What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-20 · 206 added, 122 removed, 246 unchanged (57% of the section changed)

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Overview of Our Business

Following the closing of the XTI Merger (refer to Note 5 of the Notes to Condensed Consolidated Financial Statements), we are primarily an aircraft development company.

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.

We believe our initial configuration, the TriFan 600, will be one of the first civilian fixed-wing VTOL aircraft that offers the speed and comfort of a business aircraft and the range and versatility of VTOL for a wide range of customer applications, including private aviation for business and high net worth individuals, emergency medical services, and commuter and regional air travel.

We believe our initial configuration, the TriFan 600, will be one of the first civilian fixed-wing VTOL aircraft that offers the speed, range, and comfort of a business aircraft and the versatility of a helicopter for a wide range of customer applications, including private aviation for business and high net worth individuals, emergency medical services, and commuter and regional air travel.

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 aircraft.

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

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

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

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

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For Industrial IoT we generate revenue from sales of hardware, software licenses and professional services.

For Commercial Aviation, the segment is pre-revenue and is currently developing the TriFan 600 aircraft.

For Commercial Aviation, the segment is pre-revenue as we are currently developing the TriFan 600 aircraft.

Key Factors Affecting Operating Results

We believe that the growth of our business and our future success are dependent upon many factors, including our ability to retain and develop engineering internal and third-party resources, secure strategic partnerships with suppliers, expand the number of customer purchase orders, locate a facility for further aircraft development and testing, expand on that facility or locate to a new facility for commercial production, build-out production assembly lines in a timely manner, develop ancillary service offerings related to the TriFan 600 such as flight training, insurance programs and maintenance products, and secure the needed financing to achieve Federal Aviation Administration ("FAA") certification.

While each of these areas presents significant opportunities for us, they also pose material challenges and risks that we must successfully address in order to achieve FAA certification of the TriFan 600 and further reach our current aircraft delivery forecasts.

We believe that the growth of our business and our future success are dependent upon many factors, including our ability to retain and develop engineering internal and third-party resources, secure strategic partnerships with suppliers, expand the number of customer purchase orders, locate a facility for further aircraft development and testing, expand on that facility or locate to a new facility for commercial production, build-out production assembly lines in a timely manner, develop ancillary service offerings related to the TriFan 600 such as flight training and maintenance products, and secure the needed financing to achieve Federal Aviation Administration ("FAA") certification.

While each of these areas presents significant opportunities for us, they also pose material challenges and risks that we must successfully address to achieve FAA certification of the TriFan 600 and further reach our current aircraft delivery forecasts.

Corporate Strategy Update

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Industrial IoT

Since 2019 and post acquisition, Legacy Inpixon's operations have been focused on building and developing our Indoor IntelligenceTM platform to be able to offer a comprehensive range of solutions that allow for the collection of data within workplace environments to delivering insights from that data for, people, places and things.

Since 2019 and post acquisition, Legacy Inpixon's operations have been focused on building and developing our Indoor Intelligence TM platform to be able to offer a comprehensive range of solutions that allow for the collection of data within workplace environments to delivering insights from that data for, people, places and things.

We believe we have positioned the Industrial IoT business as a market leader with a comprehensive suite of products and solutions allowing us to help organizations enhance the visitor and employee experience with actionable indoor intelligence making them smarter, safer and more secure.

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Initial concept and engineering analysis for the TriFan 600 was completed in July 2015.

XTI Aircraft Company or "Legacy XTI" built a 65% scale prototype and in May 2019 began initial hover tests.

Legacy XTI built a 65% scale prototype and in May 2019 began initial hover tests.

The prototype was successfully hover-tested multiple times.

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Legacy XTI completed its preliminary design review (“PDR”) in 2022, which set the stage for the next step of design development.

Legacy XTI updated the exterior design of the TriFan 600, including the wing fans location and the location of the horizontal tail, all of which had a positive impact on the performance and efficiency of the aircraft.

Legacy XTI updated the exterior design of the TriFan 600, including the location of the wing fans and the location of the horizontal tail, all of which had a positive impact on the performance and efficiency of the aircraft.

Design and engineering for other systems, including the propulsion system, landing gear, cockpit visibility, cabin sizing and structural integrity were also advanced during 2022 and 2023.

The current development design review phase (“DDR”) of the program includes further interactions with suppliers to develop and mature major structures and systems of the aircraft.

With input from industry-respected suppliers, we believe all systems of the TriFan 600 can be incorporated into the airframe to deliver a fully-integrated solution.

The fulfillment of this phase is expected to pave the way for approving engineering designs used to build the aircraft.

The DDR phase also includes ongoing communication with the FAA to discuss and maintain awareness of our compliance with federal regulations.

The next target milestones include critical design review (“CDR”) and building and preliminary testing of a full-scale flight test aircraft, along with building additional full-scale flight test aircraft, are fully dependent on raising additional financing.

The XTI team is currently working toward an update to the initial PDR to address additional aerodynamic and performance improvements.

In addition, the program includes further interactions with potential suppliers for the development of major structures and systems of the aircraft.

The team is focused on industry-respected suppliers and systems for the TriFan 600 to reduce certification risk and to deliver a fully-integrated aircraft.

Also, during this phase XTI will formally establish a project plan with the FAA and apply for Type Certification (TC).

The next target milestones include the critical design review (“CDR”) and building and preliminary testing of a full-scale flight test aircraft, along with building additional full-scale flight test aircraft, are fully dependent on raising additional financing.

Industrial IoT

Our management believes that we must continue to dedicate a significant amount of resources to research and development efforts to maintain a competitive position.

Our management believes that we must continue to dedicate significant resources to research and development efforts to maintain a competitive position.

Our RTLS products intersect many emerging fields including metaverse, augmented reality, occupancy planning, industry 4.0, smart cities, and more, and we continue to innovate and patent new methods to solve problems for our customers.

Commercial Aviation

The private jet and private business aircraft markets are highly competitive and we face a significant number of original equipment manufacturer competitors, most of which are larger, better known and have better financial resources than us.

The business aircraft market is highly competitive and we face a significant number of original equipment manufacturer competitors, most of which are larger, better known and have better financial resources than us.

When the TriFan 600 goes into production, we believe it will compete with other aircraft manufacturers by providing our customers with what we believe is a unique “crossover” aircraft with distinct and largely unique performance capabilities at a competitive purchase price.

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Recent Events

The Company completed its merger with XTI Aircraft Company on March 12, 2024, which was structured as a reverse triangular merger.

Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements included elsewhere in the Form 10-Q for further discussion of the XTI Merger.

On May 15, 2024, the Company received a letter from the Nasdaq Stock Market LLC informing the Company that, as a result of Tensie Axton’s appointment to the Board and the Audit Committee, the Company has regained compliance with the independent director and audit committee requirements set forth in Nasdaq Listing Rules 5605(b)(1) and 5605(c)(2).

Refer to Note 25, Subsequent Events, of the Notes to Condensed Consolidated Financial Statements for additional information regarding Ms.

Axton's appointment to the Board and its committees as well as a summary of other recent events.

The Company completed its merger with Legacy XTI on March 12, 2024, which was structured as a reverse triangular merger.

Capital Collation and Distribution Agreement

On June 28, 2024, the Company entered into a Capital Collation and Distribution Agreement (the “Distribution Agreement”) with FC Imperial Limited (“FCIL”), which sets forth the terms of a proposed equity investment by FCIL for shares of preferred stock with a minimum value of approximately $12 million and up to approximately $55 million at a postmoney valuation of $275 million, subject to the parties entering into a definitive equity purchase agreement.

intends to use the investment, to the extent it is received, for the development of the Company’s TriFan 600 aircraft.

The Distribution Agreement provides for several non-binding anticipated material terms of FCIL’s investment in the Company.

No assurances can be made that the Company and FCIL will successfully negotiate and enter into a definitive equity purchase agreement or that the Company and FCIL will make any of the capital contributions contemplated by the Distribution Agreement.

Appointment of Tensie Axton to the Board of Directors and Committees

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 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.

Entry into Employment Agreements

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.

Non-Employee Director Compensation Policy

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.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S.

Our condensed consolidated financial statements are prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

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Historically changes in management estimates have not been material.

There have been no significant changes to Legacy Inpixon's critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, except for the addition of Legacy XTI's critical accounting policies and estimates which have been incorporated and disclosed in Note 3 of the condensed consolidated financials statements included elsewhere in this 10Q filing.

Valuation of Long-lived and Intangible Assets and Goodwill.

We periodically review long-lived assets and certain identifiable intangible assets for impairment in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment.” Goodwill and intangible assets not subject to amortization are reviewed annually for impairment in accordance with ASC 350, “Intangibles – Goodwill and Other,” or more often if there are indications of possible impairment.

The analysis to determine whether or not an asset is impaired requires significant judgments that are dependent on internal forecasts, including estimated future cash flows, estimates of long-term growth rates for our business, the expected life over which cash flows will be realized and assumed royalty and discount rates.

Changes in these estimates and assumptions could materially affect the determination of fair value and any impairment charge.

While the fair value of these assets exceeds their carrying value based on our current estimates and assumptions, materially different estimates and assumptions in the future in response to changing economic conditions, changes in our business or for other reasons could result in the recognition of impairment losses.

For assets to be held and used, including acquired intangible assets subject to amortization, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Recoverability of an asset is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset is expected to generate.

Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.

Significant management judgment is required in this process.

For intangible assets not subject to amortization such as goodwill, we test for impairment annually, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

In testing goodwill for impairment, we compare the fair value with the carrying value.

The determination of fair value is based on a discounted cash flow analysis, using inputs and assumptions such as revenue growth rates, projected research and development expenditures based on future milestones of the TriFan 600 aircraft development, other projected expenses, and discount rates.

If we were to experience a decrease in forecasted future revenues attributable to the intangible assets, this could indicate a potential impairment.

If the carrying value exceeds the estimated fair value, the goodwill is considered impaired, and an impairment loss will be recognized in an amount equal to the excess of the carrying value over the fair value of goodwill.

We will perform our annual goodwill impairment test required by ASC 350 as of October 1 st of each year.

In testing goodwill for impairment, we analyze qualitative factors as stated within ASC 350 to determine if the fair value of our single reporting unit may be less than the carrying value of the reporting unit.

We have one reporting unit (Industrial IoT).

If the fair value of the reporting unit, based on qualitative factors, may be less than the carrying value of the reporting unit, we then perform the goodwill impairment test required under ASC 350 by comparing the fair value of the reporting unit with the

carrying value of the reporting unit and, if the fair value is less than the carrying value, , the amount that the carrying value exceeds fair value represents the amount of goodwill impairment.

Accordingly, we would recognize an impairment loss in the amount of such excess.

In connection with the XTI Merger we recorded approximately $12 million in goodwill which allocated to our Industrial IOT reporting unit.

Since the closing date of the XTI Merger on March 12, 2024, the price of our common stock has declined significantly and may continue to fluctuate in future periods.

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

We will continue monitoring the analysis of the qualitative and quantitative factors used as a basis for the goodwill impairment test during fiscal year 2024 and at the Company's October 1st annual testing date.

As of June 30, 2024, Management evaluated potential triggers and completed a qualitative assessment and determined in the aggregate, it is not more likely than not, that the fair value of the Goodwill is less than the carrying value.

To corroborate this conclusion, we entered into an agreement for a proposed equity investment at a post-money valuation in line with the fairness opinion obtained in July 2023 and compared our equity carrying value to our market capitalization and concluded that there was no goodwill impairment during the six months ended June 30, 2024.

If the negative volatility of our market capitalization is sustained, it is possible that our goodwill could become impaired, which could result in a material charge and adversely affect our results of operations.

Components of Results of Operations

Commercial Aviation

We are still working to design, develop, certify, and bring up manufacturing of our TriFan 600 aircraft and thus have not generated revenue from this segment.

We do not expect to begin generating significant revenues until we are able to complete the design, development, certification, and manufacturing our aircraft.

We are still working to design, develop and certify the TriFan 600 aircraft and thus have not generated revenue from this segment.

We do not expect to begin generating significant revenues until we are able to complete the design, development, certification, and manufacturing of the aircraft.

Industrial IoT

Our RTLS products are primarily sold on a license and SaaS mode, which we call "location as a service" or "LaaS." In our licensing model, we also typically charge an annual maintenance fee.

The LaaS model is typically for a 3-5 year contract and includes license to use, maintenance and hardware upgrades.

The LaaS model is typically for a 3-5 year contract and includes a license to use, maintenance and hardware upgrades.

The LaaS model generates a recurring revenue stream.

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Our research and development efforts focus on the design and development of (i) our indoor intelligence products, and (ii) our TriFan 600 aircraft, including certain of the systems that will be used in it.

As part of the aircraft development activities, we continue to work closely with the FAA towards our goal of achieving certification of our aircraft on an efficient timeline.

As part of our aircraft development activities, we continue to work closely with the FAA towards our goal of achieving certification of our aircraft on an efficient timeline.

Research and development expenses consist primarily of costs incurred in connection with the research and development of the TriFan 600 aircraft.

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• employee-related expenses, including salaries and benefits for personnel engaged in research and development functions;

• expenses incurred in connection with XTI's research and development activities, including under agreements with third parties such as consultants and contractors;

• expenses incurred under agreements with third parties such as consultants and contractors;

• software and technology-related expenses to support computer-aided design of the aircraft, flight simulations, and other technology needs of our engineers.

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We expect our research and development expenses to increase significantly as we increase staffing to support aircraft engineering and software development, build aircraft prototypes and continue to explore and develop technologies.

We cannot determine with certainty the timing, duration or the costs necessary to complete the design, development, certification, and manufacturing our TriFan 600 aircraft due to the inherently unpredictable nature of our research and development activities.

We cannot determine with certainty the timing, duration or the costs necessary to complete the design, development, certification, and manufacturing of our TriFan 600 aircraft due to the inherently unpredictable nature of our research and

development activities.

Development timelines, the probability of success, and development costs may differ materially from expectations.

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Inducement loss on debt conversions includes primarily the inducement charges incurred by Legacy XTI when it entered into voluntary note conversion letter agreements with several note holders.

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.

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.

Per the letter agreements, principal and accrued interest under the notes was converted at a reduced conversion price into shares of Legacy XTI common stock immediately prior to the XTI Merger closing time, which converted into shares of the Company's common stock upon the closing of the XTI Merger.

Change in fair value of convertible notes represent the remeasurement of certain Legacy XTI convertible notes to fair value.

These notes were converted to equity ahead of the Merger closing time.

These notes were converted to equity prior to the closing of XTI Merger.

Change in fair value of warrant liability represents the remeasurement of certain Legacy XTI and Legacy Inpixon outstanding warrants to fair value.

These outstanding warrants were exchanged for common shares of the Company during the second quarter of 2024.

Other income (expense), net consists of miscellaneous income and expense items.

R ESULTS OF O PERATIONS

Three Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 compared to the Three Months Ended June 30, 2023

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

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands, except percentages) Amount Amount $ Change %

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** Comparisons between positive and negative numbers and with a zero are not meaningful.

Revenues for the three months ended March 31, 2024 were $0.2 million compared to $0.0 million for the comparable period in the prior year for a decrease of approximately $0.2 million.

The revenue amount for the three months ending March 31, 2024 represents the results of the revenue-generating Industrial IoT segment following the Merger closing through the March 31, 2024 reporting date, or 19 days, whereas the Company was pre-revenue in 2023.

Revenues for the three months ended June 30, 2024 were $1.0 million compared to $0.0 million for the comparable period in the prior year for an increase of approximately $1.0 million.

The revenue amount for the three months ended June 30, 2024 represents the results of the revenue-generating Industrial IoT segment, whereas the Company was pre-revenue in 2023.

We expect revenues for the third and fourth quarters of 2024 to remain consistent with the second quarter of 2024.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2024 were $0.1 million compared to $0.0 million for the comparable period in the prior year.

The cost of revenues amount for the three months ending March 31, 2024 represents the results of the revenue-generating Industrial IoT segment following the Merger closing through the March 31, 2024 reporting date, or 19 days, whereas the Company was pre-revenue in 2023.

Gross profit for the three months ended March 31, 2024 was $0.1 million compared to $0.0 million for the three months ended March 31, 2023.

The gross profit amount for the three months ending March 31, 2024 represents the results of the revenue-generating Industrial IoT segment following the Merger closing through the March 31, 2024 reporting date, or 19 days, whereas the Company was pre-revenue in 2023.

Cost of revenues for the three months ended June 30, 2024 were $0.4 million compared to $0.0 million for the comparable period in the prior year.

The cost of revenues amount for the three months ended June 30, 2024 represents the results of the revenue-generating Industrial IoT segment, whereas the Company was pre-revenue in 2023.

Gross profit for the three months ended June 30, 2024 was $0.7 million compared to $0.0 million f or the comparable period in the prior year.

The gross profit amount for the three months ended June 30, 2024 represents the results of the revenue-generating Industrial IoT segment, whereas the Company was pre-revenue in 2023.

Operating Expenses

Operating expenses for the three months ended March 31, 2024 were $9.0 million and $1.3 million for the comparable period ended March 31, 2023.

This increase of approximately $7.7 million is primarily attributable to (i) increases in non-cash stock-based compensation expense of approximately $5.7 million (ii) merger-related transaction costs incurred during the three months ended March 31, 2024, and (iii) the inclusion of 19 days of operating results for the Industrial IoT segment for the three months ended March 31, 2024.

Operating expenses for the three months ended June 30, 2024 were $14.6 million and $4.0 million for the comparable period ended June 30, 2023.

This increase of approximately $10.5 million was primarily attributable to (i) the recognition of $ 6.7 million of nonrecurring transaction bonus expense during the second quarter of 2024 as the bonuses became payable upon the earlier of the closing of qualifying financings or June 30, 2024, (ii) an increase in legal and accounting fees relating to capital raising activities during the second quarter of 2024, (iii) an increase in consulting compensation mainly attributable to consulting arrangements entered into with prior executives of Legacy Inpixon on March 12, 2024, (iv) an increase in public company-related professional fees as the 2023 historical results reflect the operations of a private company, Legacy XTI, and (v) the inclusion of the operating results of the Industrial IoT segment as of the closing of the closing of the XTI Merger.

Although we expect to increase research and development activities during the second half of 2024, we expect a decline in operating expenses for the third and fourth quarters of 2024 primarily due to a decline in nonrecurring transaction-related expenditures.

Other Income (Expense)

Other income (expense) for the three months ended March 31, 2024 was a gain of $6.3 million compared to a loss of $0.3 million for the comparable period in the prior year.

This increase in other income gain of approximately $6.6 million is primarily attributable to the Company recognizing an income gain of approximately $12.9 million relating to the remeasurement of convertible notes at fair value during the three months ended March 31, 2024, partially offset by inducement losses on debt conversions of approximately $6.7 million incurred during the three months ended March 31, 2024.

Other income (expense) for the three months ended June 30, 2024 was a loss of $0.8 million compared to a loss of $0.6 million for the comparable period in the prior year.

This fluctuation in other income (expense) of approximately $0.2 million was primarily attributable to the Company recognizing a loss of $0.7 million during the three months ended June 30, 2024 relating to the fair value remeasurement of the warrant liability.

The increase in other income (expense) was partially offset by (i) a decline in interest expense due primarily to outstanding Legacy XTI convertible notes being converted into equity immediately prior to the XTI Merger closing and (ii) a decline in loss from the fair value remeasurement of the JV obligation as the obligation was reclassified to equity in May 2023 because the joint venture arrangement between Legacy XTI and Xeriant, Inc.

terminated by its terms on May 31, 2023.

Provision for Income Taxes

The provision for income tax for the three months ended March 31, 2024 and 2023 was immaterial.

Liquidity and Capital Resources as of March 31, 2024

Our current capital resources and operating results as of and through March 31, 2024, consist of:

The provision for income tax for the three months ended June 30, 2024 and 2023 was immaterial.

Six Months Ended June 30, 2024 compared to the Six Months Ended June 30, 2023

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

Six Months Ended June 30,

(in thousands, except percentages) Amount Amount $ Change %

Revenues $ 1,251 $ — $ 1,251 **

Cost of revenues $ 448 $ — $ 448 **

Gross profit $ 803 $ — $ 803 **

Operating expenses $ 23,607 $ 5,324 $ 18,283 343 %

Loss from operations $ (22,804) $ (5,324) $ (17,480) 328 %

Other income (expense) $ 5,508 $ (870) $ 6,378 (733) %

Provision for income taxes $ (16) $ — $ (16) **

$ (17,312) $ (6,194) $ (11,118) 179 %

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

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

** Comparisons between positive and negative numbers and with a zero are not meaningful.

Revenues for the six months ended June 30, 2024 were $1.3 million compared to $0.0 million for the comparable period in the prior year for an increase of approximately $1.3 million.

The revenue amount for the six months ended June 30, 2024 represents the results of the revenue-generating Industrial IoT segment following the XTI Merger closing date of March 12, 2024 through the June 30, 2024 reporting date, whereas the Company was pre-revenue in 2023.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2024 were $0.4 million compared to $0.0 million for the comparable period in the prior year.

The cost of revenues amount for the six months ended June 30, 2024 represents the results of the revenue-generating Industrial IoT segment following the XTI Merger closing date of March 12, 2024 through the June 30, 2024 reporting date, whereas the Company was pre-revenue in 2023.

Gross profit for the six months ended June 30, 2024 was $0.8 million compared to $0.0 million for the comparable period in the prior year.

The gross profit amount for the six months ended June 30, 2024 represents the results of the revenue-

generating Industrial IoT segment following the XTI Merger closing date of March 12, 2024 through the June 30, 2024 reporting date, whereas the Company was pre-revenue in 2023.

Operating Expenses

Operating expenses for the six months ended June 30, 2024 were $23.6 million and $5.3 million for the comparable period ended June 30, 2023.

This increase of approximately $18.3 million was primarily attributable to (i) the recognition of $6.7 million of nonrecurring transaction bonus expense during the second quarter of 2024 as the bonuses became payable upon the earlier of the closing of qualifying financings or June 30, 2024, (ii) an increase in one-time merger-related transaction costs of $5.8 million, (iii) an increase in non-cash stock-based compensation expense of approximately $3.1 million , (iv) an increase in consulting compensation mainly attributable to consulting arrangements entered into with prior executives of Legacy Inpixon on March 12, 2024, (v) an increase in legal and accounting fees relating to capital raising activities during 2024, (vi) an increase in public company-related professional fees as the 2023 historical results reflect the operations of a private company, Legacy XTI, and (vii) the inclusion of the operating results of the Industrial IoT segment as of the XTI Merger closing date through the June 30, 2024 reporting date.

Other Income (Expense)

Other income (expense) for the six months ended June 30, 2024 was a gain of $5.5 million compared to a loss of $0.9 million for the comparable period ended June 30, 2023.

This fluctuation of approximately $6.4 million was primarily attributable to the Company recognizing an income gain of approximately $12.9 million relating to the remeasurement of convertible notes at fair value during the six months ended June 30, 2024, partially offset by inducement losses on debt conversions of approximately $6.7 million incurred during the six months ended June 30, 2024.

Provision for Income Taxes

The provision for income tax for the six months ended June 30, 2024 and 2023 was immaterial.

Liquidity and Capital Resources as of June 30, 2024

Our current capital resources and operating results as of and through June 30, 2024, consist of:

1) an overall working capital deficit of approximately $7.9 million;

2) cash and cash equivalents of approximately $5.8 million;

3) net cash used by operating activities for the three months ended March 31, 2024 of $2.6 million.

The breakdown of our overall working capital deficit as of March 31, 2024 is as follows (in thousands):

3) net cash used by operating activities for the six months ended June 30, 2024 of $8.2 million.

The breakdown of our overall working capital deficit as of June 30, 2024 is as follows (in thousands):

Working Capital Assets Liabilities Net

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

As of March 31, 2024, the total obligation for capitalized operating leases is approximately $0.7 million, of which approximately $0.3 million is expected to be paid in the next twelve months.

As of March 31, 2024, we owed approximately $0.8 million in principal under promissory notes with related and third parties.

As of June 30, 2024, the total obligation for capitalized operating leases was approximately $0.6 million, of which approximately $0.2 million is expected to be paid in the next twelve months.

As of June 30, 2024, we owed approximately $2.5 million relating to outstanding short-term promissory notes.

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

These notes are payable within the next twelve months and the interest rate charged under the notes range from 4.0% to 18.6%.

See Note 11 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

In addition, as of March 31, 2024, we have accrued a liability for outstanding warrants, of $1.0 million.

Customer Deposits

As of March 31, 2024, we received conditional pre-orders under a combination of non-binding aircraft purchase agreements, reservation deposit agreements, options and letters of intent for aircraft which generated approximately $1.4 million of cash from customer deposits.

As of June 30, 2024, we received conditional pre-orders under a combination of non-binding aircraft purchase agreements, reservation deposit agreements, options and letters of intent for aircraft which generated approximately $1.4 million of cash from customer deposits.

These funds from customer reservation deposits will not be recorded as revenue until the orders for aircraft are delivered, which may not be for many years or at all if we do not deliver the aircraft.

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Additionally, Maxim will receive $0.2 million 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 following the Effective Time.

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 a cash payment commitment of $0.2 million and 189,037 registered shares of XTI Aerospace common stock (the “Chardan Closing Shares”) in exchange for shares of Legacy XTI common stock issued to Chardan based on the exchange ratio under the XTI Merger Agreement.

If within 90 days following the Effective Time, the Company consummates a public offering of securities in which the price per share of XTI Aerospace common stock (“Chardan Qualified Offering price”) is less than the per share price of Inpixon common stock utilized to calculate the number of Chardan Closing Shares, the Company will be required, subject to applicable securities laws, to issue additional shares of XTI Aerospace common stock to Chardan in an amount equal to (i) $1,000,000 minus the product of the number of Chardan Closing Shares and Chardan Qualified Offering Price, divided by (ii) the Chardan Qualified Offering Price.

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 LLC (“Chardan”) received registered shares of XTI Aerospace common stock.

During June 2024, the Company received a letter from Chardan’s counsel seeking additional compensation under the Chardan Engagement Letter, including a cash payment of $0.2 million , and threatening to file an arbitration with the Financial Industry Regulatory Authority.

The Company has responded to the letter, disputing that it owes any compensation to Chardan.

Transaction Bonus Plan in connection with Future Strategic Transactions

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• Participants listed on Schedule 1 of the Plan, including Nadir Ali, Wendy Loundermon, Soumya Das and certain other employees, are eligible for a cash bonus equal to 100% of their aggregate annual base salary and target bonus amount in effect as of the closing of the Contemplated Transaction or a Qualifying Transaction, provided, however, that the Company’s payment of such bonus to a participant may, in the Company’s discretion, be conditioned on the participant’s timely execution and delivery of a customary release of claims and confidentiality agreement and such participant’s non-revocation of the release prior to the expiration of any revocation rights afforded to such participant by applicable law.

These bonus amounts will generally be paid at the closing of each applicable transaction, except

that bonus amounts in connection with the closing of the XTI Merger are payable according to the payment schedule set forth in the Plan Amendment and described below.

These bonus amounts will generally be paid at the closing of each applicable transaction, except that bonus amounts in connection with the closing of the XTI Merger are payable according to the payment schedule set forth in the Plan Amendment and described below.

• Participants listed on Schedule 2 of the Plan, including Nadir Ali and Wendy Loundermon, are eligible for a cash bonus based on the Transaction Value (as defined below) attributed to the Contemplated Transaction or Qualifying Transaction, as calculated in accordance with the terms of the Plan.

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“Qualifying Securities” means any debt or equity securities other than debt or equity securities having a maturity date or a redemption right at the option of the holder of fewer than six (6) months following the issuance of that security.

(2) The remaining fifty percent (50%) of any amounts payable pursuant to Schedule 1 and Schedule 2 of the Plan (the “Remaining Fifty Percent”) will be earned upon the earlier of the closing of a subsequent financing in which the Company receives an amount of gross proceeds that when added to the proceeds of previous sales of Qualifying Securities following the First Financing aggregates to at least $5 million (“Subsequent Financing”) or the Earned Date.

the Company receives an amount of gross proceeds that when added to the proceeds of previous sales of Qualifying Securities following the First Financing aggregates to at least $5 million (“Subsequent Financing”) or the Earned Date.

(3) Following the Earned Date, the First Fifty Percent (50%) will be paid in three (3) equal monthly installments, beginning on July 1, 2024, and on the first day of each month thereafter until the First Fifty Percent is paid in full.

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Das, delivered an acknowledgment agreement to the Company irrevocably waiving and releasing the Company from any and all rights to payment of such individual’s payments under Schedule 1 of the Plan except pursuant to and as provided under the terms of the Plan Amendment.

As of June 30, 2024, we have accrued 100%, or $6.7 million, of the transaction bonuses as the bonuses became payable during the second quarter of 2024.

During the third quarter of 2024 and as of the date of this report, the Company paid $0.9 million of the transaction bonuses.

Consulting Agreements

In conjunction with the Plan Amendment described above, the Compensation Committee approved and the Company entered into consulting agreements on March 12, 2024, with each of Nadir Ali (the “Ali Consulting Agreement”) , the Company’s former Chief Executive Officer , and Wendy Loundermon (the “Loundermon Consulting Agreement”), the Company’s former Chief Financial Officer.

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

Ali will provide consulting services to the Company f or 15 m onths or until earlier termination in accordance with its terms (the “Ali Consulting Period”).

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

If the Company terminates the Ali Consulting Agreement during the first six months of the Ali Consulting Period without Company Good Reason (as defined in the Ali Consulting Agreement), the Company will be required to pay all consulting fees that would be due for such six-month period.

Ali terminates the Ali Consulting Agreement during the Ali Consulting Period for Consultant Good Reason (as defined in the Ali Consulting Agreement), the Company will be required to pay all consulting fees that would be due for the remainder of the Ali Consulting Period, including the Equity Payment described below.

In addition, the Company will pay Mr.

Ali, in securities as described below or cash at the Company’s discretion, (a) the amount of $1.5 million due three months following the Closing, and (b) the aggregate amount of $4.5 million 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 the Company’s discretion, in (i) cash, (ii) fully vested shares of common stock under the Company’s equity incentive plan and registered on a registration statement on Form S-8 or another appropriate form (“Registered Shares”), or a combination of cash and Registered Shares.

Ali must continue to provide consulting services to the Company on the date of payment of an Equity Payment to receive the Equity Payment, unless the Company terminates the Ali Consulting Agreement without Company Good Reason or Mr.

Ali terminates the Ali Consulting Agreement for Consulting Good Reason, in which case the Equity Payments would become due and payable in full.

To the extent all or a portion of an Equity Payment is made in shares, such shares will be valued based on the closing price per share on the date on which the Equity Payment is made.

Subject to compliance with Section 15(b)(13) of Securities Exchange Act of 1934, as amended (the “Exchange Act”) , if Mr.

Ali provides services involving the identification of prospective merger or acquisition targets for the Company or its affiliates, it is intended that he be eligible for a bonus upon the successful delivery of services.

The specifics of the bonus will be negotiated and mutually agreed upon by the Company and Mr.

Pursuant to the Loundermon Consulting Agreement, following the closing of the XTI Merger, 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 her services regarding the transition of the management of the Company’s financial reporting function to ensure continuity of business operations (with such advisory fees payable, subject to certain conditions, pursuant to the payment schedule set forth in the Loundermon Consulting Agreement), 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.

If, during the first six months of the Loundermon Consulting Period, the Company terminates the Loundermon Consulting Agreement without Company Good Reason (as defined in the Loundermon Consulting Agreement) or Ms.

Loundermon terminates the Loundermon Consulting Agreement for Consultant Good Reason (as defined in the Loundermon Consulting Agreement), the Company will be required to pay all advisory fees that would be due for such six month period.

In conjunction with the Plan Amendment described above, the Compensation Committee approved and the Company entered into consulting agreements on March 12, 2024, with each of Nadir Ali , the Company’s former Chief Executive Officer , and Wendy Loundermon, the Company’s former Chief Financial Officer.

See Note 23 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Legacy XTI Deferred Compensation and Retention Bonus Plan

In an effort to conserve cash, Legacy XTI implemented a cost savings plan, effective on July 1, 2022.

As part of the cost savings plan, Legacy XTI installed a compensation reduction directive and retention bonus program impacting all employees and several current consultants, which is in effect until the Company secures sufficient financing as determined by executive management.

Accrued deferred compensation amounts will be repaid to participating individuals when executive management, at its sole discretion, determines that sufficient funding has been received by the Company, provided, in the case of employees, that such employees remain employed with the Company on such date.

As part of the plan, Legacy XTI granted participants a retention bonus, of either cash or equity, at the participant’s discretion, equal in value to three months of their monthly deferred compensation amount, if cash, or six months of their monthly deferred compensation amount, if equity, if the employee remains with the Company at the “earn date,” which is defined as six months after the date on which the deferred compensation described above is repaid.

As of March 31, 2024, liability amounts of approximatel y $0.7 million and $0.1 million are included in Accrued Expenses and Other Current Liabilities and Related Party Payables, respectively, on the accompanying condensed consolidated balance sheets relating to deferred compensation and retention bonuses under this plan.

Upon receiving additional financing during the first quarter of 2023, Legacy XTI restored the salaries of all employees to the original salary amount, effective with the semi-monthly payroll ending March 31, 2023.

As part of the cost savings plan, Legacy XTI installed a compensation reduction directive and retention bonus program impacting all employees and several current consultants.

Accrued deferred compensation amounts under the cost savings plan will be repaid to participating individuals when executive management, at its sole discretion, determines that sufficient funding has been received by the Company, provided, in the case of employees, that such employees remain employed with the Company on such date.

monthly deferred compensation amount, if equity, if the employee remains with the Company at the “earn date,” which is defined as six months after the date on which the deferred compensation described above is repaid.

As of June 30, 2024, liability amounts of approximatel y $0.5 million and $0.1 million are included in Accrued Expenses and Other Current Liabilities and Related Party Payables, respectively, on the accompanying condensed consolidated balance sheets relating to deferred compensation and retention bonuses under this plan.

Risks and Uncertainties

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 $2.6 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.

As of June 30, 2024, the Company has a working capital deficit of approximately $7.9 million, and cash and cash equivalents of approximately $5.8 million.

For the six months ended June 30, 2024, the Company had a net loss of approximately $17.3 million.

During the six months ended June 30, 2024, the Company used approximately $8.2 million of cash for operating activities.

There can be no assurances that the Company will ever earn revenues sufficient to support its operations, or that it will ever be profitable.

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

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.

The Company’s condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 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 Company's ability to obtain additional equity or debt financing, and attain further operating efficiency, which is uncertain, 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 and six months ended June 30, 2024 and 2023 do not include any adjustments that might result from the outcome of this uncertainty.

Liquidity and Capital Resources

The Company’s net cash flows used in operating, investing and financing activities for the three months ended March 31, 2024 and 2023 and certain balances as of the end of those periods are as follows (in thousands):

For the Three Months Ended March 31,

The Company’s net cash flows used in operating, investing and financing activities for the six months ended June 30, 2024 and 2023 and certain balances as of the end of those periods are as follows (in thousands):

For the Six Months Ended June 30,

Net cash used in operating activities $ (8,190) $ (1,573)

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Net increase in cash and cash equivalents $ 5,774 $ (78)

As of March 31,

As of June 30,

2024 As of December 31,

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Working capital deficit $ (7,868) $ (13,028)

Operating Activities for the three months ended March 31, 2024

Net cash used in operating activities during the three months ended March 31, 2024 was approximately $2.6 million.

The cash flows related to the three months ended March 31, 2024 consisted of the following (in thousands):

Operating Activities for the six months ended June 30, 2024

Net cash used in operating activities during the six months ended June 30, 2024 was approximately $8.2 million.

The cash flows related to the six months ended June 30, 2024 consisted of the following (in thousands):

Net loss $ (17,312)

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$ 47 Depreciation and amortization expenses

235 Amortization of intangible assets

92 Amortization of right-of-use asset

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156 Amortization of debt discount

4 Provision for doubtful accounts

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

6,732 Loss on extinguishment of debt

(398) Gain on fair value of warrant liability

1 Provision for credit losses

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

6,732 Inducement loss on debt conversions

281 Change in fair value of warrant liability

24 Change in fair value of warrant asset

(131) Unrealized loss on foreign currency transactions

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The net cash used in the change in operating assets and liabilities aggregated approximately $8.7 million and consisted primarily of the following (in thousands):

$ (143) Increase in accounts receivable and other receivables

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

$ 309 Decrease in accounts receivable and other receivables

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

1,981 Increase in accounts payable

(60) Decrease in related party payables

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

6,494 Increase in accrued liabilities, income tax liabilities and other liabilities

86 Increase in accrued interest

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$ 8,724 Net cash used in the changes in operating assets and liabilities

Operating Activities for the three months ended March 31, 2023

Net cash used in operating activities during the three months ended March 31, 2023 was approximately $0.5 million.

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

Operating Activities for the six months ended June 30, 2023

Net cash used in operating activities during the six months ended June 30, 2023 was approximately $1.6 million.

The cash flows related to the six months ended June 30, 2023 consisted of the following (in thousands):

Net loss $ (6,194)

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251 Amortization of debt discount

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

2,602 Stock based compensation

197 Change in fair value of JV obligation

126 Change in fair value of warrant liability

$ 3,238 Total non-cash expenses

The net use of cash in the change in operating assets and liabilities aggregated approximately $1.4 million and consisted primarily of the following (in thousands):

$ (1) Increase in accounts receivable and other receivables

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

$ 114 Decrease in other receivables

29 Decrease in prepaid expenses and other current assets

727 Increase in accounts payable

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$ 1,383 Net use of cash used in the changes in operating assets and liabilities

Cash Flows from Investing Activities as of March 31, 2024 and 2023

Net cash flows used in investing activities during the three months ended March 31, 2024 was approximately $3.0 million compared to net cash flows provided by investing activities during the three months ended March 31, 2023 of $0.0 million.

Cash flows related to investing activities during the three months ended March 31, 2024 consist primarily of the cash assumed from legacy Inpixon in connection with the Merger.

Cash Flows from Financing Activities as of March 31, 2024 and 2023

Net cash flows provided by financing activities during the three months ended March 31, 2024 was $1.4 million.

During the three months ended March 31, 2024, the Company received incoming cash flows of $0.4 million from a promissory note relating to the financing of insurance premiums, and $1.0 million in proceeds from an existing promissory note arrangement with Legacy Inpixon.

Net cash flows provided by financing activities during the three months ended March 31, 2023 was $0.7 million.

During the three months ended March 31, 2023, the Company received incoming cash flows of $0.3 million from the issuance of a convertible note and received 0.4 million in proceeds from promissory notes with David Brody and Legacy Inpixo n.

Cash Flows from Investing Activities as of June 30, 2024 and 2023

Net cash flows provided by investing activities during the six months ended June 30, 2024 was approximately $2.9 million compared to $0.0 million for the six months ended June 30, 2023.

Cash flows related to investing activities during the six months ended June 30, 2024 consist primarily of the cash assumed from Legacy Inpixon in connection with the XTI Merger.

Cash Flows from Financing Activities as of June 30, 2024 and 2023

Net cash flows provided by financing activities during the six months ended June 30, 2024 was $11.1 million.

During the six months ended June 30, 2024, the Company received incoming cash flows of $8.5 million from the ATM Offering, $2.0 million from promissory notes issued to Streeterville Capital, LLC, and $1.0 million in proceeds from an existing promissory note arrangement with Legacy Inpixon.

During the six months ended June 30, 2024, the Company repaid $0.5 million towards outstanding promissory notes.

Net cash flows provided by financing activities during the six months ended June 30, 2023 was $1.5 million.

During the six months ended June 30, 2023, the Company received proceeds of $0.8 million from the issuance of convertible notes, received $0.2 million in proceeds from the sale of common stock, and received $0.6 million in proceeds from promissory notes with David Brody and Legacy Inpixo n.

Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis