eInvoice, and adDelivery) or cloudbased applications and analytics for the advertising, media and publishing industries referred to as Shoom by Inpixon;

eInvoice, and adDelivery) or cloudbased applications and analytics for the advertising, media and publishing industries through our advertising management platform referred to as Shoom by Inpixon;

• A comprehensive set of data analytics and statistical visualization solutions for engineers and scientists referred to as SAVES by Inpixon.

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For Shoom and SAVES, we generate revenue from the sale of software licenses.

We experienced a net loss of approximately $49.9 million and approximately $32.0 million for the nine months ended September 30, 2022 and 2021, respectively.

We experienced a net loss from continuing operations of approximately $12.3 million and approximately $10.8 million for the three months ended March 31, 2023 and 2022, respectively.

We cannot assure that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable.

In order to continue our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds from loans and bank credit lines.

In order to continue our operations, we have

supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds from loans and bank credit lines.

Global Events

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In addition, to the extent that certain customers or prospective customers continue to be challenged by the lasting effects of the pandemic, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders.

While we have been able to realize growth in the nine months ended September 30, 2022 as compared to the same periods in 2021, the impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain.

While we have been able to realize growth in the three months ended March 31, 2023 as compared to the same periods in 2022, the impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain.

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

supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business.

We anticipate that certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and Ukraine, and inflation on our customers and partners in regions throughout the world, we expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business.

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

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Corporate Strategy Update

Since 2019, management has pursued a corporate strategic acquisition strategy focused on building and developing its business as the Indoor Intelligence TM provider with the ability to provide end to end solutions ranging from the collection of data to delivering insights from that data to our customers with a focus on securing, digitizing and optimizing premises with our indoor positioning, mapping and analytics solutions for businesses and governments.

In furtherance of this strategy, we have completed a series of strategic transactions to enhance our products and solution offerings, including, the acquisition of (1) technologies allowing for wireless device positioning and radio frequency augmentation of video surveillance systems;

(2) GPS tracking products, software, technologies, and related intellectual property to provide ground positioning, asset tracking, and situational awareness monitoring for those whose intelligence needs expand outdoors;

(3) our indoor mapping solution, Inpixon Mapping, to provide users with the tools to add intelligence to complex indoor spaces by integrating business data with geospatially accurate indoor maps to create relevant views of indoor environments;

(4) a suite of on-device “blue dot” indoor location and motion technologies, including patents, trademarks, software and related intellectual property;

(5) IoT solutions for real-time location systems (RTLS) and indoor and outdoor positioning solutions utilizing both industry-standard technologies, such as ultra-wideband (UWB), and patented proprietary wireless communication technologies, such as Chirp Spread Spectrum (CSS);

(6) a suite of augmented reality, computer vision, localization, navigation, mapping, and 3D reconstruction technologies, including patents, trademarks, software and related intellectual property;

(7) 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 and (8) an industrial IoT, RTLS, and sensor data services provider.

We believe these transactions have positioned us as a market leader with a comprehensive suite of products and solutions allowing us to provide organizations with actionable indoor intelligence to make their indoor spaces smarter, safer and more secure.

We also operate and compete in an industry that is characterized by rapid technological innovation, changing customer needs, evolving industry standards and frequent introductions of new products, product enhancements, services and distribution methods.

Our success will depend on our ability to develop expertise with these new products, product enhancements, services and distribution methods and to implement solutions that anticipate and respond to rapid changes in technology, the industry, and customer needs.

In order to continue to respond to rapid changes and required technological advancements, as well as increase shareholder value, we intend to continue to evaluate various strategic transactions and opportunities that we believe will enhance shareholder value and/or support our commitment to delivering exceptional experiences and continued innovation with technologies that combine the physical and digital worlds with augmented reality and location based technologies.

We are primarily focused on identifying potential targets or other opportunities that we believe will increase shareholder value, which may include, but not be limited to other alternative investment opportunities, such as minority investments, joint ventures or special purpose acquisition companies.

In order to continue to respond to rapid changes and required technological advancements, as well as increase our shareholder value, we are exploring strategic transactions and opportunities that we believe will enhance shareholder value.

Our board of directors has authorized a review of strategic alternatives, including a possible asset sale, merger with another company or spin-off of one or more of our business units.

We will also be opportunistic and may consider other strategic and/or attractive transactions, which may include, but not be limited to other alternative investment opportunities, such as minority investments, joint ventures or special purpose acquisition companies.

If we make any acquisitions in the future, we expect that we may pay for such acquisitions with cash, equity securities and/or debt in combinations appropriate for each acquisition.

In addition, at the end of last year, our board of directors authorized a review of strategic alternatives, including a possible asset sale, merger with another company or spin-off of one or more of our business units.

In this regard, we have entered into the Separation Agreement and the Merger Agreement (each as defined below under “Proposed Spin-Off of our Enterprise Apps Business”), pursuant to which we plan to separate our enterprise apps business into our wholly-owned subsidiary and combine such subsidiary with a special purpose acquisition corporation, resulting in the subsidiary becoming a separate publicly traded company in exchange for the issuance of shares to certain holders of Inpixon securities of the post-merger company valued at $69 million as of the date of the Merger Agreement.

For more details, see “Proposed Spin-Off of our Enterprise Apps Business” below.

In addition, we have and may enter into one or more non-binding letters of intent in connection with our due diligence and evaluation process.

In this regard, we have entered into a non-binding letter of intent and are in the due diligence stages with another third party in connection with a potential transaction involving the remainder of our business.

We may also retain an investment bank as our financial advisor in order to evaluate strategic options that may be available to us.

In September of 2022, we entered into an Agreement and Plan of Merger in connection with the spin-off and sale of our enterprise apps business which was consummated on March 14, 2023.

(See “Recent Events” below for more details).

In addition, we have entered into a non-binding letter of intent and are in the due diligence and negotiation stages with another third party in connection with a potential transaction involving the remainder of our business.

We may enter into one or more additional non-binding letters of intent in connection with our due diligence and evaluation process.

Recent Events

At-The-Market (ATM) Program

million from time to time through Maxim, acting exclusively our sales agent (the “ATM”).

We are not obligated to make any sales of shares under the Sales Agreement and no assurance can be given that we will sell any shares under the Sales Agreement, or if we do, as to the price or amount of shares that we will sell, or the date on which any such sales will take place.

Note Purchase Agreement and Promissory Note

On July 22, 2022, we entered into a note purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC (the “Holder”) pursuant to which we issued and sold to the Holder an unsecured promissory note (the “Note”) in an aggregate initial principal amount of approximately $6.5 million (the “Initial Principal Amount”), which is payable on or before the date that is 12 months from the issuance date (the “Maturity Date”).

The Initial Principal Amount includes an original issue discount of approximately $1.5 million and $15,000 that we agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs.

In exchange for the Note, the Holder paid an aggregate purchase price of $5 million (the “Transaction”).

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

We may pay all or any portion of the amount owed earlier than it is due in an amount equal to 115% of the portion of the outstanding balance the Company elects to prepay.

Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the Note is paid in full, the Holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the Note each month (each monthly exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption Notice”) delivered to the Company;

provided, however, that if the Holder does not exercise any Monthly Redemption Amount in its corresponding month then such Monthly Redemption Amount shall be available for the Holder to redeem in any future month in addition to such future month’s Monthly Redemption Amount.

Upon receipt of any Monthly Redemption Notice, the Company shall pay the applicable Monthly Redemption Amount in cash to the Holder within five business days of the Company’s receipt of such Monthly Redemption Notice.

Monitoring Fee.

If the Note is still outstanding on the date that is six (6) months from the issuance date, then a one-time monitoring fee equal to ten percent (10%) of the then-current outstanding balance shall be added to the Note.

Default Events.

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

Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings (the “Bankruptcy-Related Event of Default”)), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the Note to be immediately due and payable.

Upon the occurrence of a Bankruptcy-Related Event of Default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the Note will become immediately due and payable at the Mandatory Default Amount.

In addition, at any time while the Note is outstanding, if the Company intends to enter into a financing pursuant to which it will issue securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Company’s common stock, or (B) are or may become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the common stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition (a “Future Offering”), then the Company must first offer such opportunity to the Holder to provide such financing to the Company on the same terms no later than five (5) trading days immediately prior to the trading day of the expected announcement of the Future Offering (the “Right of First Refusal”).

If the Holder is unwilling or unable to provide such financing to the Company within five (5) trading days from the Holder’s receipt of notice of the Future Offering from the Company, then the Company may obtain such financing upon the exact same terms and conditions offered by the Company to the Holder, which transaction must be completed within 30 days after the date of the notice.

If the Company does not receive the financing within 30 days after the date of the notice, then the Company must again offer the financing opportunity to the Holder as described above, and the process detailed above will be repeated.

The Right of First Refusal does not apply to an Exempt Issuance (as defined in the Purchase Agreement) or to a registered offering made pursuant to a registration statement on Form S-1 or Form S-3.

In addition, pursuant to the terms of the Purchase Agreement, so long as the Note is outstanding, the Holder has the right to participate in any offering of securities by the Company which contains any term or condition more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder (the “Participation Right”).

The Participation Right does not apply in connection with an offering of securities which qualifies as an Exempt Issuance, a transaction under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), a registered offering made pursuant to a registration statement on Form S-1 or Form S-3, or in connection with the satisfaction of outstanding trade payables.

On July 22, 2022, we entered into an Equity Distribution Agreement (the “Sales Agreement”) with Maxim Group LLC ("Maxim") under which we may offer and sell shares of our common stock having an aggregate offering price of up to $25 million (the "Shares") from time to time through Maxim, acting exclusively as our sales agent (the “ATM Offering”).

Maxim is entitled to compensation at a fixed commission rate of 3.0% of the gross sales price per Share sold excluding Maxim's costs and out-of-pocket expenses incurred in connection with its services, including the fees and out-of-pocket expenses of its legal counsel.

During the quarter ended March 31, 2023, the Company sold 9,655,207 shares of common stock at share prices between $1.15 and $1.86 per share under the Sales Agreement for gross proceeds of approximately $15.4 million.

From April 1, 2023 through the date of this filing, the Company sold 12,046,742 shares of common stock at share prices between $0.22771 and $0.54 per share under the Sales Agreement for gross proceeds of approximately $4.1 million.

The Company is currently subject to the SEC’s “baby shelf rules,” as of April 17, 2023, which prohibits companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company’s public float in a 12-month period.

These rules may limit future issuances of shares by the Company under the Sales Agreement or other offerings pursuant to the Company’s effective shelf registration statement on Form S-3.

Note Exchanges

Since August 15, 2022, we have issued an aggregate of 103,553 shares of common stock to the holder of that certain outstanding promissory note of the Company issued on March 18, 2020 (the “March 2020 Note”), at exchange rates between $4.78 and $10.07 per share, in each case at a price per share equal to the Minimum Price as defined in Nasdaq Listing Rule 5635(d) in connection with exchange agreements pursuant to which we and the holder agreed to (i) partition new promissory notes in the form of the March 2020 Note in the aggregate original principal amount equal to approximately $0.6 million and then cause the outstanding balance of the March 2020 Note to be reduced by an aggregate of approximately $0.6 million;

and (ii) exchange the partitioned notes for the delivery of the shares of common stock.

FOXO Debenture

On April 27, 2022, the Company entered into and consummated the transactions contemplated by a securities purchase agreement (the “Purchase Agreement”) with FOXO Technologies Operating Company, formerly FOXO Technologies Inc.

(“FOXO Legacy”), an unaffiliated company operating in the insurance technology sector, pursuant to which the Company purchased a 10% Original Issue Discount Senior Convertible Debenture (a “Debenture”) issued by FOXO Legacy in an aggregate principal amount of approximately $6.1 million for a purchase price of $5.5 million.

The Purchase Agreement is one of a series of securities purchase agreements which FOXO Legacy entered into under a private placement of Debentures commenced in February 2022.

Interest on the Debenture accrues at a rate of 12% per annum, of which 12 months will be guaranteed, and is payable on each conversion date (as to the principal amount being converted) and on the maturity date, in cash, or in shares of FOXO Legacy's Class A common stock upon a conversion of all or a portion of the outstanding principal amount on the Debenture.

The Debenture will mature on the date that is 12 months from the original issue date, which may be extended or accelerated pursuant to the terms of the Debenture.

On September 15, 2022, FOXO Legacy consummated a business combination with Delwinds Insurance Acquisition Corp., now known as FOXO Technologies Inc.

("FOXO"), which qualified as a qualified offering as defined in the Purchase Agreement.

This qualified offering triggered a mandatory conversion of the convertible note to FOXO Legacy Class A common stock, which was then automatically converted into 891,124 shares of FOXO's Class A common stock.

The Company recognized a realized loss on conversion of $2.4 million to be recognized on the income statement for the three and nine months ended September 30, 2022.

GYG Promissory Notes

Pursuant to the terms of Securities Purchase Agreements, dated October 29, 2021, January 18, 2022, March 22, 2022, May 17, 2022, June 29, 2022, July 28, 2022, August 17, 2022, September 16, 2022 and October 26, 2022, Game Your Game, Inc., a majority owned subsidiary of the Company ("GYG") issued promissory notes in an aggregate principal amount equal to approximately $2.3 million (the "GYG Notes"), including an aggregate of approximately $1.5 million to the Company and approximately $0.8 million to a third party.

All of the GYG Notes have an interest rate of 8% and are due on or before December 31, 2022.

The proceeds received from the issuance of the GYG Notes were used to satisfy GYG working capital requirements.

On July 1, 2022, we loaned $150,000 to Cardinal Venture Holdings LLC (“CVH”).

We are a member of CVH.

CVH owns certain interests in KINS Capital, LLC, the sponsor entity (the “Sponsor”) to KINS Technology Group Inc., a Delaware corporation and special purpose acquisition company with which the Company anticipates entering into the Business Combination (see “Proposed Spin-Off of our Enterprise Apps Business” below for more details ) .

The loan bears no interest and is due and payable in full on the earlier of:

(i) the date by which KINS has to complete a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “business combination”), and (ii) immediately prior to the date of consummation of the business combination of KINS, unless accelerated upon the occurrence of an event of default.

Nadir Ali, our Chief Executive Officer and director, is also a member in CVH through 3AM, LLC, which is a member of CVH, and which may, in certain circumstances, be entitled to manage the affairs of CVH.

Proposed Spin-Off of our Enterprise Apps Business

As previously disclosed in our Current Report on Form 8-K dated September 26, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 25, 2022, by and among the Company, KINS Technology Group Inc., a Delaware corporation (“KINS”), CXApp Holding Corp., a Delaware corporation and newly formed wholly-owned subsidiary of the Company (“CXApp”), and KINS Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of KINS (“Merger Sub”), pursuant to which KINS will acquire our enterprise apps business (including its workplace experience technologies, indoor mapping, events platform, augmented reality and related business solutions) (the “Enterprise Apps Business”) in exchange for the issuance of shares of KINS capital stock valued at $69 million (the “Business Combination”).

The proposed Business Combination is expected to be completed in the fourth quarter of 2022.

Immediately prior to the Merger (as defined below) and pursuant to a Separation and Distribution Agreement, dated as of September 25, 2022, by and among KINS, the Company, CXApp and Design Reactor, Inc., a California corporation and wholly-owned subsidiary of the Company (“Design Reactor”) (the “Separation Agreement”), and other ancillary conveyance documents, we will, among other things and on the terms and subject to the conditions of the Separation Agreement, transfer the Enterprise Apps Business, including certain of our related subsidiaries, including Design Reactor, to CXApp, and, in connection therewith, will distribute (the “Distribution”) to our stockholders and other security holders 100% of the common stock of CXApp, par value $0.00001.

Immediately following the Distribution, in accordance with and subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into CXApp (the “Merger”), with CXApp continuing as the surviving company in the Merger and as a wholly-owned subsidiary of KINS.

Following the Business Combination, we will retain the remainder of our products including the Industrial Internet of Things (IIoT) business line.

The Business Combination has not yet occurred and will be subject to various conditions.

Reverse Stock Split

On October 4, 2022, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse stock split of the Company’s authorized and issued and outstanding shares of common stock at a ratio of one (1) share of common stock for every seventy five (75) shares of common stock (the “Reverse Stock Split”).

The Reverse Stock Split was effective October 7, 2022.

The Reverse Stock Split was primarily intended to bring the Company into compliance with the minimum bid price requirement for maintaining its listing on the Nasdaq Capital Market.

The Company has reflected the Reverse Stock Split herein, unless otherwise indicated.

Series 8 Preferred Stock Redemptions

During October 2022, the Company received cash redemption notices from the holders of the Series 8 Convertible Preferred Stock issued on March 22, 2022, totaling 45,755.72 shares of Series 8 Convertible Preferred Stock for aggregate cash required to be paid of approximately $45.8 million.

Registered Direct Offering

On October 18, 2022, the Company entered into a Securities Purchase Agreement with an institutional investor named therein (the “Purchaser”), pursuant to which the Company agreed to issue and sell, in a registered direct offering, 253,112 shares of the Company’s common stock and warrants to purchase up to 3,846,153 shares of common stock (the “Purchase Warrants”) at a combined offering price of $5.85 per share.

The Purchase Warrants have an exercise price of $5.85 per share.

Each Purchase Warrant is exercisable for one share of common stock and will be immediately exercisable and will expire five years from the issuance date.

The Company also offered and sold to the Purchaser pre-funded warrants to purchase up to 2,310,990 shares of common stock, in lieu of shares of common stock at the Purchaser’s election.

Each Pre-Funded Warrant is exercisable for one share of Common Stock.

The purchase price of each Pre-Funded Warrant is $5.849, and the exercise price of each Pre-Funded Warrant is $0.001 per share.

The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

The Company raised net proceeds of $14.2 million after deduction of sales commissions and other offering expenses.

During the quarter ended March 31, 2023, the Company exchanged approximately $0.9 million of the outstanding principal and interest under the March 2020 10% Note Purchase Agreement and Promissory Note for 611,258 shares of the

Company's common stock at prices from $1.09 to $1.682 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).

This note was fully satisfied as of January 31, 2023.

During the quarter ended March 31, 2023, the Company exchanged approximately $0.5 million of the outstanding principal and interest under the July 2022 10% Note Purchase Agreement and Promissory Note for 935,976 shares of the Company's common stock at prices from $0.37 to $0.915 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).

From April 1, 2023 through the date of this filing, the Company exchanged approximately $1.2 million of the outstanding principal and interest under the July 2022 10% Note Purchase Agreement and Promissory Note for 3,260,379 shares of the Company's common stock at prices from $0.3336 to $0.3966 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).

Enterprise Apps Spin-off and Business Combination

On March 14, 2023, Inpixon completed (the “Closing”) the separation (the “Separation”) of its enterprise apps business (including its workplace experience technologies, indoor mapping, events platform, augmented reality and related business solutions) (the “Enterprise Apps Business”) through a spin-off of CXApp Holding Corp., a Delaware corporation ("CXApp"), to certain holders of Inpixon securities as of March 6, 2023 (the “Record Date”) on a pro rata basis (the “Distribution” or “Enterprise Apps Spin-off”) and merger (the “Merger”) of CXApp with a wholly owned subsidiary of KINS Technology Group Inc., a Delaware corporation (“KINS”), in a Reverse Morris Trust transaction (collectively, the “Transactions”) pursuant to (i) an Agreement and Plan of Merger, dated as of September 25, 2022, by and among Inpixon, KINS, CXApp, and KINS Merger Sub Inc.

(the "Merger Agreement") and (ii) a Separation and Distribution Agreement, dated as of September 25, 2022, among KINS, Inpixon, CXApp and Design Reactor, Inc.

(the "Separation Agreement”, and collectively with the Merger Agreement and the other related transaction documents, the “Transaction Agreements”).

In connection with the Closing, KINS was renamed CXApp Inc.

(“New CXApp”).

Pursuant to the Transaction Agreements, Inpixon contributed cash sufficient to ensure CXApp had $10 million in cash and cash equivalents prior to the deduction of transaction expenses at closing and certain assets and liabilities constituting the Enterprise Apps Business, including certain related subsidiaries of Inpixon, to CXApp (the “Contribution”).

In consideration for the Contribution, CXApp issued to Inpixon additional shares of CXApp common stock such that the number of shares of CXApp common stock then outstanding equaled the number of shares of CXApp common stock necessary to effect the Distribution.

Pursuant to the Distribution, Inpixon shareholders as of the Record Date received one share of CXApp common stock for each share of Inpixon common stock held as of such date.

Pursuant to the Merger Agreement, each share of Legacy CXApp common stock was thereafter exchanged for the right to receive 0.09752221612415190 of a share of New CXApp Class A common stock (with fractional shares rounded down to the nearest whole share) and 0.3457605844401750 of a share of New CXApp Class C common stock (with fractional shares rounded down to the nearest whole share).

New CXApp Class A common stock and New CXApp Class C common stock are identical in all respects, except that New CXApp Class C common stock is not listed and will automatically convert into New CXApp Class A common stock on the earlier to occur of (i) the 180th day following the closing of the Merger and (ii) the day that the last reported sale price of New CXApp Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period following the closing of the Merger.

Upon the closing of the Transactions, Inpixon’s existing security holders held approximately 50.0% of the shares of New CXApp common stock outstanding.

Employee Matters Agreement

On March 14, 2023, in connection with the consummation of the Business Combination and as contemplated by the Separation Agreement, CXApp, Legacy CXApp, Inpixon and Merger Sub entered into the Employee Matters Agreement (the “Employee Matters Agreement”).

The Employee Matters Agreement sets forth the terms and conditions of certain employee related matters in connection with the transaction, including, but not limited to the participation in benefits for each of the respective companies as relevant, and the assumption and retention of benefit plan assets and liabilities, worker's compensation, payroll taxes, regulatory filings, and the sharing of employee information.

Tax Matters Agreement

On March 14, 2023, in connection with the consummation of the Business Combination and as contemplated by the Separation Agreement, CXApp, Legacy CXApp and Inpixon entered into the Tax Matters Agreement (the “Tax Matters Agreement”) which governs each party’s respective rights, responsibilities and obligations with respect to tax liabilities and

benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes.

Allocation of Taxes

In general, KINS and CXApp will be liable for all U.S.

federal, state, local and foreign taxes (and any related interest, penalties or audit adjustments) that are (i) imposed with respect to tax returns that include both CXApp and Inpixon, to the extent such taxes are attributable to CXApp or the Enterprise Apps Business, or (ii) imposed with respect to tax returns that include CXApp but not Inpixon, in each case, for tax periods (or portions thereof) beginning after the Distribution.

Inpixon will generally be liable for taxes described in clauses (i) and (ii) above for tax periods (or portions thereof) ending on the date of or prior to the Distribution, and any and all Distribution Taxes, as defined in the Tax Matters Agreement (generally, taxes imposed with respect to the Separation, Contribution, and Distribution).

However, CXApp and KINS may be liable for certain taxes pursuant to indemnity obligations described below.

Indemnification Obligations

The Tax Matters Agreement generally provides for indemnification obligations between New CXApp and KINS, on the one hand, and Inpixon, on the other hand.

In particular, CXApp and KINS must indemnify Inpixon for taxes allocated to CXApp or KINS, as described above, and Inpixon must indemnify New CXApp and KINS for taxes as allocated to Inpixon as described above, which would generally include Distribution Taxes.

The Tax Matters Agreements, however, provides that KINS and CXApp may be liable for certain taxes to the extent such taxes result from a breach of certain representations or restrictive covenants made by KINS and CXApp, as described below.

Transition Services Agreement

On March 14, 2023, in connection with the consummation of the Business Combination and as contemplated by the Separation Agreement, Legacy CXApp and Inpixon entered into a Transition Services Agreement (the “Transition Services Agreement”) pursuant to which Inpixon and certain employees and representatives and CXApp and certain employees and representatives will provide services to each other primarily related to payroll and benefits administration, IT support, finance and accounting services, contract administration and management services, and other administrative support services that may be required on an as needed basis, which services are of the type that CXApp and Inpixon provided to, and received from, each other prior to the Separation.

The fees for each of the transition services are set forth in the Transition Services Agreement.

The Transition Services Agreement will terminate on the expiration of the term of the last service provided under it, and if no expiration date is provided for any transition service, then such transition service will terminate twelve months after the date of the Transition Services Agreement, provided that the receiving party shall have the right to an extension of each or any transition service for up to six months by providing written notice to providing party in advance of the original termination date for such transition service if, prior to such request for extension, the receiving party has used commercially reasonable efforts to establish analogous capabilities of its own.

The transaction is expected to be tax-free to Inpixon and its security holders for U.S.

federal income tax purposes.

On March 15, 2023, New CXApp began regular-way trading on NASDAQ under the ticker symbol “CXAI.” Inpixon continues to trade under the ticker symbol “INPX.”

Compliance with Nasdaq Continued Listing Requirement

On April 14, 2023, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days beginning on March 2, 2023, and ending on April 13, 2023, the Company no longer meets the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided a period of 180 calendar days, or until October 11, 2023, in which to regain compliance.

In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1 per share for a minimum of ten consecutive business days during this 180-day period.

In the event that the Company does not regain compliance within this 180-day period, the Company may be eligible to seek an additional compliance period of 180 calendar days if it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and provides written notice to Nasdaq of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary.

However, if it appears to the Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice to the Company that our common stock will

be subject to delisting.

The letter does not result in the immediate delisting of our common stock from the Nasdaq Capital Market.

The Company intends to monitor the closing bid price of our common stock and consider its available options in the event that the closing bid price of our common stock remains below $1 per share.

Critical Accounting Policies and Estimates

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Indoor Intelligence, SAVES, and Shoom.

We have selected December 31 as the date to perform our annual goodwill impairment test.

Goodwill is the only intangible asset with an indefinite useful life.

Circumstances that could indicate impairment and require us to perform a quantitative impairment test include a significant decline in our financial results, a significant decline in our enterprise value relative to our net book value, a sustained decline in our stock price, or an unanticipated change in competition or our market share and a significant change in our strategic plans.

As of December 31, 2021, we concluded that our fair value did not exceed our carrying value in our Indoor Intelligence reporting unit and an impairment charge of $14.8 million was recorded.

At December 31, 2021, the fair value of the SAVES reporting unit exceeded its carrying value by greater than 100%.

There is no goodwill assigned to the Shoom reporting unit.

Since December 31, 2021, the price of our common stock has declined significantly and may continue to fluctuate in future periods.

A sustained decrease in the price of our common stock is one of the qualitative factors to be considered as part of an impairment test when evaluating whether events or changes in circumstances may indicate that it is more likely than not that a potential goodwill impairment exists.

Primarily because of the sustained decrease in stock price, we determined there to be trigger indicators of impairment.

At June 30, 2022, the Company completed a quantitative test and concluded to record an impairment charge for $7.6 million in goodwill which resulted in remaining goodwill being fully impaired.

As of June 30, 2022, the Company's previously recorded goodwill has been fully impaired.

R ESULTS OF O PERATIONS

Three Months Ended September 30, 2022 compared to the Three Months Ended September 30, 2021

The following table sets forth selected consolidated financial data as a percentage of our revenue and the percentage of period-over-period change:

Three Months Ended September 30,

(in thousands, except percentages) Amount % of

Revenues Amount % of

Revenues $ Change %

Revenues $ 4,177 100 % $ 4,450 100 % $ (273) (6) %

Cost of revenues $ 1,255 30 % $ 1,186 27 % $ 69 6 %

Gross profit $ 2,922 70 % $ 3,264 73 % $ (342) (10) %

Operating expenses $ 13,315 319 % $ 15,720 353 % $ (2,405) (15) %

Loss from operations $ (10,393) (249) % $ (12,456) (280) % $ 2,063 17 %

Other income (expense) $ (7,600) (182) % $ (22,347) (502) % $ 14,747 66 %

Provision for income taxes $ — — % $ 854 19 % $ (854) (100) %

Net (loss) income $ (17,993) (431) % $ (33,949) (763) % $ 15,956 47 %

Net income (loss) attributable to stockholders of Inpixon $ (17,591) (421) % $ (33,640) (756) % $ 16,049 48 %

* Amounts used to calculate dollar and percentage changes are based on numbers in the thousands.

Accordingly, calculations in this item, which may be rounded to the nearest hundred thousand, may not produce the same results.

Revenues for the three months ended September 30, 2022 were $4.2 million compared to $4.5 million for the comparable period in the prior year for a decrease of approximately $0.3 million, or approximately 6%.

This decrease is primarily attributable to the decrease in Indoor Intelligence sales due to delayed shipments in the IIoT product line and lower sales for the SAVES product line.

Cost of Revenues

Cost of revenues for the three months ended September 30, 2022 were $1.3 million compared to $1.2 million for the comparable period in the prior year.

This increase in cost of revenues of approximately $0.1 million, or approximately 6%, was primarily attributable to the sales mix during the quarter.

The gross profit margin for the three months ended September 30, 2022 was 70% compared to 73% for the three months ended September 30, 2021.

This decrease in margin is primarily due to the sales mix during the quarter.

Operating Expenses

Operating expenses for the three months ended September 30, 2022 were $13.3 million and $15.7 million for the comparable period ended September 30, 2021.

This decrease of approximately $2.4 million is primarily attributable to lower compensation, professional fees and legal expenses.

Other Income (Expense)

Other income/expense for the three months ended September 30, 2022 was a loss of $7.6 million compared to a loss of $22.3 million for the comparable period in the prior year.

This decrease in loss of approximately $14.7 million is primarily attributable to the lower unrealized loss on equity securities in the three months ended September 30, 2022.

Provision for Income Taxes

There was no income tax provision for the three months ended September 30, 2022 and an income tax benefit of $0.9 million for the three months ended September 30, 2021.

Nine Months Ended September 30, 2022 compared to the Nine Months Ended September 30, 2021

The following table sets forth selected consolidated financial data as a percentage of our revenue and the percentage of period-over-period change:

For the Nine Months Ended September 30,

Three Months Ended March 31, 2023 compared to the Three Months Ended March 31, 2022

The following table sets forth selected condensed consolidated financial data as a percentage of our revenue and the percentage of period-over-period change:

For the Three Months Ended March 31,

(in thousands, except percentages) Amount % of

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Provision for income taxes $ (2,478) (80) % $ — — % $ (2,478) — %

Net (loss) income $ (49,880) (353) % $ (31,982) (295) % $ (17,898) (56) %

Net (loss) income attributable to stockholders of Inpixon $ (48,674) (344) % $ (31,438) (290) % $ (17,236) (55) %

Net loss from continuing operations $ (12,322) (397) % $ (10,783) (407) % $ (1,539) (14) %

Loss from Discontinued Operations, Net of Tax $ (4,856) (156) % $ (774) (29) % $ (4,082) (527) %

Net loss attributable to stockholders of Inpixon $ (16,873) (544) % $ (11,211) (423) % $ (5,662) (51) %

* Amounts used to calculate dollar and percentage changes are based on numbers in the thousands.

Accordingly, calculations in this item, which may be rounded to the nearest hundred thousand, may not produce the same results.

Revenues for the nine months ended September 30, 2022 were $14.1 million compared to $10.9 million for the comparable period in the prior year for an increase of approximately $3.3 million, or approximately 30%.

This increase is primarily attributable to the increase in Indoor Intelligence sales including the addition of the CXApp product line during the second quarter of 2021 and the addition of the IIoT product line in the fourth quarter of 2021.

Cost of Revenues

Cost of revenues for the nine months ended September 30, 2022 were $4.0 million compared to $3.0 million for the comparable period in the prior year.

This increase in cost of revenues of approximately $1.1 million, or approximately 36%, was primarily attributable to the increased sales during the quarter.

The gross profit margin for the nine months ended September 30, 2022 was 71% compared to 73% for the nine months ended September 30, 2021.

This decrease in gross profit margin is due to the sales mix during the period.

Revenues for the three months ended March 31, 2023 were $3.1 million compared to $2.6 million for the comparable period in the prior year for an increase of approximately $0.5 million, or approximately 17%.

This increase is primarily attributable to the increase in Indoor Intelligence sales from the Aware and RTLS component product lines.

Cost of Revenues and Gross Profit

Cost of revenues for the three months ended March 31, 2023 and 2022 were $0.8 million.

The gross profit margin for the three months ended March 31, 2023 was 75% compared to 70% for the three months ended March 31, 2022.

This increase in gross profit margin is due to the sales mix during the period.

Operating Expenses

Operating expenses for the nine months ended September 30, 2022 were $50.4 million and $46.1 million for the comparable period ended September 30, 2021.

This increase of $4.4 million is primarily attributable to the $7.6 million of goodwill impairment, offset by lower compensation, professional fees and legal expense in the nine months ended September 30, 2022.

Operating expenses for the three months ended March 31, 2023 were $10.5 million and $11.1 million for the comparable period ended March 31, 2022.

This decrease of $0.6 million is primarily attributable to lower compensation, professional fees and legal expense in the three months ended March 31, 2023.

Other Income (Expense)

Other income/expense for the nine months ended September 30, 2022 was a loss of $9.4 million compared to a gain of $7.5 million for the comparable period in the prior year.

This increase in other loss of approximately $17.0 million is primarily attributable to the unrealized losses on equity securities of $7.1 million, and unrealized foreign exchange losses of $2.8 million in the nine months ended September 30, 2022 as compared to the discounted net unrealized loss of approximately $1.4 million on the Sysorex note, a $7.5 million release on the valuation allowance on the Sysorex note and approximately $1.6 million of interest received on the Sysorex note were included in other income for the nine months ended September 30, 2021.

Other income/expense for the three months ended March 31, 2023 was a loss of $1.7 million as compared to a loss of $1.5 million for the three months ended March 31, 2022.

The three months ended March 31, 2023 included higher interest expense on short term debt and the three months ended March 31, 2022 included a $1.5 million unrealized loss on equity securities.

Provision for Income Taxes

There is an income tax expense of approximately $0.1 million and $1.4 million for the nine months ended September 30, 2022 and 2021, respectively.

There is an income tax expense of approximately $2.5 million and $0.0 million for the three months ended March 31, 2023 and 2022, respectively.

The income tax expense in the three months ended March 31, 2023 includes a $2.6 million deferred tax expense to increase the valuation allowance, which is offset by a current tax benefit of $0.1 million, due to the Enterprise Apps Spin-off.

Loss from Discontinued Operations, Net of Tax

Loss from discontinued operations, net of tax for the three months ended March 31, 2023 was $4.9 million compared to a loss of $0.8 million for the three months ended March 31, 2022.

This increase in loss of $4.1 million was due to approximately $1.0 million of spin off transaction costs in the three months ended March 31, 2023 and the earnout compensation benefit of approximately $2.8 million in the three months ended March 31, 2022.

Non-GAAP Financial information

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It is defined as EBITDA plus adjustments for other income or expense items, non-recurring items and non-cash stock-based compensation.

Adjusted EBITDA for the three months ended September 30, 2022 was a loss of $8.2 million compared to a loss of $6.7 million for the prior year period.

Adjusted EBITDA for the nine months ended September 30, 2022 was a loss of $26.9 million compared to a loss of $18.5 million for the prior year period.

The following table presents a reconciliation of net income (loss) attributable to stockholders of Inpixon, which is our GAAP operating performance measure, to Adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021 (in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2022 2021 2022 2021

Adjusted EBITDA for the three months ended March 31, 2023 was a loss of $7.7 million compared to a loss of $8.8 million for the prior year period.

The following table presents a reconciliation of net income (loss) attributable to stockholders of Inpixon, which is our GAAP operating performance measure, to Adjusted EBITDA for the three and three months ended March 31, 2023 and 2022 (in thousands):

For the Three Months Ended March 31,

Net loss attributable to stockholders of Inpixon $ (16,873) $ (17,362)

Interest expense/(income), net 1,724 (2)

Income tax (benefit)/provision — (854) 84 1,350

Income tax provision 2,478 100

Depreciation and amortization 1,454 1,806

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Non-recurring one-time charges:

Loss on exchange of debt for equity — — — 30

Provision for valuation allowance on held for sale loan — — — (7,345)

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

Unrealized loss on equity securities 5,854 22,285 7,110 51,250

Unrealized (gain)/loss on equity securities (34) 1,503

Acquisition transaction/financing costs 164 121

Earnout compensation expense/(benefit) — 835 (2,827) 2,893

Earnout compensation benefit — (2,827)

Professional service fees — 8

Impairment of goodwill — — 7,570 —

Unrealized losses/(gains) on notes, loans, investments — (6) 124 (497)

Bad debts expense/provision 5 100 5 100

Reserve for inventory obsolescence — 300 — 300

Transaction costs 2,443 —

Accretion of Series 7 Preferred Stock — 4,555

Accretion of Series 8 Preferred Stock — 548

Deemed dividend for the modification related to Series 8 Preferred Stock — 2,627

Deemed contribution for the modification related to warrants issued in connection with Series 8 Preferred Stock — (1,469)

Amortization premium- modification related to Series 8 Preferred Stock — (110)

Distribution of equity method investment shares to employees as compensation 666 —

Unrealized foreign exchange (gains)/losses (205) 89

Stock-based compensation - compensation and related benefits 329 1,533

Severance costs 127 111

Restructuring costs 597 — 597 —

Adjusted EBITDA $ (7,727) $ (8,769)

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

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

the fair value of derivative liability, impairment of goodwill and one time charges including gain/loss on the settlement of obligations, severance costs, provision for doubtful accounts, acquisition costs and the costs associated with the public offering.

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

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Proforma Non-GAAP Net Income (Loss) per Share

Basic and diluted net income (loss) per share for the three months ended September 30, 2022 was a loss of $10.21 compared to a loss of $22.31 for the prior year period.

The decrease in loss per share in 2022 was attributable to the changes discussed in our results of operations.

Basic and diluted net income (loss) per share for the nine months ended September 30, 2022 was a loss of $31.08 compared to loss of $23.95 for the prior year period.

The increase in loss per share in 2022 was attributable to the changes discussed in our results of operations.

Basic and diluted net income (loss) per share for the three months ended March 31, 2023 was a loss of $1.38 compared to loss of $9.05 for the prior year period.

Proforma non-GAAP net income (loss) per share is used by our Company’s management as an evaluation tool as it manages the business and is defined as net income (loss) per basic and diluted share adjusted for non-cash items including stock based compensation, amortization of intangibles and one time charges including gain on the settlement of obligations, severance costs, provision for doubtful accounts, change in the fair value of shares to be issued, acquisition costs and the costs associated with the public offering.

Proforma non-GAAP net loss per basic and diluted common share for the three months ended September 30, 2022 was a loss of $3.96 per share compared to a loss of $3.77 per share for the prior year period.

Proforma non-GAAP net loss per basic and diluted common share for the nine months ended September 30, 2022 was a loss of $13.44 per share compared to a loss of $13.68 per share for the prior year period.

Proforma non-GAAP net loss per basic and diluted common share for the three months ended March 31, 2023 was a loss of $1.01 per share compared to a loss of $4.79 per share for the prior year period.

The following table presents a reconciliation of net loss per basic and diluted share, which is our GAAP operating performance measure, to proforma non-GAAP net loss per share for the periods reflected (in thousands, except per share data):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(thousands, except per share data) 2023 2022

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Non-recurring one-time charges:

Loss on the exchange of debt for equity — — — 30

Provision for valuation allowance on held for sale loan — — — (7,345)

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

Unrealized loss on equity securities 5,854 22,285 7,110 51,250

Unrealized (gain)/loss on equity securities (34) 1,503

Acquisition transaction/financing costs 164 121

Earnout compensation expense/(benefit) — 835 (2,827) 2,893

Earnout compensation benefit — (2,827)

Professional service fees — 8

Impairment of goodwill — — 7,570 —

Unrealized losses/(gains) on notes, loans, investments — (6) 124 (497)

Bad debts expense/provision 5 100 5 100

Reserve for inventory obsolescense — 300 — 300

Transaction costs 2,443 —

Accretion of Series 7 Preferred Stock — 4,555

Accretion of Series 8 Preferred Stock — 548

Deemed dividend for the modification related to Series 8 Preferred Stock — 2,627

Deemed contribution for the modification related to warrants issued in connection with Series 8 Preferred Stock — (1,469)

Amortization premium- modification related to Series 8 Preferred Stock — (110)

Distribution of equity method investment shares to employees as compensation 666 —

Unrealized foreign exchange (gains)/losses (205) 89

Stock-based compensation - compensation and related benefits 329 1,533

Severance costs 127 111

Restructuring costs 597 — 597 —

Amortization of intangibles 1,025 1,489

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

Liquidity and Capital Resources as of September 30, 2022

Our current capital resources and operating results as of and through September 30, 2022, consist of:

Liquidity and Capital Resources as of March 31, 2023

Our current capital resources and operating results as of and through March 31, 2023, consist of:

1) an overall working capital surplus of approximately $0.2 million;

2) cash of approximately $15.3 million;

3) net cash used by operating activities for the nine months ended September 30, 2022 of $26.9 million.

The breakdown of our overall working capital surplus as of September 30, 2022 is as follows (in thousands):

3) net cash used by operating activities for the three months ended March 31, 2023 of $9.5 million.

The breakdown of our overall working capital surplus as of March 31, 2023 is as follows (in thousands):

Working Capital Assets Liabilities Net

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Total $ 23,659 $ 23,431 $ 228

On July 22, 2022, we also entered into an Equity Distribution Agreement pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $25 million.

We are not obligated to make any sales under the Equity Distribution Agreement and no assurance can be given we will sell any shares or if we do, as to the price or amount of shares that we will sell, or the date on which any such sales will take place.

In addition, subsequent to the quarter ended September 30, 2022, we entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company agreed to issue and sell, in a registered direct offering, the Company’s common stock, warrants and pre-funded warrants for net proceeds of $14.2 million after deduction of sales commissions and other offering expenses.

Contractual Obligations and Commitments

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Our contractual obligations consists of operating lease liabilities and acquisition liabilities that are included in our consolidated balance sheet and vendor commitments associated with agreements that are legally binding.

As of September 30, 2022, the total obligation for operating leases is approximately $1.5 million, of which approximately $0.6 million is expected to be paid in the next twelve months.

Our vendor commitments are approximately $0.5 million all of which is expected in the next twelve months.

As of September 30, 2022, our obligation for acquisition liabilities is approximately $3.4 million of which approximately $3.4 million is expected to be paid in the next twelve months.

In addition, any time during the

Series 8 Redemption Period, each holder of our Series 8 Shares is entitled to require us to redeem all or part of the Series 8 Shares then held by such holder in cash for a redemption price per share equal to the Series 8 Redemption Amount.

Any holder that elects to redeem its shares of Series 8 Preferred Stock will be required to forfeit 50% of the corresponding warrants held by such holder.

During October 2022, the Company was required to redeem 45,755.72 shares of its Series 8 Preferred Stock for an aggregate amount of $45.8 million.

The remaining aggregate Redemption Amount that we may be required to pay is equal to $7.4 million (which may be increased to $8.2 million in the event of certain events of default) plus any accrued but unpaid dividends, liquidated damages and other costs, expenses, or amounts due in respect of the shares, to the extent applicable.

As of September 30, 2022, we owed approximately $6.2 million in principal under promissory notes with third parties.

As of March 31, 2023, the total obligation for capitalized operating leases is approximately $0.5 million, of which approximately $0.2 million is expected to be paid in the next twelve months.

As of March 31, 2023, we owed approximately $15.0 million in principal under promissory notes with third parties.

This balance excludes intercompany amounts that are eliminated in the financial statements.

These notes are payable within the next twelve months and the interest rate charged under the notes range from 8% to 10%.

See Note 12 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-Q.

Net cash used in operating activities during the nine months ended September 30, 2022 of $26.9 million consists of a net loss of $49.9 million offset by non-cash adjustments of approximately $22.2 million less net cash changes in operating assets and liabilities of approximately $0.7 million.

Although the Company has sustained significant losses during nine months ended September 30, 2022, in addition to the cash we had on hand, we raised net proceeds of approximately $14.2 million after placement agent commissions in connection with a registered direct offering in October 2022 and in July 2022 raised $5 million in connection with the debt offering described above.

The Company has also filed an At-The-Market financing facility having an aggregate offering price of up to $25 million that it can access should the Company deem necessary.

See Note 10 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Net cash used in operating activities during the three months ended March 31, 2023 of $9.5 million consists of a net loss of $17.2 million offset by non-cash adjustments of approximately $5.6 million less net cash changes in operating assets and liabilities of approximately $2.0 million.

Although the Company has sustained significant losses during three months ended March 31, 2023, in addition to the cash we had on hand, we raised gross proceeds of approximately $19.6 million since January 1, 2023, in connection with the ATM Offering described above.

Given our current cash balances, financing facilities and budgeted cash flow requirements, the Company believes such funds are sufficient to satisfy its working capital needs, capital asset purchases, debt repayments and other liquidity requirements associated with its existing operations for the next 12 months from the issuance date of the financial statements.

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While the impact of the COVID-19 pandemic is generally subsiding, the lasting impact on our business and results of operations continues to remain uncertain.

While we were able to continue operations remotely throughout the pandemic, we have experienced supply chain cost increases and constraints and delays in the receipt of certain components of our hardware products impacting delivery times for our products.

products impacting delivery times for our products.

In addition, to the extent that certain customers continue to be challenged by the lasting effects of the pandemic, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders.

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and other matters that influence our customers spending.

Increasing volatility in financial markets and changes in the economic climate could adversely affect our results of operation.

Increasing volatility in financial markets and changes in the economic climate could adversely affect our results of operations.

We also expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business.

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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Liquidity and Capital Resources

The Company’s net cash flows used in operating, investing and financing activities for the nine months ended September 30, 2022 and 2021 and certain balances as of the end of those periods are as follows (in thousands):

For the Nine Months Ended September 30,

The Company’s net cash flows used in operating, investing and financing activities for the three months ended March 31, 2023 and 2022 and certain balances as of the end of those periods are as follows (in thousands):

For the Three Months Ended March 31,

Net cash used in operating activities $ (9,503) $ (15,319)

Net cash provided by (used in) investing activities (376) 27,813

Net cash provided by financing activities 902 125,425

Net cash provided by (used in) financing activities 4,892 (4,103)

Effect of foreign exchange rate changes on cash 6 (19)

Net increase in cash and cash equivalents $ 10,673 $ 48,789

As of September 30,

Net (decrease)/increase in cash and cash equivalents $ (4,981) $ 8,372

As of March 31,

2023 As of December 31,

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Working capital surplus $ 228 $ 5,152

Operating Activities for the nine months ended September 30, 2022

Net cash used in operating activities during the nine months ended September 30, 2022 was approximately $26.9 million.

The cash flows related to the nine months ended September 30, 2022 consisted of the following (in thousands):

Operating Activities for the three months ended March 31, 2023

Net cash used in operating activities during the three months ended March 31, 2023 was approximately $9.5 million.

The cash flows related to the three months ended March 31, 2023 consisted of the following (in thousands):

Net income (loss) $ (17,178)

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The non-cash income and expense of approximately $5.6 million consisted primarily of the following (in thousands):

$ 5,567 Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, Jibestream, Systat, Ten Degrees, Nanotron, Game Your Game, Visualix, CXApp and IntraNav, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, August 15, 2019, June 30, 2020, August 19, 2020, October 6, 2020, April 9, 2021, April 23, 2021, April 30, 2021, December 9, 2021 respectively.

$ 1,454 Depreciation and amortization expenses

110 Amortization of right of use asset

329 Stock-based compensation expense attributable, warrants, restricted stock grants and options issued as part of Company operations

(2,827) Earnout expense valuation benefit

121 Amortization of issued discount

1,870 Unrealized loss(gain) on note

(791) Loss on conversion of note receivable

(278) Accrued interest income, related party

5 Provision for doubtful accounts

834 Amortization of debt discount

666 Distribution of equity method investment shares to employees as compensation

2,478 Deferred income tax

(34) Unrealized loss on equity securities

7,570 Impairment of goodwill

$ 5,632 Total non-cash expenses

The net cash used in the change in operating assets and liabilities aggregated approximately $2.0 million and consisted primarily of the following (in thousands):

$ 336 Decrease in accounts receivable and other receivables

571 Decrease in inventory, other current assets and other assets

237 Increase in accounts payable

$ (1,994) Increase in accounts receivable and other receivables

553 Decrease in inventory, prepaid expenses and other current assets and other assets

(534) Decrease in accounts payable

3,543 Increase in accrued liabilities, income tax liabilities and other liabilities

(109) Decrease in operating lease liabilities

(915) Decrease in deferred revenue

584 Increase in deferred revenue

$ 2,043 Net cash used in the changes in operating assets and liabilities

Operating Activities for the nine months ended September 30, 2021

Net cash used in operating activities during the nine months ended September 30, 2021 was approximately $24.0 million.

The cash flows related to the nine months ended September 30, 2021 consisted of the following (in thousands):

Operating Activities for the three months ended March 31, 2022

Net cash used in operating activities during the three months ended March 31, 2022 was approximately $15.3 million.

The cash flows related to the three months ended March 31, 2022 consisted of the following (in thousands):

Net income (loss) $ (11,557)

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The non-cash income and expense of approximately $2.2 million consisted primarily of the following (in thousands):

$ 4,541 Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, Jibestream, Systat, Ten Degrees, Nanotron, Game Your Game, Visualix and CXApp, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, August 15, 2019, June 30, 2020, August 19, 2020, October 6, 2020, April 9, 2021, April 23, 2021 and April 30, 2021, respectively.

$ 1,806 Depreciation and amortization expenses

169 Amortization of right of use asset

1,533 Stock-based compensation expense attributable to warrants and options issued as part of Company operations

30 Loss on exchange of debt for equity

224 Amortization of debt discount

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

(1,627) Accrued interest income, related party

100 Provision for doubtful accounts

300 Provision for inventory accounts

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

(4,507) Income tax expense

(2,827) Earnout payment expense

(167) Unrealized loss on foreign currency transactions

1,503 Unrealized loss on equity securities

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$ (239) Increase in accounts receivable and other receivables

(369) Increase in inventory,other current assets and other assets

(3,385) Increase in inventory, prepaid expenses and other current assets and other assets

(1,345) Decrease in accounts payable

3,510 Increase in accrued liabilities and other liabilities

3,471 Increase in income tax liabilities

(149) Decrease in accrued liabilities, income tax liabilities and other liabilities

(141) Decrease in operating lease liabilities

1,214 Increase in deferred revenue

(666) Decrease in deferred revenue

$ (5,925) Net use of cash used in the changes in operating assets and liabilities

Cash Flows from Investing Activities as of September 30, 2022 and 2021

Net cash flows provided by investing activities during the nine months ended September 30, 2022 was approximately $36.7 million compared to net cash flows used in investing activities during the nine months ended September 30, 2021 of approximately $52.7 million.

Cash flows related to investing activities during the nine months ended September 30, 2022 include $0.2 million for the purchase of property and equipment, $0.6 million for investment in capitalized software, $5.5 million for the purchase of a convertible note, $0.2 million for the issuance of a note receivable, $0.2 million for the sales of equity securities and $43.0 million of sales of treasury bills.

Cash flows related to investing activities during the nine months ended September 30, 2021 include $0.3 million for the purchase of property and equipment, $0.9 million investment in capitalized software, $63.4 million for the purchase of treasury bills, $2.0 million for the purchase of short term investments, $2.0 million sale of short term investment, $28.0 million from sales of treasury bills, $0.2 million from the acquisition of Game Your Game, $15.2 million for the acquisition of CXApp, $0.9 million for the purchase of the Systat licensing agreement, $0.3 million for the issuance of a note receivable and $0.1 million for the acquisition of Visualix.

Cash Flows from Financing Activities as of September 30, 2022 and 2021

Net cash flows provided by financing activities during the nine months ended September 30, 2022 was $0.9 million.

Net cash flows provided by financing activities during the nine months ended September 30, 2021 was $125.4 million.

During the nine months ended September 30, 2022, the Company received incoming cash flows of $46.9 million for the issuance of preferred stock and warrants, paid $49.3 million for the redemption of preferred series 7 stock, paid $2.0 million of the CXApp acquisition liability, received $5.5 million net proceeds from promissory note, and paid $0.3 million for the settlement of employee taxes on restricted stock.

During the nine months ended September 30, 2021, the Company received incoming cash flows of $77.9 million from the issuance of common stock and warrants, received incoming cash flows of $50.6 million for the issuance of preferred stock and warrants, loaned $0.1 million to a related party, paid $1.7 million of taxes related to the net share settlement of restricted stock units, paid a $0.2 million liability related to the CXApp acquisition, paid a $0.5 million acquisition liability to the pre-acquisition shareholders of Nanotron, and paid a $0.5 million acquisition liability to the pre-acquisition shareholders of Locality.

Cash Flows from Investing Activities as of March 31, 2023 and 2022

Net cash flows used in investing activities during the three months ended March 31, 2023 was approximately $0.4 million compared to net cash flows provided by investing activities during the three months ended March 31, 2022 of approximately $27.8 million.

Cash flows related to investing activities during the three months ended March 31, 2023 include $0.01 million for the purchase of property and equipment, $0.2 million for investment in capitalized software, $0.3 million for the issuance of a note receivable, and $0.2 million of proceeds from a note receivable.

Cash flows related to investing activities during the three months ended March 31, 2022 include $0.1 million for the purchase of property and equipment, $0.1 million investment in capitalized software, and $28.0 million from sales of treasury bills.

Cash Flows from Financing Activities as of March 31, 2023 and 2022

Net cash flows provided by financing activities during the three months ended March 31, 2023 was $4.9 million.

Net cash flows used in financing activities during the three months ended March 31, 2022 was $4.1 million.

During the three months ended March 31, 2023, the Company received incoming cash flows of $0.1 million from a promissory note, $15.0 million from a registered direct offering, paid $0.2 million of the CXApp acquisition liability, and distributed $10.0 million to the shareholders related to the spin-off of CXApp.

During the three months ended March 31, 2022, the Company received incoming cash flows $46.9 million for the issuance of preferred series 8 stock and warrants, paid $49.3 million for the redemption of preferred series 7 stock, paid $1.8 million of the CXApp acquisition liability, received $0.4 million of net proceeds from promissory notes and paid $0.3 million of taxes related to the net share settlement of restricted stock units.

Off-Balance Sheet Arrangements

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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 2. Management’s Discussion and Analysis