XTI Aerospace, Inc. 10-Q

ITEM 1: FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information which are the accounting principles that are generally accepted in the United States of America and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented. The results for the period ended September 30, 2023 are not necessarily indicative of the results of operations for the full year. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited consolidated financial statements for the fiscal years ended December 31, 2022 and 2021 included in the annual report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 17, 2023 and the recasted audited consolidated financial statements within Exhibit 99.1 on Form 8-k filed with the SEC on June 20, 2023 to reflect the presentation of CXApp operations as discontinued operations to the consolidated financial statements for the years ended December 31, 2022 and 2021. iii Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except number of shares and par value data) As of September 30, 2023 As of December 31, 2022 (Unaudited) (Audited) Assets Current Assets Cash and cash equivalents $ 13,489 $ 10,235 Accounts receivable, net of allowance for credit losses of $ 237 and $ 272 , respectively 1,560 1,889 Other receivables 142 86 Inventory 3,355 2,442 Notes receivable 2,068 150 Prepaid expenses and other current assets 1,949 2,803 Current assets of discontinued operations — 12,261 Total Current Assets 22,563 29,866 Property and equipment, net 1,013 1,064 Operating lease right-of-use asset, net 376 531 Software development costs, net 988 1,265 Investments in equity securities 189 330 Long-term investments 50 716 Intangible assets, net 2,304 2,994 Other assets 164 158 Non-current assets of discontinued operations — 20,711 Total Assets $ 27,647 $ 57,635 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 1 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands, except number of shares and par value data) As of September 30, 2023 As of December 31, 2022 (Unaudited) (Audited) Liabilities and Stockholders’ Equity Current Liabilities Accounts payable $ 1,920 $ 1,503 Accrued liabilities 3,569 2,619 Warrant liability 1,410 — Operating lease obligation, current 198 211 Deferred revenue 1,315 1,323 Short-term debt 11,165 13,643 Acquisition liability — 197 Current liabilities of discontinued operations — 5,218 Total Current Liabilities 19,577 24,714 Long Term Liabilities Operating lease obligation, noncurrent 188 334 Non-current liabilities of discontinued operations — 472 Total Liabilities 19,765 25,520 Commitments and Contingencies Stockholders’ Equity Preferred Stock -$ 0.001 par value; 5,000,000 shares authorized Series 4 Convertible Preferred Stock - 10,415 shares authorized; 1 issued and 1 outstanding as of September 30, 2023 and December 31, 2022 — — Series 5 Convertible Preferred Stock - 12,000 shares authorized; 126 issued and 126 outstanding as of September 30, 2023 and December 31, 2022 — — Common Stock - $ 0.001 par value; 500,000,000 shares authorized; 111,692,178 and 3,570,894 issued and 111,692,177 and 3,570,893 outstanding as of September 30, 2023 and December 31, 2022, respectively. 112 4 Additional paid-in capital 358,692 346,668 Treasury stock, at cost, 1 share ( 695 ) ( 695 ) Accumulated other comprehensive income 41 1,061 Accumulated deficit ( 347,971 ) ( 313,739 ) Stockholders’ Equity Attributable to Inpixon 10,179 33,299 Non-controlling Interest ( 2,297 ) ( 1,184 ) Total Stockholders’ Equity 7,882 32,115 Total Liabilities and Stockholders’ Equity $ 27,647 $ 57,635 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 2 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) Revenues $ 2,016 $ 2,435 $ 7,177 $ 7,660 Cost of Revenues 451 756 1,632 2,409 Gross Profit 1,565 1,679 5,545 5,251 Operating Expenses Research and development 2,347 2,136 6,380 6,713 Sales and marketing 1,149 1,036 3,506 2,960 General and administrative 3,747 3,573 13,596 12,705 Acquisition-related costs 1,656 2 2,343 254 Transaction costs 1,527 — 2,970 — Impairment of goodwill — — — 2,030 Amortization of intangibles 221 395 671 1,137 Total Operating Expenses 10,647 7,142 29,466 25,799 Loss from Operations ( 9,082 ) ( 5,463 ) ( 23,921 ) ( 20,548 ) Other (Expense)/Income Interest expense, net ( 818 ) ( 234 ) ( 4,300 ) ( 65 ) Other income/(expense), net ( 44 ) 830 1,169 802 Unrealized gain/(loss) on equity securities 5,791 ( 5,854 ) 5,733 ( 7,110 ) Realized loss on equity securities ( 6,692 ) ( 151 ) ( 6,692 ) ( 151 ) Total Other Expense ( 1,763 ) ( 5,409 ) ( 4,090 ) ( 6,524 ) Net Loss from Continuing Operations, before tax ( 10,845 ) ( 10,872 ) ( 28,011 ) ( 27,072 ) Income tax provision ( 3 ) — ( 2,488 ) ( 22 ) Net Loss from Continuing Operations ( 10,848 ) ( 10,872 ) ( 30,499 ) ( 27,094 ) Loss from Discontinued Operations, Net of Tax — ( 7,121 ) ( 4,856 ) ( 22,786 ) Net Loss ( 10,848 ) ( 17,993 ) ( 35,355 ) ( 49,880 ) Net Loss Attributable to Non-controlling Interest ( 464 ) ( 402 ) ( 1,131 ) ( 1,206 ) Net Loss Attributable to Stockholders of Inpixon ( 10,384 ) ( 17,591 ) ( 34,224 ) ( 48,674 ) Accretion of Series 7 Preferred Stock — — — ( 4,555 ) Accretion of Series 8 Preferred Stock — ( 6,305 ) — ( 13,089 ) 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 — 1,265 — 2,626 3 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) Net Loss Attributable to Common Stockholders $ ( 10,384 ) $ ( 22,631 ) $ ( 34,224 ) $ ( 64,850 ) Net Loss Per Share - Basic and Diluted Continuing Operations $ ( 0.16 ) $ ( 7.00 ) $ ( 0.82 ) $ ( 20.16 ) Discontinued Operations $ — $ ( 3.21 ) $ ( 0.14 ) $ ( 10.92 ) Net Loss Per Share - Basic and Diluted $ ( 0.16 ) $ ( 10.21 ) $ ( 0.96 ) $ ( 31.08 ) Weighted Average Shares Outstanding Basic and Diluted 65,840,189 2,216,544 35,845,916 2,086,633 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 4 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) Net Loss $ ( 10,848 ) $ ( 17,993 ) $ ( 35,355 ) $ ( 49,880 ) Unrealized gain on available for sale debt securities — ( 375 ) — — Unrealized foreign exchange gain (loss) from cumulative translation adjustments 230 1,273 ( 1,020 ) 1,452 Comprehensive Loss $ ( 10,618 ) $ ( 17,095 ) $ ( 36,375 ) $ ( 48,428 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 5 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY For the three and nine months ended September 30, 2023 (Unaudited) (In thousands, except share and 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 Shares Amount Shares Amount Shares Amount Shares Amount Balance - January 1, 2023 1 $ — 126 $ — 3,570,894 $ 4 $ 346,668 ( 1 ) $ ( 695 ) $ 1,061 $ ( 313,739 ) $ ( 1,184 ) $ 32,115 Common shares issued for extinguishment of debt — — — — 1,547,234 1 1,425 — — — — — 1,426 Common shares issued for net cash proceeds of a public offering 9,655,207 10 14,956 — — — — — 14,966 Stock options and restricted stock awards granted to employees for services — — — — — — 329 — — — — — 329 Deconsolidation of CXApp business as result of spin off — — — — — — ( 24,230 ) — — — — — ( 24,230 ) Common shares issued for net proceeds from warrants exercised — — — — 1,380,000 1 — — — — — — 1 Common shares issued for exchange of warrants — — — — 324,918 — — — — — — — — Cumulative translation adjustment — — — — — — — — — ( 1,259 ) 26 ( 17 ) ( 1,250 ) Net loss — — — — — — — — — — ( 16,873 ) ( 305 ) ( 17,178 ) Balance - March 31, 2023 1 $ — 126 $ — 16,478,253 $ 16 $ 339,148 ( 1 ) $ ( 695 ) $ ( 198 ) $ ( 330,586 ) $ ( 1,506 ) $ 6,179 Stock options and restricted stock awards granted to employees for services — — — — — — 241 — — — — — 241 Common shares issued for extinguishment of debt — — — — 7,349,420 7 2,013 — — — — — 2,020 Common shares issued for net cash proceeds of a public offering — — — — 19,326,522 20 5,397 — — — — — 5,417 Cumulative translation adjustment — — — — — — — — — 9 ( 3 ) 3 9 Net loss — — — — — — — — — — ( 6,966 ) ( 363 ) ( 7,329 ) Balance - June 30, 2023 1 $ — 126 $ — 43,154,195 $ 43 $ 346,799 ( 1 ) $ ( 695 ) $ ( 189 ) $ ( 337,555 ) $ ( 1,866 ) $ 6,537 Stock options granted to employees and consultants for services — — — — — — 227 — — — — — 227 Common shares issued for extinguishment of debt — — — — 18,144,158 18 3,160 — — — — — 3,178 Common shares issued for exercise of warrants — — — — 9,000,000 9 2,421 — — — — 2,430 Common shares issued for net cash proceeds of a public offering — — — — 41,393,825 42 6,085 — — — — — 6,127 Cumulative translation adjustment — — — — — — — — — 230 ( 32 ) 33 231 Net loss — — — — — — — — — — ( 10,384 ) ( 464 ) ( 10,848 ) Balance - September 30, 2023 1 $ — 126 $ — 111,692,178 $ 112 $ 358,692 ( 1 ) $ ( 695 ) $ 41 $ ( 347,971 ) $ ( 2,297 ) $ 7,882 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 6 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY For the three and nine months ended September 30, 2022 (Unaudited) (In thousands, except share and per share data) Series 7 Preferred Stock Series 8 Preferred Stock Series 4 Convertible Preferred Stock Series 5 Convertible Preferred Stock Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Non-Controlling Interest Total Stockholders’ (Deficit) Equity Shares Amount Shares Amount Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance - January 1, 2022 49,250 44,695 — — 1 $ — 126 $ — 1,730,140 $ 2 $ 332,761 ( 1 ) $ ( 695 ) $ 44 $ ( 250,309 ) $ 1,688 $ 83,491 Common shares issued for extinguishment of debt — — — — — — — — 57,472 — 1,500 — — — — — 1,500 Stock options and restricted stock awards granted to employees for services — — — — — — — — — — 1,533 — — — — — 1,533 Series 7 Preferred redeemed for cash ( 49,250 ) ( 49,250 ) — — — — — — — — — — — — — — — Series 8 Preferred stock issued for cash — — 53,197.72 41,577 — — — — — — 5,329 — — — — — 5,329 Accretion Discount- Series 7 Preferred Shares — 4,555 — — — — — — — — ( 4,555 ) — — — — — ( 4,555 ) Accretion Discount- Series 8 Preferred Shares — — — 548 — — — — — — ( 548 ) — — — — — ( 548 ) Deemed dividend for the modification related to Series 8 Preferred Stock — — — 2,627 — — — — — — ( 2,627 ) — — — — — ( 2,627 ) Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock — — — ( 1,469 ) — — — — — — 1,469 — — — — — 1,469 Amortization Premium- modification related to Series 8 Preferred Stock — — — ( 110 ) — — — — — — 110 — — — — — 110 Restricted stock grants withheld for taxes — — — — — — — — ( 12,802 ) — ( 336 ) — — — — — ( 336 ) Common shares issued for CXApp earnout — — — — — — — — 144,986 — 3,697 — — — — — 3,697 Common shares issued for exchange of warrants — — — — — — — — 184,153 — — — — — — — — Cumulative translation adjustment — — — — — — — — — — — — — ( 102 ) ( 15 ) 15 ( 102 ) Net loss — — — — — — — — — — — — — — ( 11,211 ) ( 346 ) ( 11,557 ) Balance - March 31, 2022 — $ — 53,198 $ 43,173 1 $ — 126 $ — 2,103,949 $ 2 $ 338,333 ( 1 ) $ ( 695 ) $ ( 58 ) $ ( 261,535 ) $ 1,357 $ 77,404 Stock options and restricted stock awards granted to employees for services — — — — — — — — — — 741 — — — — — 741 Common shares issued for cashless stock options exercised — — — — — — — — 35,062 — 500 — — — — — 500 Series 8 Preferred stock issued for cash — — — — — — — — — — — — — — — — — Accretion Discount- Series 8 Preferred Shares — — — 6,236 — — — — — — ( 6,236 ) — — — — — ( 6,236 ) Restricted stock grants withheld for taxes — — — — — — — — — — 1,251 — — — — — 1,251 7 Table of Contents Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock — — — — — — — — — — — — — — — — — Amortization Premium- modification related to Series 8 Preferred Stock — — — ( 1,251 ) — — — — — — — — — — — — — Cumulative translation adjustment — — — — — — — — — — — — — 656 ( 56 ) 57 657 Net income (loss) — — — — — — — — — — — — — — ( 19,872 ) ( 458 ) ( 20,330 ) Balance - June 30, 2022 — $ — 53,198 $ 48,158 1 $ — 126 $ — 2,139,011 $ 2 $ 334,589 ( 1 ) $ ( 695 ) $ 598 $ ( 281,463 ) $ 956 $ 53,987 Stock options granted to employees and consultants for services — — — — — — — — — — 688 — — — — — 688 Common shares issued for extinguishment of debt — — — — — — — — 111,585 — 1,250 — — — — — 1,250 Accrete discount - preferred series 8 shares — — — — — — — — — — ( 6,305 ) — — — — — ( 6,305 ) Amortization Premium- modification related to Series 8 Preferred Stock — — — 6,305 — — — — — — 1,265 — — — — — 1,265 Cumulative Translation Adjustment — — — ( 1,265 ) — — — — — — — — — 898 ( 69 ) 68 897 Net loss — — — — — — — — — — — — — — ( 17,591 ) ( 402 ) ( 17,993 ) — — — — Balance - September 30, 2022 — $ — 53,198 $ 53,198 1 $ — 126 $ — 2,250,596 $ 2 $ 331,487 ( 1 ) $ ( 695 ) $ 1,496 $ ( 299,123 ) $ 622 $ 33,790 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 8 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Nine Months Ended September 30, 2023 2022 Cash Flows Used in Operating Activities (Unaudited) Net loss $ ( 35,355 ) $ ( 49,880 ) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation and amortization 834 1,008 Amortization of intangible assets 1,476 4,559 Amortization of right-of-use asset 206 536 Stock based compensation 797 2,962 Amortization of warrant liability to redemption value 20 — Earnout expense valuation benefit — ( 2,827 ) Gain on settlement with FOXO ( 1,142 ) — Amortization of debt issuance costs 2,103 121 Accrued interest income, related party — ( 278 ) Unrealized gain on note — 1,870 Unrealized loss on foreign currency transactions 176 — Distribution of equity method investment shares to employees as compensation 666 — Deferred income tax 2,591 ( 1 ) Unrealized (gain) loss on equity securities ( 5,733 ) 7,110 Impairment of goodwill — 7,570 Gain on fair value of warrant liability 71 — Realized loss on sale of equity securities 6,692 151 Gain on conversion of note receivable — ( 791 ) Loss on exchange of debt for equity 124 — Other 24 202 Changes in operating assets and liabilities: Accounts receivable and other receivables ( 652 ) 336 Inventory ( 951 ) ( 1,002 ) Prepaid expenses and other current assets 1,110 1,545 Other assets 3 28 Accounts payable ( 372 ) 237 Accrued liabilities 2,018 1,059 Income tax liabilities ( 119 ) ( 38 ) Deferred revenue 530 ( 915 ) Operating lease obligation ( 207 ) ( 505 ) Net Cash Used in Operating Activities ( 25,090 ) ( 26,943 ) Cash Flows Used in Investing Activities Purchase of property and equipment ( 142 ) ( 221 ) Investment in capitalized software ( 135 ) ( 611 ) Purchase of convertible note — ( 5,500 ) 9 Table of Contents INPIXON AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In thousands) Sales of equity securities 323 229 Sales of treasury bills — 43,001 Proceeds from repayment of note receivable 150 — Issuance of note receivable ( 2,025 ) ( 150 ) Net Cash (Used in) Provided By Investing Activities ( 1,829 ) 36,748 Cash From Financing Activities Net proceeds from issuance of preferred stock — 46,906 Net proceeds from promissory note 125 5,539 Net proceeds from ATM stock offerings 26,510 — Cash paid for redemption of preferred stock series 7 — ( 49,250 ) Taxes paid related to net share settlement of restricted stock units — ( 336 ) Net proceeds from the issuance of warrants 1,409 — Repayment of CXApp acquisition liability ( 197 ) ( 1,957 ) Distribution to shareholders related to spin-off of CXApp ( 10,003 ) — Common shares issued for exercise of warrants 2,341 — Net Cash Provided By Financing Activities 20,185 902 Effect of Foreign Exchange Rate on Changes on Cash ( 12 ) ( 34 ) Net (Decrease)/Increase in Cash and Cash Equivalents ( 6,746 ) 10,673 Cash and Cash Equivalents - Beginning of period 20,235 52,480 Cash and Cash Equivalents - End of period $ 13,489 $ 63,153 Supplemental Disclosure of cash flow information: Cash paid for: Interest $ — $ 2 Income Taxes $ 10 $ 100 Non-cash investing and financing activities Common shares issued for extinguishment of debt $ 6,624 $ 3,250 Noncash debt modification fees $ 144 $ — Marketable securities received for settlement of FOXO $ 1,142 $ — Common shares issued for CXApp Earnout Payment $ — $ 3,697 Common shares issued in exchange for warrants $ — $ 14 Right of use asset obtained in exchange for lease liability $ — $ 284 Noncash exercise of liability classified warrants to common shares $ 90 $ — Investment in equity securities through conversion of note receivable $ — $ 6,776 Noncash net assets distribution to shareholders related to spin-off of CXApp $ 14,227 $ — The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 10 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 1 - Organization and Nature of Business Inpixon is the Indoor Intelligence™ company. Our solutions and technologies help organizations enable smarter, safer and more secure environments. Inpixon customers can leverage our real-time positioning and analytics technologies to achieve higher levels of productivity and performance, increase safety and security, and drive a more connected environment. We specialize 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 cloud-based applications and analytics for the advertising, media and publishing industries through our advertising management platform referred to as Shoom by Inpixon; and • A comprehensive set of data analytics and statistical visualization solutions for engineers and scientists referred to as SAVES by Inpixon. We report financial results for three segments: Indoor Intelligence, Shoom and SAVES. For Indoor Intelligence, we generate revenue from sales of hardware, software licenses and professional services. For Shoom and SAVES, we generate revenue from the sale of software licenses. Enterprise Apps Spin-off and Business Combination On March 14, 2023, we completed the Enterprise Apps Spin-off and subsequent Business Combination (the "Closing"). In connection with the Closing, KINS was renamed CXApp Inc. (“New CXApp”). Pursuant to the Transaction Agreements, Inpixon contributed to CXApp cash 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 180 th 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. In accordance with applicable accounting guidance, the results of CXApp are presented as discontinued operations in the Condensed Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment 11 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 results for all periods presented prior to the completion of the Enterprise Apps Spin-off. The Condensed Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations. See Note 25 of the Notes to the Condensed Consolidated Statements of Operations for additional information on the Enterprise Apps Spin-off. XTI Merger Agreement On July 24, 2023, Inpixon entered into an Agreement and Plan of Merger with XTI Aircraft Company (the “XTI Merger Agreement”). See Note 22 and Note 25 for additional information on the XTI Merger Agreement. Note 2 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results for the full year ending December 31, 2023. 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, 2022 and 2021 included in the annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC on April 17, 2023 and the recasted audited consolidated financial statements within Exhibit 99.1 on Form 8-k filed with the SEC on June 20, 2023 to reflect the presentation of CXApp operations as discontinued operations to the consolidated financial statements for the years ended December 31, 2022 and 2021. Note 3 - Summary of Significant Accounting Policies The Company's complete accounting policies are described in Note 2 to the Company's audited consolidated financial statements and notes for the year ended December 31, 2022. Liquidity As of September 30, 2023, the Company has a working capital surplus of approximately $ 3.0 million, and cash of approximately $ 13.5 million. For the three and nine months ended September 30, 2023, the Company had a net loss of approximately $ 10.8 million and $ 35.4 million, respectively. During the nine months ended September 30, 2023, the Company used approximately $ 25.1 million of cash for operating activities. Risks and Uncertainties The Company cannot assure you that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In order to continue our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds from loans and bank credit lines. Certain global events, such as the recent military conflict between Russia and Ukraine and Israel and Hamas, market volatility and other general economic factors that are beyond our control may impact our results of operations. These factors can include interest rates; recession; inflation; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; 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 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. The impact that these global events will have on general economic conditions is continuously evolving and the impact that they will have on our results of operations continues to remain uncertain. There are no assurances that we will not be materially adversely effected. The Company's recurring losses and utilization of cash in its operations are indicators of going concern however with the Company's current liquidity position, including $ 13.5 million cash and cash equivalents on hand, plus based on the terms of the warrant financing the company currently has the potential to raise up to approximately $ 14.1 million, plus the additional 12 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 3 - Summary of Significant Accounting Policies (continued) financing available to the Company, we believe we have the ability to mitigate such concerns for a period of at least one year from the date these financial statements are issued. Consolidations The consolidated financial statements have been prepared using the accounting records of Inpixon, Inpixon GmbH, Inpixon Limited, Inpixon Holding UK Limited, Nanotron Technologies, GmBh, Intranav GmbH, Inpixon India Limited and Game Your Game, Inc. The consolidated financial statements also include financial data of Inpixon Canada, Inc., Design Reactor, Inc. and Inpixon Philippines, Inc. through March 14, 2023, which is the date those entities were spun off in the Enterprise Apps Spin-off and Business Combination transaction discussed above. All material inter-company balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of: • the valuation of stock-based compensation; • the valuation of the Company’s common stock issued in transactions, including acquisitions; • the allowance for credit losses; • the valuation of equity securities; • the valuation of warrant liabilities; • the valuation allowance for deferred tax assets; and • impairment of long-lived assets and goodwill. Business Combinations The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date. 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 ASC 321, "Investments-Equity Securities". 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 gain on equity securities for the three and nine months ended September 30, 2023 was approximately $ 5.8 million and $ 5.7 million, respectively, and for the three and nine months ended September 30, 2022 was approximately a loss of $( 5.9 ) million and $( 7.1 ) million, respectively. Revenue Recognition 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. Hardware and Software Revenue Recognition 13 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 3 - Summary of Significant Accounting Policies (continued) For sales of hardware and software products, the Company’s performance obligation is satisfied at a point in time when they are shipped to the customer. This is when the customer has title to the product and the risks and rewards of ownership. The delivery of products to Inpixon's customers occurs in a variety of ways, including (i) as a physical product shipped from the Company’s warehouse, (ii) via drop-shipment by a third-party vendor, or (iii) via electronic delivery with respect to software licenses. The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer. Accordingly, the Company is the principal in the transaction with the customer and records revenue on a gross basis. The Company receives fixed consideration for sales of hardware and software products. The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice. The Company has elected the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the asset that otherwise would have been recognized is less than a year. Software As A Service Revenue Recognition With respect to sales of the Company’s maintenance, consulting and other service agreements including the Company’s digital advertising and electronic services, customers pay fixed monthly fees in exchange for the Company’s service. The Company’s performance obligation is satisfied over time as the digital advertising and electronic services are provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service. Professional Services Revenue Recognition The Company’s professional services include milestone, fixed fee and time and materials contracts. Professional services under milestone contracts are accounted for using the percentage of completion method. As soon as the outcome of a contract can be estimated reliably, contract revenue is recognized in the consolidated statement of operations in proportion to the stage of completion of the contract. Contract costs are expensed as incurred. Contract costs include all amounts that relate directly to the specific contract, are attributable to contract activity, and are specifically chargeable to the customer under the terms of the contract. Professional services are also contracted on the fixed fee and time and materials basis. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company’s time and materials contracts are paid weekly or monthly based on hours worked. Revenue on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended. Materials, or other specified direct costs, are reimbursed as actual costs and may include markup. The Company has elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date. For fixed fee contracts including maintenance service provided by in house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous service. Because the Company’s contracts have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations. Anticipated losses are recognized as soon as they become known. For the three and nine months ended September 30, 2023 and 2022, the Company did not incur any such losses. These amounts are based on known and estimated factors. 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. The contracts provide for either (i) a one year stated term with a one year renewal option, (ii) a perpetual term or (iii) a two year term with the option to upgrade to a perpetual license at the end of the term. The contracts may also provide for yearly on-going maintenance services for a specified price, which includes maintenance services, designated support, and enhancements, upgrades and improvements to the software (the “Maintenance Services”), depending on the contract. Licenses for on-premises software provide the customer with a right to use the software as it exists when made available to the customer. All software provides customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. 14 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 3 - Summary of Significant Accounting Policies (continued) 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. A software arrangement that is provided through an access code or key represents the transfer of a good. Licenses for on-premises software represents a good and provide the customer with a right to use the software as it exists when made available to the customer. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. Renewals or extensions of licenses are evaluated as distinct licenses (i.e., a distinct good or service), and revenue attributed to the distinct good or service cannot be recognized until (1) the entity provides the distinct license (or makes the license available) to the customer and (2) the customer is able to use and benefit from the distinct license. Renewal contracts are not combined with original contracts, and, as a result, the renewal right is evaluated in the same manner as all other additional rights granted after the initial contract. The revenue is not recognized until the customer can begin to use and benefit from the license, which is typically at the beginning of the license renewal period. Therefore, the Company recognizes revenue resulting from renewal of licensed software at a point in time, specifically, at the beginning of the license renewal period. The Company recognizes revenue related to Maintenance Services evenly over the service period using a time-based measure because the Company is providing continuous service and the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the services are performed. Contract Balances The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The Company had deferred revenue of approximately $ 1.3 million and $ 1.3 million as of September 30, 2023 and December 31, 2022, respectively, related to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff. The Company expects to satisfy its remaining performance obligations for these maintenance services and professional services, and recognize the deferred revenue and related contract costs over the next twelve months. The Company recognized revenue in the reporting period of $ 1.1 million that was included in the contract liability balance at the beginning of the period, for the period ended September 30, 2023. Stock-Based Compensation The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as an expense over the period during which the recipient is required to provide services in exchange for that award. Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period. The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date and recognized over the period services are required to be provided in exchange for the award, usually the vesting period. Forfeitures of unvested stock options are recorded when they occur. The Company incurred stock-based compensation charges of approximately $ 0.2 million and $ 0.8 million, respectively, for the three and nine months ended September 30, 2023. The Company incurred stock-based compensation charges of approximately $ 0.7 million and $ 3.0 million for the three and nine months ended September 30, 2022, respectively, which are included in general and administrative expenses. Stock-based compensation charges are related to employee compensation and related benefits. Acquisition-Related Costs 15 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 3 - Summary of Significant Accounting Policies (continued) The Company recognized acquisition-related costs of approximately $ 1.7 million and $ 2.3 million, respectively, for the three and nine months ended September 30, 2023 primarily related to the XTI transaction outlined in Note 22. These acquisition-related costs include professional fees incurred by the Company. The Company recognized acquisition-related costs of approximately $ 0.3 million for the nine months ended September 30, 2022 related to various other acquisitions. The Company did not record material acquisition-related costs for the three months ended September 30, 2022. Transaction Costs The Company recognized transaction costs of approximately $ 1.5 million and $ 3.0 million, respectively, for the three and nine months ended September 30, 2023 related to the Enterprise Apps Spin-off in the form of bonuses paid to Inpixon management, former management and professional fees that were incurred by the Company. Transaction Bonus Plan in connection with Completed Transaction On July 24, 2023, the compensation committee of the Inpixon Board (the “Committee”) adopted a Transaction Bonus Plan (the “Completed Transaction Bonus Plan”), which is intended to compensate certain current and former employees and service providers for the successful consummation of the Completed Transaction. The Completed Transaction Bonus Plan is administered by the Committee. It will terminate upon the completion of all payments under the terms of the Completed Transaction Bonus Plan, provided, that the Board may terminate the plan as to any participant prior to the completion of all payment to under participant under the plan. The Completed Transaction is the Enterprise Apps Spin-off and subsequent Business Combination. The bonuses include a cash bonus equal to 100 % of the individual's aggregate annual base salary and a cash bonus of 4 % of the transaction value. 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 nine months ended September 30, 2023 and 2022: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Options 285,170 363,973 327,164 334,800 Warrants 147,219,886 1,737,626 76,948,805 1,455,405 Convertible preferred stock 13 1,503,739 13 1,503,739 Rights to common stock — 52,513 — 52,513 Total 147,505,069 3,657,851 77,275,982 3,346,457 Preferred Stock The Company relies on the guidance provided by ASC 480, "Distinguishing Liabilities from Equity" ("ASC 480"), to classify certain redeemable and/or convertible instruments. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as permanent equity. The Company also follows the guidance provided by ASC 815, "Derivatives and Hedging" (“ASC 815”), which states that contracts that are both, (1) indexed to its own stock and (2) classified in stockholders’ equity in its statement of financial 16 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 3 - Summary of Significant Accounting Policies (continued) position, are not classified as derivative instruments, and to be recorded under stockholder's equity on the balance sheet of the financial statements. Management assessed the preferred stock and determined that it did meet the scope exception under ASC 815, and would be recorded as equity, and not a derivative instrument, on the balance sheet of the Company's financial statements. Fair Value of Financial Instruments 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. 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 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. Recently Issued Accounting Standards Not Yet Adopted The Company reviewed recently issued accounting pronouncements and concluded that they were not applicable to the condensed consolidated financial statements, except for the following: In July 2023, the FASB issued ASU 2023-03, "Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718)", which updates codification on how an entity would apply the scope guidance in paragraph 718-10-15-3 to determine whether profits interest and similar awards should be accounted for in accordance with Topic 718, Compensation—Stock Compensation. The effective date of this update is for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is currently assessing potential impacts of ASU 2023-03 and does not expect the adoption of this guidance will have a material impact on its condensed consolidated financial statements and disclosures. In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Updated and Simplification Initiative", which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements. The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. The Company is currently assessing potential impacts of ASU 2023-06 and does not expect the adoption of this guidance will have a material impact on its condensed consolidated financial statements and disclosures. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. These reclassifications had no material effect on the reported results of operations or cash flows. The condensed consolidated balance sheet as of December 31, 2022 included approximately $ 1.1 million of earnings reclassified from controlling accumulated deficit to non-controlling interest. This reclassification did not effect the Company’s total stockholders’ equity. 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 17 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 4 - Disaggregation of Revenue (continued) 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. Revenues consisted of the following (in thousands): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Recurring revenue Software $ 1,026 $ 995 $ 3,030 $ 3,065 Total recurring revenue $ 1,026 $ 995 $ 3,030 $ 3,065 Non-recurring revenue Hardware $ 483 $ 750 $ 2,300 $ 2,445 Software 457 351 947 1,116 Professional services 50 339 900 1,034 Total non-recurring revenue $ 990 $ 1,440 $ 4,147 $ 4,595 Total Revenue $ 2,016 $ 2,435 $ 7,177 $ 7,660 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Revenue recognized at a point in time Indoor Intelligence (1) $ 487 $ 829 $ 2,663 $ 2,523 SAVES (1) 453 273 1,286 1,039 Total $ 940 $ 1,102 $ 3,949 $ 3,562 Revenue recognized over time Indoor Intelligence (2) (3) $ 295 $ 497 $ 868 $ 1,538 SAVES (3) 307 318 935 1,012 Shoom (3) 474 518 1,425 1,548 Total $ 1,076 $ 1,333 $ 3,228 $ 4,098 Total Revenue $ 2,016 $ 2,435 $ 7,177 $ 7,660 (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 over time. 18 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 5- Goodwill and Intangible Assets The Company reviews goodwill for impairment on a reporting unit basis on December 31 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The Company’s significant assumptions in these analyses include, but are not limited to, project revenue, the weighted average cost of capital, the terminal growth rate, derived multiples from comparable market transactions and other market data. As of September 30, 2023, the Company's cumulative impairment charges are approximately $ 13.5 million with approximately $ 11.6 million related to the Indoor Intelligence reporting unit, approximately $ 1.2 million related to the Shoom reporting unit and approximately $ 0.7 million related to the SAVES reporting unit. There is no unimpaired goodwill as of September 30, 2023 or December 31, 2022. Intangibles assets at September 30, 2023 and December 31, 2022 consisted of the following (in thousands): September 30, 2023 Gross Amount, net of impairment Accumulated Amortization Spin-Off Net Carrying Amount Remaining Weighted Average Useful Life IP Agreement $ 160 $ ( 120 ) $ — $ 40 1.00 Trade Name/Trademarks 1,786 ( 319 ) ( 1,367 ) 100 3.25 Customer Relationships 6,169 ( 945 ) ( 4,454 ) 770 2.05 Developed Technology 14,722 ( 1,862 ) ( 11,466 ) 1,394 4.59 Non-compete Agreements 1,821 ( 617 ) ( 1,204 ) — 0.00 Totals $ 24,658 $ ( 3,863 ) $ ( 18,491 ) $ 2,304 December 31, 2022 Gross Amount Accumulated Amortization Impairment Discontinued Operations Net Carrying Value IP Agreement $ 162 $ ( 91 ) $ — $ — $ 71 Trade Name/Trademarks 3,590 ( 1,414 ) ( 593 ) ( 1,458 ) 125 Customer Relationships 9,121 ( 2,776 ) ( 749 ) ( 4,636 ) 960 Developed Technology 21,777 ( 5,385 ) ( 2,921 ) ( 11,781 ) 1,690 Non-compete Agreements 4,270 ( 2,488 ) ( 220 ) ( 1,414 ) 148 Totals $ 38,920 $ ( 12,154 ) $ ( 4,483 ) $ ( 19,289 ) $ 2,994 Amortization Expense: Amortization expense from continuing operations for the three and nine months ended September 30, 2023 was approximately $ 0.2 million and $ 0.7 million, respectively, and for the three and nine months ended September 30, 2022 was approximately $ 0.4 million and $ 1.1 million respectively. 19 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 5 - Goodwill and Intangible Assets (continued) Future amortization expense on intangibles assets is anticipated to be as follows (in thousands): Amount December 31, 2023 (for 3 months) $ 170 December 31, 2024 671 December 31, 2025 591 December 31, 2026 403 December 31, 2027 319 December 31, 2028 and thereafter 150 $ 2,304 20 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 6 - Inventory Inventory as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands): As of September 30, 2023 As of December 31, 2022 Raw materials $ 414 $ 351 Work-in-process 123 127 Finished goods 2,818 1,964 Inventory $ 3,355 $ 2,442 Note 7 - 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 September 30, 2023 As of December 31, 2022 Cost Fair Value Cost Fair Value Investments in equity securities- fair value Equity shares $ 48,363 $ 187 $ 54,237 $ 328 Equity rights 11,064 2 11,064 2 Total investments in equity securities- fair value $ 59,427 $ 189 $ 65,301 $ 330 As of September 30, 2023, the Company owned equity shares which include approximately 1.7 million shares of FOXO Technologies Inc. common stock and 13.0 million shares of Sysorex common stock. As of December 31, 2022, the Company owned approximately 0.8 million shares of FOXO Technologies Inc. common stock and 13.0 million shares of Sysorex common stock. As of September 30, 2023 and December 31, 2022, the Company owned equity rights which include the right to acquire 3.0 million shares of Sysorex common stock. On April 27, 2022, the Company purchased a 10 % convertible note in aggregate principal amount of approximately $ 6.1 million for a purchase price of $ 5.5 million from FOXO Technologies Operating Company, formerly FOXO Technologies Inc. (“FOXO Legacy”), pursuant to the terms of a securities purchase agreement between FOXO Legacy and the Company (the “April 2022 Purchase Agreement”). Interest on the convertible note accrued at 12 % per annum. The term of the convertible note is twelve months , however FOXO Legacy has the ability to extend the maturity date for an additional 3 months. The convertible note is subject to certain conversion features which include qualified financing, and/or qualified transaction, as defined in the April 2022 Purchase Agreement. The Company can voluntarily convert the note after 270 days. The note is required to convert upon FOXO Legacy completing a qualified offering. 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 April 2022 Purchase Agreement. This qualified offering triggered a mandatory conversion of the convertible note to FOXO Legacy common stock which was then automatically converted into 891,124 shares of FOXO Class A common stock, par value $ 0.0001 (“FOXO common stock”) upon closing of the business combination. The Company recognized an unrealized gain on conversion of $ 0.8 million recognized in the income statement for the year ended December 31, 2022. On June 20, 2023 (the "Release Effective Date"), the Company entered into a general release agreement (the "General Release Agreement") with FOXO, pursuant to which the Company received 0.67 shares of FOXO Class A Common Stock for every $ 1.00 of subscription amount of the 10 % convertible note purchased on April 27, 2022 in exchange for an agreement by the Company to release, waive and forever discharge FOXO (including its officers, directors, affiliates, etc.) from any causes of action, losses, costs and expenses from the beginning of time through the Release Effective Date. The Company received 3,685,000 shares of FOXO Class A Common Stock in exchange for such release. The Company recognized a realized gain on receipt of FOXO securities of $ 1.1 million based on the fair value of the FOXO securities for the nine months ended 21 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 September 30, 2023, included in Other income/(expense), net, on the accompanying unaudited condensed consolidated statement of operations. FOXO common stock is traded in active markets, as the security is trading under “FOXO” on the NYSE American. FOXO common stock is accounted for as available-for-sale equity securities based on “Level 1” inputs, which consist of quoted prices in active markets, with unrealized holding gains and losses included in earnings. The fair value was determined by the closing trading price of the security as of September 30, 2023. The Company recognized an unrealized gain (loss) on FOXO common stock of $ 5.8 million and $( 5.9 ) million on the income statement for the three months ended September 30, 2023 and 2022, respectively. The Company recognized an unrealized gain (loss) on FOXO common stock of $ 5.7 million and $( 7.1 ) million on the income statement for the nine months ended September 30, 2023 and 2022, respectively. During the nine months ended September 30, 2023, the Company sold 2.8 million shares of FOXO common stock with net proceeds of $ 0.3 million. The Company recognized a realized loss on the sale of FOXO common stock of $ 6.7 million on the income statement for the three and nine months ended September 30, 2023. The Company did no t sell any shares of FOXO common stock during the three and nine months ended September 30, 2022. Note 8 - Other Long Term Investments In October 2020, the Company paid $ 1.8 million for 599,999 Class A Units and 1,800,000 Class B Units of Cardinal Venture Holdings LLC (“CVH”). In December 2020, the Company increased its capital contribution by $ 0.7 million in exchange for an additional 700,000 Class B Units. The Company is 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 entered into the Business Combination (see “Enterprise Apps Spin-off and Business Combination” under Note 1 above). The $ 1.8 million purchase price was paid on October 12, 2020 and therefore is the date the purchase of the Units was closed. The capital contribution was used by CVH to fund the Sponsor's purchase of securities in KINS. The underlying subscription agreement provides that each Class A Unit and each Class B Unit represents the right of the Company to receive any distributions made by the Sponsor on account of the Class A Interests and Class B Interests, respectively, of the Sponsor. The Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income. During the period January 1, 2022 to December 31, 2022 and January 1, 2023 to September 30, 2023, CVH had no operating results as CVH is a holding company. CVH only contains units and has not been allocated shares of KINS, therefore CVH is not allocating any portion of income or expense incurred by KINS. As such, there was no share of earnings recognized by the Company in its statement of operations on its proportional equity investment. The following component represents components of Other long-term investments as of September 30, 2023 and December 31, 2022: Ownership interest as of September 30, Ownership interest as of December 31, 2023 2022 Instrument Held Investee CVH Class A — % 14.1 % Units CVH Class B 38.4 % 38.4 % Units Inpixon’s investment in equity method eligible entities are represented on the condensed consolidated balance sheets as a long term asset of approximately $ 0.1 million as of September 30, 2023 and approximately $ 0.7 million as of December 31, 2022. On July 1, 2022, the Company loaned $ 150,000 to CVH. 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 22 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 default. Nadir Ali, the Company’s 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. As a result of the closing of the Business Combination, on March 15, 2023, the $ 150,000 loan was repaid. On February 27, 2023, the Company entered into Limited Liability Company Unit Transfer and Joinder Agreements with certain of the Company’s employees and directors (the “Transferees”), pursuant to which (i) the Company transferred all of its Class A Units of CVH (the “Class A Units”), an aggregate of 599,999 Class A Units, to the Transferees as bonus consideration in connection with each Transferee’s services performed for and on behalf of the Company as an employee, as applicable, and (ii) each Transferee became a member of CVH and a party to the Amended and Restated Limited Liability Company Agreement of CVH, dated as of September 30, 2020. The Company recorded approximately $ 0.7 million of compensation expense for the fair market value of the shares transferred to the Transferees which is included in the operating expenses section of the condensed consolidated statements of operations in the nine months ended September 30, 2023. On August 25, 2023, as part of their distribution rights as holders of CVH Class B Units, the Company received 2.5 million warrants in New CXApp. The Company determined that the New CXApp warrants are a level 1 marketable security because the warrants are publically traded on the Nasdaq. Note 9 - Accrued Liabilities Accrued liabilities as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands): As of September 30, 2023 As of December 31, 2022 Accrued compensation and benefits $ 698 $ 655 Accrued interest expense 1,764 1,197 Accrued bonus and commissions 469 426 Accrued other 361 105 Accrued sales and other indirect taxes payable 277 236 $ 3,569 $ 2,619 Note 10 - Debt Debt as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands): Short-Term Debt Maturity September 30, 2023 December 31, 2022 July 2022 Promissory Note, less extension fee of $ 35 . 5/17/2024 $ 1,103 $ 6,045 December 2022 Promissory Note, less debt discount and extension fee of $ 466 and $ 54 , respectively. 5/17/2024 8,859 6,520 Third Party Note Payable 11/30/2023 1,203 1,078 Total Short-Term Debt $ 11,165 $ 13,643 Interest expense on the short-term debt totaled approximately $ 0.8 million and $ 0.2 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $ 4.3 million and $ 0.5 million for the nine months ended September 30, 2023 and 2022, respectively. Interest expense includes the interest on the outstanding balance of the note and the amortization of deferred financing costs and note discounts recorded at issuance for the Short Term Debt. Notes Payable March 2020 10 % Note Purchase Agreement and Promissory Note 23 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 10- Debt (continued) During the quarter ended March 31, 2023, the Company entered into exchange agreements with Iliad, pursuant to which the Company and Iliad agreed to: (i) partition new promissory notes in the form of the March 2020 10 % Note equal to approximately $ 0.9 million and then cause the outstanding balance of the March 2020 10 % Note to be reduced by approximately $ 0.9 million; and (ii) exchange the partitioned note for the delivery of 611,258 shares of the Company's common stock at effective prices between $ 1.09 and $ 1.68 per share. 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 there was no loss on the exchange for debt for equity. The March 2020 Note was satisfied in full during the nine months ended September 30, 2023. July 2022 Note Purchase Agreement and Promissory Note On July 22, 2022, the Company entered into a note purchase agreement (the "Purchase Agreement") with Streeterville Capital, LLC (the “Holder” or "Streeterville"), pursuant to which the Company agreed to issue and sell to the Holder an unsecured promissory note (the “July 2022 Note”) in an aggregate initial principal amount of $ 6.5 million (the “Initial Principal Amount”), which is payable on the maturity date or otherwise in accordance with the July 2022 Note. The Initial Principal Amount includes an original issue discount of $ 1.5 million and $ 0.02 million that the Company agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the Note, the Holder paid an aggregate purchase price of $ 5.0 million. Interest on the Note accrued at a rate of 10 % per annum, which is payable on the maturity date. We may pay all or any portion of the amount owed earlier than it is due; provided that in the event we may elect to prepay all or any portion of the outstanding balance, it shall pay to the Holder 115 % of the portion of the outstanding balance we may elect to prepay. Beginning on the date that is 6 months from the issue 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 for cash each month. The July 2022 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 default due to the occurrence of bankruptcy or insolvency proceedings), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the July 2022 Note to be immediately due and payable. Upon the occurrence of bankruptcy-related event of default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the July 2022 Note will become immediately due and payable at the mandatory default amount. Under the terms of the July 2022 Note, if the note is still outstanding after 6 months from the issuance date, or as of January 22, 2023, a 10 % monitoring fee would be added to the balance of the note. On January 31, 2023, the Holder agreed to reduce the one time monitoring fee from 10 % to 5 %. During the nine months ended September 30, 2023, the Company entered into exchange agreements with Streeterville, pursuant to which the Company and Streeterville agreed to: (i) partition new promissory notes in the form of the July 2022 Note equal to approximately $ 5.7 million and then cause the outstanding balance of the July 2022 Note to be reduced by approximately $ 5.7 million; and (ii) exchange the partitioned notes for the delivery of 26,429,554 shares of the Company’s common stock, at effective prices between $ 0.1277 and $ 0.9150 per share. The Company analyzed the exchange of the principal under the July 2022 Note as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and recorded a $ 0.1 million loss on the exchange for debt for equity which is included in the other income/expense line of the condensed consolidated statement of operations. On May 16, 2023, the Company entered into an amendment (the “July 2022 Note Amendment”) to the July 2022 Note pursuant to which the maturity date was extended from July 22, 2023 to May 17, 2024 (the “July 2022 Note Maturity Date Extension”). In exchange for the July 2022 Note Maturity Date Extension, the Company agreed to pay Streeterville an extension fee in the amount of $ 0.1 million, which was added to the outstanding balance of the July 2022 Note. The extension was treated as a modification and capitalized and amortized to interest expense over the term of the extension. December 2022 Note Purchase Agreement and Promissory Note On December 30, 2022, we entered into a note purchase agreement with Streeterville Capital, LLC (the "Holder"), pursuant to which we agreed to issue and sell to the Holder an unsecured promissory note (the "December 2022 Note") in an aggregate initial principal amount of $ 8.4 million, which is payable on or before the date that is 12 months from the issuance date. The initial principal amount of includes an original issue discount of $ 1.9 million and $ 0.02 million 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 $ 6.5 million. 24 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 10- Debt (continued) Interest on the December 2022 Note accrues at a rate of 10 % per annum and is payable on the maturity date or otherwise in accordance with the December 2022 Note. We may pay all or any portion of the amount owed earlier than it is due; provided that in the event we may elect to prepay all or any portion of the outstanding balance, it shall pay to the Holder 115 % of the portion of the outstanding balance we may elect to prepay. Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the December 2022 Note is paid in full, the Holder shall have the right to redeem up to an aggregate of 1/6th of the initial principal balance of the December 2022 Note plus any interest accrued thereunder each month by providing written notice delivered to us; 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 further month in addition to such future month's monthly redemption amount. Upon receipt of any monthly redemption notice, we shall pay the applicable monthly redemption amount in cash to the Holder within five ( 5 ) business days of the Company's receipt of such monthly redemption notice. The December 2022 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 default due to the occurrence of bankruptcy or insolvency proceedings), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the December 2022 Note to be immediately due and payable. Upon the occurrence of bankruptcy-related event of default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the December 2022 Note will become immediately due and payable at the mandatory default amount. Under the terms of the December 2022 Note, if the note is still outstanding after 6 months from the issuance date, or as of June 30, 2023, a 10 % monitoring fee would be added to the balance of the note. On June 30, 2023, a monitoring fee of $ 0.9 million was added to the balance of the note and accrued to interest expense during the nine months ended September 30, 2023 which is included in the other income/expense section of the condensed consolidated statements of operations. On May 16, 2023, the Company entered into an amendment (the “December 2022 Note Amendment”) to the December 2022 Note pursuant to which the maturity date of the December 2022 Note was extended from December 30, 2023 to May 17, 2024 (the “December 2022 Note Maturity Date Extension”). In exchange for the December 2022 Note Maturity Date Extension, the Company agreed to pay the Holder an extension fee in the amount of $ 0.1 million which was added to the outstanding balance of the December 2022 Note. This extension was treated as a modification and capitalized and amortized to interest expense over the term of the extension. Third Party Note Payable Game Your Game entered into promissory notes with an individual whereby it received approximately $ 0.2 million on October 29, 2021, approximately $ 0.2 million on January 18, 2022, approximately $ 0.1 million on March 22, 2022, approximately $ 0.1 million on August 26, 2022, approximately $ 0.1 million on September 16, 2022, approximately $ 0.1 million on October 26, 2022, approximately $ 0.1 million on November 29, 2022, approximately $ 0.1 million on December 22, 2022, approximately $ 0.03 million on January 18, 2023 and approximately $ 0.1 million on March 30, 2023 for funding of outside liabilities and working capital needs. All of the promissory notes have an interest rate of 8 % and are due on or before November 30, 2023. As of September 30, 2023, the balance owed under the notes was $ 1.2 million. Subsequent to September 30, 2023, the promissory notes were converted to 1,461,640 shares of Game Your Game common stock. See Note 26 for more details. Note 11 - Capital Raises Registered Direct Offerings On March 22, 2022, the Company entered into a Securities Purchase Agreement with certain institutional investors named therein, pursuant to which the Company sold in a registered direct offering (i) 53,197.7234 shares of Series 8 Convertible Preferred Stock and (ii) related warrants to purchase up to an aggregate of 1,503,726 shares of common stock. Each share of Series 8 Convertible Preferred Stock and the related Warrants were sold at a subscription amount of $ 940 , representing an original issue discount of 6 % of the stated value of each share of Series 8 Convertible Preferred Stock for an aggregate subscription amount of $ 50.0 million. In connection with this offering, the Company filed a Certificate of Designation for the Series 8 Convertible Preferred Stock with the Nevada Secretary of State. Each share of Series 8 Convertible Preferred Stock has a par value of $ 0.001 per share and stated value of $ 1,000 per share. The shares of Series 8 Convertible Preferred Stock are convertible into shares of the Company’s common stock, at a conversion price of $ 35.38 per share. Each share of Series 8 Convertible Preferred Stock is entitled to receive cumulative dividends, payable in the same form as dividends paid on shares of the Company’s common stock. At any time beginning on October 1, 2022 and ending ninety 90 days thereafter, the holders of 25 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 11- Capital Raises (continued) the Series 8 Convertible Preferred Stock have the right to redeem all or part of the shares held by such holder in cash for the redemption price equal to the stated value of such share, plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses or amounts due. Upon redemption, the holder of the Series 8 Convertible Preferred Stock will forfeit 50 % of the warrants issued in connection therewith. The holders of the Series 8 Convertible Preferred Stock shall vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the stockholders of the Company. The Series 8 Convertible Preferred Stock and related warrants subject to forfeiture are recorded as Mezzanine Equity in the accompanying balance sheets as the holder has the option to redeem these shares for cash and the warrants are an embedded feature for the Series 8 Convertible Preferred Stock. The remaining warrants that are not subject to forfeiture are recorded within Stockholders' Equity as the remaining warrants are classified as freestanding instruments containing a total value of $ 5.6 million. The aggregate net proceeds from the offering, after deducting the placement agent fees and other estimated offering expenses, were approximately $ 46.9 million. See Note 1 3 for Preferred Stock and Note 15 for Warrant details. During the quarter ended December 31, 2022, the Company received cash redemption notices from the holders of the Series 8 Convertible Preferred Stock issued on March 22, 2022, totaling 53,197.72 shares of Series 8 Convertible Preferred Stock for aggregate cash paid of approximately $ 53.2 million which were therefore fully redeemed. In conjunction with the redemption, 751,841 warrants were forfeited. Between March 15, 2022 and March 22, 2022, the Company received cash redemption notices from the holders of the Series 7 Convertible Preferred Stock issued on September 15, 2021, totaling 49,250 shares of Series 7 Convertible Preferred Stock for aggregate cash required to be paid of approximately $ 49.3 million. In addition, in accordance with the related purchase agreement, upon redemption of the Series 7 Convertible Preferred Stock, each holder forfeited 75 % of the related warrants that were issued. Therefore, as of March 22, 2022, 49,250 shares of Series 7 Convertible Preferred Stock were redeemed and 394,000 related warrants were forfeited. The Company noted about 71 % of the Series 7 Preferred Stock holders that redeemed shares also participated as Series 8 Convertible Preferred Stock holders (“shared holders”). The Company accounted for proceeds of the shared holders as a modification to the Series 7 and Series 8 Convertible Preferred Stock, as well as the related embedded warrants. The total change in fair value as a result of modification related to the Preferred Stock amounted to $ 2.6 million which were recognized as a deemed dividend at the date of the modification, upon which was amortized until the redemption period began on October 1, 2022. The total change in fair value as a result of modification related to the embedded warrants amounted to $ 1.5 million which was recognized as a deemed contribution at the date of the modification, upon which was accreted until the redemption period began on October 1, 2022. On July 22, 2022, the Company entered into an Equity Distribution Agreement (the "Sales Agreement") with Maxim Group LLC (“Maxim”) under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 25.0 million (the “Shares”) from time to time through Maxim, acting exclusively as the Company’s sales agent (the “ATM Offering”). On June 13, 2023, the Company entered into an amendment to the Sales Agreement with Maxim, pursuant to which the aggregate offering price of the ATM Offering was increased from $ 25.0 million to approximately $ 27.4 million. The Company intends to use the net proceeds of the ATM Offering primarily for working capital and general corporate purposes. During the nine months ended September 30, 2023, the Company sold 70,375,554 shares of common stock at share prices between $ 0.139609 and $ 1.86 per share under the Sales Agreement for gross proceeds of approximately $ 27.4 million or net proceeds of $ 26.5 million after deducting the placement agency fees and other offering expenses. The Company is not obligated to make any sales of the Shares under the Sales Agreement and no assurance can be given that the Company will sell any additional Shares under the Sales Agreement, or if it does, as to the price or amount of Shares that the Company will sell, or the date on which any such sales will take place. The Company is currently subject to the SEC’s “baby shelf rules,” which prohibit 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. 26 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 12 - Common Stock During the three months ended March 31, 2023, the Company issued 1,547,234 shares of common stock under exchange agreements to settle outstanding balance and interest totaling approximately $ 1.4 million under partitioned notes. See Note 10 . During the three months ended March 31, 2023, the Company issued 9,655,207 shares of common stock in connection with the ATM Offering at per share prices between $ 1.15 and $ 1.86 , resulting in gross proceeds to the Company of approximately $ 15.4 million and net proceeds of $ 15.0 million after subtracting sales commissions and other offering expenses. Se e Note 11 . During the three months ended March 31, 2023, the Company issued 1,380,000 shares of common stock in connection with the exercise of 1,380,000 pre-funded warrants at $ 0.001 per share in connection with the October 2022 registered direct offering. During the three months ended March 31, 2023, the Company issued 324,918 shares of common stock in connection with a warrant amendment to exchange all of the then outstanding September 2021 warrants and March 2022 warrants. See Note 15 . During the three months ended June 30, 2023, the Company issued 7,349,420 shares of common stock under exchange agreements to settle outstanding balance and interest totaling approximately $ 2.0 million under partitioned notes. See Note 10 . During the three months ended June 30, 2023, the Company issued 19,326,522 shares of common stock in connection with the ATM Offering at per share prices between $ 0.200034 and $ 0.54 , resulting in gross proceeds to the Company of approximately $ 5.6 million and net proceeds of $ 5.4 million after subtracting sales commissions and other offering expenses. Se e Note 11 . During the three months ended September 30, 2023, the Company issued 18,144,158 shares of common stock under exchange agreements to settle outstanding balance and interest totaling approximately $ 3.2 million under partitioned notes. See Note 10 . During three months ended September 30, 2023 , the Company issued 9,000,000 shares of common stock in connection with the exercise of 9,000,000 warrants with an exercise price of $ 0.26 per share in connection with the May 2023 offering for which the Company received gross proceeds of approximately $2.3 million. During the three months ended September 30, 2023, the Company issued 41,393,825 shares of common stock in connection with the ATM Offering at per share prices between $ 0.139609 and $ 0.22291 , resulting in gross proceeds to the Company of approximately $ 6.4 million and net proceeds of $ 6.1 million after subtracting sales commissions and other offering expenses. Se e Note 11 . Note 1 3 - Preferred Stock The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $ 0.001 per share with rights, preferences, privileges and restrictions as to be determined by the Company’s Board of Directors. Series 4 Convertible Preferred Stock On April 20, 2018, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 4 Convertible Preferred Stock (“Series 4 Preferred”), authorized 10,415 shares of Series 4 Preferred and designated the preferences, rights and limitations of the Series 4 Preferred. The Series 4 Preferred is non-voting (except to the extent required by law) and was convertible into the number of shares of common stock, determined by dividing the aggregate stated value of the Series 4 Preferred of $ 1,000 per share to be converted by $ 16,740 . As of September 30, 2023, there was 1 share of Series 4 Preferred outstanding. Series 5 Convertible Preferred Stock On January 14, 2019, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 5 Convertible Preferred Stock, authorized 12,000 shares of Series 5 Convertible Preferred Stock and designated the preferences, rights and limitations of the Series 5 Convertible Preferred Stock. The Series 5 Convertible Preferred Stock is non-voting (except to the extent required by law). The Series 5 Convertible Preferred Stock is convertible 27 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 13- Preferred Stock (continued) into the number of shares of common stock, determined by dividing the aggregate stated value of the Series 5 Convertible Preferred Stock of $ 1,000 per share to be converted by $ 11,238.75 . As of September 30, 2023, there were 126 shares of Series 5 Convertible Preferred Stock outstanding. Series 7 Convertible Preferred Stock On September 13, 2021, the Company entered into a securities purchase agreement with certain institutional investors named therein, pursuant to which the Company agreed to issue and sell in a registered direct offering (i) up to 58,750 shares of Series 7 Convertible Preferred Stock and (ii) related warrants to purchase up to an aggregate of 626,667 shares of common stock (the “Warrants”). Each share of Series 7 Convertible Preferred Stock and the related Warrants were sold at a subscription amount of $ 920 , representing an original issue discount of 8 % of the stated value for an aggregate subscription amount of $ 54.1 million. The shares of Series 7 Convertible Preferred Stocks were recorded as Mezzanine Equity as the holder has the option to redeem these shares for cash. The aggregate net proceeds from the offering, after deducting the placement agent fees and other estimated offering expenses, was approximately $ 50.6 million. Between March 15, 2022 and March 22, 2022, the Company received cash redemption notices from the holders of the Series 7 Convertible Preferred Stock issued on September 15, 2021, totaling 49,250 shares of Series 7 Convertible Preferred Stock for aggregate cash paid of approximately $ 49.3 million. As of September 30, 2023, there were zero shares of Series 7 Convertible Preferred Stock outstanding. Series 8 Convertible Preferred Stock On March 22, 2022, the Company entered into a securities purchase agreement with certain institutional investors named therein, pursuant to which the Company agreed to issue and sell in a registered direct offering (i) up to 53,197.7234 shares of Series 8 Convertible Preferred Stock and (ii) related warrants to purchase up to an aggregate of 1,503,726 shares of common stock (the “Warrants”). Each share of Series 8 Convertible Preferred Stock and the related Warrants (see Note 15) were sold at a subscription amount of $ 940 , representing an original issue discount of 6 % of the stated value for an aggregate subscription amount of $ 50.0 million. The shares of Series 8 Convertible Preferred Stocks were recorded as Mezzanine Equity as the holder has the option to redeem these shares for cash. The aggregate net proceeds from the offering, after deducting the placement agent fees and other estimated offering expenses, was approximately $ 46.9 million. During the quarter ended December 31, 2022, the Company received cash redemption notices from the holders of the Series 8 Convertible Preferred Stock issued on March 22, 2022, totaling 53,197.72 shares of Series 8 Convertible Preferred Stock for aggregate cash paid of approximately $ 53.2 million which were therefore fully redeemed. As of September 30, 2023, there were zero shares of Series 8 Convertible Preferred Stock outstanding. Note 14 - Stock Award Plans and Stock-Based Compensation In September 2011, the Company adopted the 2011 Employee Stock Incentive Plan (the “2011 Plan”) which provides for the granting of incentive and non-statutory common stock options and stock based incentive awards to employees, non-employee directors, consultants and independent contractors. The plan was terminated by its terms on August 31, 2021 and no new awards will be issued under the 2011 Plan. 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 is utilized for employees, corporate officers, directors, consultants and other key persons employed. The 2018 Plan provides for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan). Incentive stock options granted under the Option Plans are granted at exercise prices not less than 100 % of the estimated fair market value of the underlying common stock at date of grant. The exercise price per share for incentive stock options may not be less than 110 % of the estimated fair value of the underlying common stock on the grant date for any individual possessing 28 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 14 - Stock Award Plans and Stock-Based Compensation (continued) more that 10% of the total outstanding common stock of the Company. Options granted under the Option Plans vest over periods ranging from immediately to four years and are exercisable over periods not exceeding ten years . The aggregate number of shares that may be awarded under the 2018 Plan as of September 30, 2023 is 55,714,178 . As of September 30, 2023, 285,171 of stock options were granted to employees, directors and consultants of the Company (including 1 share outside of our plan and 41 shares under our 2011 Plan) and 55,386,081 options were available for future grant under the 2018 Plan. Employee Stock Options During the three months ended September 30, 2023 and 2022, the Company recorded a charge for the amortization of stock options of approximately $ 0.2 million and $ 0.7 million, respectively, and approximately $ 0.8 million and $ 1.6 million, respectively, for the nine months ended September 30, 2023 and 2022, which is included in the general and administrative section of the condensed consolidated statement of operations. As of September 30, 2023, the fair value of non-vested stock options totaled approximately $ 1.2 million, which will be amortized to expense over the weighted average remaining term of 0.91 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, 2023 57 351,529 1 351,587 Granted — — — — Exercised — — — — Expired ( 16 ) ( 55,866 ) — ( 55,882 ) Forfeited — ( 10,534 ) — ( 10,534 ) Ending balance as of September 30, 2023 41 285,129 1 285,171 The fair value of each employee option grant is estimated on the date of the grant using the Black-Scholes option-pricing model, however there were no stock option grants during the nine months ended September 30, 2023. The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. The Company attributes the value of stock-based compensation to operations on the straight-line single option method. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods. The dividends assumptions was $ 0 as the Company historically has not declared any dividends and does not expect to. Restricted Stock Awards On February 19, 2022, 12,802 restricted stock grants were forfeited for employee taxes. During the three months ended September 30, 2023 and 2022, the Company recorded a charge of zero and $ 0.03 million, respectively, and $ 0.03 million and $ 0.7 million for the nine months ended September 30, 2023 and 2022, respectively, for the amortization of vested restricted stock awards. The following table summarizes restricted stock based award activity granted: 29 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 14 - Stock Award Plans and Stock-Based Compensation (continued) Restricted Stock Grants Beginning balance as of January 1, 2023 42,968 Granted — Exercised — Expired — Forfeited — Ending balance as of September 30, 2023 42,968 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. The compensation expense is being amortized over the respective vesting periods. Note 15 - Warrants On January 28, 2022, the Company entered into an exchange agreement with the holder of certain existing warrants of the Company which were exercisable for an aggregate of 657,402 shares of the Company’s common stock. Pursuant to the exchange agreement, the Company agreed to issue to the warrant holder an aggregate of 184,153 shares of common stock and rights to receive an aggregate of 52,513 shares of common stock in exchange for the existing warrants. The Company accounted for the exchange agreement as a warrant modification. The Company determined the fair value of the existing warrants as if issued on the exchange agreement date and compared that to the fair value of the common stock issued. The Company calculated the fair value of the existing warrants using a Black-Scholes Option pricing model and determined it to be approximately $ 12.00 per share. The fair value of the common stock issued was based on the closing stock price of the date of the exchange. The total fair value of the warrants prior to modification was greater than the fair value of the common stock issued, and therefore, there was no incremental fair value related to the exchange. Between March 15 and March 22, 2022, we received cash redemption notices from the holders of the Company's Series 7 Convertible Preferred Stock issued on September 15, 2021, totaling 49,250 shares of Series 7 Convertible Preferred Stock for aggregate cash required to be paid of approximately $ 49.3 million. In addition, upon redemption of the Series 7 Convertible Preferred Stock, each holder forfeited 75 % of the related warrants that were issued together with the Series 7 Convertible Preferred Stock (the "Series 7 Warrants"). 394,000 corresponding warrants issued in connection with the issuance of the Series 7 Convertible Preferred Stock have been forfeited and 232,675 related warrants remain outstanding. As of September 30, 2023, there are no Series 7 Warrants outstanding as they were exchanged under the warrant amendments below. On March 22, 2022, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company agreed to issue and sell, in a registered direct offering sold an aggregate of 53,197.7234 shares of the Company’s Series 8 Convertible Preferred Shares, par value $ 0.001 per share, and warrants to purchase up to 1,503,726 shares of common stock. Each share and related warrants were sold together at a subscription amount of $ 940 , representing an original issue discount of 6 % of the stated value for an aggregate subscription amount of $ 50.0 million. During the three months ended March 31, 2023, the Company issued 1,380,000 shares of common stock in connection with the exercise of 1,380,000 pre-funded warrants at $ 0.001 per share in connection with the October 2022 registered direct offering. Warrant Amendments On February 28, 2023, the Company entered into warrant amendments (the “Warrant Amendments”) with certain holders (each, including its successors and assigns, a “Holder” and collectively, the “Holders”) of (i) those certain Common Stock Purchase Warrants issued by the Company in April 2018 (the “April 2018 Warrants”) pursuant to the registration statement on Form S-3 (File No. 333-204159), (ii) those certain Common Stock Purchase Warrants issued by the Company in September 2021 (the “September 2021 Warrants”) pursuant to the registration statement on Form S-3 (File No. 333-256827), and (iii) those certain Common Stock Purchase Warrants issued by the Company in March 2022 (the “March 2022 Warrants” and together with the April 2018 Warrants and the September 2021 Warrants, the “Existing Warrants”) pursuant to the registration statement on Form S-3 (File No. 333-256827). 30 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 15 - Warrants (continued) Pursuant to the Warrant Amendments, the Company and the Holders have agreed to amend (i) the September 2021 Warrants and the March 2022 Warrants to provide that all of such outstanding warrants shall be automatically exchanged for shares of common stock of the Company, at a rate of 0.33 shares of Common Stock (the “Exchange Shares”) for each September 2021 Warrant or March 2022 Warrant, as applicable, and (ii) the April 2018 Warrants to remove the obligation of the Company to hold the portion of a Distribution (as defined in the April 2018 Warrants) in abeyance in connection with the Beneficial Ownership Limitation (as defined in the April 2018 Warrants). In connection with the exchange of 232,675 September 2021 Warrants and 751,867 March 2022 Warrants, which were all of the then outstanding of those warrants as of the effective date of the Warrant Amendments, the Company issued 76,794 Exchange Shares and 248,124 Exchange Shares, respectively, resulting in the issuance of 324,918 Exchange Shares in the aggregate. The Company accounted for the exchange as a warrant modification. The Company determined the fair value of the Existing Warrants as if issued on the Warrant Amendment date and compared that to the fair value of the common stock issued for the Exchange Shares. The Company calculated the fair value of the Existing Warrants using a Black-Scholes Option pricing model and determined it to be approximately $ 0.6 million. The fair value of the common stock issued was based on the closing stock price of the date of the Warrant Amendment. The total fair value of the Existing Warrants prior to modification was greater than the fair value of the Exchange Shares issued, and therefore, there was no incremental fair value related to the Warrant Amendments. May 2023 Warrant Purchase Agreement On May 15, 2023, the Company entered into a Warrant Purchase Agreement (the “Agreement”) with multiple purchasers for the purchase and sale of up to an aggregate of 150,000,000 of warrants (the “May 2023 Warrants”). The Agreement and the May 2023 Warrants were subsequently amended on June 20, 2023. The purchase price for one (1) May 2023 Warrant is $ 0.01 (the “Per Warrant Purchase Price”). The May 2023 Warrants have an initial exercise price $ 0.26 , payable in cash or the cancellation of indebtedness ( the “Initial Exercise Price”). The exercise price will equal the lower of (i) the Initial Exercise Price and (ii) 90 % of the lowest VWAP (as defined in the Agreement) of the Common Stock for the five Trading Days (as defined in the Agreement) immediately prior to the date on which a Notice of Exercise is submitted to the Company (the “Adjusted Exercise Price” and together with the Initial Price, as applicable, the “Exercise Price”); provided, however, that the Adjusted Exercise Price shall not be less than $ 0.10 ; and provided further that any exercise of the May 2023 Warrants with an Adjusted Exercise Price will be subject to the Company’s consent unless the trading price of the Common Stock as of the time the Notice of Exercise is delivered to the Company is at least 10 % or more above the prior Trading Day’s Nasdaq Official Closing Price. No warrant holder may exercise the May 2023 Warrants to the extent such exercise would cause such warrant holder, together with its affiliates and attribution parties, to beneficially own a number of shares of Common Stock which would exceed 9.99 % of the Company’s then outstanding Common Stock following such exercise. Each May 2023 Warrant is immediately exercisable for one share of Common Stock and will expire 1 year from the issuance date (the “Termination Date”) unless extended by the Company with the consent of the warrant holder. Pursuant to the terms of the May 2023 Warrants, at any time prior to the Termination Date, the Company may, in its sole discretion, redeem any portion of a May 2023 Warrants that have not been exercised, in cash, at the Per Warrant Purchase Price, plus all liquidated damages and other costs, expenses or amounts due in respect of the Warrants (the “ Redemption Amount ”) upon five Trading Days’ written notice to the warrant holder (the “ Redemption Date ”). On the Termination Date, the Company will be required to redeem any portion of the May 2023 Warrants that have not been exercised or redeemed prior to such date through payment of the Redemption Amount in cash. The Company will be required to pay any Redemption Amount within five Trading Days after the Redemption Date or the Termination Date, as applicable. The 150,000,000 May 2023 Warrants were issued on May 17, 2023 for aggregate gross proceeds of approximately $ 1.5 million. The aggregate net proceeds from the offerings, after deducting the placement agent fees and other estimated offering expenses, were approximately $ 1.4 million. The May 2023 Warrants were determined to be within the scope of ASC 480 as they represent obligations to the Company, as the Company is obligated to redeem any May 2023 Warrants that have not been exercised at the Termination Date. As such, the Company recorded the May 2023 Warrants as a liability at fair value on the issuance date. The fair value of the May 2023 31 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 15 - Warrants (continued) Warrants was determined using level 3 inputs utilizing a Monte-Carlo simulation. The May 2023 Warrants are subsequently measured as if the May 2023 Warrants were to be settled on the current redemption value with subsequent changes recognized as interest cost. The fair value of the Warrants was determined to be $ 1.48 million at the date of issuance, and the redemption value of the Warrants was determined to be approximately $ 1.5 million as of September 30, 2023. The fair value of the Warrants are reflected within Warrant Liability on the Condensed Consolidated Balance Sheet. An immediate loss was recognized on the initial measurement date of $ 71,250 as a result of the difference between fair value and net proceeds. The change in fair value of Warrants of $ 71,250 for the three and nine months ended September 30, 2023 was reported as other expense on the Condensed Consolidated Statement of Operations. The interest cost of $ 20,000 for the three and nine months ended September 30, 2022 was included in interest expense, net on the Condensed Consolidated Statement of Operations. During July 2023, the Company issued 9,000,000 shares of common stock in connection with the exercise of 9,000,000 warrants with an exercise price of $ 0.26 per share in connection with the May 2023 offering for which the Company received gross proceeds of approximately $ 2.3 million. The following table summarizes the activity to warrants outstanding: Number of Warrants Beginning balance as of January 1, 2023 6,212,026 Granted 150,000,000 Exercised ( 10,380,000 ) Expired ( 1,224 ) Exchanged ( 984,542 ) Ending balance as of September 30, 2023 144,846,260 Exercisable as of September 30, 2023 144,846,260 Note 16- Income Taxes There is an income tax expense of approximately $ 0.003 million and zero for the three months ended September 30, 2023 and 2022, respectively, and $ 2.5 million and $ 0.02 million for the nine months ended September 30, 2023 and 2022, respectively. The income tax expense in the nine months ended September 30, 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. Note 17 - Credit Risk and Concentrations Financial instruments that subject the Company to credit risk consist principally of trade accounts receivable and cash and cash equivalents. The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for uncollectible accounts and, consequently, believes that its accounts receivable credit risk exposure beyond such allowances is limited. The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits. Cash is also maintained at foreign financial institutions for its UK subsidiary, German subsidiaries and its majority-owned India subsidiary. Cash in foreign financial institutions as of September 30, 2023 and December 31, 2022 was immaterial. The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash. For the three months ended September 30, 2023, there is one single customer who accounts for 17 % of the Company's revenue totaling $ 0.3 million with $ 0.3 million accounts receivable at September 30, 2023. This customer represents 19 % of the total accounts receivable balance as of September 30, 2023. 32 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 18 - Segments (continued) For the nine months ended September 30, 2023, there are two customers who account for 14 % and 10 % of the Company's revenue totaling $ 1.0 million and $ 0.7 million. These customers represent $ 0.3 million or 19 % and $ 0.0 million or — % of accounts receivable at September 30, 2023. An additional customer, which does not account for 10% of revenue in the three or nine months ended September 30, 2023, accounts for 11 % or $ 0.2 million of the total accounts receivable balance as of September 30, 2023. For the three months ended September 30, 2022, there are two customers who account for 15 % and 13 % of the Company's revenue totaling $ 0.4 million and $ 0.3 million. These customers represent 22 % or $ 0.4 million and 8 % or $ 0.1 million of accounts receivable at September 30, 2022. For the nine months ended September 30, 2022, there is one single customer who accounts for 14 % of the Company's revenue totaling $ 1.1 million. This customer represents $ 0.4 million or 22 % of accounts receivable at September 30, 2022. An additional customer, which does not account for 10% of revenue in the three or nine months ended September 30, 2022, accounts for 12 % or $ 0.2 million of the total accounts receivable balance as of September 30, 2022. For the three months ended September 30, 2023, there is one single vendor who accounts for 21 % of the Company's purchases totaling $ 0.9 million. This vendor represents 5 % or $ 0.1 million of accounts payable at September 30, 2023. For the nine months ended September 30, 2023, there is one single vendor who accounts for 13 % of the Company's purchases totaling $ 2.2 million. This vendor had no accounts payable at September 30, 2023. Two additional vendors, which do not account for 10% of purchases in the three or nine months ended September 30, 2023, account for 20 % or $ 0.4 million and 10 % or $ 0.2 million of the total accounts payable balance as of September 30, 2023. For the three months ended September 30, 2022, there are two vendors who account for 18 % and 13 % of the Company's purchases totaling $ 1.0 million and $ 0.7 million. These vendors represent 26 % or $ 0.6 million and — % or $ 0.0 million of the total accounts payable balance as of September 30, 2022. For the nine months ended September 30, 2022, there is one single vendor who accounts for 37 % of the Company's purchases totaling $ 6.8 million. This vendor had no accounts payable at September 30, 2022. One additional vendor, which did not account for 10% of purchases in the three or nine months ended September 30, 2022, accounts for 11 % or $ 0.3 million of the total accounts payable balance as of September 30, 2022. Note 18 - 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. The Company completed the Enterprise Apps Spin-off during the three months ended March 31, 2023. Design Reactor was entirely part of the Indoor Intelligence business segment. As a result, the Company met the requirements of ASC 205-20 to report the results of the Design Reactor business as discontinued operations. The operating results for Design Reactor have been reclassified to discontinued operations and are no longer reported in the Indoor Intelligence business segment. See Note 25 for further details. There were no changes to the Company's reportable segments as result of the Enterprise Apps Spin-off. Gross profit is the primary measure of segment profitability used by the Company’s Chief Operating Decision Maker ("CODM"). Revenues and gross profit segments consisted of the following (in thousands): 33 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 18 - Segments (continued) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Revenue by Segment Indoor Intelligence $ 782 $ 1,327 $ 3,531 $ 4,061 SAVES 760 591 2,221 2,051 Shoom 474 517 1,425 1,548 Total segment revenue $ 2,016 $ 2,435 $ 7,177 $ 7,660 Gross profit by Segment Indoor Intelligence $ 488 $ 882 $ 2,379 $ 2,623 SAVES 665 341 1,938 1,315 Shoom 412 456 1,228 1,313 Gross profit by Segment $ 1,565 $ 1,679 $ 5,545 $ 5,251 Income (loss) from operations by Segment Indoor Intelligence $ ( 9,259 ) $ ( 5,169 ) $ ( 24,108 ) $ ( 19,304 ) Saves ( 51 ) ( 438 ) ( 490 ) ( 1,817 ) Shoom 228 144 677 573 Loss from operations by Segment $ ( 9,082 ) $ ( 5,463 ) $ ( 23,921 ) $ ( 20,548 ) 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. 34 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 19 - Fair Value of Financial Instruments The Company's estimates of fair value for financial assets and financial liabilities are based on the framework established in ASC 820. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the ASC 820 hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. We classified our financial instruments measured at fair value on a recurring basis in the following valuation hierarchy. The Company's assets measured at fair value consisted of the following at September 30, 2023 and December 31, 2022: Fair Value at September 30, 2023 Total Level 1 Level 2 Level 3 Assets: Investments in equity securities 189 178 — 11 Total assets $ 189 $ 178 $ — $ 11 Fair Value at December 31, 2022 Total Level 1 Level 2 Level 3 Assets: Investments in equity securities 330 319 — 11 Total assets $ 330 $ 319 $ — $ 11 The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value. 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 for Level 1 equity investments was determined using quoted prices of the security in active markets. The fair value for Level 3 equity investments was determined using a pricing model with certain significant unobservable market data inputs. Investments in debt securities are valued using an option pricing model under the income approach methodology as the investment does not have observable inputs of identical or comparable instruments. The Company noted that there was no change in Level 3 instruments for which significant unobservable inputs were used to determine fair value for the nine months ended September 30, 2023. 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 nine months ended September 30, 2023: Level 3 Level 3 Investments Balance at January 1, 2023 $ 11 Unrealized loss on equity securities — Balance at September 30, 2023 $ 11 35 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 20 - Foreign Operations Prior to the Enterprise Apps Spin-off (see Note 1), the Company’s operations were located primarily in the United States, Canada, India, Germany, Ireland, and the United Kingdom. After the Enterprise Apps Spin-off (see Note 1), the Company's operations are located primarily in the United States, 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): United States Canada India Germany United Kingdom Ireland Philippines Eliminations Total For the Three Months Ended September 30, 2023: Revenues by geographic area $ 1,304 $ — $ 367 $ 725 $ 98 $ 6 $ — $ ( 484 ) $ 2,016 Operating (loss) income by geographic area $ ( 7,511 ) $ — $ 41 $ ( 1,343 ) $ ( 6 ) $ ( 263 ) $ — $ — $ ( 9,082 ) Net (loss) income from continuing operations by geographic area $ ( 9,346 ) $ — $ 41 $ ( 1,274 ) $ ( 6 ) $ ( 263 ) $ — $ — $ ( 10,848 ) For the Three Months Ended September 30, 2022: Revenues by geographic area $ 1,495 $ — $ 78 $ 880 $ 88 $ — $ — $ ( 106 ) $ 2,435 Operating (loss) income by geographic area $ ( 3,223 ) $ — $ 30 $ ( 1,974 ) $ 19 $ ( 292 ) $ ( 1 ) $ ( 22 ) $ ( 5,463 ) Net (loss) income from continuing operations by geographic area $ ( 8,642 ) $ — $ ( 31 ) $ ( 1,926 ) $ 19 $ ( 292 ) $ — $ — $ ( 10,872 ) For the Nine months ended September 30, 2023: Revenues by geographic area $ 4,559 $ — $ 1,160 $ 2,643 $ 327 $ 10 $ — $ ( 1,522 ) $ 7,177 Operating (loss) income by geographic area $ ( 20,267 ) $ — $ 161 $ ( 3,266 ) $ ( 11 ) $ ( 538 ) $ — $ — $ ( 23,921 ) Net (loss) income from continuing operations by geographic area $ ( 27,031 ) $ — $ 165 $ ( 3,085 ) $ ( 11 ) $ ( 538 ) $ — $ 1 $ ( 30,499 ) For the Nine Months Ended September 30, 2022: Revenues by geographic area $ 4,465 $ — $ 345 $ 2,851 $ 331 $ 6 $ — $ ( 338 ) $ 7,660 Operating (loss) income by geographic area $ ( 13,878 ) $ — $ 114 $ ( 6,082 ) $ 78 $ ( 756 ) $ ( 1 ) $ ( 23 ) $ ( 20,548 ) Net (loss) income from continuing operations by geographic area $ ( 20,531 ) $ — $ 53 $ ( 5,938 ) $ 78 $ ( 756 ) $ — $ — $ ( 27,094 ) As of September 30, 2023: Identifiable assets by geographic area $ 51,204 $ — $ 755 $ 19,580 $ 406 $ 80 $ — $ ( 44,378 ) $ 27,647 Long lived assets by geographic area $ 2,141 $ — $ 61 $ 2,476 $ — $ 3 $ — $ — $ 4,681 As of December 31, 2022: Identifiable assets by geographic area $ 133,382 $ 5,484 $ 682 $ 19,599 $ 277 $ 19 $ 415 $ ( 102,223 ) $ 57,635 Long lived assets by geographic area $ 2,538 $ — $ 3 $ 3,308 $ 1 $ 4 $ — $ — $ 5,854 36 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 21 - Related Party Transactions Cardinal Venture Holdings Investment Nadir Ali, the Company's Chief Executive Officer and a members of its Board of Directors, is also a controlling member of 3AM, LLC ("3AM"), which is a member of Cardinal Venture Holdings LLC ("CVH"), which may, in certain circumstances, be entitled to manage the affairs of CVH. Mr. Ali’s relationship may create conflicts of interest between Mr. Ali’s obligations to the Company and its shareholders and his economic interests and possible fiduciary obligations in CVH through 3AM. For example, Mr. Ali may be in a position to influence or manage the affairs of CVH in a manner that may be viewed as contrary to the best interests of either the Company or CVH and their respective stakeholders. On July 1, 2022, the Company loaned $ 150,000 to CVH. See Note 8 . The $ 150,000 loan was repaid on March 15, 2023. Reimbursable Expenses from New CXApp In connection with the closing of the Enterprise Apps Spin-off and Business Combination and the terms of the Merger Agreement, New CXApp was obligated to reimburse the Company for certain transaction expenses related to the Business Combination. As of September 30, 2023, New CXApp owed the Company approximately $ 0.9 million for reimbursable transaction expenses which is included in the prepaid and other current assets line of the Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2023, the Company incurred approximately $ 0.02 million and $ 0.3 million, respectively, in reimbursable expenses payable in connection with the terms and conditions of the Transition Services Agreement and was charged by CXApp for $ 0.02 million of reimbursable expenses under the Transition Services Agreement during the three months ended September 30, 2023, of which a net amount of $ 0.02 million was owed by CXApp to the Company as of September 30, 2023 and is included in other receivables on the Company’s Condensed Consolidated Balance Sheets. Note 22 - XTI Merger Agreement On July 24, 2023, Inpixon entered into an Agreement and Plan of Merger with XTI Aircraft Company (the “XTI Merger Agreement”). Subject to the terms and conditions of the Merger Agreement, at the effective time of the merger (the “Effective Time”): (i) Each share of XTI common stock outstanding immediately prior to the Effective Time (excluding any shares to be canceled pursuant to the Merger Agreement and shares held by holders of XTI common stock who have exercised and perfected appraisal rights) will automatically be converted into the right to receive a number of shares of Inpixon common stock equal to the Exchange Ratio (as described below). Prior to the Effective Time, subject to obtaining the consent of requisite note holders, all outstanding XTI convertible notes will be converted into XTI common stock and will participate in the merger on the same basis as the other shares of XTI common stock, except for (1) a promissory note dated April 1, 2023, in the initial principal amount of $ 1,817,980 , which will be amended to extend the maturity date thereof until no sooner than December 31, 2026 and be assumed by the combined company at the Closing to become convertible into the shares of common stock of the combined company, and (2) a promissory note dated December 31, 2021, in the initial principal amount of $ 1,007,323 , which will provide for, at Closing, payment in cash of $ 507,323 of the principal plus interest accrued to the date of payment, and the conversion of the remaining $ 500,000 of outstanding principal into shares of common stock of the combined company (collectively, the “Note Amendments”). (ii) Each option to purchase shares of XTI common stock outstanding and unexercised immediately prior to the Effective Time will be assumed by Inpixon and will become an option, subject to any applicable vesting conditions, to purchase shares of Inpixon common stock with the number of shares of Inpixon common stock underlying the unexercised portions of such options and the exercise prices for such options to be adjusted to reflect the Exchange Ratio. (iii) Each warrant to purchase shares of XTI common stock outstanding and unexercised immediately prior to the Effective Time will be assumed by Inpixon and will become a warrant to purchase shares of Inpixon common stock with the number of 37 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 22 - XTI Merger Agreement (continued) shares of Inpixon common stock underlying such warrants and the exercise prices for such warrants will be adjusted to reflect the Exchange Ratio. Subject to adjustment pursuant to the formula for the Exchange Ratio set forth in Exhibit A of the Merger Agreement, the Exchange Ratio will be determined based on (a) the fully diluted capitalization of each of Inpixon and XTI immediately prior to the Effective Time, provided, however, that for this purpose the calculation of Inpixon’s fully diluted capitalization will not take into account any shares of Inpixon common stock issuable after Closing for cash consideration upon conversion, exercise or exchange of derivative securities that are issued by Inpixon in Inpixon Permitted Issuances. “Inpixon Permitted Issuances” are any issuances of common stock or derivative securities by Inpixon for financing or debt cancellation purposes that are permitted under the Merger Agreement and occur after the date of the Merger Agreement but before the Closing. The Exchange Ratio will be subject to certain adjustments to the extent that Inpixon’s Net Cash (as such term is defined on Exhibit A of the Merger Agreement) is greater than or less than $ 21.5 million and/or any principal and accrued or unpaid interest remains outstanding under those certain promissory notes issued by Inpixon to Streeterville Capital, LLC on July 22, 2022 and December 30, 2022. After application of the Exchange Ratio and subject to those certain adjustments described above, Inpixon stockholders immediately prior to the Effective Time are anticipated to retain approximately 40 % of the issued and outstanding capital stock of the combined company and XTI security holders are anticipated to retain approximately 60 % of the issued and outstanding capital stock of the combined company. It is expected that Inpixon’s Chief Executive Officer, Nadir Ali, and Chief Financial Officer, Wendy Loundermon, will resign upon the Closing, effective as of the Closing Date. As a condition to closing the transactions contemplated by the XTI Merger Agreement (the “Proposed XTI Transaction”), Inpixon is required to complete the divestiture of its Shoom, SAVES and Game Your Game lines of business and investment securities, as applicable, by any lawful means, including a sale to one or more third parties, spin off, plan of arrangement, merger, reorganization, or any combination of the foregoing (the “Solutions Divestiture”). The Distribution (as defined below), if completed, would constitute part of the Solutions Divestiture. On October 23, 2023, Inpixon entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Grafiti Holding Inc., a British Columbia corporation and newly formed wholly-owned subsidiary of Inpixon (“Grafiti”). Additionally, on October 23, 2023, Inpixon entered into a Business Combination Agreement (the “Business Combination Agreement”), by and among Inpixon, Damon Motors Inc., a British Columbia corporation (“Damon”), Grafiti, and 1444842 B.C. Ltd., a British Columbia corporation and a newly formed wholly-owned subsidiary of Grafiti (“Amalco Sub”). Both the Separation Agreement and the Business Combination Agreement are outlined in Note 26. XTI Promissory Note & Security Agreement Pursuant to the Merger Agreement, on the first calendar day of the month following the date of the Merger Agreement and on the first calendar day of each month thereafter until the earlier of (i) four months following the date of the Merger Agreement and (ii) the Closing Date, Inpixon shall provide loans to XTI on a senior secured basis (each, a “Future Loan”), in such amounts requested by XTI in writing prior to the first calendar day of each such month. Each Future Loan will be in the principal amount of up to $ 500,000 , and the aggregate amount of the Future Loans will be up to approximately $ 1.8 million (or such greater amount as Inpixon shall otherwise agree in its sole and absolute discretion). These Future Loans and security will be evidenced by a Senior Secured Promissory Note (the “Promissory Note”) and a Security and Pledge Agreement (the “Security Agreement”). The Promissory Note provides an aggregate principal amount up to $ 2,313,407 , which amount includes the principal sum of $ 525,000 which Inpixon previously advanced to XTI (the “Existing Loans”, collectively with the Future Loans, the “Inpixon Loans to XTI”) plus accrued interest on such amount, and the aggregate principal amount of the Future Loans. The Promissory Note will bear interest at 10 % per annum, compounded annually, and for each Future Loan, beginning on the date the Future Loan is advanced to XTI. The Promissory Note balance and accrued interest as of September 30, 2023 is approximately $ 2.03 million and $ 0.04 million, respectively, and is included in the Company's condensed consolidated balance sheet in Notes and Other Receivables. 38 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 22 - XTI Merger Agreement (continued) The outstanding principal amount under the Promissory Note, together with all accrued and unpaid interest, shall be due and payable upon the earlier of (a) December 31, 2023, (b) when declared due and payable by Inpixon upon the occurrence of an event of default, or (c) within three business days following termination of the Merger Agreement (i) by XTI because the XTI Board adopts a superior proposal prior to delivering the XTI Stockholder Consent, or (ii) by Inpixon because the XTI Board has made a change in recommendation, or XTI has breached or failed to perform in any material respect any of its covenants and agreements regarding obtaining its required stockholder approval or non-solicitation. The Promissory Note will be forgiven and of no further force if the Merger Agreement is terminated by the Inpixon Board because it adopts a superior proposal prior to obtaining the required Inpixon stockholder approval, subject to Inpixon’s rights and remedies under the Promissory Note, the Security Agreement, and the Merger Agreement. If the Merger Agreement is terminated by XTI because the Inpixon Board makes a change in recommendation or Inpixon is in material breach of its covenants and agreements regarding obtaining its required stockholder approval or non-solicitation, the maturity date of the Promissory Note will be extended to December 31, 2024. Transaction Bonus Plan On July 24, 2023, the Committee adopted a Transaction Bonus Plan (the “Plan”), which is intended to provide incentives to certain employees and other service providers to remain with Inpixon through the consummation of a Contemplated Transaction or Qualifying Transaction (each as defined below) and to maximize the value of the company with respect to such transaction for the benefit of its stockholders. The Plan will be administered by the Committee. It will automatically terminate upon the earlier of (i) the one-year anniversary of the adoption date, (ii) the completion of all payments under the terms of the Plan, or (iii) at any time by the Committee, provided, however, that the Plan may not be amended or terminated following the consummation of a Contemplated Transaction or Qualifying Transaction without the consent of each participant being affected, except as required by any applicable law. A “Contemplated Transaction” refers to a strategic alternative transaction including an asset sale, merger, reorganization, spin-off or similar transaction (a “Strategic Transaction”) that results in a change of control as defined in the Plan. A Qualifying Transaction refers to a Strategic Transaction that does not result in a change of control for which bonuses may be paid pursuant to the Plan as approved by the Committee. The XTI Proposed Transaction is expected to qualify as a Contemplated Transaction. The bonuses included in the Plan include a cash bonus equal to 100 % of the individual's aggregate annual base salary and target bonus amounts, a cash bonus equal to an aggregate amount of 4 % of the applicable transaction value, and an equity-based bonus, such as options or restricted stock. Note 23 - Leases The Company has operating leases for administrative offices in the United States (California), India, the United Kingdom and Germany. As part of the acquisition of IntraNav on December 9, 2021. the Company acquired right-of-use assets and lease liabilities related to an operating lease for an office space (the IntraNav office) located in Frankfurt, Germany. This lease expires on January 6, 2025 and the current lease rate is approximately $ 9,105 per month. The Company entered into two new operating leases for its administrative office in Hyderabad, India and Manila, Philippines. The Hyderabad, India and Manila, Philippines office lease expires on March 25, 2025 and May 14, 2025, respectively. The Company early terminated one of its administrative offices in Hyderabad, India which generated an immaterial gain on lease termination which is included in the operating expenses section of the Condensed Consolidated Statements of Operations. The Company has no other operating or financing leases with terms greater than 12 months. Right-of-use assets are summarized below (in thousands): 39 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 23 - Leases (continued) As of September 30, 2023 As of December 31, 2022 Palo Alto, CA Office $ 630 $ 630 Hyderabad, India Office 19 — Ratingen, Germany Office 84 85 Berlin, Germany Office 500 508 Frankfurt, Germany Office 291 294 Less accumulated amortization ( 1,148 ) ( 986 ) Right-of-use asset, net $ 376 $ 531 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 condensed consolidated statement of income for the three months ended September 30, 2023 and 2022 was $ 0.2 million and $ 0.1 million, respectively, and for the nine months ended September 30, 2023 and 2022 was $ 0.5 million and $ 0.5 million, respectively. Lease liability is summarized below (in thousands): As of September 30, 2023 As of December 31, 2022 Total lease liability $ 386 $ 545 Less: short term portion ( 198 ) ( 211 ) Long term portion $ 188 $ 334 Maturity analysis under the lease agreement is as follows (in thousands): Three months ending December 31, 2023 $ 53 Year ending December 31, 2024 210 Year ending December 31, 2025 107 Year ending December 31, 2026 40 Year ending December 31, 2027 — Year ending December 31, 2028 and thereafter — Total $ 410 Less: Present value discount ( 24 ) Lease liability $ 386 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 ASC 842, "Leases" ("ASC 842"). As of September 30, 2023, the weighted average remaining lease term is 2.2 years and the weighted average discount rate used to determine the operating lease liabilities was 3.9 %. Note 24 - Commitments and Contingencies Litigation Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the 40 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 24 - Commitments and Contingencies (continued) Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. On August 21, 2023, a purported Inpixon shareholder filed a lawsuit in the United States District Court for the Northern District of California against Inpixon and its directors. Another shareholder filed a substantially similar suit in the same court against the same parties on August 24, 2023. The cases are styled Busby v. Inpixon, Case No. 3:23-cv-04249 (N.D. Cal.) and Panovski v. Inpixon, Case No. 4:23-cv-04330-KAW (N.D. Cal.). Both suits allege that Inpixon filed a purportedly misleading Form S-4 on August 14, 2023 that omits material information regarding the process leading to the XTI transaction as described in Note 22 to the Condensed Consolidated Financial Statements and the analysis performed by Inpixon’s financial advisor in connection with the merger. The suits assert claims under Section 14(a) and Section 20 of the Securities Exchange Act and seek injunctive relief, damages, costs, attorneys’ fees, and other relief. Inpixon has also received demand letters from multiple purported Inpixon shareholders alleging that the Form S-4 omits or misstates material information regarding similar topics as alleged in the lawsuits, as well as material information pertaining to other topics, including information pertaining to the compensation and business or financial relationships of Inpixon’s financial advisor for the proposed transaction. The letters demand that Inpixon make supplemental disclosures to correct the alleged misstatements and omissions. It is possible that Inpixon may be named in additional suits or receive additional demand letters containing similar allegations or asserting additional allegations or claims regarding the XTI business combination. 41 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 25 - Discontinued Operations On March 14, 2023, the Company completed the divestiture of its Enterprise Apps Business and certain related assets and liabilities through a spin-off of CXApp Holding Corp., a Delaware corporation ("Legacy CXApp") to Inpixon’s shareholders of record as of March 6, 2023 (the “Record Date”) on a pro rata basis. This Enterprise Apps Spin-off was considered a strategic shift that has a major impact on the Company, and therefore, the results of operations are recorded as a component of "Earnings (loss) from discontinued operations, net of income taxes" in the Condensed Consolidated Statements of Operations for all periods presented. The Company noted that Legacy CXApp was part of the Company’s Indoor Intelligence segment. The net assets distributed as a result of the Enterprise Apps Spin-off was $ 24.2 million. Included within the $ 24.2 million dividend recorded to Additional Paid in Capital as a result of the deconsolidation of CXApp through distribution to shareholders recorded during the three months ended March 31, 2023, is approximately $ 1.2 million in accumulated other comprehensive income that was recognized as a result of those distributed assets and liabilities included in the foreign operations of CXApp. Three Months Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Revenues $ 1,742 $ 1,620 $ 6,473 Cost of Revenues 499 483 1,628 Gross Profit 1,243 1,137 4,845 Operating Expenses Research and development 2,508 1,514 6,929 Sales and marketing 1,121 988 3,797 General and administrative 3,767 1,644 11,207 Earnout compensation benefit — — ( 2,827 ) Acquisition related costs — — 16 Transaction costs — 1,043 — Impairment of goodwill — — 5,540 Amortization of intangibles 971 805 2,919 Total Operating Expenses 8,367 5,994 27,581 Loss from Operations ( 7,124 ) ( 4,857 ) ( 22,736 ) Interest (expense)/income, net ( 6 ) 1 3 Other income/(expense) 9 — 9 Total Other Income (Expense) 3 1 12 Loss from discontinued operations, before tax ( 7,121 ) ( 4,856 ) ( 22,724 ) Income tax provision — — ( 62 ) Loss from discontinued operations, net of tax $ ( 7,121 ) $ ( 4,856 ) $ ( 22,786 ) Cash used in operating activities by the Enterprise Apps Business totaled approximately $ 0.8 million and $ 14.6 million for the nine months ended September 30, 2023 and 2022, respectively. Cash provided by investing activities from the Enterprise Apps Business totaled approximately $ 0.1 million for the nine months ended September 30, 2023 and cash used in investing activities by the Enterprise Apps Business totaled approximately $ 0.4 million for the nine months ended September 30, 2022. 42 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 25 - Discontinued Operations (continued) The following table summarizes certain assets and liabilities of discontinued operations: As of December 31, 2022 Current Assets of Discontinued Operations Cash and cash equivalents $ 10,000 Accounts receivable 1,338 Prepaid expenses and other current assets 923 Current Assets of Discontinued Operations $ 12,261 Long Term Assets of Discontinued Operations Property and equipment, net $ 202 Operating Lease Right-of-Use Asset, net 681 Software development costs, net 487 Intangible assets, net 19,289 Other Assets 52 Long Term Assets of Discontinued Operations $ 20,711 Current Liabilities of Discontinued Operations Accounts payable $ 1,054 Accrued liabilities 1,736 Operating lease obligation, current 266 Deferred revenue 2,162 Current Liabilities of Discontinued Operations $ 5,218 Long Term Liabilities of Discontinued Operations Operating lease obligation, noncurrent $ 444 Other Liabilities, noncurrent 28 Long Term Liabilities of Discontinued Operations $ 472 43 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 26 - Subsequent Events From October 1, 2023 through the date of this filing, the Company exchanged approximately $ 1.6 million of the outstanding principal and interest under the July 2022 10 % Note Purchase Agreement and Promissory Note for 15,996,373 shares of the Company's common stock at prices from $ 0.0984 to $ 0.1044 per share. Third Party Note Payable On October 31, 2023, Game Your Game, Inc., a subsidiary of Inpixon, entered into a Note Conversion Agreement with Rick Clemmer (the "Holder") pursuant to which the approximately $ 1.5 million outstanding principal and interest balance of the promissory notes held by the Holder will be converted into 1,461,640 shares of Game Your Game, Inc. common stock, par value $ 0.001 per share. As of September 30, 2023, the outstanding principal on the promissory notes is $ 1.2 million and is reflected within short-term debt on the Condensed Consolidated Balance Sheet and the outstanding interest on the promissory notes is $ 0.3 million and is included within accrued liabilities on the Condensed Consolidated Balance Sheet. Change in Ownership Percentage of Game Your Game, Inc. Subsidiary On October 31, 2023, the Company entered into a Note Conversion Agreement with Game Your Game, Inc. pursuant to which approximately $ 5.2 million outstanding principal balance of the related party notes held by the Company will be converted to 5,207,595 shares of Game Your Game, Inc. common stock, par value $ 0.001 per share. As of September 30, 2023, the Company owned 55.4 % of Game Your Game, Inc. After the conversion, the Company owns 75.4 % of Game Your Game, Inc. Divestiture of SAVES Line of Business and Subsequent Business Combination with Damon Motors Inc. As discussed in Note 22, on July 24, 2023, Inpixon entered into an Agreement and Plan of Merger with XTI Aircraft Company. On October 23, 2023, Inpixon entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Grafiti Holding Inc. (“Grafiti”), pursuant to which Inpixon plans to transfer to Grafiti all of the outstanding shares of Inpixon Ltd., a United Kingdom (the “UK”) limited company that operates Inpixon’s SAVES line of business in the UK (“Inpixon UK”), such that Inpixon UK will become a wholly-owned subsidiary of Grafiti (the “Reorganization”). Following the Reorganization and subject to conditions in the Separation Agreement, Inpixon will spin off Grafiti (the “Spin-off”) by distributing to Inpixon stockholders and certain securities holders as of a record date to be determined (the “Participating Security holders”) on a pro rata basis all of the outstanding common shares of Grafiti (the “Grafiti Common Shares”) owned by Inpixon (the “Distribution”), subject to certain lock-up restrictions and subject to registration of the Grafiti Common Shares, as further described below. On October 23, 2023, Inpixon also entered into a Business Combination Agreement (the “Business Combination Agreement”), by and among Inpixon, Damon Motors Inc., a British Columbia corporation (“Damon”), Grafiti, and 1444842 B.C. Ltd., a British Columbia corporation and a newly formed wholly-owned subsidiary of Grafiti (“Amalco Sub”), pursuant to which it is proposed that Amalco Sub and Damon amalgamate under the laws of British Columbia, Canada with the amalgamated company (the “Damon Surviving Corporation”) continuing as a wholly-owned subsidiary of Grafiti (the “Damon Business Combination”). The Damon Business Combination is subject to material conditions, including approval of the Damon Business Combination by securities holders of Damon, approval of the issuance of Grafiti Common Shares to Damon securities holders pursuant to the Business Combination Agreement by a British Columbia court after a hearing upon the fairness of the terms and conditions of the Business Combination Agreement as required by the exemption from registration provided by Section 3(a)(10) under the Securities Act, and approval of the listing of the Grafiti Common Shares on the Nasdaq Stock Market (“Nasdaq”) after giving effect to the Damon Business Combination. Upon the consummation of the Damon Business Combination (the “Closing”), both Inpixon UK and the Damon Surviving Corporation will be wholly-owned subsidiaries of Grafiti. Holders of Grafiti Common Shares, including Participating Security holders and management that hold Grafiti Common Shares immediately prior to the closing of the Damon Business Combination, are anticipated to retain approximately 18.75 % of the outstanding capital stock of the combined company determined on a fully diluted basis, which includes up to 5 % in equity incentives which may be issued to Inpixon management. On October 26, 2023, Inpixon purchased a convertible note from Damon in an aggregate principal amount of $ 3.0 million (the “Bridge Note”) together with the Bridge Note Warrant (as defined below) pursuant to a private placement, for a purchase price 44 Table of Contents INPIXON AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 Note 26 - Subsequent Events (continued) of $ 3.0 million. The Bridge Note has a 12 % annual interest rate, payable 12 months from June 16, 2023. The full principal balance and interest on the Bridge Note will automatically convert into common shares of Damon upon the public listing of Damon or a successor issuer thereof on a national securities exchange (a “Public Company Event”). Inpixon will receive a five-year warrant to purchase 1,096,321 Damon Common Shares in connection with the Bridge Note (“Bridge Note Warrant”) at an exercise price as defined in the Bridge Note Warrant. The Bridge Note Warrant contains a cashless exercise option if the warrant shares are not covered by an effective registration statement within 180 days following the consummation of the Public Company Event, and also a full ratchet price protection feature. If the Damon Business Combination is consummated, the Bridge Note will be converted into Grafiti Common Shares upon consummation of the Damon Business Combination and the Bridge Note Warrant will become exercisable for Grafiti Common Shares. XTI Promissory Note & Security Agreement As discussed in Note 22, Inpixon is providing loans to XTI on a senior secured basis. On November 14, 2023, the maximum principal amount under the XTI Promissory Note was increased to $ 3.1 million. As of the filing date of these financial statements, the principal balance on the loan to XTI is approximately $ 2.7 million. 45 Table of Contents