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Item 1. Financial Statements

2024-05-20 compared with 2023-11-20 · 922 added, 944 removed, 377 unchanged (83% of the section changed)

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.

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

As of September 30,

As of March 31,

2024 As of December 31,

(Unaudited) (Audited)

(Unaudited) (Unaudited)

Current Assets

4 unchanged sentences

Notes receivable 3,264 —

Warrant asset 448 —

Prepaid expenses and other current assets 1,722 125

Current assets of discontinued operations — 12,261

Total Current Assets 11,549 231

1 unchanged sentence

Operating lease right-of-use asset, net 653 —

Software development costs, net 988 1,265

Investments in equity securities 189 330

Long-term investments 50 716

Intangible assets, net 5,018 266

Goodwill 12,398 —

Other assets 914 —

Non-current assets of discontinued operations — 20,711

Total Assets $ 30,782 $ 509

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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

As of September 30,

As of March 31,

2024 As of December 31,

(Unaudited) (Audited)

(Unaudited) (Unaudited)

Liabilities and Stockholders’ Equity

1 unchanged sentence

Accounts payable $ 6,948 $ 2,495

Accrued liabilities 3,569 2,619

Related party payables 100 540

Accrued expenses and other current liabilities 4,905 1,127

Accrued interest 422 560

Customer deposits 1,350 1,350

Warrant liability 1,019 497

2 unchanged sentences

Short-term debt 838 6,690

Acquisition liability — 197

Current liabilities of discontinued operations — 5,218

Total Current Liabilities 16,648 13,259

Long Term Liabilities

Long-term debt 65 18,546

Operating lease obligation, noncurrent 404 —

Non-current liabilities of discontinued operations — 472

Other liabilities, noncurrent — 333

Total Liabilities 17,117 32,138

Commitments and Contingencies

Stockholders’ Equity

Commitments and Contingencies (Note 23)

Stockholders’ Equity (Deficit)

Preferred Stock -$ 0.001 par value;

1 unchanged sentence

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

1 issued and 1 outstanding as of September 30, 2023 and December 31, 2022

1 issued and outstanding as of March 31, 2024 and December 31, 2023

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

126 issued and 126 outstanding as of September 30, 2023 and December 31, 2022

126 issued and outstanding as of March 31, 2024 and December 31, 2023

Series 9 Preferred Stock - 20,000 shares authorized;

11,302 and 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

(Liquidation preference of $ 11,867,100 )

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.

9,919,411 and 3,197,771 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

Additional paid-in capital 63,080 26,327

Treasury stock, at cost, 1 share

( 695 ) ( 695 )

Accumulated other comprehensive income

Accumulated other comprehensive loss

Accumulated deficit ( 60,561 ) ( 57,959 )

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

Total Stockholders’ Equity (Deficit) 13,665 ( 31,629 )

Total Liabilities and Stockholders’ Equity (Deficit) $ 30,782 $ 509

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

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

For the Three Months Ended March 31,

Revenues $ 220 $ —

5 unchanged sentences

General and administrative 1,717 570

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

Merger-related transaction costs 6,490 137

Amortization of intangible assets 43 7

Total Operating Expenses 9,018 1,284

Loss from Operations ( 8,877 ) ( 1,284 )

Other (Expense)/Income

Other Income (Expense)

Interest expense, net ( 261 ) ( 233 )

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 )

Amortization of deferred loan costs ( 17 ) ( 22 )

Inducement loss on debt conversions ( 6,732 ) —

Change in fair value of convertible notes 12,882 —

Change in fair value of JV obligation — ( 26 )

Change in fair value of warrant liability 398 —

Other income, net 9 —

Total Other Income (Expense) 6,279 ( 281 )

Net Loss, before tax ( 2,598 ) ( 1,565 )

Income tax provision ( 4 ) —

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

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

Net Loss Attributable to Stockholders of XTI Aerospace $ ( 2,602 ) $ ( 1,565 )

Preferred stock return and dividend ( 61 ) $ —

Net Loss Attributable to Common Stockholders $ ( 2,663 ) $ ( 1,565 )

Net Loss Per Share - Basic and Diluted $ ( 0.50 ) $ ( 0.41 )

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

1 unchanged sentence

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

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

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

For the Three Months Ended March 31,

Net Loss Attributable to Common Stockholders $ ( 2,663 ) $ ( 1,565 )

Unrealized foreign exchange loss from cumulative translation adjustments

Comprehensive Loss $ ( 2,829 ) $ ( 1,565 )

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

For the three and nine months ended September 30, 2023

XTI AEROSPACE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

For the three months ended March 31, 2024

(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

Series 9 Preferred Stock at Redemption Value Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders’ (Deficit) Equity

Shares Amount Shares Amount

Balance - January 1, 2024 — $ — 3,197,771 $ 3 $ 26,327 $ — $ ( 57,959 ) $ ( 31,629 )

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 — — — — — — — —

Common stock issued for conversion of debt — — 2,621,516 3 8,688 — — 8,691

Common stock issued for conversion of debt - related party

— — 266,272 — 923 — — 923

Inducement loss on debt conversions — — — — 6,732 — — 6,732

Common stock issued to Xeriant, Inc.

(Note 12) — — 298,395 — — — — —

Common stock issued for cashless exercise of warrants — — 389,287 1 ( 1 ) — — —

Common stock issued for cashless exercise of options — — 92,728 — — — — —

Common and preferred shares issued via merger 11,302 11,302 2,075,743 2 14,301 — — 25,605

Capital contribution - forgiveness of related party payable — — — — 380 — — 380

Stock based compensation — — 977,699 1 5,791 — — 5,792

Cumulative translation adjustment — — — — — ( 166 ) — ( 166 )

Series 9 preferred stock dividend accrued — — — — ( 61 ) — — ( 61 )

Net loss — — — — — — ( 2,602 ) ( 2,602 )

Balance - March 31, 2024 11,302 — $ 11,302 — 9,919,411 — $ 10 — $ 63,080 — $ ( 166 ) — $ ( 60,561 ) — $ 13,665

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

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

For the three and nine months ended September 30, 2022

XTI AEROSPACE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

For the three months ended March 31, 2023

(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

Series 9 Preferred Stock at Redemption Value Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders’ (Deficit) Equity

Shares Amount Shares Amount

Balance - January 1, 2023 — $ — 3,181,578 $ 3 $ 17,908 — $ ( 32,893 ) $ ( 14,982 )

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 )

Stock based compensation - stock options — — — — 141 — — 141

Issuance of warrants with convertible note — — — — 39 — — 39

Net loss — — — — — — ( 1,565 ) ( 1,565 )

Balance - March 31, 2023 — $ — 3,181,578 $ 3 $ 18,088 $ — $ ( 34,458 ) $ ( 16,367 )

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

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

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash Flows Used in Operating Activities (Unaudited)

3 unchanged sentences

Amortization of intangible assets 43 7

Amortization of deferred loan costs 17 22

Amortization of right-of-use asset 10 —

Stock based compensation 5,792 141

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

Amortization of debt discount 77 116

Change in fair value of JV obligation — 26

Provision for credit losses 4 —

Change in fair value of convertible notes ( 12,882 ) —

Inducement loss on debt conversions 6,732 —

Change in fair value of warrant liability ( 398 ) —

Unrealized loss on foreign currency transactions ( 127 ) —

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 —

Changes in operating assets and liabilities:

4 unchanged sentences

Accounts payable 1,722 496

Accrued liabilities 2,018 1,059

Income tax liabilities ( 119 ) ( 38 )

Related party payables ( 60 ) 29

Accrued expenses and other current liabilities ( 496 ) 136

Accrued interest 243 116

Deferred revenue ( 13 ) —

1 unchanged sentence

Net Cash Used in Operating Activities ( 2,551 ) ( 457 )

Cash Flows Used in Investing Activities

Cash Flows Provided by Investing Activities

Purchase of property and equipment ( 7 ) —

Investment in capitalized software ( 135 ) ( 611 )

Purchase of convertible note — ( 5,500 )

INPIXON AND SUBSIDIARIES

Cash received in purchase of Inpixon 2,968 —

Purchase of intangible asset ( 3 ) —

Net Cash Provided by Investing Activities 2,958 —

Cash Provided by Financing Activities

Net proceeds from promissory notes 378 415

Net proceeds from loan from Inpixon (prior to merger) 1,012 —

Net proceeds from convertible notes — 300

Net Cash Provided by Financing Activities

XTI AEROSPACE, INC.

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 ( 1 ) —

Net (Decrease)/Increase in Cash and Cash Equivalents ( 6,746 ) 10,673

Net Increase in Cash and Cash Equivalents 1,796 258

Cash and Cash Equivalents - Beginning of period 5 115

5 unchanged sentences

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

Common shares issued for inducement of debt and accrued interest $ 5,637 $ —

Issuance of common stock for merger consideration, net of cash received $ 22,637 $ —

Right of use asset obtained in exchange for lease liability $ 394 $ —

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 $ —

Common shares issued for conversion of debt and accrued interest $ 3,959 $ —

Capital contribution - forgiveness of related party payable $ 380 $ —

Series 9 preferred stock dividend accrued $ 61 $ —

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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.

Following the closing of the XTI Merger, we are primarily an aircraft development company.

We also provide real-time location systems (“RTLS”) for the industrial sector, which was our focus prior to the closing of the XTI Merger.

Headquartered in Englewood, Colorado, XTI Aerospace is developing a vertical takeoff and landing ("VTOL") aircraft that is designed to take off and land like a helicopter and cruise like a fixed-wing business aircraft.

Since 2013, we have been engaged primarily in developing the design and engineering concepts for the TriFan 600, building and testing a two-thirds scale unmanned version of the TriFan 600, generating pre-orders for the TriFan 600, and seeking funds from investors to enable the Company to build full-scale piloted prototypes of the TriFan 600, and to eventually engage in commercial production and sale of TriFan 600.

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.

1 unchanged sentence

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.

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

It is 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.

We help organizations 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.

1 unchanged sentence

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;

• 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

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.

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

On March 12, 2024, Inpixon (“Legacy Inpixon”), Superfly Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Legacy Inpixon (“Merger Sub”), and XTI Aircraft Company, a Delaware corporation (“Legacy XTI”), completed their previously announced merger transaction.

The merger transaction was completed pursuant to an Agreement and Plan of Merger (the “XTI Merger Agreement”), dated as of July 24, 2023 and amended on December 30, 2023 and March 12, 2024, pursuant to which Legacy XTI merged in a reverse triangular merger with Merger Sub with Legacy XTI surviving the merger as a wholly-owned subsidiary of the Company (the “XTI Merger”).

In connection with the closing of the XTI Merger, our corporate name changed from Inpixon to “XTI Aerospace, Inc.” and the combined company opened for trading on the Nasdaq Capital Market on March 13, 2024 under the new ticker symbol “XTIA.”

Based on the guidance of ASC Topic 805, "Business Combinations," we determined the XTI Merger transaction should be accounted for as a reverse acquisition with Legacy XTI being considered the accounting acquirer.

Therefore, the condensed consolidated financial statements included in this filing represent a continuation of the financial statements of Legacy XTI and the results of operations of the accounting acquired entity, Legacy Inpixon, are included in the condensed consolidated financial statements as of the March 12, 2024 merger closing date and through the March 31, 2024 reporting date.

See Note 5 for more details.

Note 2 - Basis of Presentation

2 unchanged sentences

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.

Interim results for the three months ended March 31, 2024 are not necessarily indicative of the results for the full year ending December 31, 2024.

These interim unaudited condensed consolidated financial statements should be read in conjunction with Legacy Inpixon's audited consolidated financial statements and notes for the years ended December 31, 2023 and 2022 included in the annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 16, 2024.

It should be noted the aforementioned Form 10-K excludes the historical financial position and operating results of Legacy XTI as the merger closed during the first quarter of 2024.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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.

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's complete accounting policies are described in Note 2 to the Legacy Inpixon's audited consolidated financial statements and notes for the year ended December 31, 2023, except for Legacy XTI's accounting policies which have been incorporated into this Note 3.

Liquidity and Going Concern

As of March 31, 2024, the Company has a working capital deficit of approximately $ 5.1 million, and cash of approximately $ 1.8 million.

For the three months ended March 31, 2024, the Company had a net loss of approximately $ 2.7 million.

During the three months ended March 31, 2024, the Company used approximately $ 2.6 million of cash for operating activities.

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;

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

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.

The Company's recurring losses and utilization of cash in its operations are indicators of going concern.

The Company’s condensed consolidated financial statements as of three months ended March 31, 2024 and 2023 have been prepared under the assumption that the Company will continue as a going concern for the next twelve months from the date the financial statements are issued.

Management’s plans and assessment of the probability that such plans will mitigate and alleviate any substantial doubt about the Company’s ability to continue as a going concern is dependent upon the ability to obtain additional equity or debt financing, and attain further operating efficiency, which together represent the principal conditions that raise substantial doubt about our ability to continue as a going concern.

The Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2024 and 2023 do not include any adjustments that might result from the outcome of this uncertainty.

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.

The consolidated financial statements have been prepared using the accounting records of XTI Aircraft Company and as of March 12, 2024 and forward (the effective date of the XTI Merger - see Note 5) the accounting records of XTI Aerospace, Inc.

(formerly known as Inpixon), Inpixon GmbH (formerly known as Nanotron Technologies GmbH), Inpixon Holding UK Limited, and Intranav GmbH.

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

5 unchanged sentences

• 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 of convertible notes, at fair value;

• the valuation of loan conversion derivatives;

• the valuation allowance for deferred tax assets.

• impairment of long-lived assets and goodwill.

Business Combinations

3 unchanged sentences

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.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 3 - Summary of Significant Accounting Policies (continued)

Intangible Assets

Intangible assets primarily consist of developed technology, patents, customer relationships, and trade names/trademarks.

They are amortized ratably over a range of 5 to 15 years, which approximates customer attrition rate and technology obsolescence.

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

Based on its assessments, the Company has recorded no impairment during the three months ended March 31, 2024 and 2023.

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

In accordance with authoritative guidance, the Company recognizes IPR&D at fair value as of the acquisition date, and subsequently accounts for it as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts.

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

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

During fiscal year 2024, the Company acquired IPR&D through the merger with Inpixon.

Carrying Value, Recoverability and Impairment of Long-Lived Assets

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

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

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

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

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

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

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

Restoration of a previously recognized impairment loss is prohibited.

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

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

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

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

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

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

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

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

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

Based on its assessments, the Company has recorded no long-lived assets impairment during the three months ended March 31, 2024 and 2023.

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

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

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

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

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

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

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 3 - Summary of Significant Accounting Policies (continued)

and demand trends;

expected future investments to grow new units;

and estimated discount rates.

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

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

Based on its assessments, the Company has recorded no goodwill impairment during the three months ended March 31, 2024 and 2023.

Revenue Recognition

2 unchanged sentences

Hardware and Software Revenue Recognition

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.

8 unchanged sentences

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.

With respect to sales of the Company’s maintenance, consulting and other service agreements, 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.

12 unchanged sentences

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.

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

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 3 - Summary of Significant Accounting Policies (continued)

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.

For the three months ended March 31, 2024 and 2023, the Company did not incur any such losses.

These amounts are based on known and estimated factors.

1 unchanged sentence

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 provide for a stated term with a one year or multiple year renewal option.

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.

1 unchanged sentence

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

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.

13 unchanged sentences

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.

Customer Deposits

The Company periodically enters into aircraft reservation agreements that include a deposit placed by a potential customer.

The deposits serve to prioritize orders when the aircraft becomes available for delivery.

Customers making deposits are not obligated to purchase aircraft until they execute a definitive purchase agreement.

Customers may request return of their deposit any time up until the execution of a purchase agreement.

The Company records such advance deposits as a liability and defers the related revenue recognition until delivery of an aircraft occurs, if any.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 3 - Summary of Significant Accounting Policies (continued)

Convertible Instruments

GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria.

The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable GAAP.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

When the Company has determined the embedded conversion options should be bifurcated from their host instruments, the Company records a free-standing derivative asset or liability measured at fair value at issuance.

Subsequent to initial measurement, the Company will re-measure the derivative asset or liability at fair value at each reporting date with changes in the fair value recognized in earnings.

Stock-Based Compensation

1 unchanged sentence

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

INPIXON AND SUBSIDIARIES

The Company measures compensation expense for its non-employee stock-based compensation under ASC 718, "Stock Based Compensation".

The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received.

The fair value is measured at the value of the Company’s common stock or stock award on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.

The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

The Company incurred the following stock-based compensation charges for the periods indicated below (in thousands):

For the Three Months Ended March 31,

Employee and consultant stock options 1

Vesting of previously unvested warrants 2

Professional fees 2

Total $ 5,792 $ 141

1 amount included in general and administrative expenses on the condensed consolidated statements of operations

2 amount included in merger-related transaction costs on the condensed consolidated statements of operations

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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.

The Company computes basic and diluted earnings per share by dividing net loss attributable to common shareholders 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

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the three months ended March 31, 2024 and 2023 as they are considered to be anti-dilutive:

For the Three Months Ended March 31,

Options 1,140,699 929,523

1 unchanged sentence

Convertible preferred stock 2 —

Rights to common stock — 52,513 — 52,513

Convertible notes 978,975 645,716

Total 2,563,032 1,694,771

Basic earnings per share for the three months ended March 31, 2024 and 2023, included 549,286 and 608,528 of weighted average penny warrants shares, respectively, since the exercise price was $ 0.01 per share.

Additional, basic earnings per share for the three months ended March 31, 2024, included 236,093 weighted average number of common shares that were issuable to Xeriant Inc.

(Xeriant”) related to the joint venture arrangement that expired by its term on May 31, 2023.

The shares were issued to Xeriant for no additional consideration immediately prior to the XTI Merger.

Preferred Stock

3 unchanged sentences

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

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.

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 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.

Fair Value of Financial Instruments and Fair Value Measurements

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

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

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

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

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:

The valuation methodology of notes receivable are described in Note 24 .

ASC 820 , " Fair Value Measurements" (“ASC 820” ), provides guidance on the development and disclosure of fair value measurements.

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

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 3 - Summary of Significant Accounting Policies (continued)

expands disclosures about fair value measurements.

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

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

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

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

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2024 and December 31, 2023 and during the periods ended March 31, 2024 and March 31, 2023.

The Company and its Chief Executive Officer ("CEO"), acting as the Chief Operating Decision Maker ("CODM") determined its operating segments in accordance with ASC 280, "Segment Reporting" ("ASC 280").

The Company is organized and operated as two business segments based on similar economic characteristics, the nature of products and production processes, end-use markets, channels of distribution, and regulatory environments.

Recently Issued and Adopted Accounting Standards

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.

The Company adopted ASU 2023-03 as of January 1, 2024.

The adoption of this guidance did not have a material impact on the condensed consolidated financial statements and disclosures.

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 October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements:

1 unchanged sentence

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.

The new guidance is intended to align GAAP requirements with those of the SEC and to facilitate the application of 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.

2 unchanged sentences

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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.

The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker.

The standard is effective for the Company beginning in fiscal year 2024 and interim periods within fiscal year 2025,

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 3 - Summary of Significant Accounting Policies (continued)

with early adoption permitted.

The Company does not expect to early adopt the new standard.

The Company is currently evaluating the impact of ASU 2023-07 on its financial statements and related disclosures and will adopt the new standard using a retrospective approach.

In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.

The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid.

The standard is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company does not expect to early adopt the new standard.

The new standard is expected to be applied prospectively, but retrospective application is permitted.

The Company is currently evaluating the impact of ASU 2023-09 on its financial statements and related disclosures.

In March 2024, FASB issued ASU No.

2024-01, “Compensation- Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards.” ASU 2024-01 provides an illustrative example that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718.

ASU 2024-01 is effective for fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of ASU 2024-01 on its financial statements and related disclosures.

Note 4 - Disaggregation of Revenue

1 unchanged sentence

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.

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.

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

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

For the Three Months Ended March 31,

Recurring revenue

3 unchanged sentences

Hardware $ 162 $ —

Software 457 351 947 1,116

Professional services 5 —

1 unchanged sentence

Total Revenue $ 220 $ —

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

2023 2022 2023 2022

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 4 - Disaggregation of Revenue (continued)

For the Three Months Ended March 31,

Revenue recognized at a point in time

Indoor Intelligence (1) $ 487 $ 829 $ 2,663 $ 2,523

SAVES (1) 453 273 1,286 1,039

Industrial IoT (1) $ 162 $ —

Total $ 162 $ —

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

Industrial IoT (2) (3) $ 58 $ —

Total $ 58 $ —

Total Revenue $ 220 $ —

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

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

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

1 unchanged sentence

(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.

INPIXON AND SUBSIDIARIES

(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 revenue is recognized over time.

Note 5 – Merger Transaction

The XTI Merger was accounted for as a reverse merger in accordance with GAAP.

Under this method of accounting, Legacy Inpixon was treated as the "acquired" company for financial reporting purposes.

This determination is primarily based on the fact that subsequent to the XTI Merger, Legacy XTI maintains control of the Board of Directors and management of the combined company, and the preexisting shareholders of Legacy XTI will have majority voting rights of the combined company.

For accounting purposes, the acquirer is the entity that has obtained control of another entity and, thus, consummated a business combination.

Accordingly, Legacy XTI’s assets and liabilities are recorded at carrying value and the assets and liabilities associated with Legacy Inpixon are recorded at estimated fair value as of the acquisition date.

The excess of the purchase price over the estimated fair value of the net assets acquired, if applicable, is recognized as goodwill.

The below summarizes the total consideration transferred in the business combination (in thousands):

Fair value of common stock $ 10,939

Fair value of warrants 3,250

Fair value of preferred stock 11,302

Fair value of debt assumed 114

Total consideration $ 25,605

The Company determined the estimated fair value of common stock included in consideration to be calculated based on Inpixon’s common stock outstanding of 2,075,743 multiplied by the price of Inpixon’s common stock on March 12, 2024 of $ 5.27 (which reflects the 1 to 100 reverse stock split which went effective before the closing of the transaction).

The Company determined the stock price of Inpixon was utilized in determining fair value as it is more reliably measurable than the value of the Legacy XTI’s (accounting acquirer) equity interests given it is not a publicly traded entity prior to the Merger.

The fair value of warrants of approximately $ 3.3 million was included in the total equity consideration.

A portion of this total represents 918,689 warrants outstanding by the Company with a fair value of $ 1.00 per warrant, which is the warrant's redemption value.

The warrant fair value was determined to be the redemption value as the warrants include protective

XTI AEROSPACE, INC.

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

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 5 - Merger Transaction (continued)

covenants for the Company which prevent the holder from exercising the warrants.

The warrant is redeemable in May 2024, and at that time, the holder will receive the redemption value ($ 1 per share) for each warrant.

The remainder of this total represents 491,310 warrants with a fair value of $ 4.75 per warrant which was determined by using level 3 inputs utilizing a Black-Scholes valuation.

The Black-Scholes valuation inputs include a dividend rate of — %, risk free rate of 4.2 %, share price of $ 5.27 , exercise price of $ 5.13 per share, an expected term of 4.76 years, and volatility of 146 %.

The fair value of preferred stock of approximately $ 11.3 million included in the total equity consideration represents 11,302 shares of a new series of Preferred Stock that was issued and outstanding by the Company upon the consummation of the Merger at a stated value of $ 1,000 and fair value of $ 1,000 per share, which was determined by using level 3 inputs utilizing a scenario-based method under the income approach.

Inputs and assumptions under the scenario-based method include preferred return and preferred dividends outlined in Note 13 and an expected holding period of 5 years.

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

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

The Company has made a provisional allocation of the purchase price of the merger to the assets acquired and the liabilities assumed as of the purchase date.

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

Assets acquired

Cash and cash equivalents $ 2,968

Accounts receivable 696

Notes and other receivables 7,929

Inventory 3,283

Prepaid assets and other current assets 756

Property and equipment 246

Other assets 1,202

Warrant assets 448

Tradename & trademarks 913

Proprietary technology 2,934

Customer relationships 702

In process research and development 243

Goodwill 12,398

Liabilities assumed

Accounts payable 2,675

Accrued liabilities 4,282

Operating lease obligation 299

Deferred revenue 824

Short-term debt 114

Warrant liability 919

Total liabilities assumed 9,113

Estimated fair value of assets acquired $ 25,605

The assets were valued using a combination of a multi-period excess earnings methodologies, a relief from royalty approach, a discounted cash flow approach and present value of cash flows approach.

The goodwill represents the excess fair value after the allocation of intangibles.

As a nontaxable transaction, the historical tax bases of the acquired assets, liabilities and tax attributes have carried over.

Although no new tax goodwill has been created in the transaction, the Company has approximately $ 5.8 million of tax deductible goodwill that arose in previous transactions which carries over.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 5 - Merger Transaction (continued)

The Company incurred approximately $ 13.8 million of merger related transaction costs in conjunction with the merger transaction.

Refer to XTI Aerospace Inc.'s annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 16, 2024, for more information on the XTI Merger transaction.

Note 6 - Proforma Financial Information

Inpixon Financial Information

The following unaudited proforma financial information presents the consolidated results of operations of the Company and Inpixon for the three months ended March 31, 2024 and 2023, as if the acquisition had occurred as of the beginning of the first period presented (January 1, 2023) instead of on March 12, 2024.

The proforma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.

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

For the Three Months Ended March 31, 2024 For the Three Months Ended March 31, 2023

Revenues $ 727 $ 1,292

Net loss attributable to common stockholders $ ( 16,530 ) $ ( 9,284 )

Net loss per basic and diluted common share $ ( 1.67 ) $ ( 0.94 )

Weighted average common shares outstanding:

Basic and Diluted 9,919,411 9,919,411

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 7- Intangible Assets

Intangible assets at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024

Gross Amount Accumulated Amortization Net Carrying Amount Remaining Weighted Average Useful Life

Patents $ 416 $ ( 162 ) $ 254 9.5

Trade Name/Trademarks 921 ( 9 ) 912 5.0

Proprietary Technology 2,934 ( 20 ) 2,914 7.0

Customer Relationships 702 ( 7 ) 695 5.0

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

In-Process R&D 243 — 243 3.0

Total $ 5,216 $ ( 198 ) $ 5,018

December 31, 2023

Gross Amount Accumulated Amortization Impairment Discontinued Operations Net Carrying Value

IP Agreement $ 162 $ ( 91 ) $ — $ — $ 71

Gross Amount Accumulated Amortization Net Carrying Amount

Patents $ 413 $ ( 155 ) $ 258

Trade Name/Trademarks 8 — 8

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.

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)

Total $ 421 $ ( 155 ) $ 266

Amortization expense for the three months ended March 31, 2024 and 2023 was approximately $ 0.04 million and $ 0.01 million respectively.

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

5 unchanged sentences

December 31, 2029 and thereafter 1,118

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 8 - 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

The Company did not have any inventory as of December 31, 2023.

Inventory as of March 31, 2024 consisted of the following (in thousands):

As of March 31, 2024

Raw materials $ 29

2 unchanged sentences

Inventory $ 2,875

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

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

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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

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 - Deferred Revenue

As of December 31, 2023, the Company did not have any deferred revenue.

As part of the merger, the Company acquired approximately $ 0.8 million of deferred revenue, all of which relates to RTLS maintenance agreements.

The Company's deferred revenue balance as of March 31, 2024 related to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff.

The fair value of the deferred revenue approximates the services to be rendered.

Note 10 - 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 liabilities as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

As of March 31, 2024 As of December 31, 2023

Accrued compensation and benefits $ 3,218 $ 649

Accrued interest expense 1,764 1,197

Accrued bonus and commissions 469 426

Accrued other 613 173

Accrued sales and other indirect taxes payable 277 236

Accrued bonus and commissions 518 305

Consulting agreements expense accrual (See Note 23) 302 —

Due to Grafiti Group, LLC 254 —

$ 4,905 $ 1,127

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 11 - 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

Debt as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

Short-Term Debt Maturity March 31, 2024 December 31, 2023

Promissory Note - 2023 $ — $ 3,071

Promissory Note - 2023 - related party 5/31/2024 125 125

Convertible Note - 2021 - related party 4/1/2024 175 1,079

Convertible Note - 2021 5/23/2024 47 2,500

Unamortized Discounts — ( 50 )

Unamortized Loan Costs — ( 35 )

Third Party Note Payable - 2023 12/31/2024 114 —

Third Party Note Payable - 2024 12/14/2024 377 —

Total Short-Term Debt $ 838 $ 6,690

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.

Long-Term Debt

SBA loan 6/3/2050 $ 65 $ 65

Convertible notes, at fair value 1

Convertible Note - 2017 1

Convertible Note - 2022 1

Convertible Note - 2023 1

Unamortized Discounts — ( 1,210 )

Total Long-Term Debt $ 65 $ 18,546

1 principal balance was converted to equity immediately prior to the XTI Merger closing time - refer to Note 12

Interest expense on the short-term debt totaled approximately $ 0.4 million and $ 0.2 million for the three months ended March 31, 2024 and 2023, respectively.

Interest expense includes the interest on the outstanding balance of the notes 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

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.

INPIXON AND SUBSIDIARIES

Promissory Note - 2023

On July 24, 2023, the Company and XTI Aircraft Company entered into a Senior Promissory Note which had an outstanding principal balance of approximately $ 3.1 million as of December 31, 2023.

During the period from January 1, 2024 to March 12, 2024, legacy Inpixon provided an additional $ 1.0 million in funding to XTI Aircraft Company.

On March 12, 2024, the Company and XTI Aircraft Company effected a reverse triangular merger resulting in XTI Aircraft Company becoming a wholly-owned subsidiary of the Company.

As a result of the merger, the outstanding subsidiary debt balance, related parent note receivable balance and accrued interest eliminated upon the consolidation of the Company's March 31, 2024 balance sheet.

The Company intends to legally terminate this intercompany promissory note during the second quarter of 2024.

Promissory Note - 2023 - related party

On January 5, 2023, the Company entered into a promissory note agreement with David Brody.

The note has a principal amount of approximately $ 0.1 million and accrues interest at a rate of 5 % per annum.

The note matures on May 31, 2024 (as amended).

On May 2, 2024, the Company paid $ 0.05 million towards the principal balance of the note.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 11 - 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 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

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.

INPIXON AND SUBSIDIARIES

Convertible Note - 2021 - related party

On October 1, 2023, an existing convertible note entered into on December 31, 2021 by and between the Company and David Brody was replaced by a new convertible note with a principal balance of approximately $ 1.1 million and interest rate of 4 %.

On March 12, 2024, approximately $ 0.9 million of the note's outstanding balance was converted into common shares of the Company, The Company repaid the remaining balance of the note on April 1, 2024.

Convertible Note - 2021

During 2021, the Company entered into convertible notes with a syndicate of investors.

The notes had a combined principal amount of $ 2.5 million and accrue interest at a rate of 4.0 % per annum.

On March 12, 2024, approximately $ 2.45 million of the note's outstanding principal balance was converted into common shares of the Company.

As of March 31,2024, approximately $ 0.05 million of the note's principal balance and $ 0.2 million of accrued interest remained outstanding.

The note holder has the right to receive repayment of the note at the note’s maturity date in either cash or in shares of common stock of the Company at a value of $ 1.00 per share.

The share conversion may occur prior to May 23, 2024 at the option of the note holder.

Third Party Note Payable - 2023 - financing agreement

As part of the Merger, the Company acquired a financing agreement whereby the lender paid a Company vendor approximately $ 0.1 million for a service contract.

The terms of the agreement are for a 12 months period with a 18.6 % interest rate whereby there is no payment due for the first 4 months, and then the Company is to pay approximately $ 0.01 million a month over 8 months until the debt is repaid in full.

Third Party Note Payable - 2024 - financing agreement

On March 14, 2024, the Company entered into a financing agreement whereby the lender paid a Company vendor approximately $ 0.4 million for an insurance contract.

The terms of the agreement are for a 9 month period with a 8.3 % interest rate.

The Company is to pay $ 0.04 million per month until the debt is repaid in full.

On June 3, 2020, the Company entered into a promissory note with the U.S.

Small Business Administration (SBA).

The note has a principal amount of $ 0.07 million and accrues interest at a rate of 3.75 % per annum.

Monthly interest only payments commenced on June 3, 2021.

The note matures on June 3, 2050 and is collateralized by tangible and intangible personal assets of the Company.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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 .

Reverse Stock Split

The Company effected a reverse stock split of its outstanding common stock at a ratio of 1-for-100, effective as of March 12, 2024, for the purpose of complying with Nasdaq Listing Rule 5550(a)(2) and satisfying the bid price requirements applicable for initial listing applications in connection with the closing of the XTI Merger.

All references in the condensed consolidated financial statements to the number of shares and per share amounts of the Company’s common stock have been retroactively restated to reflect completion of the Merger and the Reverse Stock Split.

Note Conversion

Immediately prior to the effective time of the XTI Merger on March 12, 2024, the 2017 convertible note, 2018 convertible note and 2019 convertible note (collectively classified as "convertible notes, at fair value" - refer to the debt table in Note 11) were converted into an aggregate 8,416,201 pre-exchange common shares or 751,226 post merger exchange common shares of the company.

Immediately prior to the conversion, the convertible notes, at fair value were marked to market resulting in a gain of $ 12.9 million, which is included in change in fair value of convertible notes in the other income and expense section of the condensed consolidated statement of operations.

As a result of the conversions, the notes were satisfied in full and therefore relieved the company of all obligations.

Note Inducements

To induce note holders to convert their outstanding note balances into XTI common shares ahead of the XTI Merger so to assist the Company in qualifying for a Nasdaq Capital Markets listing, Legacy XTI entered into voluntary note conversion letter agreements in February 2024 as detailed below.

Per the letter agreements, an aggregate principal and accrued interest balance was converted at a reduced conversion price into common shares of Legacy XTI immediately prior to the XTI Merger closing time.

As a result of the voluntary note conversions, for some transactions there was a syndicate note balance remaining post-merger which was assumed by the combined company (XTI Aerospace).

The Company accounted for these conversions as an inducement and, as such, recognized a loss related to the fair value of the additional shares issued compared to the original terms of the convertible note, which is included in inducement loss on debt conversions in the other income and expense section of the condensed consolidated statement of operations.

Letter Agreement Aggregate Principal and Interest

Reduced Conversion Price

Pre - Exchange Ratio Common Shares

Post - Exchange Ratio Common Shares

Post Conversion Note Balance Outstanding - Assumed by XTI Aerospace

Net Inducement Charge

Convertible Note 2021 $ 2,503,776 $ 0.265 9,450,209 843,523 $ 273,000 $ 3,266,167

Convertible Note 2017

$ 2,147,687 $ 0.265 8,106,195 723,557 $ — $ 2,795,492

Convertible Note 2022

$ 600,000 $ 0.265 2,264,630 202,140 $ 82,000 $ 464,055

Convertible Note 2023

$ 300,000 $ 0.265 1,132,315 101,070 $ 33,000 $ 206,733

1,870,290 $ 6,732,447

Note Inducement:

Convertible Note 2021 - Related Party

To induce the note holder to convert his outstanding note balances into XTI common shares ahead of the XTI Merger so to assist the Company in qualifying for a Nasdaq Capital Markets listing, XTI Aircraft Company entered into voluntary note conversion letter agreement with the note holder in February 2024.

Per the letter agreement, $ 0.9 million of the outstanding note balance was converted at a reduced conversion price of $ 0.309 into 2,983,115 pre-exchange common shares of XTI immediately prior to the XTI Merger closing time or 266,272 post merger exchange common shares.

As a result of the voluntary note conversion, $ 0.2 million of the note balance remained outstanding post-merger and was assumed by the combined company (XTI Aerospace) and was subsequently paid in full on April 1, 2024.

The Company accounted for this conversion as an inducement and, as such, recognized an inducement charge of $ 1.0 million related to the fair value of the additional shares issued compared to the original terms of the convertible note.

As this note holder is a related party of the

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 12 - Common Stock (continued)

Company, the Company accounted for the conversion as a capital transaction and therefore recorded the inducement charge within additional paid in capital.

Share Issuances

At the closing of the merger transaction, there were 2,075,743 shares of the Company's common stock issued to Inpixon’s preexisting shareholders as consideration for the transaction.

3,342,998 of pre-exchange common shares of XTI Aircraft Company were issued to Xeriant, Inc.

immediately prior to the XTI Merger closing time or 298,395 post merger exchange common shares.

This share issuance to Xeriant Inc.

fully settled the obligation relating to a joint venture arrangement by and between XTI Aircraft Company and Xeriant Inc., which terminated by its terms on May 31, 2023.

The obligation to issue shares to Xeriant was classified in equity as of December 31, 2023, as the share consideration became fixed once the joint venture terminated.

4,000,000 of pre-exchange common shares of XTI Aircraft Company were issued to Scott Pomeroy as transaction compensation immediately prior to the XTI Merger closing time or 357,039 post merger exchange common shares.

As a result of this share issuance transaction, the Company recorded $ 1.9 million of stock-based compensation expense included in the condensed consolidated statement of operations for the three months ended March 31, 2024.

4,317,279 of pre-exchange common shares of XTI Aircraft Company were issued to Maxim Group as transaction compensation immediately prior to the XTI Merger closing time or 385,359 post merger exchange common of pre-exchange common shares As a result of this share issuance transaction, the Company recorded $ 2.0 million of stock-based compensation expense included in the condensed consolidated statement of operations for the three months ended March 31, 2024.

2,117,817 of pre-exchange common shares of XTI Aircraft Company were issued to Chardan Capital Markets as transaction compensation immediately prior to the XTI Merger closing time or 189,036 post merger exchange common shares.

As a result of this share issuance transaction, the Company recorded $ 1.0 million of stock-based compensation expense included in the condensed consolidated statement of operations for the three months ended March 31, 2024.

518,317 of pre-exchange common shares of XTI Aircraft Company were issued to a non-executive officer as transaction compensation immediately prior to the XTI Merger closing time or 46,265 post merger exchange common shares.

As a result of this share issuance transaction, the Company recorded $ 0.2 million of stock-based compensation expense included in the condensed consolidated statement of operations for the three months ended March 31, 2024.

Note 1 3 - Preferred Stock

3 unchanged sentences

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 $ 1,674,000 .

As of September 30, 2023, there was 1 share of Series 4 Preferred outstanding.

As of March 31, 2024, there was 1 share of Series 4 Preferred outstanding.

Series 5 Convertible Preferred Stock

2 unchanged sentences

The Series 5 Convertible Preferred Stock is convertible

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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 $ 1,123,875 .

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.

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.

As of September 30, 2023, there were zero shares of Series 8 Convertible Preferred Stock outstanding.

As of March 31, 2024, there were 126 shares of Series 5 Convertible Preferred Stock outstanding.

Series 9 Preferred Stock

On March 12, 2024, the Company filed the Certificate of Designations of Preferences and Rights of Series 9 Preferred Stock (the “Certificate of Designation”), with the Secretary of State of Nevada, designating 20,000 shares of preferred stock, par value $ 0.001 of the Company, as Series 9 Preferred Stock.

Each share of Series 9 Preferred Stock has a stated face value of $ 1,050 (“Stated Value”) and do not have any voting rights.

Preferred stock is recorded on the accompanying consolidated balance sheet at its redemption value which is the carrying value of the redeemable preferred stock.

Each share of Series 9 Preferred Stock will accrue a rate of return on the Stated Value in the amount of 10 % per year, compounded annually to the extent not paid, and pro rata for any fractional year periods (the “Preferred Return”).

The Preferred Return will accrue on each share of Series 9 Preferred Stock from the date of issuance and will be payable on a quarterly basis, either in cash or through the issuance of an additional number of shares of Series 9 Preferred Stock equal to (i) the Preferred Return then accrued and unpaid, divided by (ii) the Stated Value, at the Company’s discretion.

The Preferred Stock holders will also receive a quarterly dividend at 2 % per quarter, beginning on the one-year anniversary of the issuance date and for all periods following the two-year anniversary of the issuance date of a share of Series 9 Stock, the dividend shall be 3 % per quarter.

The Company may elect, in the sole discretion of the Board, to redeem all or any portion of the Series 9 Stock then issued and outstanding from all of the Series 9 Holders by paying to the applicable Series 9 Holders an amount in cash equal to the liquidation amount as defined in the preferred stock agreement.

Exchange Agreement

On March 12, 2024, Inpixon and Streeterville Capital, LLC (the “Note Holder”, or “Streeterville”), the holder of an outstanding promissory note issued on December 30, 2023 (as amended, the “December 2023 Note”), entered into an Exchange Agreement, pursuant to which the Note Holder exchanged the remaining balance of principal and accrued interest under the December 2023 Note in the aggregate amount of approximately $ 9.8 million for 9,802 shares of Series 9 Preferred Stock (the “Preferred Stock”), based on an exchange price of $ 1,000 per share of Series 9 Preferred Stock.

The Company analyzed the exchange of the principal and interest as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of preferred stock being issued).

The Company notes that the net carrying value of the debt was the fair value of the preferred stock (reacquisition price).

As such, no gain or loss was recognized upon debt extinguishment.

Following such exchange and the extinguishment of the December 2023 Note, the December 2023 Note is deemed paid in full, automatically canceled, and will not be reissued.

Securities Purchase Agreement

On March 12, 2024, Legacy Inpixon entered into a securities purchase agreement (the “Securities Purchase Agreement”) with an entity controlled by the Inpixon’s former director and former Chief Executive Officer (the “Purchaser”), and owner of 3AM investments, LLC (“3AM”).

Pursuant to the Securities Purchase Agreement, the Purchaser purchased 1,500 shares of Series 9 Preferred Stock for a total purchase price of approximately $ 1.5 million, based on a purchase price of $ 1,000 per share of Series 9 Preferred Stock.

The Company agreed that the Purchaser will be deemed a “Required Holder” as defined in the Certificate of Designation as long as the Purchaser holds any shares of Series 9 Preferred Stock.

The Securities Purchase Agreement sets forth certain restrictions on the Company’s use of the proceeds from the sale of the Series 9 Preferred Stock pursuant thereto, including that the proceeds must be used in connection with the redemption of the Series 9 Preferred Stock pursuant to the Certificate of Designation or working capital purposes, and may not, without the consent of the required holders of Series 9 Preferred Stock, be used for, among other things, (i) the redemption of any XTIA common stock or common stock equivalents, (ii) the settlement of any outstanding litigation, or (iii) for the repayment of debt for borrowed money to any officer or director, or Merger-transaction related bonuses to any employee or vendor except for such

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 13 - Preferred Stock (continued)

non-merger transaction related bonuses as may be payable to participants pursuant to the Company’s existing employee bonus plan

In connection with the issuance of the Preferred Stock, the direct and incremental expenses incurred were immaterial.

As of March 31, 2024, there were 11,302 shares of Series 9 Preferred 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 Company has three Employee Stock Incentive plans.

The Company has a 2017 Employee and Consultant Stock Ownership Plan (“2017 Plan”) and legacy Inpixon had put in place a 2011 Employee Stock Incentive Plan (the “2011 Plan”) and a 2018 Employee Stock Incentive Plan (the “2018 Plan”).

During 2017, the Company adopted the 2017 Plan, which was amended in 2021 to increase the maximum shares eligible to be granted under the Plan.

The Company may issue awards in the form of restricted stock units and stock options to employees, directors, and consultants.

Under the 2017 Plan, stock options are generally granted with an exercise price equal to the estimated fair value of the Company’s common stock, as determined by the Company’s Board of Directors on the date of grant.

Options generally have contractual terms of ten years .

Incentive stock options (ISO) may only be granted to employees, whereas all other stock awards may be granted to employees, directors, consultants and other key

As of March 31, 2024, 1,068,959 of stock options were granted to employees, directors and consultants of the Company.

Post merger and as of March 31, 2024, the 2017 Plan has zero unallocated shares available for future grants under the Plan.

As of March 31, 2024, the fair value of non-vested stock options of the 2017 Plan totaled approximately $ 5.2 million, which will be amortized to expense over the weighted average remaining term of 0.95 years.

2011 Plan and 2018 Plan

In September 2011, legacy Inpixon adopted 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.

In February 2018, legacy Inpixon adopted the 2018 Plan and together with the 2011 Plan, the “Legacy Inpixon 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

INPIXON AND SUBSIDIARIES

Incentive stock options granted under the Legacy Inpixon Option Plans are granted at exercise prices not less than 100 % of the estimated fair market value of the underlying common stock at date of grant.

The exercise price per share for incentive stock options may not be less than 110 % of the estimated fair value of the underlying common stock on the grant date for any individual possessing more that 10% of the total outstanding common stock of the Company.

Options granted under the Option Plans vest over periods ranging from immediately to four years and are exercisable over periods not exceeding ten years .

The aggregate number of shares that may be awarded under the 2018 Plan as of March 31, 2024 is 62,164,297 .

As of March 31, 2024, 968 of stock options were granted to employees, directors and consultants of the Company, 430 restricted stock awards were granted to employees of the company that were converted to common shares in prior periods and 62,162,899 options were available for future grant under the 2018 Plan.

As of March 31, 2024, the fair value of non-vested stock options of the 2018 Plan totaled approximately $ 0.6 million, which will be amortized to expense over the weighted average remaining term of 0.9 years.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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.

During the three months ended March 31, 2024 and 2023, the Company recorded a charge for the amortization of stock options of approximately $ 0.1 million and $ 0.1 million, respectively, which is included in the operating expense section of the condensed consolidated statement of operations.

See below for a summary of the stock options granted under the 2011, 2017, and 2018 plans:

2011 Plan 2018 Plan Non Plan Total

2011 Plan 2017 Plan 2018 Plan Total

Beginning balance as of January 1, 2024 — 1,161,687 — 1,161,687

Legacy Inpixon stock options from merger 9 — 1,139 1,148

Granted — — — —

2 unchanged sentences

Forfeited — — — —

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.

Ending balance as of March 31, 2024 — 1,068,959 968 1,069,927

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.

3 unchanged sentences

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:

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

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.

Stock Option Exercises

To induce option holders to exercise option shares ahead of the XTI Merger so to assist the company in qualifying for a Nasdaq Capital Markets listing, XTI Aircraft Company entered into exercise letter agreements with several option holders in February 2024 at reduced exercise prices from the original option agreements.

The net impact of these option inducements to the condensed consolidated statement of operations was not material.

In total, 1,038,871 option shares under the 2017 Plan were net exercised into 1,036,420 pre-exchange common shares of XTI Aircraft Company immediately prior to the XTI Merger closing time or 92,728 post merger exchange common shares.

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.

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.

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

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:

1 unchanged sentence

Beginning balance as of January 1, 2024 771,895

Granted 150,000,000

Legacy Inpixon warrants from merger 1,448,481

Exercised ( 389,287 )

Expired ( 96,504 )

Exchanged ( 984,542 )

Ending balance as of September 30, 2023 144,846,260

Exercisable as of September 30, 2023 144,846,260

Ending balance as of March 31, 2024 1,734,585

Exercisable as of March 31, 2024 1,545,430

Warrant Exercise Price Reduction

On March 21, 2024, the Company’s Board of Directors authorized a reduction in the exercise price of the warrants issued as part of the legacy Inpixon warrant inducement that occurred on December 15, 2023 from $ 7.324 to $ 5.13 per share in

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 15 - Warrants (continued)

accordance with the existing terms of such warrants.

The Company notes that the reduction in exercise price authorization was perfunctory, as it was known on March 12, 2024 that the reduction was going to occur.

Therefore, the Company accounted for the modification of the warrants at the time of the merger and is reflected as part purchase accounting.

Warrants Exercises

On February 2, 2022, XTI Aircraft Company executed a conditional purchase order (“Aircraft Purchase Agreement”) with a regional airline customer to deliver 100 TriFan aircraft.

In conjunction with this purchase order, the Company issued a warrant for the purchase of a total of 6,357,474 shares of common stock at an exercise price of $ 0.01 .

Effective as of March 11, 2024, XTI Aircraft Company entered into an amendment (the “Warrant Amendment”) with the same regional airline customer.

The Warrant Amendment modifies the vesting criteria with respect to the shares of common stock underlying the warrant.

As amended by the Warrant Amendment, (i) one-third of the shares represented by the warrant vested upon the execution and delivery of the conditional aircraft purchase contract, dated February 2, 2022, by and between the Company and regional airline customer, relating to the purchase of 100 TriFan 600 aircraft, (ii) one-sixth of the shares vested on March 12, 2024 in which the Company recorded $ 0.5 million of stock-based compensation expense for the three months ended March 31, 2024, (iii) one-sixth of unvested shares lapsed on March 12, 2024, and (iv) one-third of the shares will vest upon the acceptance of delivery and final purchase of the first TriFan 600 aircraft by the regional airline customer pursuant to the Aircraft Purchase Agreement.

The Warrant Amendment requires the parties to agree on an initial strategic public and industry announcement within 90 days of March 11, 2024 or such other time as the parties may mutually agree.

On March 12, 2024 and per a warrant exercise letter agreement, all vested warrant shares were net exercised into 3,178,737 pre-exchange common shares of XTI Aircraft Company immediately prior to the XTI Merger closing time or 283,737 post merger exchange common shares.

To induce warrant holders to exercise warrant shares ahead of the XTI Merger so to assist the company in qualifying for a Nasdaq Capital Markets listing, XTI Aircraft Company entered into exercise letter agreements with several warrant holders in February 2024 at reduced exercise prices from the original warrant agreements.

The net impact of these warrant inducements to the condensed consolidated statement of operations was not material.

In total, 1,182,522 warrant shares were net exercised into 1,179,732 pre-exchange common shares of XTI Aircraft Company immediately prior to the XTI Merger closing time or 105,550 post merger exchange common shares .

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.

There is an income tax expense of approximately $ 0.004 million and zero for three months ended March 31, 2024 and 2023, respectively.

The income tax expense included in the three months ended March 31, 2024 profit and loss statement includes state income tax liabilities for the period.

Note 17 - Credit Risk and Concentrations

3 unchanged sentences

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.

Cash is also maintained at foreign financial institutions for its UK subsidiary and German subsidiaries.

Cash in foreign financial institutions as of March 31, 2024 and December 31, 2023 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.

INPIXON AND SUBSIDIARIES

The customers who account for 10% or more of the Company's revenue for the three months ended March 31, 2024 or 10% or more of the Company's outstanding receivable balance as of March 31, 2024 are presented as follows:

XTI AEROSPACE, INC.

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.

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 17 - Credit Risk and Concentrations (continued)

Three Months ended March 31, 2024 As of March 31, 2024

Customer Revenues (thousands)

Percentage of revenues Accounts Receivable (thousands)

Percentage of accounts receivable

A $ 162 73 % $ 261 32 %

B $ 17 8 % $ 195 24 %

C $ 9 4 % $ 198 24 %

Total $ 188 85 % $ 654 80 %

The Company did not have revenue for the three months ended March 31, 2023.

The Company did not have outstanding receivables as of March 31, 2023.

The vendors who account for 10% or more of the Company's purchases for three months ended March 31, 2024 or 10% or more of the Company's outstanding payable balance as of March 31, 2024 are presented as follows:

Three Months ended March 31, 2024 As of March 31, 2024

Purchases (thousands)

Percentage of purchases

Accounts Payable (thousands)

Percentage of accounts payable

A $ 437 15 % $ 1,785 26 %

Total $ 437 15 % $ 1,785 26 %

The vendors who account for 10% or more of the Company's purchases for three months ended March 31, 2023 or 10% or more of the Company's outstanding payable balance as of March 31, 2023 are presented as follows:

Three Months ended March 31, 2023

As of March 31, 2023

Purchases (thousands)

Percentage of purchases

Accounts Payable (thousands)

Percentage of accounts payable

A $ 101 17 % $ 636 48 %

B $ 84 14 % $ 40 3 %

C $ 65 11 % $ 2 — %

D $ 59 10 % $ — — %

E $ — — % $ 525 39 %

Total $ 309 52 % $ 1,203 90 %

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):

INPIXON AND SUBSIDIARIES

The Company’s Chief Executive Officer (“CEO”), acting as the Chief Operating Decision Maker, or (“CODM”), regularly reviews and manages certain areas of its businesses, resulting in the Company identifying two reportable segments:

Industrial IoT and Commercial Aviation.

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

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

The commercial aviation segment is currently in the pre-revenue development stage and its primary activity is the development of the TriFan 600 aircraft.

The Industrial IoT segment generates revenue primarily from the sale of real-time location system solutions for the industrial sector and its customers are primarily located in Germany and the U.S.

As it relates to the Industrial IoT segment, the results disclosed in the table below only reflect activity following the Merger closing through the March 31, 2024 reporting date:

refer to Note 3 - Consolidations .

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 18 - Segments (continued)

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

2023 2022 2023 2022

Gross profit and income (loss) from operations are the primary measures of Industrial IoT segment performance used by the Company’s CODM.

The Company notes that Commercial Aviation is in the pre-revenue operating stage, and therefore the CODM primarily focuses on research and development expenses and total loss by operations as the primary measure of Commercial Aviation segment performance used by the Company’s CODM.

Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group;

included expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.

The following table reflects results of operations from our business segments for the periods indicated below (in thousands):

For the Three Months Ended March 31,

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

Industrial IoT $ 220 $ —

Commercial Aviation — —

Total segment revenue $ 220 $ —

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

Industrial IoT $ 141 $ —

Commercial Aviation — —

Gross profit by Segment $ 141 $ —

Research and Development Expenses by Segment

Industrial IoT

Commercial Aviation

Research and Development Expenses by Segment

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

Industrial IoT

$ ( 164 ) $ —

Commercial Aviation

( 7,797 ) ( 1,284 )

Loss from operations by segment

$ ( 7,961 ) $ ( 1,284 )

Unallocated costs

Consolidated loss from operations

$ ( 8,877 ) $ ( 1,284 )

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

INPIXON AND SUBSIDIARIES

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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 Company's estimates of fair value for financial assets and 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.

2 unchanged sentences

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

The Company notes that the Company did not hold any financial assets fair valued under ASC 820 as of March 31, 2024 and December 31, 2023, other than the Damon Motors convertible note and warrant outlined in Note 24.

The Company's assets and liabilities measured at fair value consisted of the following at March 31, 2024 and December 31, 2023:

Fair Value at March 31, 2024

Total Level 1 Level 2 Level 3

Investments in equity securities 189 178 — 11

Notes receivable $ 3,264 $ — $ — $ 3,264

Warrant Asset 448 — — 448

Total assets $ 3,712 $ — $ — $ 3,712

Warrant liability

$ 1,019 $ — $ — 1,019

Total liabilities

$ 1,019 $ — $ — $ 1,019

Fair Value at December 31, 2023

Total Level 1 Level 2 Level 3

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 Investments

Warrant liability

$ 497 $ — $ — $ 497

Convertible notes, at fair value

16,804 — — 16,804

Loan conversion derivatives

Total liabilities

$ 17,634 $ — $ — $ 17,634

Refer to Note 24 for discussion of the valuation methodologies used for the Company's Damon Motors convertible note and warrant assets measured at fair value.

The fair value of the Level 3 warrant liability was determined using a pricing model with certain significant unobservable market data inputs.

The table below includes a reconciliation of the Level 3 assets and liabilities for which significant unobservable inputs were used to determine fair value for the three months ended March 31, 2024:

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 19 - Fair Value of Financial Instruments (continued)

Level 3 Assets

Level 3 Liabilities

Level 3 Assets and Liabilities Notes receivable Warrant asset Warrant liability Convertible notes, at fair value Loan conversion derivatives

Balance at January 1, 2024 $ — $ — $ 497 $ 16,804 $ 333

Unrealized loss on equity securities —

Balance at September 30, 2023 $ 11

INPIXON AND SUBSIDIARIES

Acquired 3,264 448 920 — —

Change in fair value — — ( 398 ) ( 12,882 ) —

Conversion to Equity — — — ( 3,922 ) ( 333 )

Balance at March 31, 2024 $ 3,264 $ 448 $ 1,019 $ — $ —

The changes in fair value of the warrant liability and convertible notes are presented within 'Other income, net' and 'Change in fair value of convertible notes', respectively, in the consolidated statements of operations.

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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.

Prior to the Merger, the Company’s operations were located primarily in the United States.

After the Merger, the Company's operations are located primarily in the United States, Germany, and the United Kingdom.

Revenues by geographic area are attributed by country of domicile of our subsidiaries.

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

States Canada India Germany United Kingdom 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:

States Germany United Kingdom Eliminations Total

For the Three Months Ended March 31, 2024:

Revenues by geographic area $ 27 $ 193 $ — $ — $ 220

Operating (loss) income by geographic area $ ( 8,940 ) $ 63 $ — $ — $ ( 8,877 )

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:

Net (loss) income by geographic area $ ( 2,674 ) $ 72 $ — $ — $ ( 2,602 )

For the Three Months Ended March 31, 2023:

Revenues by geographic area $ — $ — $ — $ — $ —

Operating (loss) income by geographic area $ ( 1,284 ) $ — $ — $ — $ ( 1,284 )

Net (loss) income from continuing operations by geographic area $ ( 20,531 ) $ — $ 53 $ ( 5,938 ) $ 78 $ ( 756 ) $ — $ — $ ( 27,094 )

As of September 30, 2023:

Net (loss) income by geographic area $ ( 1,565 ) $ — $ — $ — $ ( 1,565 )

As of March 31, 2024:

Identifiable assets by geographic area $ 39,147 $ 23,041 $ 10 $ ( 31,416 ) $ 30,782

Long lived assets by geographic area $ 2,186 $ 3,735 $ — $ — $ 5,921

Goodwill by geographic area $ 3,142 $ 9,256 $ — $ — $ 12,398

As of December 31, 2023:

1 unchanged sentence

Long lived assets by geographic area $ 278 $ — $ — $ — $ 278

INPIXON AND SUBSIDIARIES

Goodwill by geographic area $ — $ — $ — $ — $ —

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

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.

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.

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

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.

INPIXON AND SUBSIDIARIES

Refer to Note 11 for disclosures on related party debt transactions and Note 23 for disclosures on Nadir Ali's related party consulting agreement.

David Brody, board member and founder of XTI Aircraft Company, provided legal and strategic consulting services for the Company.

During the three months ended March 31, 2024 and 2023, the Company paid Mr.

Brody compensation of $ 20,000 and $ 0 , respectively.

As of March 31, 2024 and December 31, 2023, the Company owed Mr.

Brody accrued consulting compensation of $ 0 and $ 320,000 , respectively, which is included in Related Party Payables within the accompanying balance sheets.

Pursuant to an amendment to the consulting agreement, the outstanding payable amount of $ 320,000 was waived by Mr.

Brody and the consulting agreement terminated in connection with the Merger closing.

During the three months ended March 31, 2024 and 2023, the Company paid Scott Pomeroy, the Company's CEO and Chairman, who was the CFO and board member of XTI Aircraft Company up until the Merger closing, consulting compensation of $ 43,750 and $ 26,250 , respectively.

As of March 31, 2024 and December 31, 2023, the Company owed Mr.

Pomeroy accrued consulting compensation of $ 99,750 and $ 99,750 , respectively, which is included in Related Party Payables within the accompanying balance sheets.

During the three months ended March 31, 2024 and 2023, the Company paid its former Chief Operating Advisor consultant, Charlie Johnson, who was a board member of XTI Aircraft Company up until the date of the Merger closing, compensation of $ 0 and $ 10,000 , respectively.

As of March 31, 2024 and December 31, 2023, the Company owed Mr.

Johnson accrued consulting compensation of $ 0 and $ 120,000 , respectively, which is included in Related Party Payables within the accompanying balance sheets.

Pursuant to an amendment to the consulting agreement during the first quarter of 2024, the Company paid $ 60,000 to Mr.

Johnson and the remaining accrued consulting compensation balance of $ 60,000 was waived.

The consulting agreement was terminated in connection with the Merger closing and Mr.

Johnson is no longer a board member of the Company's XTI Aircraft Company subsidiary.

Grafiti Group Divesiture

On February 21, 2024, Inpixon completed the disposition of the remaining portion of the Shoom, SAVES, and GYG business lines and assets ("Grafiti Group Divestiture") in accordance with the terms and conditions of an Equity Purchase Agreement, dated February 16, 2024, by and among Inpixon (“Seller”), Grafiti LLC, and Grafiti Group LLC (a newly formed entity controlled by Nadir Ali, the Company's CEO and a director) (“Buyer”).

Pursuant to the terms, Buyer acquired from 100% of the equity interest in Grafiti LLC, including the assets and liabilities primarily relating to Inpixon’s Saves, Shoom and Game Your Game business, including 100% of the equity interests of Inpixon India, Grafiti GmbH (previously Inpixon Gmbh) and Game Your Game, Inc.

from the Company for a minimum purchase price of $1.0 million paid in two annual cash installments of $0.5 million due within 60 days after December 31, 2024 and 2025.

The purchase price and annual cash installment payments will be (i) increased for 50% of net income after taxes, if any, from the operations of Grafiti LLC for the years ended December 31, 2024 and 2025;

(ii) decreased for the amount of transaction expenses assumed;

(iii) increased or decreased by the amount working capital of Grafiti LLC on the closing balance sheet is greater or less than $1.0 million.

The Company notes that $0.5 million of the receivable is included in current assets as other receivables in the Company's condensed consolidated balance sheet as of March 31, 2024, and the remaining $0.5 million of the receivable is included in long term assets as other assets in the Company's condensed consolidated balance sheet as of March 31, 2024.

Director Services Agreement

The Company and Kareem Irfan, a director of the Company, have amended Mr.

Irfan's October 21, 2014 Director Services Agreement on May 16, 2022 (as amended, the "Amended Director Services Agreement") to increase his quarterly compensation by an additional $ 10,000 per month as consideration for the additional time and efforts dedicated to the Company and management in support of the evaluation of strategic relationships and growth initiatives.

The Amended Director Services Agreement supersedes and replaces all prior agreements by and between the Company and Mr.

At its meeting on May 1, 2024, the Board adopted a new Board compensation policy applicable to all Directors - refer to Note 25.

XTI AEROSPACE, INC.

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.

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 22 - 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 operating leases for administrative offices in the United States (Colorado) and Germany.

As part of the Merger, 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 $ 9,295 (€ 8,612 ) per month.

As part of the Merger, the Company acquired right-of-use assets and lease liabilities related to an operating lease for an office space (the Inpixon GmbH office) located in Berlin, Germany.

This lease expires on May 31, 2026 and the current lease rate is $ 7,987 (€ 7,400 ) per month.

On January 1, 2024, the Company entered into a lease agreement for its new corporate office location in Englewood, Colorado.

This lease expires on January 31, 2028 and the current lease rate is $ 8,966 per month.

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

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

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

As of March 31, 2024 As of December 31, 2023

Englewood, CO Office $ 394 $ —

Berlin, Germany Office 197 —

3 unchanged sentences

Lease expense for operating leases recorded in the balance sheet is included in operating costs and expenses and is based on the future minimum lease payments recognized on a straight-line basis over the term of the lease plus any variable lease costs.

Operating lease expenses, inclusive of short-term and variable lease expenses, recognized in our 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.

Operating lease expenses, inclusive of short-term and variable lease expenses, recognized in our condensed consolidated statement of income for the three months ended March 31, 2024 and 2023 was approximately $ 43,000 and $ 1,000 , respectively.

Lease liability is summarized below (in thousands):

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Total lease liability $ 663 $ —

2 unchanged sentences

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

Three months ending December 31, 2023 $ 53

Nine months ending December 31, 2024 $ 237

Year ending December 31, 2025 220

5 unchanged sentences

Lease liability $ 663

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 22 - Leases (continued)

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 %.

As of March 31, 2024, the weighted average remaining lease term is 2.9 years and the weighted average discount rate used to determine the operating lease liabilities was 6.7 %.

Note 23 - Commitments and Contingencies

Financial Advisory Fees

Pursuant to the terms of an amended advisory fees agreement between the Company and Maxim Group ("Maxim"), the Company is obligated to pay Maxim $ 200,000 which becomes payable upon the closing of one or more debt or equity financings for which Maxim serves as placement agent or underwriter and in which the Company raises minimum aggregate gross proceeds of $ 10 million.

Pursuant to its engagement letter with Legacy XTI, dated as of June 7, 2022, as amended (the “Chardan Engagement Letter”) and the XTI Merger Agreement, Chardan Capital Markets (“Chardan”) received registered shares of XTI Aerospace common stock and will receive a cash payment of $ 200,000 , which is included in Accounts Payable on the condensed consolidated balance sheets as of March 31, 2024.

Chardan may be entitled to receive additional common shares of XTI Aerospace depending on the share price of a public offering the Company consummates within 90 days following the XTI Merger closing, as outlined in the amended engagement letter.

Consulting Agreements with Prior "Legacy Inpixon" CEO and CFO

On March 12, 2024, the Company entered into a Consulting Agreement with Mr.

Nadir Ali (the “Ali Consulting Agreement”), the Company's former Chief Executive Officer.

Pursuant to the Ali Consulting Agreement, following the Closing of the XTI Merger, Mr.

Ali will provide consulting services to the Company for 15 months or until earlier termination in accordance with its terms.

During the Ali Consulting Period, the Company will pay him a monthly fee of $ 20,000 .

In addition, the Company shall pay Mr.

Ali (a) the amount of $ 1,500,000 due three months following the Closing, and (b) the aggregate amount of $ 4,500,000 , payable in 12 equal monthly installments of $ 375,000 each, starting four months after the Effective Date (the payments described in (a) and (b), each an “Equity Payment”).

Each Equity Payment may be made, in Company’s discretion, in (i) cash, (ii) fully vested shares of common stock under the Company’s equity incentive plan , or a combination of cash and registered shares.

On March 12, 2024, the Company also entered into a Consulting Agreement with Ms.

Wendy Loundermon (the “Loundermon

Consulting Agreement”), the Company's former Chief Financial Officer.

Pursuant to the Loundermon Consulting Agreement,

following the Closing, Ms.

Loundermon will provide consulting services to the Company for one year or until earlier termination in accordance with its terms (the “Loundermon Consulting Period”).

As compensation for Ms.

Loundermon’s consulting services, the Company will pay her (i) $ 83,333 per month for the first six months of the Loundermon Consulting Period for services she performs on an as-needed basis during the Loundermon Consulting Period regarding the transition of the

management of the Company’s financial reporting function to ensure continuity of business operations , and (ii) $ 300 per hour for services performed on an as needed basis regarding the preparation and filing of Company’s public company financial reporting and compliance matters including accounting, payroll, audit and tax compliance functions.

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

INPIXON AND SUBSIDIARIES

In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 23 - 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 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.

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.

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.

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.

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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

On December 6, 2023, Xeriant, Inc.

(“Xeriant”) filed a complaint against Legacy XTI, along with two unnamed companies and five unnamed persons, in the United States District Court for the Southern District of New York.

On January 31, 2024, Xeriant filed an amended complaint, which added us as a defendant.

On February 2, 2024, the Court ordered Xeriant to show cause as to why the amended complaint should not be dismissed without prejudice for lack of subject matter jurisdiction.

On February 29, 2024, Xeriant filed a second amended complaint.

The second amended complaint alleges that Legacy XTI, through multiple breaches and fraudulent actions, has caused substantial harm to Xeriant and has prevented it from obtaining compensation owed to it under various agreements entered into between Xeriant and Legacy XTI, including but not limited to a joint venture agreement, a cross-patent license agreement, an operating agreement, and a letter agreement.

In particular, Xeriant contends that Legacy XTI gained substantial advantages from the intellectual property, expertise, and capital deployed by Xeriant in the design and development of Legacy XTI’s TriFan 600 aircraft yet has excluded Xeriant from the transaction involving the TriFan 600 technology in its merger with Legacy Inpixon, which has resulted in a breach of the Letter Agreement, in addition to the other aforementioned agreements.

Xeriant, in the second amended complaint, asserts the following causes of action:

(1) breach of contract;

(2) intentional fraud;

(3) fraudulent concealment;

(4) quantum meruit;

(5) unjust enrichment;

(6) unfair competition/deceptive business practices;

and (7) misappropriation of confidential information, and seeks damages in excess of $ 500 million, injunctive relief enjoining us from engaging in any further misconduct, the imposition of a royalty obligation, and such other relief as deemed appropriate by the court.

On March 13, 2024, Legacy XTI moved for partial dismissal of the second amended complaint, Counts 2 through 7 in particular.

Legacy XTI argued that Counts 2 through 7 are (1) impermissible attempts to repackage claims arising from contractual dispute as quasi-contractual or tort claims;

and (2) expressly refuted by the clear and unequivocal terms of the aforementioned agreements.

The case is in its early stages, no discovery with respect to the Company has occurred, and we are unable to estimate the likelihood or magnitude of a potential adverse judgment.

The Court has neither scheduled Legacy XTI’s motion for hearing nor otherwise ruled upon it.

Legacy XTI nevertheless denies the allegations of wrongdoing contained in the second amended complaint and is vigorously defending against the lawsuit.

Note 24 - Damon Motors Convertible Note

On October 26, 2023, Legacy Inpixon purchased a 12 % convertible note through a private placement in aggregate principal amount of $ 3.0 million for a purchase price of $ 3.0 million from Damon Motors Inc.

Interest on the convertible note accrues at 12 % per annum.

The term of the convertible note is 12 months from October 26, 2023.

The convertible note is subject to certain conversion features which include qualified financing, and/or qualified transaction, as defined in the securities purchase agreement.

The note will be required to convert upon Damon Motors Inc.

completing a public company event.

In addition, Damon Motors Inc.

issued a five-year warrant to purchase 1,096,321 shares of Damon Motors Inc.

common stock in connection with the note.

Management notes the Warrant is freestanding.

The exercise price per Common Share is equal to the quotient of the valuation cap and the diluted capitalization, as defined in the agreement.

The Warrant provides for cashless exercise after 180 days following the closing of the public company event should there be no effective registration statement.

The convertible note receivable is not traded in active markets and its fair value was determined using a present value technique.

The convertible note receivable is accounted for as an available-for-sale debt security based on “Level 3” inputs, which consist of unobservable inputs and reflect management’s estimates of assumptions that market participants would use in pricing the asset, with unrealized holding gains and losses excluded from earnings and reported in other comprehensive income (loss).

The Warrant is accounted for as an equity security based on “Level 3” inputs, which consist of unobservable inputs and reflect management’s estimates of assumptions that market participants would use in pricing the asset, recorded at fair value with subsequent changes in fair value recorded in earnings.

The convertible note's and warrant's values as of March 31, 2024 total $ 3.7 million and are included in Notes Receivable, $ 3.3 million, and Warrant asset, $ 0.4 million, on the condensed consolidated balance sheets.

Note 25 - 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.

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

INPIXON AND SUBSIDIARIES

On April 18, 2024, the Company entered into an exchange agreement with the holder of shares of the Company’s Series 9 Preferred Stock pursuant to which the Company and the holder exchanged 750 shares of Series 9 Preferred Stock with an aggregate stated value of approximately $ 0.8 million for 266,047 shares of common stock at an effective price per share of

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 25 - 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.

The Company issued the shares of common stock to the holder on April 19, 2024, at which time the shares of Series 9 Preferred Stock were cancelled.

On April 30, 2024, the Company entered into Exchange Agreements (the “Exchange Agreements”) with the holders (the “Warrant Holders”) of certain existing warrants of the Company (the “Existing Warrants”) initially issued on May 17, 2023, which were exercisable for an aggregate of 918,690 shares of the Company’s common stock.

Pursuant to the Exchange Agreements, the Company issued to the Warrant Holders 0.70 shares of common stock for each Existing Warrant, for an aggregate of 643,082 shares of common stock, in exchange for the Existing Warrants.

On April 30, 2024, the Company filed a Certificate of Amendment to Designations of Preferences and Rights of Series 9 Preferred Stock with the Secretary of State of the State of Nevada, which now allows the Company to pay the holders of Series 9 Preferred Stock, if such holders agree, with securities or other property of the Company in an amount equal to the Series 9 Preferred Liquidation Amount (as defined in the Series 9 Preferred Stock Certificate of Designation) in the event the Company elects to redeem all of any portion of the Series 9 Preferred Stock then issued and outstanding (a “Corporation Optional Conversion”).

Previously, the Company was to pay any such amount in only cash.

The amendment also now provides that the Company will provide notice of a Corporation Optional Conversion to the holders of Series 9 Preferred Stock within five business days prior to the consummation of such redemption rather than five business days following the determination of the Company’s board of directors to consummate such redemption.

In addition, the amendment eliminates the requirement for the Company to obtain the written consent of the holders of at least a majority of the outstanding Series 9 Preferred Stock before repaying any outstanding indebtedness owed to any holder of Series 9 Preferred Stock or its affiliates.

On May 1, 2024, 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 a secured promissory note (the "May 2024 Note") in an aggregate initial principal amount of approximately $ 1.3 million, which is payable on or before the date that is 12 months from the issuance date, and upon the satisfaction of certain conditions set forth in the note purchase agreement, up to two additional secured promissory notes (the “Subsequent Notes”).

The initial principal amount of the May 2024 Note includes an original issue discount of approximately $ 0.3 million and approximately $ 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 May 2024 Note, the Holder paid an aggregate purchase price of $ 1.0 million.

The Company intends to use the net proceeds from the sale of the May 2024 Note and any Subsequent Notes for general working capital purposes.

The Company disclosed the material terms of the May 2024 Note and related transaction documents in a Current Report on Form 8-K filed with the SEC on May 1, 2024.

On May 2, 2024, the Company entered into an exchange agreement with the holder of shares of the Company’s Series 9 Preferred Stock pursuant to which the Company and the holder exchanged 750 shares of Series 9 Preferred Stock with an aggregate stated value of approximately $ 0.8 million for 357,954 shares of common stock at an effective price per share of $ 2.20 .

The Company issued the shares of common stock to the holder on May 3, 2024, at which time the shares of Series 9 Preferred Stock were cancelled.

On May 1, 2024, the Board approved and adopted a compensation policy for the Company’s non-employee directors (the “Non-Employee Director Compensation Policy”), which was developed in consultation with Zayla Partners, LLC, an independent external compensation consulting firm.

Pursuant to the terms of the Non-Employee Director Compensation Policy, non-employee directors are eligible to receive cash retainer fees as well as equity incentive awards pursuant to the Company’s 2018 Employee Stock Incentive Plan for their service, as follows:

Each of the Company’s non-employee directors will receive $ 50,000 annually for general availability and participation in meetings and conference calls of the Board.

Additionally, the Chair of the Audit Committee will receive $ 20,000 annually and other members of the Audit Committee will receive $ 10,000 annually;

the Chair of the Compensation Committee will receive $ 15,000 annually and other members of the Compensation Committee will receive $ 7,500 annually;

and the Chair of the Nominating and Corporate Governance Committee will receive $ 10,000 annually and other members of the Nominating and Corporate Governance Committee will receive $ 5,000 annually.

All cash compensation will be payable quarterly in arrears.

Each of the Company’s non-employee directors will also receive an annual grant of stock options pursuant to the Company’s 2018 Employee Stock Incentive Plan, with a fair market value equal to the aggregate annual cash retainer for the applicable director based upon a Black-Scholes option pricing model.

The exercise price of the stock options will be equal to the market price of the Company’s common stock at the time of grant.

Effective as of May 13, 2024, the Company's Board of Directors (the “Board”) appointed Tensie Axton to the Board as a Class III director (for a term ending with the 2026 annual meeting of shareholders), to fill the vacancy created by the resignation of Leonard Oppenheim.

The Board also appointed Ms.

Axton to serve as a member of the Audit Committee, a member of the Compensation Committee and as the Chair of the Nominating and Corporate Governance Committee.

In accordance with the

XTI AEROSPACE, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Note 25 - Subsequent Events (continued)

terms of the Company's Non-Employee Director Compensation Policy, Ms.

Axton's compensation comprises (x) the following annual cash fees, each payable quarterly in arrears:

(i) $ 50,000 for her services as a director, (ii) $ 10,000 for her services as a member of the Audit Committee, (iii) $ 7,500 for her services as a member of the Compensation Committee, and (iv) $ 10,000 for her services as the Chair of the Nominating and Corporate Governance Committee, and (y) an annual grant of stock options pursuant to the Company’s 2018 Employee Stock Incentive Plan, with a fair market value equal to her aggregate annual cash retainer.

The Company entered into an employment agreement with Scott Pomeroy on May 6, 2024 (the “Pomeroy Employment Agreement”), pursuant to which Mr.

Pomeroy agreed to continue to serve as the Company’s Chief Executive Officer and as a member and Chairman of the Board.

Pursuant to the terms of the Pomeroy Employment Agreement, Mr.

Pomeroy is entitled to receive an annual base salary of $ 400,000 , which may be increased by the Board from time to time in its sole discretion.

Pomeroy is also entitled to receive an annual cash bonus of up to a baseline of 100 % of his base salary, with the right and ability to earn up to a cap of 150 % of his base salary, applying a weighted average percentage of the objective and subjective criteria and milestones set forth in the Pomeroy Employment Agreement.

The Board will determine and award the annual cash bonus by January 31 following the end of each calendar year during Mr.

Pomeroy’s employment period.

Pomeroy’s employment agreement term ends on December 31, 2025, with one automatic one-year extension to December 31, 2026, unless either party provides prior notice of non-renewal on or before March 31, 2025.

The Company disclosed the remaining material terms of the Pomeroy Employment Agreement in a Current Report on Form 8-K filed with the SEC on May 10, 2024.

The Company entered into an employment agreement with Brooke Turk on May 8, 2024 (the “Turk Employment Agreement”), pursuant to which Ms.

Turk agreed to continue to serve as the Company’s Chief Financial Officer.

Pursuant to the terms of the Turk Employment Agreement, Ms.

Turk is entitled to receive an annual base salary of $ 350,000 , which may be increased by the Board from time to time in its sole discretion.

Turk is also entitled to receive an annual cash bonus of up to a baseline of 75 % of her base salary, with the right and ability to earn up to a cap of 112.5 % of her base salary, applying a weighted average percentage of the objective and subjective criteria and milestones set forth in the Turk Employment Agreement.

The Board will determine and award the annual cash bonus within 30 days after the end of each calendar year during Ms.

Turk’s employment period.

The remaining material terms of the Turk Employment Agreement are substantially similar to the terms of the Pomeroy Employment Agreement.

On May 14, 2024, the Company entered into an exchange agreement with the holder of shares of the Company’s Series 9 Preferred Stock pursuant to which the Company and the holder exchanged 500 shares of Series 9 Preferred Stock with an aggregate stated value of approximately $ 0.5 million for 332,278 shares of common stock at an effective price per share of $ 1.58 .

The Company issued the shares of common stock to the holder on May 16, 2024, at which time the shares of Series 9 Preferred Stock were cancelled.

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

What changed 10-Q

Item 1. Financial Statements