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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

March 31, 2022

OR

☐

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to

_______________

Commission file number:File Number 001-36404

INPIXON

INPIXON
(Exact name of registrant as specified in its charter)

Nevada88-0434915
Nevada88-0434915
(State or other jurisdiction of

incorporation or organization)		(I.R.S. Employer

Identification No.)

2479 Bayshore Road
Suite 195
Palo Alto, CA		94303
2479 E. Bayshore Road
Suite 195
Palo Alto, CA 94303
(Address of principal executive offices)
(Zip Code)
(408) 702-2167
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code:  (408) 702-2167

code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on
which each is registered
Common Stock, par value $0.001INPXThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),; and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐

¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒x No ☐

¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☐¨Accelerated filer☐¨
Non-accelerated filer☐ (Do not check if a smaller reporting company)xSmaller reporting company☒x
Emerging growth company☒¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

¨

Indicate by check mark whether the registrantissuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐¨ No ☒

x


Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Common Stock, par valuePar Value $0.00116,583,635152,476,355
(Class)Outstanding at November 17, 2017May 12, 2022


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INPIXON

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

TABLE OF CONTENTS

Page
Page No.
Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report
ii
PART I - FINANCIAL INFORMATION
iv
ItemITEM 1.Financial Statements1
iv
Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2022 and December 31, 2016 (Audited)20212
1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021
4
Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2017March 31, 2022 and 201620214
6
Condensed Consolidated StatementStatements of Stockholders’ (Deficit)Changes in Mezzanine Equity and Stockholders' Equity for the ninethree months ended September 30, 2017March 31, 2022 and 20216
7
Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2022 and 201620217
9
Notes to Unaudited Condensed Consolidated Financial Statements8
10
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations28
43
Item 3.Quantitative and Qualitative Disclosures About Market Risk46
57
Item 4.Controls and Procedures46
57
PART II - OTHER INFORMATION
58
Item 1.Legal Proceedings47
58
Item 1A.Risk Factors47
58
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds50
60
Item 3.Defaults Upon Senior Securities50
61
Item 4.Mine Safety DisclosureDisclosures50
61
Item 5.Other Information50
61
Item 6.Exhibits50
61
Signatures51
62


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION
CONTAINED IN THIS REPORT

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

●our limited cash and our history of losses;

●our ability to achieve profitability;

●our limited operating history with recent acquisitions;
●obtaining credit with suppliers needed for customers due to our credit issues;

●emerging competition and rapidly advancing technology in our industry that may outpace our technology;

●customer demand for the products and services we develop;

●the impact of competitive or alternative products, technologies and pricing;

●our ability to manufacture any products we develop;

●general economic conditions and events and the impact they may have on us and our potential customers;

●our ability to obtain adequate financing in the future;

●our ability to continue as a going concern;

●our success at managing the risks involved in the foregoing items; and

●other factors discussed in this Form 10-Q.

•our history of losses;
•our ability to achieve profitability;
•our limited operating history with recent acquisitions;
•risks related to our recent acquisitions;
•our ability to successfully integrate companies or technologies we acquire;
•emerging competition and rapidly advancing technology in our industry that may outpace our technology;
•customer demand for the products and services we develop;
•the impact of competitive or alternative products, technologies and pricing;
•our ability to manufacture any products we develop;
•general economic conditions and events and the impact they may have on us and our potential customers, including, but not limited to supply chain challenges, increased costs for materials and labor and other impacts resulting from COVID-19 and the Russia/Ukraine conflict;
•our ability to obtain adequate financing in the future;
•our ability to consummate strategic transactions which may include acquisitions, mergers, dispositions or investments;
•our ability to maintain compliance with the continued listing requirements of the Nasdaq Stock Market LLC;
•lawsuits and other claims by third parties or investigations by various regulatory agencies that we are and may be become subject to and are required to report, including but not limited to, the U.S. Securities and Exchange Commission;
•our success at managing the risks involved in the foregoing items; and
•other factors discussed in this Form 10-Q.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking
ii
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statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.


You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Unless otherwise stated or the context otherwise requires, the terms “Inpixon,”“Inpixon” “we,” “us,” “our,” “the Corporation”“our” and the “Company” refer collectively to Inpixon f/k/a Sysorex Global, and, where appropriate, its subsidiaries.

Except where

Unless indicated all share and per share dataotherwise in this Form 10-Q, includingall references to “$” refer to United States dollars, the unaudited condensed consolidated financial statements, reflect the 1 for 15 reverse stock splitlawful currency of the Company’s issued and outstanding sharesUnited States of common stock effected on March 1, 2017.

America. References to “CAD” refer to Canadian dollars, the lawful currency of Canada. References to “INR” refer to Indian rupees, the lawful currency of India. References to “EUR” refer to euros, the single currency of Participating Member States of the European Union. References to “GBP” refer to the British pound, the lawful currency of the United Kingdom.






















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PART I—I — FINANCIAL INFORMATION

Item 1.Financial Statements

ITEM 1: FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information which are the accounting principles that are generally accepted in the United States of America and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.


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


The results for the period ended September 30, 2017March 31, 2022 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, 20162021 and 20152020 included in the annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 17, 2017.

1
March 16, 2022.

iv

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

  September 30,  December 31, 
  2017  2016 
  (Unaudited)  (Audited) 
Assets      
Current Assets      
Cash and cash equivalents $107  $1,821 
Accounts receivable, net  5,738   11,788 
Notes and other receivables  419   362 
Inventory  790   1,061 
Prepaid licenses and maintenance contracts  5,746   13,321 
Assets held for sale  23   23 
Prepaid assets and other current assets  1,312   1,768 
         
Total Current Assets  14,135   30,144 
         
Prepaid licenses and maintenance contracts, non-current  2,958   5,169 
Property and equipment, net  896   1,385 
Software development costs, net  2,249   2,058 
Intangible assets, net  13,597   17,691 
Goodwill  636   9,028 
Other assets  734   998 
         
Total Assets $35,205  $66,473 

As of March 31,
2022		As of December 31,
2021
(Unaudited)(Audited)
Assets
Current Assets
Cash and cash equivalents$60,852 $52,480 
Accounts receivable, net of allowances of $272 and $272, respectively3,454 3,218 
Notes and other receivables284 321 
Inventory, net of reserve of $438 and $438, respectively1,766 1,976 
Short-term investments15,035 43,125 
Prepaid expenses and other current assets8,474 4,842 
Total Current Assets89,865 105,962 
Property and equipment, net1,412 1,442 
Operating lease right-of-use asset, net1,558 1,736 
Software development costs, net1,688 1,792 
Investments in equity securities335 1,838 
Long-term investments2,500 2,500 
Intangible assets, net32,002 33,478 
Goodwill7,656 7,672 
Other assets209 253 
Total Assets$137,225 $156,673 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2
statements

1

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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


As of March 31,
2022		As of December 31,
2020
(Unaudited)(Audited)
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable$1,066 $2,414 
Accrued liabilities3,863 10,665 
Operating lease obligation, current619 643 
Deferred revenue4,133 4,805 
Short-term debt2,411 3,490 
Acquisition liability3,436 5,114 
Total Current Liabilities15,528 27,131 
Long Term Liabilities
Operating lease obligation, noncurrent982 1,108 
Other liabilities, noncurrent28 28 
Acquisition liability, noncurrent110 220 
Total Liabilities16,648 28,487 
Commitments and Contingencies00
Mezzanine Equity
Series 7 Convertible Preferred Stock - 58,750 shares authorized; zero and 49,250 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.— 44,695 
Series 8 Convertible Preferred Stock- 53,197.7234 shares authorized; 53,197.7234 and zero issued and outstanding as of March 31, 2022 and December 31, 2021, respectively. (Liquidation preference of $53,197,723)43,173 — 
Stockholders’ Equity
Preferred Stock -$0.001 par value; 5,000,000 shares authorized
Series 4 Convertible Preferred Stock - 10,415 shares authorized; 1 issued, and 1 outstanding as of March 31, 2022 and December 31, 2021— — 
Series 5 Convertible Preferred Stock - 12,000 shares authorized; 126 issued, and 126 outstanding as of March 31, 2022 and December 31, 2021— — 
Common Stock - $0.001 par value; 2,000,000,000 shares authorized; 152,476,356 and 124,440,924 issued and 152,476,355 and 124,440,923 outstanding as of March 31, 2022 and December 31, 2021, respectively.152 124 
Additional paid-in capital338,183 332,639 
Treasury stock, at cost, 1 share(695)(695)
Accumulated other comprehensive (loss) income(58)44 
Accumulated deficit(261,535)(250,309)
Stockholders’ Equity Attributable to Inpixon76,047 81,803 
Non-controlling Interest1,357 1,688 
2

  September 30,  December 31, 
  2017  2016 
  (Unaudited)  (Audited) 
Liabilities and Stockholders’ (Deficit) Equity      
       
Current Liabilities      
Accounts payable $27,778  $23,027 
Accrued liabilities  4,372   3,959 
Deferred revenue  6,859   15,043 
Short-term debt  3,519   6,887 
Derivative liabilities  350   210 
Liabilities held for sale  2,053   2,041 
         
Total Current Liabilities  44,931   51,167 
         
Long Term Liabilities        
Deferred revenue, non-current  3,440   5,960 
Long-term debt  2,081   4,047 
Other liabilities  221   371 
Acquisition liability - Integrio  997   1,648 
Acquisition liability - LightMiner  --   567 
         
Total Liabilities  51,670   63,760 
         
Commitments and Contingencies        
         
Stockholders’ (Deficit) Equity        
         
Preferred Stock - $0.001 par value; 5,000,000 shares authorized, 0 issued and outstanding as of September 30, 2017  --   -- 
Convertible Series 1 Preferred Stock - $1,000 stated value, 5,000,000 shares authorized; 0 issued and outstanding at September 30, 2017 and 2,250 issued and outstanding at December 31, 2016 Liquidation preference of $0 at September 30, 2017 and $2,250,000 at December 31, 2016.  --   1,340 
Series 2 Convertible Preferred Stock - $1,000 stated value; 4,669 shares authorized; 0 issued and outstanding at September 30, 2017 and December 31, 2016 Liquidation preference of $0 at September 30, 2017 and December 31, 2016.  --   -- 
Common Stock - $0.001 par value; 50,000,000 shares authorized; 15,413,769 and 2,171,886 issued and 15,397,847 and 2,155,964 outstanding at September 30, 2017 and December 31, 2016, respectively  15   2 
Additional paid-in capital  73,440   64,148 
Treasury stock, at cost, 15,922 shares  (695)  (695)
Due from Sysorex Consulting Inc.  (666)  (666)
Accumulated other comprehensive income  37   52 
Accumulated deficit (excluding $2,442 reclassified to additional paid in capital in quasi-reorganization)  (86,588)  (59,473)
         
Stockholders’ (deficit) equity attributable to Inpixon  (14,457)  4,708 
         
Non-controlling interest  (2,008)  (1,995)
         
Total Stockholders’ (Deficit) Equity  (16,465)  2,713 
         
Total Liabilities and Stockholders’ (Deficit) Equity $35,205  $66,473 

INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except number of shares and par value data)

Total Stockholders’ Equity77,404 83,491 
Total Liabilities, Mezzanine Equity and Stockholders’ Equity$137,225 $156,673 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3
statements

3

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

For the Three Months Ended March 31,
20222021
(Unaudited)
Revenues$5,231 $2,954 
Cost of Revenues1,386 884 
Gross Profit3,845 2,070 
Operating Expenses
Research and development4,085 2,708
Sales and marketing2,276 1,639
General and administrative6,105 9,171
Acquisition-related costs121 470
Amortization of intangibles1,322 502
Total Operating Expenses13,909 14,490 
Loss from Operations(10,064)$(12,420)
Other Income (Expense)
Interest income (expense), net2 (349)
Loss on exchange of debt for equity— (30)
Provision for valuation allowance on related party loan - held for sale— (117)
Other income108 386 
Unrealized loss on equity securities(1,503)— 
Total Other Income (Expense)(1,393)(110)
Net Loss, before tax(11,457)(12,530)
Income tax provision(100)(9)
Net Loss(11,557)$(12,539)
Net (Loss) Income Attributable to Non-controlling Interest(346)18 
Net Loss Attributable to Stockholders of Inpixon(11,211)(12,557)
Accretion of Series 7 Preferred Stock(4,555)— 
Accretion of Series 8 Preferred Stock(548)— 
Deemed dividend for the modification related to Series 8 Preferred Stock(2,627)— 
Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock1,469 — 
Amortization premium- modification related to Series 8 Preferred Stock110 — 
Net Loss Attributable to Common Stockholders$(17,362)$(12,557)
Net Loss Per Share - Basic and Diluted$(0.13)$(0.16)
4

  For the Three Months Ended  For the Nine Months Ended 
  September 30,  September 30, 
  2017  2016  2017  2016 
  (Unaudited)  (Unaudited) 
Revenues      
Products $9,566  $8,366  $31,225  $27,871 
Services  2,358   2,874   9,277   10,788 
Total Revenues  11,924   11,240   40,502   38,659 
                 
Cost of Revenues                
Products  8,519   6,873   26,805   22,363 
Services  1,154   1,269   4,773   5,807 
Total Cost of Revenues  9,673   8,142   31,578   28,170 
                 
Gross Profit  2,251   3,098   8,924   10,489 
                 
Operating Expenses                
Research and development  447   587   1,459   1,711 
Sales and marketing  1,301   1,876   5,522   6,713 
General and administrative  5,378   3,699   14,633   11,116 
Acquisition related costs  --   22   5   52 
Impairment of goodwill  8,392   --   8,392   -- 
Amortization of intangibles  1,327   1,056   4,094   3,169 
                 
Total Operating Expenses  16,845   7,240   34,105   22,761 
                 
Loss from Operations  (14,594)  (4,142)  (25,181)  (12,272)
                 
Other Income (Expense)                
Interest expense  (694)  (639)  (2,721)  (1,037)
Change in fair value of shares to be issued  --   5   --   13 
Change in fair value of derivative liability  46   41   254   41 
Other income  610   15   545   54 
                 
Total Other Expense  (38)  (578)  (1,922)  (929)
                 
Net Loss from Continuing Operations  (14,632)  (4,720)  (27,103)  (13,201)
                 
Loss from Discontinued Operations, Net of Tax  (9)  --   (26)  -- 
                 
Net Loss  (14,641)  (4,720)  (27,129)  (13,201)
                 
Net Loss Attributable to Non-controlling Interest  (4)  (4)  (13)  (12)
                 
Net Loss Attributable to Stockholders of Inpixon $(14,637) $(4,716) $(27,116) $(13,189)
                 
Net Loss Per Share - Basic and Diluted $(1.56) $(2.70) $(5.79) $(7.77)
                 
Weighted Average Shares Outstanding                
Basic and Diluted  9,449,102   1,743,451   4,690,876   1,697,645 

INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Weighted Average Shares Outstanding
Basic and Diluted138,502,493 78,942,697 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4
statements

5

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

  For the Three Months Ended  For the Nine Months Ended 
  September 30,  September 30, 
  2017  2016  2017  2016 
  (Unaudited)  (Unaudited) 
             
Net Loss $(14,641) $(4,720) $(27,129) $(13,201)
                 
Unrealized foreign exchange gain/(loss) from cumulative translation adjustments  (5)  15   (15)  34 
                 
Comprehensive Loss $(14,646) $(4,705) $(27,144) $(13,167)

For the Three Months Ended March 31,
20222021
(Unaudited)
Net Loss$(11,557)$(12,539)
Unrealized foreign exchange loss from cumulative translation adjustments(102)(671)
Comprehensive Loss$(11,659)$(13,210)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5
statements

6

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT)MEZZANINE EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

AND STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands, except per share data)


Series 7 Preferred StockSeries 8 Preferred StockSeries 4 Convertible Preferred StockSeries 5 Convertible Preferred StockCommon StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive Income (Loss)Accumulated DeficitNon-Controlling InterestTotal Stockholders’ (Deficit) Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance - January 1, 202249,250 $44,695 — $— 1 $— 126 $— 124,440,924 $124 $332,639 (1)$(695)$44 $(250,309)$1,688 $83,491 
Common shares issued for extinguishment of debt— — — — — — — — 4,310,245 4 1,496 — — — — — $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)— — — — — — — — — 1— — — — — $— 
Series 8 Preferred stock issued for cash— — 53,197.7234 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 embedded warrants— — — (110)— — — — — — 110 — — — — — 110 
Restricted stock grants withheld for taxes— — — — — — — — (960,106)(1)(335)— — — — — $(336)
Common shares issued for CXApp earnout— — — — — — — — 10,873,886 11 3,686 — — — — — $3,697 
Common shares issued for exchange of warrants— — — — — — — — 13,811,407 14 (14)— — — — — $— 
Cumulative translation adjustment— — — — — — — — — — — — — (102)(15)15 $(102)
Net loss— — — — — — — — — — — — — — (11,211)(346)$(11,557)
Balance - March 31, 2022— $— 53,197.7234 $43,173 1 $— 126 $— 152,476,356 $152 $338,183 (1)$(695)$(58)$(261,535)$1,357 $77,404 

  Series 1 Convertible  Series 2 Convertible     Additional        Due from Sysorex  Accumulated Other     Non-  Total Stockholders’ 
  Preferred Stock  Preferred Stock  Common Stock  Paid-In  Treasury Stock  Consulting,  Comprehensive  Accumulated  Controlling  (Deficit) 
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Shares  Amount  Inc.  Income (Loss)  Deficit  Interest  Equity 
                                           
Balance - January 1, 2017  2,250  $1,340  $--  $--   2,171,886  $2  $64,147   (15,922) $(695) $(666) $52  $(59,472) $(1,995) $2,713 
                                                         
Common shares issued for services  --   --   --  --   155,137  --  253   --   --   --  --   --   --  253 
Stock options granted to employees for services  --   --   --  --   --  --  713   --   --   --  --   --   --  713 
Common shares issued for LightMiner Acquisition  --   --   --  --   18,905  --  567   --   --   --  --   --   --  567 
Fractional shares issued for stock split  --   --   --  --   1,496  --  --   --   --   --  --   --   --  -- 
Redemption of convertible series 1 preferred stock  (2,250)  (1,340)  --  --   100,000  --  1,340   --   --   --  --   --   --  -- 
Common shares issued in lieu of interest  --   --   --  --   110,000  --  316   --   --   --  --   --   --  316 
Common and preferred shares issued for net cash proceeds from a public offering  --   --   4,060  1,508   1,849,460  2  3,618   --   --   --  --   --   --  5,128 
Redemption of convertible series 2 preferred stock  --   --   (4,060) (1,508)  7,710,825  8  1,500   --   --   --  --   --   --  -- 
Common shares issued for net proceeds from warrants exercised  --   --   --  --   3,296,060  3  986   --   --   --  --   --   --  989 
Reclassification of warrants to derivative liabilities                          (3,773)                           (3,773) 
Reclassification of warrants from derivative liabilities to APIC                          3,773                           3,773 
Cumulative Translation Adjustment  --   --   --  --   --  --  --   --   --   --  (15)  --   --  (15)
Net loss  --   --   --  --   --  --  --   --   --   --  --   (27,115)  (13) (27,128)
                                                         
Balance - September 30, 2017  --  $--  $--  $--   15,413,769  $15  $73,440   (15,922) $(695) $(666) $37  $(86,588) $(2,008)  (16,465)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6
statements

1
7
INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS

  For the Nine Months Ended 
  September 30, 
  2017  2016 
  (Unaudited) 
Cash Flows from Operating Activities      
Net loss $(27,129) $(13,201)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:        
Depreciation and amortization  1,324   884 
Amortization of intangible assets  4,094   3,169 
Impairment of goodwill  8,392   -- 
Stock based compensation  1,282   1,055 
Change in fair value of shares to be issued  --   (13)
Change in fair value of derivative liability  (254)  (41)
Amortization of technology  50   -- 
Amortization of deferred financing costs  167   -- 
Amortization of debt discount  1,545   196 
Provision for doubtful accounts  773   455 
Other  129   22 
         
Changes in operating assets and liabilities:        
Accounts receivable and other receivables  5,223   4,016 
Inventory  270   (97)
Other current assets  455   (26)
Prepaid licenses and maintenance contracts  9,787   1,248 
Other assets  46   (173)
Accounts payable  4,751   850 
Accrued liabilities  455   (1,205)
Deferred revenue  (10,704)  1,915 
Other liabilities  (438)  (190)
Total Adjustments  27,347   12,065 
         
Net Cash Provided by (Used in) Operating Activities  218   (1,136)
         
Cash Flows From (Used in) Investing Activities        
Purchase of property and equipment  (91)  (461)
Investment in capitalized software  (1,063)  (1,160)
Net Cash Flows Used in Investing Activities  (1,154)  (1,621)
         
Cash Flows from Financing Activities        
Net repayment of line of credit  (3,348)  (4,150)
Repayment of term loan  --   (1,611)
Advances to related party  --   (3)
Net proceeds from issuance of common stock, preferred stock and warrants  6,117   -- 
Repayment of debenture  (2,850)  -- 
Repayment of notes payable  (20)  (70)
Advances from related party  --   2 
Proceeds from debenture and convertible preferred stock  --   5,000 
Net proceeds from convertible promissory notes  2,000   -- 
Repayment of convertible promissory notes  (2,662)  -- 
Net Cash Used in Financing Activities  (763)  (832)
         
Effect of Foreign Exchange Rate on Changes on Cash  (15)  34 
         
Net Decrease in Cash and Cash Equivalents  (1,714)  (3,555)
         
Cash and Cash Equivalents - Beginning of period  1,821   4,060 
         
Cash and Cash Equivalents - End of period $107  $505 
         
Supplemental Disclosure of cash flow information:        
Cash paid for:        
Interest $545  $837 
Income Taxes  --   -- 
Debt discount of the fair value of the embedded conversion feature  --  $2,356 

CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

(Unaudited)
(In thousands, except per share data)

Series 7 Preferred StockSeries 4 Convertible Preferred StockSeries 5 Convertible Preferred StockCommon StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive Income (Loss)Accumulated DeficitNon-Controlling InterestTotal Stockholders’ (Deficit) Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance - January 1, 2021— — 1 $— 126 $— 53,178,462 $53 $225,613 (1)$(695)$660 $(180,992)$41 $44,680 
Common shares issued for registered direct offering— — — — — — 15,800,000 16 74,058 — — — — — 74,074 
Common shares issued for extinguishment of debt— — — — — — 893,921 1 1,499 — — — — — 1,500 
Common shares issued for cashless stock options exercised— — — — — — 4,977 — — — — — — — — 
Common shares issued for net proceeds from warrants exercised— — — — — — 31,505,088 32 3,747 — — — — — 3,779 
Stock options granted to employees and consultants for services— — — — — — — — 5,096 — — — — — 5,096 
Cumulative translation adjustment— — — — — — — — — — — (671)— — (671)
Net loss— — — — — — — — — — — — (12,557)18 (12,539)
Balance - March 31, 2021— — 1 $— 126 $— 101,382,448 $102 $310,013 (1)$(695)$(11)$(193,549)$59 $115,919 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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statements

8

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months Ended March 31,
20222021
Cash Flows Used in Operating Activities(Unaudited)
Net loss$(11,557)$(12,539)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization317 293 
Amortization of intangible assets1,489 650 
Amortization of right of use asset169 181 
Stock based compensation1,533 5,096 
Earnout payment expense(2,827)— 
Loss on exchange of debt for equity— 30 
Amortization of debt discount— 224 
Related party note, gain on foreign currency transaction— (363)
Unrealized gain on note(167)— 
Provision for valuation allowance for held for sale loan— 117 
Income tax expense— 9 
Unrealized loss on equity securities1,503 — 
Other146 — 
Changes in operating assets and liabilities:
Accounts receivable and other receivables(239)426 
Inventory181 (279)
Prepaid expenses and other current assets(3,607)135 
Other assets41 (227)
Accounts payable(1,345)480 
Accrued liabilities(109)421 
Income tax liabilities(40)— 
Deferred revenue(666)(235)
Operating lease obligation(141)(176)
Other liabilities— 96 
Net Cash Used in Operating Activities(15,319)(5,661)
Cash Flows Used in Investing Activities
Purchase of property and equipment(81)(109)
Purchases of capitalized software(107)(253)
Investments in short term investments— (42,059)
Sales of treasury bills28,001 — 
Purchase of Systat licensing agreement— (900)
Net Cash Provided By (Used in) Investing Activities27,813 (43,321)
Cash From Financing Activities
Net proceeds from issuance of preferred stock and warrants46,906 — 
Net proceeds from issuance of common stock and warrants— 77,853 
9
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Cash paid for redemption of preferred stock series 7(49,250)— 
Restricted stock forfeiture for settlement of employee taxes(336)— 
Loans to related party— (117)
Net proceeds from promissory notes364 — 
Repayment of CXApp acquisition liability(1,787)— 
Repayment of acquisition liability to Locality shareholders— (467)
Net Cash (Used In) Provided By Financing Activities(4,103)77,269 
Effect of Foreign Exchange Rate on Changes on Cash(19)(10)
Net Increase in Cash and Cash Equivalents8,372 28,277 
Cash and Cash Equivalents - Beginning of period52,480 17,996 
Cash and Cash Equivalents - End of period$60,852 $46,273 
Supplemental Disclosure of cash flow information:
Cash paid for:
Interest$1 $— 
Income Taxes$100 $— 
Non-cash investing and financing activities
Common shares issued for extinguishment of debt$1,500 $1,500 
Common shares issued for CXApp Earnout Payment$3,697 $— 
Common shares issued in exchange for warrants$14 $— 
The accompanying notes are an integral part of these financial statements























10
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 1 - Organization and Nature of Business
Inpixon is the Indoor Intelligence™ company. Our solutions and Going Concern

Inpixon,technologies help organizations create and redefine exceptional workplace experiences that enable smarter, safer and more secure environments. We leverage our positioning, mapping, analytics and app technologies to achieve higher levels of productivity and performance, increase safety and security, improve worker and employee satisfaction rates and drive a more connected workplace. We have focused our corporate strategy on being the primary provider of the full range of foundational technologies needed in order to offer a comprehensive suite of solutions that make indoor data available and meaningful to organizations and their employees.



Our Indoor Intelligence solutions are used by our customers for a variety of use cases including, but not limited to, employee and visitor experience enhancement through its wholly-owned subsidiaries, Inpixon USA, Inpixon Federal, Inc. (“Inpixon Federal”), Inpixon Canada, Inc. (“Inpixon Canada”)a customer branded app with features such as desk booking, wayfinding and navigation, and the majority-owned subsidiary, Sysorex Arabia LLC (“Sysorex Arabia”) (unless otherwise stateddelivery of content to tens of thousands of attendees in hybrid events. Our real time location (RTLS) and asset tracking products offer manufacturing and warehouse logistics optimization and automation, increase workforce productivity, and enhance worker safety and security.

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

•Digital solutions (eTearsheets; eInvoice, adDelivery) or cloud-based applications and analytics for the context otherwise requires, the terms “Inpixon” “we,” “us,” “our”advertising, media and the “Company” refer collectivelypublishing industries y advertising management platform referred to Inpixonas Shoom by Inpixon; and the above subsidiaries), provides Big Data

•A comprehensive set of data analytics and location based productsstatistical visualization solutions for engineers and related servicesscientists referred to as SAVES by Inpixon.

We report financial results for the cyber-security3 segments: Indoor Intelligence, Shoom and InternetSAVES. For Indoor Intelligence, we generate revenue from sales of Things markets. The Company is headquartered in California,hardware, software licenses and has salesprofessional services. For Shoom and subsidiary offices in Virginia, California, and Vancouver, Canada.

On November 21, 2016, and as more fully described in Note 4, the Company completed the acquisition of substantially all of the assets and certain liabilities of Integrio Technologies, LLC (“Integrio”), which is in the U.S. Federal Government IT contracts business.

As of September 30, 2017, the Company has a working capital deficiency of approximately $30.8 million. For the nine months ended September 30, 2017, the Company incurred a net loss of approximately $27.1 million. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the financial statements are issued. 

On August 9, 2016, the Company entered into a Securities Purchase Agreement with Hillair Capital Investments L.P. pursuant to which it issued and sold (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amount of $5,700,000 due on August 9, 2018 and (ii) 2,250 shares of newly created Series 1 Convertible Preferred Stock, par value $0.001 per share, for an aggregate purchase price of $5,000,000. On June 30, 2017 the Company received proceeds from a public offering of $6 million of which $5.5 million was used to pay down outstanding indebtedness. During the third quarter of 2017, the Company implemented a cost cutting program that would reduce operating expenses by approximately $6 million on an annual basis.

The Company’s capital resources as of September 30, 2017, availability on the unlimited Payplant Loan Agreement (as described in Note 9) to finance purchase orders and invoices, higher margin business line expansion and credit limitation improvements, may not be sufficient to fund planned operations during 2017. The Company will need to raise $8-10 million outside capital under structures available to it including debt and/or equity offerings this year. The Company also has an effective registration statement on Form S-3 which will may allow it to raise additional capitalSAVES, we generate revenue from the sale of its securities, subject to certain limitations for registrants with a market capitalization of less than $75 million. The information in this Form 10-Q concerning the Company’s Form S-3 registration statement does not constitute an offer of any securities for sale. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months, the Company may need to curtail certain aspects of its operating activities or consider other means of obtaining additional financing, such as through the sale of assets or of a business segment, although there is no guarantee that the Company could obtain the financing necessary to continue its operations.

8
software licenses.


INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 2 - Basis of Presentation


The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information, which are the accounting principles that are generally accepted in the United States of America.America (“GAAP”), for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC") . Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. TheInterim results of the Company’s operations for the nine month periodthree months ended September 30, 2017 isMarch 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.2022. 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, 20162021 and 20152020 included in the annual report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange CommissionSEC on April 17, 2017.

March 16, 2022.
11
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Note 3 - Summary of Significant Accounting Policies

The Company’sCompany's complete accounting policies are described in Note 2 to the Company’sCompany's audited consolidated financial statements and notes for the years ended December 31, 20162021 and 2015.

2020.

Liquidity
As of March 31, 2022, the Company has a working capital surplus of approximately $74.3 million, cash of approximately $60.9 million and short term investments of $15.0 million. For the three months ended March 31, 2022, the Company had a net loss of approximately $11.6 million.
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 112,778,720 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. The net proceeds to the Company from this offering was $46.9 million after placement agent commissions and other offering costs. See further breakdown in Note 12 - Capital Raises.
Risks and Uncertainties
The Companycannot assure youthat we will everearnrevenuessufficient tosupport ouroperations,orthat we will everbe profitable.Inordertocontinueouroperations,wehavesupplementedtherevenuesweearnedwithproceedsfromthesaleof our equity and debt securities and proceeds from loans and bank credit lines. While the impact of the COVID-19 pandemic is generally subsiding, the lasting impact on our business and results of operations continues to remain uncertain. While we were able to continue operations remotely throughout the pandemic, we have experienced supply chain cost increases and constraints and delays in the receipt of certain components of our hardware products impacting delivery times for our products. In addition, to the extent that certain customers continue to be challenged by the lasting effects of the pandemic, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders. Despite these challenges, we were able to realize growth in revenue for the first quarter of 2022 when compared to the same period of 2021 as a result of an increase in sales associated with our indoor intelligence platform including the CXApp and Intranav acquisitions completed in April and December 2021, respectively.

We anticipate that certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and Ukraine, and inflation on our customers and partners in regions throughout the world. We expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business. The impact that these global events will have on general economic conditions is continuously evolving and the ultimate that they will have on our results of operations continues to remain uncertain and there are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected.
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, the Company believes it has the ability to mitigate such concerns for a period of at least one year from the date these financial statements are issued.
Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of:

●
•the valuation of stock-based compensation;
•the valuation of stock-based compensation;
●the allowance for doubtful accounts;
●the valuation allowance for the deferred tax asset; and
●impairment of long-lived assets and goodwill.

Revenue Recognition

The Company provides information technology, or IT, solutions and services to customers and derives revenues primarily from the sale of third-party hardware and software products, software, assurance, licenses and other consulting services, including maintenance services and recognizes revenue once the following four criteria are met: (1) persuasive evidence of an arrangement exists; (2) the price is fixed and determinable, (3) shipment (software and hardware) or fulfillment (maintenance) has occurred; and (4) there is reasonable assurance of collection of the sales proceeds (the “Revenue Recognition Criteria”). In addition, the Company also records revenuesCompany’s common stock issued in accordance with Accounting Standards Codification (“ASC”) Topic 605-45 “Principal Agent Consideration” (“ASC 605-45”). The Company evaluates the salestransactions, including acquisitions;

12
Table of products and services on a case by case basis to determine whether the transaction should be recorded gross or net, including, but not limited to, assessing whether or not the Company: (1) is the primary obligor in the transaction; (2) has inventory risk with respect to the products and/or services sold; (3) has latitude in pricing; and (4) changes the product or performs part of the services sold. The Company evaluates whether revenues received from the sale of hardware and software products, licenses, and services, including maintenance and professional consulting services, should be recognized on a gross or net basis on a transaction by transaction basis. As of September 30, 2017, the Company has determined that all revenues received should be recognized on a gross basis in accordance with applicable standards.

9
Contents

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 3 - Summary of Significant Accounting Policies (continued)

Revenue Recognition

•the allowance for credit losses;
•the valuation of loans receivable;
•the valuation of equity securities;
•the valuation allowance for deferred tax assets; and
•impairment of long-lived assets and goodwill.



13
Table of Contents
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 3 - Summary of Significant Accounting Policies (continued)

Cooperative reimbursements from vendors, which are earned

Business Combinations
The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and available,accordingly, the assets and liabilities of the acquired business are recorded duringat their fair values at the perioddate of acquisition. The excess of the related transaction has occurred. Cooperative reimbursements arepurchase price over the estimated fair value is recorded as a reductiongoodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of costoperations are consolidated as of salesand subsequent to the acquisition date.
Investments
Short-term investments
Investments with maturities greater than 90 days but less than one year are classified as short-term investments on the consolidated balance sheets and consist of U.S. Treasury Bills. Accrued interest on U.S. Treasury bills are also classified as short term investment.
Our short-term investments are considered available for use in accordancecurrent operations, are classified as available-for-sale securities. Available for sale securities are carried at fair value, with ASC Topic 605-50 “Accounting by a Customer (including reseller) for Certain Consideration Received from a Vendor.” Provisions for returns are estimated based on historical collectionsan unrealized gains and credit memo analysis forlosses included in the period.Other income (expense) line of the Condensed Consolidated Statements of Operations. The Company receives Marketing Development Funds from vendors based on quarterly or annual sales performance to promote the marketingrecorded unrealized losses of vendor productsapproximately $89,000 and services. The Company must file claims with vendors$2,000 for these cooperative reimbursements by providing invoices and receipts for marketing expenses. Reimbursements are recorded as a reduction of marketing expenses and other applicable selling, general and administrative expenses ratably over the period in which the expenses are expected to occur. The Company receives vendor rebates which are recorded to cost of sales.

The Company also enters into sales transactions whereby customer orders contain multiple deliverables, and reports its multiple deliverable arrangements under ASC 605-25 “Revenue Arrangements with Multiple Deliverables” (“ASC-605-25”). These multiple deliverable arrangements primarily consist of the following deliverables: the Company’s design, configuration, installation, integration, warranty/maintenance and consulting services; and third-party computer hardware, software and warranty maintenance services. In situations where the Company bundles all or a portion of the separate elements, Vendor Specific Objective Evidence (“VSOE”) is determined based on prices when sold separately. For the three months ended September 30, 2017March 31, 2022 and 2016 revenues recognized2021, respectively.

Mezzanine equity
When ordinary or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the issuer, and upon such event, the shares would become redeemable at the option of the holders, they are classified as ‘mezzanine equity’ (temporary equity). The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.
Investment in equity securities- fair value
Investment securities—fair value consist primarily of investments in equity securities and are carried at fair value in accordance with Accounting Standards Codification ("ASC") 321, Investments-Equity Securities (“ASC 321”). These securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity. These securities transactions are recorded on a trade date basis. Any unrealized appreciation or depreciation on investment securities is reported in the Condensed Consolidated Statement of Operations within Unrealized Loss on Equity Securities. The Unrealized loss on equity securities for the three months ended March 31, 2022 and 2021 was approximately $1.5 million and zero, respectively.
Revenue Recognition
The Company recognizes revenue when control is transferred of the promised products or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company derives revenue from software as a result of customer contracts requiring the delivery of multiple elements were $1.6 millionservice, design and $3.7 million, respectively. For the nine months ended September 30, 2017implementation services for its Indoor Intelligence systems, and 2016 revenues recognized as a result of customer contracts requiring the delivery of multiple elements were $11.3 millionprofessional services for work performed in conjunction with its systems.
Hardware and $15.4 million, respectively.

Hardware, Software and Licensing Revenue Recognition

Generally, the Revenue Recognition Criteria are met with respect to the


For sales of hardware and software products, the Company’s performance obligation is satisfied at a point in time when they are shipped to the customer. This is when the customer has title to the product and the risks and rewards of ownership. The delivery of products to ourInpixon's customers occurs in a variety of ways, including (i) as a physical product shipped from the Company’s warehouse, (ii) via drop-shipment by a third-party vendor, or (iii) via electronic delivery with respect to software licenses. The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer. As a result,Accordingly, the Company recognizesis the saleprincipal in the transaction with the customer and records revenue on a gross
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Table of Contents
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 3 - Summary of Significant Accounting Policies (continued)
basis. The Company receives fixed consideration for sales of hardware and software products. The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice. The Company has elected the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the product and the cost of such upon receiving notification from the supplierasset that the product has shipped. Vendor rebates and price protection are recorded when earned asotherwise would have been recognized is less than a reduction to cost of sales or merchandise inventory, as applicable. Vendor product price discounts are recorded when earned as a reduction to cost of sales.

Maintenance and Professional Servicesyear.

Software As A Service Revenue Recognition

With respect to sales of ourthe Company’s maintenance, consulting and other service agreements including ourthe Company’s digital advertising and electronic services, customers pay fixed monthly fees in exchange for the Company’s service. The Company’s performance obligation is satisfied over time as the digital advertising and electronic services are provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service.
Professional Services Revenue Recognition Criteria
The Company’s professional services include milestone, fixed fee and time and materials contracts.
Professional services under milestone contracts are accounted for using the percentage of completion method. As soon as the outcome of a contract can be estimated reliably, contract revenue is met oncerecognized in the service has been provided.consolidated statement of operations in proportion to the stage of completion of the contract. Contract costs are expensed as incurred. Contract costs include all amounts that relate directly to the specific contract, are attributable to contract activity, and are specifically chargeable to the customer under the terms of the contract.
Professional services are also contracted on the fixed fee and time and materials basis. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company’s time and materials contracts are paid weekly or monthly based on hours worked. Revenue on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended. The fixed rate includes direct labor, indirect expenses, and profits. Materials, or other specified direct costs, are reimbursed as actual costs and may include markup. The Company has elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date. For fixed fee contracts including maintenance service provided by in house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous service. Because the Company’s contracts have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations. Anticipated losses are recognized as soon as they become known. For the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, the Company did not incur any such losses. These amounts are based on known and estimated factors. Revenues
License Revenue Recognition
The Company enters into contracts with its customers whereby it grants a non-exclusive on-premise license for the use of its proprietary software. The contracts provide for either (i) a one year stated term with a one year renewal option, (ii) a perpetual term or (iii) a two year term with the option to upgrade to a perpetual license at the end of the term. The contracts may also provide for yearly on-going maintenance services for a specified price, which includes maintenance services, designated support, and enhancements, upgrades and improvements to the software (the “Maintenance Services”), depending on the contract. Licenses for on-premises software provide the customer with a right to use the software as it exists when made available to the customer. All software provides customers with the same functionality and differ mainly in the duration over which the customer benefits from the software.
The timing of the Company's revenue recognition related to the licensing revenue stream is dependent on whether the software licensing agreement entered into represents a good or service. Software that relies on an entity’s IP and is delivered only through a hosting arrangement, where the customer cannot take possession of the software, is a service. A software arrangement that is provided through an access code or key represents the transfer of a good. Licenses for on-premises software represents a good and provide the customer with a right to use the software as it exists when made available to the customer. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Revenue from distinct on-premises licenses is recognized upfront at the point in time and material or firm fixed price long-term and short-term contracts are derived principally with various United States government agencies and commercial customers.  

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when the software is made available to the customer.

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Table of Contents
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 3 - Summary of Significant Accounting Policies (continued)

Maintenance

Renewals or extensions of licenses are evaluated as distinct licenses (i.e., a distinct good or service), and Professional Services Revenue Recognition (continued)

revenue attributed to the distinct good or service cannot be recognized until (1) the entity provides the distinct license (or makes the license available) to the customer and (2) the customer is able to use and benefit from the distinct license. Renewal contracts are not combined with original contracts, and, as a result, the renewal right is evaluated in the same manner as all other additional rights granted after the initial contract. The revenue is not recognized until the customer can begin to use and benefit from the license, which is typically at the beginning of the license renewal period. Therefore, the Company recognizes revenue resulting from renewal of licensed software at a point in time, specifically, at the beginning of the license renewal period.

The Company recognizes revenue for sales of all services billed as a fixed fee ratablyrelated to Maintenance Services evenly over the termservice period using a time-based measure because the Company is providing continuous service and the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the services are performed.
Contract Balances
The timing of the arrangement as such services are provided. Billings for such services that are made in advanceCompany’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue recognizeduntil the performance obligations are recordedsatisfied. The Company had deferred revenue of approximately $4.1 million and $4.8 million as of March 31, 2022 and December 31, 2021, 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 recognized as revenue ratablyrelated contract costs over the billing coverage period. Amounts received as prepayments for services to be rendered are recognized as deferred revenue. Revenue from such prepayments is recognized when the services are provided.

The Company’s storage and computing maintenance services agreements permit customers to obtain technical support from the Company and/or the manufacturer and to update, at no additional cost, to the latest technology when new software updates are introduced when and if available during the period that the maintenance agreement is in effect. Since the Company assumes certain responsibility for product staging, configuration, installation, modification, and integration with other client systems, or retains general inventory risk upon customer return or rejection and is most familiar with the customer and its required specifications, it generally serves as the initial contact with the customer with respect to any storage and computing maintenance services required and therefore will perform all or part of the required service.

Typically, the Company sells maintenance contracts for a separate fee with initial contractual periods ranging from one to three years with renewal for additional periods thereafter. The Company generally bills maintenance fees in advance and records the amounts received as deferred revenue with respect to any portion of the fee for which services have not yet been provided. The Company recognizes the related revenue ratably over the term of the maintenance agreement as services are provided. In situations where the Company bundles all or a portion of the maintenance fee with products, VSOE for maintenance is determined based on prices when sold separately.

Customers that have purchased maintenance/warranty services have a right to cancel and receive a refund of the amounts paid for unused services at any time during the service period upon advance written notice to the Company. Cancellation and refund privileges with respect to maintenance/warranty services lapse as to any period during the term of the agreement for which such services have already been provided. Customers do not have the right to a refund of paid fees for maintenance/warranty services that the Company has earned and recognized as revenue. Invoices issued for maintenance/warranty services not yet rendered are recorded as deferred revenue and then recognized as revenue ratably over the service period. As a result, (1) the warranty and maintenance service fees payable by each customer are separately accounted for in each customer purchase order as a separate line item, and (2) upon the Company’s receipt and acceptance of a request for refund of maintenance/warranty services not yet provided, the Company’s obligation to perform any additional maintenance/warranty services will end. Sales are recorded net of discounts and returns.

next twelve months.

Stock-Based Compensation

The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as an expense over the period during which the recipient is required to provide services in exchange for that award.

Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period.

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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 3 - SummaryThe Company measures the cost of Significant Accounting Policies (continued)

Stock-Based Compensation (continued)

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 net of estimated forfeitures, of $288,000approximately $1.5 million and $344,000$5.1 million for the three months ended September 30, 2017March 31, 2022 and 2016, and $1,282,000 and $1,055,000 for the nine-month period ended September 30, 2017 and 2016,2021, respectively, which are included in general and administrative expenses. The following table summarizes the natureStock-based compensation charges are related to employee compensation and related benefits.

16
Table of such charges for the periods then ended (in thousands):

  For the Three Months Ended
September 30,		  For the Nine Months Ended
September 30,		 
  2017  2016  2017  2016 
Compensation and related benefits $201  $334  $713  $1,008 
Professional and legal fees  87   10   246   47 
Acquisition transaction costs  --   --   7   -- 
Interest expense  --   --   316   -- 
Totals $288  $344  $1,282  $1,055 

Contents

INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 3 - Summary of Significant Accounting Policies (continued)
Net LossIncome (Loss) Per Share

The Company computes basic and diluted earnings per share by dividing net loss by the weighted average number of common shares outstanding during the period. Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options and warrants in the calculation of diluted net loss per common shares would have been anti-dilutive.

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the ninethree months ended September 30, 2017March 31, 2022 and 2016:

  For the Nine Months Ended
September 30,		 
  2017  2016 
Options  309,609   398,370 
Warrants  3,812,449   37,417 
Shares accrued but not issued  --   18,905 
Convertible preferred stock  --   100,000 
Convertible debenture  404,255   253,333 
Totals  4,526,313   808,025 

2021:

For the Three Months Ended March 31,
20222021
Options28,456,321 7,012,891 
Warrants130,321,970 49,398,338 
Convertible preferred stock112,779,566 846 
Rights to common stock3,938,424 — 
Restricted Stock Award— 5,250,000 
Total275,496,281 61,662,075 
Preferred Stock

The Company appliesrelies on the accounting standards for distinguishing liabilitiesguidance provided by ASC 480, "Distinguishing Liabilities from equity under GAAP when determining the classification and measurement of itsEquity", to classify certain redeemable and/or convertible preferred stock.instruments. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as permanent equity.

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The Company also follows the guidance provided by ASC 815 "Derivatives and Hedging", 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. Company determines the estimated fair value of such financial instruments presented in these financial statements using available market information and appropriate methodologies. These financial instruments, except for short-term debt and investments in equity securities, are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. Investments in equity securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity, as necessary. Short-term debt approximates market value based on similar terms available to the Company in the market place.
Recently Issued and Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)” (“ASU 2020-06”). ASU 2020-06 reduces the number of models used to account for convertible instruments, amends diluted EPS calculations for convertible instruments, and amends the requirements for a contract (or embedded derivative) that is potentially settled in an entity's own shares to be classified in equity. The amendments add certain disclosure requirements to increase transparency and decision-usefulness about a convertible instrument's terms and features. Under the amendment, the Company must use the if-converted method for including convertible instruments in diluted EPS as
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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 3 - Summary of Significant Accounting Policies (continued)

Reclassification

Certain accounts in the prior year’s financial statements have been reclassified for comparative purposes to conform

opposed to the presentation intreasury stock method. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2023 for smaller reporting companies as defined by the current year’sSEC. Early adoption is allowed under the standard with either a modified retrospective or full retrospective method. The Company early adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. As a result of Management’s evaluation, the adoption of ASU 2020-06 did not have a material impact on the consolidated financial statements. These reclassifications have no effect on previously reported earnings.

Derivative Liabilities

During


In May 2021, the year ended December 31, 2016,FASB issued ASU 2021-04, "Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options'" ("ASU 2021-04"), which introduces a new way for companies to account for warrants either as stock compensation or derivatives. Under the Company issued a convertible debenture that included reset provisions considered to be down-round protection. In addition,new guidance, if the Company issued warrants that include a fundamental transaction clause which providemodification does not change the instrument's classification as equity, the company accounts for the warrant holders to be paid in cashmodification as an exchange of the original instrument for a new instrument. In general, if the fair value of the warrants as computed under a Black Scholes valuation model. The Company determined that the conversion feature and warrants are derivative instruments pursuant to ASC 815 “Derivatives and Hedging” issued by the Financial Accounting Standards Board (“FASB”). The accounting treatment of derivative financial instruments requires that the Company bifurcate the conversion feature and record it as a liability at fair value and"new" instrument is greater than the fair value of the warrants were computed as defined in"original" instrument, the agreement. The instruments are marked-to-market at fair value as of each balance sheet date. Any change in fair valueexcess is recorded as a change inrecognized based on the fair value of derivative liabilities for each reporting period. The fair valuesubstance of the conversion feature was determined usingtransaction, as if the Binomial Lattice model.issuer has paid cash. The Company reassesses the classification at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of theeffective date of the event that caused the reclassification. As of September 30, 2017, the fair value of the derivative liability was $350,000standard is for interim and was included in short term liabilities on the balance sheet.

Recent Accounting Standards

In January 2017, the FASB issued ASU 2017-04: “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which removes Step 2 from the goodwill impairment test. It is effective for annual and interimreporting periods beginning after December 15, 2019. Early2021 for all entities, and early adoption is permitted for interim or annual goodwill impairment tests performed with a measurement date afterpermitted. The Company adopted ASU 2021-04 on January 1, 2017. The Company is currently evaluating2022. As a result of Management’s evaluation, the standard to determine theadoption of ASU 2021-04 did not have a material impact of its adoption on the consolidated financial statements.


In May 2017,October 2021, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718); Scope of Modification Accounting. The amendments2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" ("ASU 2021-08"), which addresses diversity in this ASU provide guidance that clarifies when changespractice related to the terms or conditions ofaccounting for revenue contracts with customers acquired in a share-based payment award must be accounted for as modifications. Ifbusiness combination. Under the value, vesting conditions or classificationnew guidance, the acquirer is required to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The effective date of the award changes, modification accounting will apply. The guidancestandard is effective for fiscal years beginning after December 15, 2017, and2022, including interim periods within those fiscal years.years, with early adoption permitted. The Company is currently evaluating the impactadopted ASU 2021-08 on January 1, 2022. As a result of Management’s evaluation, the adoption of this standardASU 2021-08 did not have a material impact on itsthe consolidated financial statements.


In July 2017,November 2021, the FASB issued ASU 2017-11, “Earnings Per Share2021-10, "Government Assistance (Topic 260)832)" ("ASU 2021-10"), Distinguishing Liabilities from Equity (Topic 480)which provides guidance on disclosing government assistance. Under the new guidance, the Company is required to including the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement(3) the effect of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reducedassistance on the basisentity's financial statements. The effective date of the pricing of future equity offerings. Current accounting guidance creates cost and complexitystandard is for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interimannual periods within those years, beginning after December 15, 2018. 2021. The Company has early adopted ASU 2021-10 on January 1, 2022. As a result of Management’s evaluation, the accounting guidance during the three months ended September 30, 2017 and accordingly has reclassified approximately $3.8 millionadoption of derivative liabilities to equity.

In September 2017, the FASB issued ASU No. 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments” that enhances the guidance surrounding sale leaseback transactions, accounting for taxes2021-10 did not have a material impact on leveraged leases and leases with third party value. The related amendments to the Topics described above become effective on the same schedule as Topics 605, 606, 840 and 842. 

Reverse Stock Split

The board of directors was authorized by the Company’s stockholders to effect a 1 for 15 reverse stock split of its issued and outstanding shares of common stock which was effective March 1, 2017. The financial statements and accompanying notes give effect to the 1 for 15 reverse stock split as if it occurred at the beginning of the first period presented.

Subsequent Events

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

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Table of Contents
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 4 - Integrio Technologies, LLC Asset Acquisition

On November 14, 2016,Disaggregation of Revenue

Disaggregation of Revenue
The Company recognizes revenue when control is transferred of the promised products or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company derives revenue from software as a service, design and implementation services for its wholly-owned subsidiary, Sysorex Government Services, Inc. (collectively, the “Buyer”), entered into an Asset Purchase Agreement, as amended by the Amendment No. 1 to Asset Purchase Agreement (as so amended, the “Purchase Agreement”)Indoor Intelligence systems, and professional services for work performed in conjunction with Integrio and Emtec Federal, LLC, a wholly-owned subsidiary of Integrio, (collectively, the “Seller”) which are in the business of providing IT integration and engineering services to customers, primarily government agencies. The transaction closed on November 21, 2016. The consideration paid for the assets included an aggregate of (A) $1,800,000 in cash, of which $1,400,000 minus certain amounts payable to creditors of the Seller was paid upon the closing of the acquisition and $400,000 will be paid in two annual installments of $200,000 each on the respective anniversary dates of the closing, subject to certain set offs and recoupment by Buyer; (B) 35,333 unregistered restricted shares of the Company’s voting common stock valued at $22.50 per share; (C) certain specified assumed liabilities as detailed in the purchase price table below; and (D) up to an aggregate of $1,200,000 in earnout payments, of which up to $400,000 shall be payable to the Seller per year for the three years following the closing. Inpixon acquired these assets to pursue its previously stated strategy to expand its business into the federal government sector because of the large long-term contracts that the government sector offers. Inpixon started with bidding on government contracts directly and this acquisition provided an opportunity to accelerate this expansion. In addition, the acquisition allows Inpixon to offset the revenue softening in the commercial vertical for this business segment that it experienced in 2016. 

The total recorded purchase price for the transaction was $2,332,000 at closing on November 21, 2016 (“Closing”) whichsystems recognition policy. Revenues consisted of the cash paidfollowing (in thousands):

For the Three Months Ended March 31,
20222021
Recurring revenue
 Hardware$— $— 
 Software2,310 1,460 
 Professional services— 35 
 Total recurring revenue$2,310 $1,495 
Non-recurring revenue
 Hardware$821 $814 
 Software368 311 
 Professional services1,732 334 
 Total non-recurring revenue$2,921 $1,459 
 Total Revenue$5,231 $2,954 
For the Three Months Ended March 31,
20222021
Revenue recognized at a point in time
Indoor Intelligence (1)$821 $814 
Saves (1)368 311 
Shoom (1)— — 
Total$1,189 $1,125 
Revenue recognized over time
Indoor Intelligence (2) (3)$3,158 $803 
Saves (3)366 521 
Shoom (3)518 505 
Total$4,042 $1,829 
Total Revenue$5,231 $2,954 
(1) Hardware and Software's performance obligation is satisfied at Closing of $753,000, $400,000 cash that will be paida point in two annual installments of $200,000 eachtime where when they are shipped to the customer.
(2) Professional services are also contracted on the respective anniversary datesfixed fee and time and materials basis. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company has elected the Closing, $1,078,000 in contingent earnout payments and $101,000 representingpractical expedient to recognize revenue for the fair valueright
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Table of the stock issued at Closing.

The Purchase Agreement provided for a post-closing adjustment based on the collection of the acquired accounts receivable. If there is an adjustment amount, the buyers available methods of recouping the adjustment amount shall be (i) first, to withhold the annual cash payments and (ii) if those are not sufficient to recoup the amount, to withhold earnout payments otherwise due under the agreement. During the nine months ended September 30, 2017 $561,000 was recorded as a reduction in the amounts owed to Sellers of Integrio for uncollectible accounts receivable.

The purchase price is allocated as follows (in thousands):   
    
Assets Acquired:   
Cash $189 
Accounts receivable  2,365 
Other receivables  377 
Prepaid assets  4,164 
Fixed assets  64 
Other assets  34 
Customer relationships  1,873 
Supplier relationships  2,985 
Goodwill (A)  3,261 
   15,312 
Liabilities Assumed:    
Accounts payable $8,341 
Accrued liabilities  344 
Deferred revenue  4,252 
Other long term liabilities  43 
   12,980 
Total Purchase Price $2,332 

(A)The goodwill will be deductible for tax purposes once the contingent and assumed liabilities are settled.

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Contents

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBERMARCH 31, 2022 AND 2021
Note 4 - Disaggregation of Revenue (continued)
to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date, in which revenue is recognized over time.
(3) Software As A Service Revenue's performance obligation is satisfied evenly over the service period using a time-based measure because the Company is providing continuous access to its service and service is recognized overtime.

Note 5 – CXApp Acquisition
On March 3, 2022, we entered into a Second Amendment to that certain Stock Purchase Agreement, dated as of April 30, 20172021 (the CXApp Stock Purchase Agreement"), by and among the Company, Design Reactor, Inc. (the "CXApp") and the holders of the outstanding capital stock of CXApp (the "Sellers") with the Sellers' Representative (as defined in the CXApp Stock Purchase Agreement), pursuant to which the parties agreed that withholding taxes payable by certain of the Sellers, as applicable, in connection with the issuance of the Earnout Shares (as defined in the CXApp Purchase Agreement) would be offset up to the aggregate amount payable to such Seller by the Company from the Holdback Amount (as defined in the CXApp Purchase Agreement) and the Holdback Amount would be reduced by an equal amount. On March 3, 2022, the Company issued 10,873,886 shares of common stock to the Sellers in connection with the satisfaction of the Earnout Payment (as defined in the CXApp Purchase Agreement). The fair market value of the Earnout Shares issued was lower than the fair market value of the Earnout Shares as of December 31, 2021, and therefore the Company recorded a benefit of $2.8 million for the three months ended March 31, 2022, which is included in the General and Administrative costs of the condensed consolidated statements of operations.

20
INPIXON AND 2016

SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Note 56 - Proforma Financial Information

CXApp Proforma Financial Information
The following unaudited proforma financial information presents the consolidated results of operations of the Company and Integriothe CXApp for the ninethree months ended September 30, 2016,March 31, 2021, as if the acquisition of Integrio had occurred on January 1, 2016as of the beginning of the first period presented instead of November 21, 2016.on April 30, 2021. The proforma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.
The proforma financial information for LightMiner was deminimis. 

(in thousands, except share amounts) For the Nine Months Ended
September 30,
2016		 
Revenues $76,666 
Net Loss Attributable to Common Shareholder $(15,551)
Weighted Average Number of Common Shares Outstanding, Basic and Diluted  1,732,849 
Loss Per Common Share - Basic and Diluted $(8.97)

Note 6 - Related Party

Due from Related Parties

Non-interest bearing amounts due on demand from a related party were $666,000Game Your Game, Visualix and IntraNav have not been presented as of September 30, 2017 and December 31, 2016, and consist primarily of amounts due from Sysorex Consulting, Inc. (“SCI”). Subsequent to December 31, 2014, SCIit is no longer a direct shareholder or investor in the Company. deemed immaterial.

The amounts due from SCI as of September 30, 2017 and December 31, 2016 have been classified in and as a reduction of stockholders’ equity. Subsequent to September 30, 2017,proforma financial information for the Company and the CXApp is in negotiations with SCI for the repayment and settlement of this receivable through the purchase of Sysorex India, a wholly owned subsidiary of SCI. The Company cannot provide assurance it will be successful in the consummation of the arrangement.

Note 7 - Inventory

Inventory at September 30, 2017 and December 31, 2016 consisted of the followingas follows (in thousands):

  September 30,
2017		  December 31,
2016		 
Raw materials $220  $326 
Work in process  7   238 
Finished goods  563   497 
Total Inventory $790  $1,061 

For the Three Months Ended March 31, 2021
Revenues$4,429 
Net income (loss) attributable to common stockholders$(13,076)
Net income (loss) per basic and diluted common share$(0.15)
Weighted average common shares outstanding:
Basic and Diluted87,693,906 

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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 8 -7- Goodwill

The Company has recorded goodwill and other indefinite-lived assets in connection with its acquisitions of Lilien, Shoom, AirPatrol, LightMiner and Integrio. Goodwill, which represents the excess of acquisition cost over the fair value of the net tangible and intangible assets of the acquired company, is not amortized. Indefinite-lived intangible assets are stated at fair value as of the date acquired in a business combination. The Company’s goodwill balance and other assets with indefinite lives were evaluated for potential impairment during the third quarter of September 30 2017, as certain indications on a qualitative and quantitative basis were identified, that an impairment exists as of the reporting date.

During the three months ended September 30, 2017, the Company recognized an $8.4 million impairment charge for our Storage and Computing and SasS Revenues division. The impairment charge was primarily precipitated by the continued decline in Company’s stock price during the nine months ended September 30, 2017, accumulated losses and the lack of required working capital to fund our continuing operations.

Intangibles


Goodwill:

The following table summarizes the changes in the carrying amount of Goodwill by segment and in total for nine months ended September 30, 2017 (in thousands):

  Storage and Computing  SaaS Revenues  Consolidated 
          
Balance as of December 31, 2016 $7,805  $1,223  $9,028 
             
Goodwill impairment (level 3 fair value adjustment)  (7,805)  (587)  (8,392)
Balance at September 30, 2017 $--  $636  $636 

15

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 9 - Discontinued Operations

As of December 31, 2015, the Company’s management decided to close its Saudi Arabia legal entity as business activities and operations have been strategically shifted according to the business plan of the Company.

In accordance with ASC topic 360 “Property, Plant and Equipment”, the Company has classified the assets and liabilities as discontinued assets and liabilities in the accompanying consolidated financial statements.

The major categories of assets and liabilities held for sale in the condensed consolidated balance sheets at September 30, 2017 and December 31, 2016 (in thousands):

  September 30,
2017		  December 31,
2016		 
Assets:      
Accounts receivable, net $1  $1 
Notes and other receivables  8   8 
Other assets  14   14 
Total Current Assets  23   23 
         
Other assets  --   -- 
Total Assets $23  $23 
         
Liabilities:        
         
Current Liabilities:        
Accounts payable $178  $178 
Accrued liabilities  913   904 
Deferred revenue  236   236 
Due to related party  4   1 
Short term debt  722   722 
Total Current Liabilities  2,053   2,041 
         
Long Term Liabilities  --   -- 
         
Total Liabilities $2,053  $2,041 

The Company has entered into surety bonds with a financial institution in Saudi Arabia which guaranteed performance on certain contracts. Deposits for surety bonds amounted to $0 as of September 30, 2017 and December 31, 2016, as a reserve was placed against the deposit balance during the year ended December 31, 2016 due to the uncertainty of when the bond will be released.

The Company did not recognize any depreciation or amortization expense related to discontinued operations during the three and nine months ended September 30, 2017 and 2016. There were no significant capital expenditures or non-cash operating or investing activities of discontinued operations during the periods presented. The operations of Sysorex Arabia were insignificant for the three months ended March 31, 2022 (in thousands):

SegmentsAcquisitionsBalance as of January 1, 2022Goodwill additions through acquisitionsValuation Measurement Period AdjustmentsExchange rate fluctuations as of March 31, 2022Balance as of March 31, 2022
SAVESSystat$695 $— $— $— $695 
Indoor IntelligenceGTX1 — — — 1 
Nanotron1,119 — — (21)1,098 
Jibestream480 — — 7 487 
CXApp5,066 — — — 5,066 
Game Your Game152 — — — 152 
IntraNav159 — — (2)157 
Total$7,672 $— $— (16)$7,656 

The Company reviews goodwill for impairment on a reporting unit basis on December 31 of each year and nine ended September 30, 2017 and 2016.

Endwhenever events or changes in circumstances indicate the carrying value of Service Indemnity Provision

In accordance with local labor laws, Sysorex Arabia is required to accrue benefits payable to its employees atgoodwill may not be recoverable. As of March 31, 2022, the endCompany did not identify any changes in circumstances that would indicate the carrying value of their services with Sysorex Arabia. For the three and nine months ended September 30, 2017 and 2016, no amounts were required togoodwill may not be accrued under this provision.

16

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 10 – Debt

Debt asrecoverable. As of September 30, 2017March 31, 2022 and December 31, 20162021, the Company has cumulative goodwill impairment charges of $0 and $14.8 million related to the Indoor Intelligence reporting unit, respectively.


Intangibles assets at March 31, 2022 and December 31, 2021 consisted of the following (in thousands):

  

September 30,

2017

  

December 31,

2016

 
Short-Term Debt      
Notes payable $150  $170 
Revolving line of credit (A)  3,369   6,717 
Total Short-Term Debt $3,519  $6,887 
         
Long-Term Debt        
Notes payable $212  $212 
Senior secured convertible debenture, less debt discount of $981 (B)  1,869   3,835 
Total Long-Term Debt $2,081  $4,047 

(A)  Revolving Lines of Credit

GemCap Loan and Security Agreement Amendment 2

On January 24, 2017, the Company, and its U.S. wholly-owned subsidiaries, Inpixon USA and Inpixon Federal, entered into Amendment Number 2 to the Loan and Security Agreement to amend that certain Loan and Security Agreement and Loan Agreement Schedule, both dated as of November 14, 2016, with GemCap Lending I, LLC whereby Section (21) of the definition of “Eligible Accounts” in Section 1.29 of the Loan Agreement was deleted and restated in its entirety as follows: Accounts that satisfy the criteria set forth in the foregoing items (1) – (20), which are owed by any other single Account Debtor or its Affiliates so long as such Accounts, in the aggregate, constitute no more than twenty percent (20%) of all Eligible Accounts, provided, that only


Gross Carrying AmountAccumulated Amortization AmountRemaining Weighted Average Useful Life
March 31,December 31,March 31,December 31,
2022202120222021
IP Agreement$167 $172 $(63)$(54)2.50
Trade Name/Trademarks3,598 3,602 (844)(662)4.02
Webstores & Websites404 404 (157)(123)1.83
Customer Relationships9,288 9,294 (1,782)(1,440)5.53
Developed Technology22,216 22,175 (3,608)(3,010)8.25
Non-compete Agreements4,783 4,786 (2,000)(1,666)2.21
Totals$40,456 $40,433 $(8,454)$(6,955)

Amortization Expense:

Amortization expense for the period commencing on January 24, 2017 throughthree months ended March 31, 2022 and including April 24, 2017, Accounts in the aggregate only from2021 was approximately $1.5 million and owed by Centene Corporation or its Affiliates may exceed twenty percent (20%)$0.6 million, respectively.

22
Table of all Eligible Accounts by an amount not to exceed $500,000, provided, further, that, from and after April 25, 2017, Accounts in the aggregate that are owed by Centene Corporation or its Affiliates that satisfy the criteria set forth in the foregoing items (1) – (20) shall not exceed twenty percent (20%) of all Eligible Accounts; and Borrower shall have paid to Lender an accommodation fee in the amount of $5,000 on February 2, 2017.

Payplant Accounts Receivable Bank Line

Pursuant to the terms of a Commercial Loan Purchase Agreement, dated as of August 14, 2017, Gemcap Lending I, LLC (“Gemcap”) sold and assigned to Payplant LLC, as agent for Payplant Alternatives Fund LLC, all of its right, title and interest to that certain revolving Secured Promissory Note in an aggregate principal amount of up to $10,000,000 issued in accordance with that certain Loan and Security Agreement, dated as of November 14, 2016 by and among Gemcap and the Company and its wholly-owned subsidiaries, Inpixon USA and Inpixon Federal, Inc. for an aggregate purchase price of $1,402,770.16. In connection with the purchase and assignment, the GemCap loan was amended and restated in accordance with the terms and conditions of the Payplant Loan and Security Agreement, dated as of August 14, 2017, between the Company and Payplant (the “Loan Agreement”) The Loan Agreement allows the Company to request loans from Payplant with a term of no greater than 360 days in amounts that are equivalent to 80% of the face value of purchase orders received. In connection with the assignment, the Company entered into the Payplant Client Agreement (the “Client Agreement”), pursuant to which the Company will offer to Payplant for purchase those receivables payable to the Company in connection with the purchase orders under which advances have been made pursuant to the Loan Agreement for the purposes of paying off any notes issued pursuant to the Loan Agreement. Under the Client Agreement, the Company cannot raise additional financings, without Payplant’s approval, which will not be unreasonably withheld by Payplant unless it is an equity financing or a convertible equity financing, where the Company can force conversion, while Payplant’s advances are outstanding. In accordance with the terms of the Loan Agreement, Inpixon Federal, Inc. issued a promissory note to Payplant with a term of 30 days in an aggregate principal amount of $995,472.61 in connection with a purchase order received. The promissory note is subject to the interest rates described in the Loan Agreement and is secured by the assets of the Company pursuant to the Loan Agreement and will be satisfied in accordance with the terms of the Client Agreement.

17
Contents

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021


Note 7- Goodwill and Intangibles (continued)

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

Amount
December 31, 2022 (for 9 months)$4,646 
December 31, 20235,987 
December 31, 20245,033 
December 31, 20254,402 
December 31, 2026 and thereafter11,934 
$32,002 
Note 8 - Inventory
Inventory as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
As of March 31, 2022As of December 31, 2021
Raw materials$469 $463 
Work-in-process483 539 
Finished goods1,251 1,412 
Subtotal inventory2,204 2,414 
Inventory obsolescence reserve(438)(438)
Total Inventory$1,766 $1,976 

Note 9 - 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 March 31, 2022
CostFair Value
Investments in equity securities- fair value
Equity shares$47,841 $272 
Equity rights11,064 63 
Total investments in equity securities- fair value$58,905 $335 

For the three months ended March 31, 2022 and 2021, the Company recognized a net unrealized loss on equity securities of $1.5 million and zero, respectively, in the other income/expense section of the condensed consolidated statements of operations.

Note 10 – Debt (continued)

Payplant Accounts Receivable Bank Line (continued)

(B) Senior Secured Debenture

On June 2, 2017 the Company repaid $200,000- Accrued Liabilities


Accrued liabilities as of March 31, 2022 and December 31, 2021 consisted of the debenture. On June 30, 2017 after the closefollowing (in thousands):
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Note 10- Accrued Liabilities (continued)
As of March 31, 2022As of December 31, 2021
Accrued compensation and benefits$1,365 $8,027 
Accrued Interest Expense1,105 1,012 
Accrued Bonus and Commissions694 597 
Accrued Other531 707 
Accrued sales and other indirect taxes payable168 322 
$3,863 $10,665 
Note 11 - Debt
Debt as of March 31, 2022 and December 31, 2021 consisted of the Capital Raise (seefollowing (in thousands):
Short-Term DebtMaturityMarch 31, 2022December 31, 2021
March 2020 10% Note3/18/2023$1,808 $3,251 
Third Party Note Payable12/31/2022$603 239 
Total Short-Term Debt$2,411 $3,490 
Interest expense on the short-term debt totaled approximately $0.1 million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively, which was amortized to interest expense from the combined amortization of deferred financing costs and note discounts recorded at issuance for the Short Term Debt.

Notes Payable

March 2020 10% Note 11) the Company repaid $2.65 million of the senior secured debenture.

(C) Subordinated ConvertiblePurchase Agreement and Promissory Notes

Note


On May 31, 2017March 18, 2020, the Company entered into a Securities Purchase Agreementnote purchase agreement with institutional accredited investors wherebyIliad Research and Trading, L.P. ("Iliad"), pursuant to which the Company agreed to issue and sell to the buyers subordinated convertibleholder an unsecured promissory notesnote (the “March 2020 10% Note”) in an aggregate initial principal amount of $2,200,000$6.5 million, which is payable on or before the date that is 12 months from the issuance date. The initial principal amount includes an original issue discount of $1.5 million and $0.02 million that the Company agreed to pay to the holder to cover the holder’s legal fees, accounting costs, due on May 31, 2018diligence, monitoring and other transaction costs.

In exchange for the March 2020 10% Note, the holder paid an aggregate purchase price of $2,000,000, representing an approximately 9% original issue discount.

$5.0 million. Interest on the NotesMarch 2020 10% Note accrues at a rate of 10.0%10% per annum and is payable on the maturity date or otherwise in accordance with the March 2020 10% Note. The Company may pay all or any applicable redemption dateportion of the amount owed earlier than it is due; provided, that in cash,the event the Company elects to prepay all or upon noticeany portion of the outstanding balance, it shall pay to the holder 115% of the portion of the outstanding balance the Company elects to prepay.


Beginning on the date that is 6 months from the issuance date and compliance withat the intervals indicated below until the March 2020 10% 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 March 2020 10% Note each month by providing written notice delivered to the Company; provided, however, that if the holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for the holder to redeem in any future month in addition to such future month’s monthly redemption amount.

Upon receipt of any monthly redemption notice, the Company shall pay the applicable monthly redemption amount in cash to the holder within five business days of the Company’s receipt of such Monthly Redemption Notice. The March 2020 10% Note includes customary event of default provisions, subject to certain equity conditions as set forthcure periods, and provides for a default interest rate of 22%. Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency proceedings, the holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the March 2020 10% Note to be immediately due and payable. Upon the occurrence of a bankruptcy-related event of default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the March 2020 10% Note will become immediately due and payable at the mandatory default amount. On September 17, 2020, the Company amended the one time
24
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Note 11- Debt (continued)
monitoring fee applicable in the Notes,event the note was outstanding on the date that was 6 months from the issuance date, from 10% to 5% which was added to the March 2020 10% Note balance. On March 17, 2021, the Company extended the maturity date of the March 2020 10% Note from March 18, 2021 to March 18, 2022.

On February 11, 2021, the Company entered into an exchange agreement with Iliad, pursuant to which the Company and Iliad agreed to: (i) partition a new promissory note in the form of the March 2020 10% Note equal to $1.5 million and then cause the outstanding balance of the March 2020 10% Note to be reduced by $1.5 million; and (ii) exchange the partitioned note for the delivery of 893,921 shares of the Company’s common stock, provided thatat an effective price per share equal to $1.678. The Company analyzed the maximum aggregate amountexchange of interest thatthe principal under the March 2020 10% Note as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and recorded approximately a $30,000 loss on the exchange of debt for equity as a separate item in the other income/expense section of the condensed consolidated statements of operations for three months ended March 31, 2021.

The Company entered into an exchange agreement with Iliad which afforded a free trading date of July 1, 2021, pursuant to which the Company may elect to payand Iliad agreed to: (i) partition a new promissory note in Interest Shares will not exceed an amountthe form of the March 2020 10% Note equal to 5%$1.0 million and then cause the outstanding balance of the total interest payableMarch 2020 10% Note to be reduced by $1.0 million; and (ii) exchange the partitioned note for the delivery of 877,192 shares of the Company’s common stock, at an effective price per share equal to $1.14. The Company analyzed the exchange of the principal under the termsMarch 2020 10% Note as an extinguishment and compared the net carrying value of the Notes.

On June 30, 2017 the Company paid $2.7 million after the close of the Capital Raise (see Note 11) to settle the amounts owed under the promissory notes including all principal, interest and fees.

Note 11 - Capital Raise

On June 30, 2017, the Company completed the previously announced registered underwritten public offering (the “Offering”) of an aggregate of (i) 1,849,460 Class A Units (the “Class A Units”), with each Class A Unit consisting of one share of Common Stock and one warrant to purchase one share of Common Stock at an exercise price of $1.3125 (the “Exercise Price”) and (ii) 4,060 Class B Units (the “Class B Units”), with each Class B Unit consisting of one share of Series 2 Preferred and one warrant to purchase the number of shares of Common Stock equaldebt being extinguished to the numberreacquisition price (shares of shares of Common Stock underlyingcommon stock being issued) and there was no loss on the Series 2 Preferred at the Exercise Price. The net proceeds to the Company from the transactions, after deducting the placement agent’s fees and expenses but before paying the Company’s estimated offering expenses, and excluding the proceeds, from the exercise of the Warrants was approximately $5,711,850. 

In connection with the Offering,exchange for debt for equity.


On February 1, 2022, the Company entered into that certain waiveran exchange agreement with Iliad, pursuant to which the Company and consentIliad agreed to: (i) partition a new promissory note in the form of the March 2020 10% Note equal to $0.5 million and then cause the outstanding balance of the March 2020 10% Note to be reduced by $0.5 million; and (ii) exchange the partitioned note for the delivery of 1,191,611 shares of the Company’s common stock, at an effective price per share equal to $0.4196. 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.

On February 18, 2022, the Company entered into an exchange agreement dated June 28, 2017, (the “Waiverwith Iliad, pursuant to which the Company and Consent Agreement”)Iliad agreed to: (i) partition a new promissory note in the form of the March 2020 10% Note equal to $0.4 million and then cause the outstanding balance of the March 2020 10% Note to be reduced by $0.4 million; and (ii) exchange the partitioned note for the delivery of 966,317 shares of the Company’s common stock, at an effective price per share equal to $0.3622. 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.

On March 15, 2022, the Company entered into an exchange agreement with those purchasers (the “December 2016 Purchasers”) signatoryIliad, pursuant to that certain securities purchase agreement, datedwhich the Company and Iliad agreed to: (i) partition a new promissory note in the form of the March 2020 10% Note equal to $0.7 million and then cause the outstanding balance of the March 2020 10% Note to be reduced by $0.7 million; and (ii) exchange the partitioned note for the delivery of 2,152,317 shares of the Company’s common stock, at an effective price per share equal to $0.3020. 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.
Effective as of December 12, 2016March 16, 2022, we entered into a third amendment (the “December 2016 SPA”“Third Amendment”). to the Original Note which was accounted for as a modification. Pursuant to the terms of the Waiver and Consent Agreement,Third Amendment, the December 2016 Purchasersmaturity date of the Original Note was extended from March 18, 2022 to March 18, 2023 (the “Maturity Date Extension”). In exchange for the Maturity Date Extension, we agreed to waive (the “Waiver”) the variable rate transaction prohibition containedpay a 2% extension fee in the December 2016 SPA,amount of approximately $56,860 (the “Extension Fee”), which if not waived, prohibits the adjustmentwas added to the exercise price set forth in the Warrants. In considerationoutstanding balance of the Waiver, the warrants held by the December 2016 Purchasers issued in accordanceOriginal Note.

Third Party Note Payable

Game Your Game entered into promissory notes with the December 2016 SPA (the “December 2016 Warrants”) have been amended to equal the Exercise Pricean individual whereby it received approximately $0.24 million on October 29, 2021, approximately $0.24 million on January 18, 2022, and approximately $0.13 million on March 22, 2022 for funding of outside liabilities and working capital needs. All of the warrants issued inpromissory notes have a interest rate of 8% and are due on or before December 31, 2022. As of March 31, 2022, the Offering and to provide for an adjustment tobalance owed under the Exercise Price to the extent sharesnotes was $0.6 million.
25
Table of Common Stock are issued or sold for a consideration per share that is less than the exercise price then in effect; provided, that the exercise price will not be less than $0.50 per share. The impact of the above modification was deminimis for the nine months ended September 30, 2017.

Agreement with Warrant Holders

Contents

INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 12 - Capital Raises
Registered Direct Offerings
On August 9, 2017,January 24, 2021, the Company entered into a warrant exercisesecurities purchase agreement (the “Warrant Exercise Agreement”) with certain participants in the Offering (collectively, the “Warrant Holders” and each, a “Warrant Holder”)an institutional investor, pursuant to which the Warrant Holders agreedit sold in a registered direct offering, 5,800,000 shares of its common stock, and warrants to exercise, forpurchase up to an aggregate of 1,095,71919,354,838 shares of common stock the warrants (the “Warrants”) issued pursuant to that certain warrant agency agreement, dated as of June 30, 2017 (the “Warrant Agency Agreement”), by and between the Company and Corporate Stock Transfer, as warrant agent (the “Warrant Agent”), provided that the Company will agree to:

(a)      amend the Warrant Agency Agreement to reduce the exercise price of the Warrants from $1.325 per share to $0.30 per share in accordance with the terms and conditions of Amendment No. 1 to the Warrant Agency Agreement, dated August 9, 2017 between the Company and the Warrant Agent (“Warrant Agreement Amendment”), with the consent of Aegis Capital Corp. and the registered holders of a majority of the outstanding Warrants; and

(b)      issue additional warrants to the Warrant Holders, for the number of shares of common stock that will be equal to the number of exercised shares purchased by such Warrant Holder (the “Additional Warrant Shares”), at an exercise price of $0.55$1.55 per share (the “Additional Warrant”“January 2021 Purchase Warrants”) for a combined purchase price of $1.55 per share and pre-funded warrants to purchase up to 13,554,838 shares of common stock ("January 2021 Pre-funded Warrants") at an exercise price of $0.001 per share, at a purchase price of $1.549 per share for net proceeds of approximately $27.8 million. Each January 2021 Purchase Warrant and January 2021 Pre-funded Warrant is exercisable for 1 share of common stock, is immediately exercisable and will expire 5 years from the issuance date. The January 2021 Pre-funded Warrants were exercised in full as of February 8, 2021. In addition, the investor exercised its purchase rights for 3,000,000 shares of common stock pursuant to the the January 2021 Purchase Warrant on February 11, 2021.

On February 12, 2021, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which it sold in a registered direct offering, 7,000,000 shares of its common stock, and warrants to purchase up to 15,000,000 shares of common stock at an exercise price of $2.00 per share (the “First February 2021 Purchase Warrants”) for a combined purchase price of $2.00 per share and pre-funded warrants to purchase up to 8,000,000 shares of common stock ("First February 2021 Pre-funded Warrants") at an exercise price of $0.001 per share, at a purchase price of $1.999 per share for net proceeds of approximately $27.8 million. Each First February 2021 Purchase Warrant and First February 2021 Pre-funded Warrant is exercisable for 1 share of common stock, is immediately exercisable and will expire 5 years from the issuance date. The First February 2021 Pre-funded warrants were exercised in full as of February 18, 2021.
On February 16, 2021, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company sold in a registered direct offering, 3,000,000 shares of its common stock, and warrants to purchase up to 9,950,250 shares of common stock at an exercise price of $2.01 per share (the “Second February 2021 Purchase Warrants”) for a combined purchase price of $2.01 per share and pre-funded warrants to purchase up to 6,950,250 shares of common stock ("Second February 2021 Pre-funded Warrants") at an exercise price of $0.001 per share, at a purchase price of $2.009 per share for net proceeds of $18.5 million after deducting placement agent commissions and offering expenses. Each Second February 2021 Purchase Warrant and Second February 2021 Pre-funded Warrant is exercisable for 1 share of common stock, is immediately exercisable and will expire five years from the issuance date. The Second February 2021 Pre-funded warrants were exercised in full as of March 1, 2021.
On September 13, 2021, 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) 58,750 shares of Series 7 Convertible Preferred Stock and (ii) related warrants to purchase up to an aggregate of 1,095,71947,000,000 shares of common stock.

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 of each share of Series 7 Convertible Preferred Stock for an aggregate subscription amount of $54.1 million. In connection with this offering, the Company filed a Certificate of Designation for the Series 7 Convertible Preferred Stock with the Nevada Secretary of State. The impactCompany has authorized the issuance of this modification was deemed5,000,000 shares of preferred stock, of which 49,250 shares were issued and outstanding as of March 31, 2022. Each share of Series 7 Convertible Preferred Stock has a par value of $0.001 per share and stated value of $1,000 per share. The shares of Series 7 Convertible Preferred Stock are convertible into shares of the Company’s common stock, at a conversion price of $1.25 per share. Each share of Series 7 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 the 6-month anniversary of the date the shares of Series 7 Convertible Preferred Stock are issued and ending 90 days thereafter, the holders of the Series 7 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 7 Convertible Preferred Stock will forfeit 75% of the warrants issued in connection therewith. The holders of the Series 7 Convertible Preferred Stock are entitled to vote together with all other classes and series of stock of the Company as a single class on all actions to be deminimistaken by the stockholders of the Company.The Series 7 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 nine months ended September 30, 2017.

18
Series 7 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 The aggregate net proceeds from the offering, after

26

Table of Contents
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021


Note 1212- Capital Raises (continued)
deducting the placement agent fees and other estimated offering expenses, were approximately $50.6 million. See Note 14 for Preferred Stock and Note 17 for Warrant details.
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 112,778,720 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 $0.4717 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 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 Stockwill 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 14 for Preferred Stock and Note 17 for Warrant details.

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 will forfeit 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 29,550,000 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 will be amortized until the redemption period begins 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 will be accreted until the redemption period begins on October 1, 2022.
Note 13 - Common Stock

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 49,305,088 shares of the Company’s common stock. Pursuant to the exchange agreement, the Company agreed to issue to the warrant holder an aggregate of 13,811,407 shares of common stock and rights to receive an aggregate of 3,938,424 shares of common stock in exchange for the existing warrants.
On February 19, 2022, 960,106 shares of common stock issued in connection with restricted stock grants were withheld for employee taxes.
On March 3, 2022, the Company issued 10,873,886 shares of common stock to the sellers of the CXApp in connection with the satisfaction of an earnout payment. See Note 5.
27
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Note 13- Common Stock (continued)
During the three months ended March 31, 2017,2022, the Company issued 1,7674,310,245 shares of common stock relatedunder exchange agreements to the acquisition of Integrio Technologies, LLC which were fully vested upon the date of grant. settle outstanding balances totaling approximately $1.5 million under partitioned notes.

Note 14 - Preferred Stock

The Company recorded an expenseis authorized to issue up to 5,000,000 shares of $7,050 for the fairpreferred stock with a par value of those shares.

During the three months ended March 31, 2017, the Company issued 3,613 shares of common stock for services which were fully vested upon the date of grant. The Company recorded an expense of $14,092 for the fair value of those shares.

During the three months ended March 31, 2017, the Company issued 18,905 of common stock for the settlement of $567,000 of shares held in escrow related$0.001 per share with rights, preferences, privileges and restrictions as to the LightMiner asset acquisition.

On April 19, 2017, Inpixon entered into an exchange agreement (the “Exchange Agreement”) with Hillair Capital Investments L.P. in connection with an interest payment due on May 9, 2017 pursuant tobe determined by the Company’s 8% Original Issue Discount Senior Secured Convertible Debenture in the principal amountBoard of $5,700,000. In accordance with the Exchange Agreement, solely in respect of the interest payment in the amount of $343,267 due on May 9, 2017, the parties agreed that $315,700 of such interest payment will be made in in the form of 110,000 shares of the Company’s common stock issued at an interest conversion rate equal to $2.87 per share. The shares were issued on April 20, 2017.

On May 8, 2017, Hillair Capital Investments L.P. delivered a conversion notice to the Company pursuant to which it converted 2,250 shares of the Company’s Directors.


Series 14 Convertible Preferred Stock into 100,000 shares of

On April 20, 2018, the Company’s common stock. Such shares of common stock were issued on May 9, 2017.

On June 30, 2017, and as more fully described in Note 11, the Company issued 1,849,460 shares of common stock at $1.05 per share for proceeds of approximately $1.9 million.

During the three months ended June 30, 2017, the Company issued 52,004 shares of common stock for services which were fully vested upon the date of grant. The Company recorded an expense of $144,790 for the fair value of those shares.

During the three months ended September 30, 2017, the Company issued 97,753 shares of common stock for services which were fully vested upon the date of grant. The Company recorded an expense of $87,000 for the fair value of those shares.

During the three months ended September 30, 2017, the Company issued 2,104,764 shares of common stock for the conversion of 2,210 of Series 2 Preferred Stock.

During the three months ended September 30, 2017, pursuant to an exchange agreement the Company cancelled 1,850 shares of Series 2 Preferred Stock and issued 5,606,061 shares of common stock.

During the three months ended September 30, 2017, the Company issued 3,296,060 shares of common stock in connection with the exercise of 3,296,060 warrants at $0.30 a share. 

Note 13 - Series 2 Preferred Stock

On June 29, 2017, Inpixon filed with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 24 Convertible Preferred Stock par value $0.001 per share,(“Series 4 Preferred”), authorized 4,66910,415 shares of Series 24 Preferred and designated the preferences, rights and limitations of the Series 24 Preferred. The Series 24 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 $828.


As of March 31, 2022, there was 1 share of Series 4 Preferred outstanding.

Series 5 Convertible Preferred Stock

On January 14, 2019, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 5 Convertible Preferred Stock, authorized 12,000 shares of Series 5 Convertible Preferred Stock and designated the preferences, rights and limitations of the Series 5 Convertible Preferred Stock. The Series 5 Convertible Preferred Stock is non-voting (except to the extent required by law). The Series 25 Convertible Preferred Stock is convertible into the number of shares of the Company’s common stock, par value $0.001 per share, determined by dividing the aggregate stated value of the Series 25 Convertible Preferred Stock of $1,000 per share to be converted by $1.05.

19
$149.85.


INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 13 -

As of March 31, 2022, there were 126 shares of Series 25 Convertible Preferred Stock (continued)

outstanding.


Series 7 Convertible Preferred Stock

On June 30, 2017,September 13, 2021, the Company completedfiled a Certificate of Designation with the previously announced registered underwritten public offering and sold 4,060 Class B Units with each Class B UnitSecretary of State of the State of Nevada, amending the Company’s Articles of Incorporation, as amended, to establish the Series 7 Convertible Preferred Stock, consisting of one58,750 authorized shares, $0.001 par value per share and $1,000 stated value per share. The holders of the Series 7 Convertible Preferred Stock have full voting rights and powers, except as otherwise required by the Articles of Incorporation, as amended, or applicable law. The holders of Series 27 Convertible Preferred Stock are entitled to vote together with all other classes and one warrantseries of stock of the Company as a single class on all actions to purchasebe taken by the stockholders of the Company. Each holder of the Series 7 Convertible Preferred Stock is entitled to the number of shares of common stockvotes equal to the number of shares of common stock underlyinginto which the Series 2 Preferred. (See Note 11) During the three months ended September 30, 2017, the 4,060 shares of Series 27 Convertible Preferred Stock werethen held by such holder could be converted to 7,710,825on the record date for the vote which is being taken, provided, however, that the voting power of a holder together with its Attribution Parties (as defined in the Certificate of Designation), may not exceed 19.99% (or such greater percentage allowed by the Nasdaq Listing Rules without any shareholder approval requirements). The Series 7 Convertible Preferred Stock is convertible into the number of shares of common stock, (see Note 12).

determined by dividing the aggregate stated value of the Series 7 Convertible Preferred Stock of $1,000 per share to be converted by $1.25.

On August 14, 2017,September 13, 2021, the Company entered into an exchange righta securities purchase agreement (the ” Exchange Agreement” ) with Hillair Capital Investments L.P. (” Hillair” ),certain institutional investors named therein, pursuant to which the Company granted Hillair the rightagreed to exchange 1,850issue and sell in a registered direct offering (i) up to 58,750 shares of the Company’ s Series 27 Convertible Preferred Stock (the “Preferred Shares”) forand (ii) related warrants to purchase up to an aggregate of 5,606,06147,000,000 shares of common stock (the “Exchange Shares”“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 Company’ sstated value for an aggregate subscription amount of $54.1 million. The shares of Series 7 Convertible Preferred Stocks are recorded as Mezzanine Equity in the accompanying balance sheets 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. The Company has
28
Table of Contents
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Note 14- Preferred Stock (continued)
elected to accrete the issuance costs, discount, and freestanding warrants through the date shares can be first be redeemed at the option of the holders, which is the sixth month anniversary of the original issuance date using the effective interest method.
During the year ended December 31, 2021, 9,500 shares of Series 7 Convertible Preferred Stock were converted into 7,600,000 shares of the Company's common stock. Pursuant
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.
As of March 31, 2022 there were 0 shares of Series 7 Convertible Preferred stock outstanding.
Series 8 Convertible Preferred Stock
On March 22, 2022, the Exchange Agreement, for so longCompany filed a Certificate of Designation with the Secretary of State of the State of Nevada, amending the Company’s Articles of Incorporation, as amended, by establishing the Series 8 Convertible Preferred Shares remain outstanding, each outstandingStock, consisting of 53,197.7234 authorized shares, $0.001 par value per share and $1,000 stated value per share.The holders of the Series 8 Convertible Preferred Share mayStock have full voting rights and powers, except as otherwise required by the Articles of Incorporation, as amended, or applicable law. The holders of Series 8 Convertible Preferred Stock are entitled to vote together with all other classes and series of stock of the Company as a single class on all actions to be exchanged fortaken by the stockholders of the Company. Each holder of the Series 8 Convertible Preferred Stock is entitled to the number of Exchange Sharesvotes equal to the quotient obtained by dividing $1,000 by $0.33. The exchange of the Preferred Shares will not be effected if, after giving effect to the exchange Hillair, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect tointo which the issuance ofSeries 8 Convertible Preferred Stock then held by such holder could be converted on the Exchange Shares. Upon not less than 61 days’ prior notice torecord date for the Company, Hillair may increase or decrease the ownership limitation,vote which is being taken, provided, however, that the ownership limitationvoting power of a holder together with its Attribution Parties (as defined in no event exceeds 9.99%the Certificate of Designation), may not exceed 19.99% (or such greater percentage allowed by the Nasdaq Listing Rules without any shareholder approval requirements). The Series 8 Convertible Preferred Stock is convertible into the number of shares of common stock, determined by dividing the aggregate stated value of the Series 8 Convertible Preferred Stock of $1,000 per share to be converted by $0.4717.

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 112,778,720 shares of common stock (the “Warrants”). Each share of Series 8 Convertible Preferred Stock and the related Warrants (see Note 17) 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 are recorded as Mezzanine Equity in the accompanying balance sheets 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. The Company has elected to accrete the issuance costs, discount, and freestanding warrants through the date shares can be first be redeemed at the option of the holders, which is the sixth month anniversary of the original issuance date using the effective interest method.
.
Note 15- Authorized Share Increase
On November 18, 2021, the Company filed a certificate of amendment to the Company’s articles of incorporation, as amended, with the Secretary of State of the State of Nevada to increase the number of authorized shares of common stock outstanding immediately after giving effectfrom 250,000,000 to the issuance2,000,000,000 shares effective as of the Exchange Shares. The 1,850 shares of Preferred Shares were converted to common stock during the 3 months ended September 30, 2017.

November 18, 2021.

Note 1416 - Stock Options

Award Plans and Stock-Based Compensation

In September 2011, the Company adopted the 2011 Employee Stock Incentive Plan (the “2011 Plan”) which provides for the granting of incentive and non-statutory common stock options and stock based incentive awards to employees, non-employee directors, consultants and independent contractors. The plan was amendedterminated by its terms on August 31, 2021 and restatedand no new awards will be issued under the 2011 Plan.
29
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 16 - Stock Award Plans and Stock-Based Compensation (continued)
In February 2018, the Company adopted the 2018 Employee Stock Incentive Plan (the “2018 Plan” and together with the 2011 Plan, the “Option Plans”), which 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 May 2014. 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 more that 10% of the total outstanding common stock of the Company. Unless terminated sooner by the Board of Directors, this plan will terminate on August 31, 2021.

Options granted under the Company’s planOption 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 Company’s plan2018 Plan as of DecemberMarch 31, 20162022 is 450,402.43,000,000. As of September 30, 2017, 309,609March 31, 2022, 31,678,907 of stock options and restricted stock were granted to employees, directors and consultants of the Company (including 41,667 shares1 share outside of our plan)plan and 140,79370 under our 2011 Plan) and 11,321,164 options were available for future grant under our plan.

the 2018 Plan.

Employee Stock Options
During the three months ended March 31, 2017,2021, the Company granted options under the 2018 Plan for the purchase of 25,6271,605,000 shares of common stock to employees and directorsconsultants of the Company. These options are 100% vested or vest pro-rata over 4812, 24 or 36 months, and have a life of ten years and an exercise price of $3.90$1.83 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the awards was determined to be $51,000.approximately $1.0 million. The fair value of the common stock as of the grant date was determined to be $3.90$1.83 per share.

On February 5, 2021, the Company issued 4,977 shares of common stock in connection with the cashless exercise of 14,583 employee stock options.
On June 10, 2021, the Company issued 414 shares of common stock in connection with the cashless exercise of 6,111 employee stock options.
During the ninethree months ended September 30, 2017March 31, 2022, the Company granted options under the 2018 Plan for the purchase of 9,945,000 shares of common stock to employees and 2016,consultants of the Company. These options are 100% vested or vest pro-rata over 12 or 48 months, have a life of ten years and an exercise price of $0.53 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the awards was determined to be approximately $1.8 million. The fair value of the common stock as of the grant date was determined to be $0.53 per share.
During the three months ended March 31, 2022 and 2021, the Company recorded a charge of $713,000 and $1,008,000, respectively, for the amortization of employee stock options.

options of approximately $0.9 million and $0.5 million, respectively, which is included in the general and administrative section of the condensed consolidated statement of operations.

As of September 30, 2017,March 31, 2022, the fair value of non-vested stock options totaled $1,087,000approximately $4.7 million, which will be amortized to expense over the weighted average remaining term of 0.981.21 years.

20

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

2011 Plan2018 PlanNon PlanTotal
Beginning balance as of January 1, 202273 18,882,229 1 18,882,303 
Granted— 9,945,000 — 9,945,000 
Exercised— — — — 
Expired(3)(101,267)— (101,270)
Forfeited— (269,712)— (269,712)
Ending balance as of March 31, 202270 28,456,250 1 28,456,321 
30
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 1416 - Stock OptionsAward Plans and Stock-Based Compensation (continued)

The fair value of each employee option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. Key weighted-average assumptions used to apply this pricing model during the ninethree months ended September 30, 2017 and 2016March 31, 2022 were as follows:

  For the Nine Months Ended
September 30,		 
  2017  2016 
Risk-free interest rate  2.27%   1.41% 
Expected life of option grants  7 years   7 years 
Expected volatility of underlying stock  47.34%   47.47% 
Dividends assumption $--  $-- 

For the Three Months Ended March 31, 2022
Risk-free interest rate1.50%
Expected life of option grants5 years
Expected volatility of underlying stock37.24%
Dividends assumption--
The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. The Company attributes the value of stock-based compensation to operations on the straight-line single option method. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods. The dividends assumptions werewas $0 as the Company historically has not declared any dividends and does not expect to.

Restricted Stock Awards
On February 19, 2021, the Company granted 5,250,000 restricted stock awards to employees of the Company. These stock awards vest either 25% on the grant date and 25% on each one year anniversary of the grant date or 50% on the grant date and 50% on the one year anniversary. In accordance with the terms of the restricted stock award agreements 921,838 shares of common stock underlying the awards were withheld by the Company in satisfaction of the employee portion of the payroll taxes required to paid in connection with the grant of such awards.
On April 23, 2021, the Company granted 344,826 restricted stock awards to employees of the Company. These stock awards either vest 50% at the 6 months anniversary and 50% on the one year anniversary or over 2 years pro rata every 6 months.
On August 21, 2021, 337,500 of unvested restricted stock award grants were forfeited in connection with the departure of an employee.
On February 19, 2022, 960,106 restricted stock grants were forfeited for employee taxes.
During the three months ended March 31, 2022 and 2021 the Company recorded a charge of $0.7 million and $4.6 million, respectively, for the amortization of vested restricted stock awards.
The following table summarizes restricted stock based award activity granted:
21
Restricted Stock Grants
Beginning balance as of January 1, 20224,182,692 
Granted— 
Exercised— 
Expired— 
Forfeited(960,106)
Ending balance as of March 31, 20223,222,586 

The Company determined the fair value of these grants based on the closing price of the Company’s common stock on the respective grant dates. The compensation expense is being amortized over the respective vesting periods.

��

Note 17 - Warrants
31
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 15 – Fair Value

17 - Warrants (continued)

On January 24, 2021, Inpixon entered into a securities purchase agreement (the "January 2021 Purchase Agreement") with an institutional investor named therein (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering, 5,800,000 shares of the Company’s common stock, par value $0.001 per share, and warrants to purchase up to 19,354,838 shares of common stock (the “Purchase Warrants”) at a combined offering price of $1.55 per share. The Purchase Warrants have an exercise price of $1.55 per share. Each Purchase Warrant is exercisable for 1 share of common stock and will be immediately exercisable and will expire five years from the issuance date.
The Company measuresalso offered and sold to the Investor pre-funded warrants to purchase up to 3,000,000 shares of common stock (the “Pre-Funded Warrants” and, together with the 5,800,000 shares and the Purchase Warrants, the “Securities”), in lieu of shares of common stock at the Investor’s election. Each Pre-Funded Warrant is exercisable for 1 share of common stock. The purchase price of each Pre-Funded Warrant is $1.549, and the exercise price of each Pre-Funded Warrant is $0.001 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
During the year ended December 31, 2021, the Company issued 13,554,838 shares of common stock in connection with the exercise of 13,554,838 Pre-Funded Warrants at $0.001 per share in connection with the January 2021 Purchase Agreement.
On February 12, 2021, Inpixon entered into a securities purchase agreement (the "February 12, 2021 Securities Purchase Agreement") with an institutional investor named therein (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering, 7,000,000 shares of the Company’s common stock, par value $0.001 per share, and warrants to purchase up to 15,000,000 shares of common stock (the “Purchase Warrants”) at a combined offering price of $2.00 per share. The Purchase Warrants have an exercise price of $2.00 per share. Each Purchase Warrant is exercisable for 1 share of common stock and will be immediately exercisable and will expire five years from the issuance date.
The Company also offered and sold to the Investor pre-funded warrants to purchase up to 8,000,000 shares of common stock (the “Pre-Funded Warrants” and, together with the 7,000,000 shares and the Purchase Warrants, the “Securities”), in lieu of shares of common stock at the Investor’s election. Each Pre-Funded Warrant is exercisable for one share of common stock. The purchase price of each Pre-Funded Warrant is $1.999, and the exercise price of each Pre-Funded Warrant is 0.001 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
During the year ended December 31, 2021, the Company issued 8,000,000 shares of common stock in connection with the exercise of 8,000,000 Pre-Funded Warrants at an exercise price of $0.001 per share in connection with the February 12, 2021 Securities Purchase Agreement.
On February 16, 2021, Inpixon entered into a securities purchase agreement (the "February 16, 2021 Securities Purchase Agreement") with an institutional investor named therein (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering, 3,000,000 shares of the Company’s common stock, par value 0.001 per share, and warrants to purchase up to 9,950,250 shares of common stock (the “Purchase Warrants”) at a combined offering price of $2.01 per share. The Purchase Warrants have an exercise price of $2.01 per share. Each Purchase Warrant is exercisable for 1 share of common stock and will be immediately exercisable and will expire five years from the issuance date.
The Company also offered and sold to the Investor pre-funded warrants to purchase up to 6,950,250 shares of common stock in lieu of shares of common stock at the Investor’s election. Each Pre-Funded Warrant is exercisable for one share of common stock. The purchase price of each Pre-Funded Warrant is $2.009, and the exercise price of each Pre-Funded Warrant is 0.001 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
During the year ended December 31, 2021, the Company issued 6,950,250 shares of common stock in connection with the exercise of 6,950,250 pre-funded warrants at $0.001 per share in connection with the February 16, 2021 Securities Purchase Agreement.
On September 13, 2021, 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 58,750 shares of the Company’s Series 7
32
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 17 - Warrants (continued)
Convertible Preferred Shares, par value $0.001 per share, which are convertible into 47,000,000 shares of the Company’s common stock and warrants to purchase up to 47,000,000 shares of common stock. Each share and related warrants were sold together 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.

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 49,305,088 shares of the Company’s common stock. Pursuant to the exchange agreement, the Company agreed to issue to the warrant holder an aggregate of 13,811,407 shares of common stock and rights to receive an aggregate of 3,938,424 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 financial assets and liabilities basedthe existing warrants as if issued on the guidance of ASC 820 “Fair Value Measurementsexchange agreement date and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the exchange pricecompared that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices available in active markets for identical assets or liabilities trading in active markets.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quotable prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

Financial instruments, including accounts receivable and accounts payable are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.common stock issued. The Company’s other financial instruments include debt payable, the carrying value of which approximates fair value, as the notes bear terms and conditions comparable to market for obligations with similar terms and maturities, as well as warrant and embedded conversion liabilities that are accounted for at fair value on a recurring basis as of September 30, 2017, by level withinCompany calculated the fair value hierarchy (in thousands): 

  

Quoted

Prices in

Active

Markets

for

Identical

Assets or Liabilities
(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  Significant Unobservable Inputs
(Level 3)		  Total 
Warrant liability  --   --   349,000   349,000 
Derivative liability – September 30, 2017 $--  $--  $349,000  $349,000 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The Company’s level 3 liabilities shown in the above table consist of warrants that contain a cashless exercise feature that provides for their net share settlement at the option of the holder. Settlement atexisting warrants using a Black-Scholes Option pricing model and determined it to be approximately $0.16 per share. The fair value uponof the occurrence of a fundamental transaction would be computed usingcommon stock issued was based on the Black Scholes Option Pricing Model.

22

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 15 – Fair Value (continued)

Assumptions utilized in the valuation of Level 3 liabilities are described as follows:

For the Nine Months Ended
September 30,
2017
Risk-free interest rate1.89%
Expected life of option grants5 years
Expected volatility of underlying stock200%
Dividends assumption$--

The expectedclosing 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. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods. The expected term used is the contractual life of the instrument being valued.date of the exchange. The dividends assumptions were $0 astotal fair value of the Company historically has not declared any dividends and does not expect to.

The following table presentswarrants prior to modification was greater than the fair value reconciliation of Level 3 liabilities measured atthe common stock issued, and therefore, there was no incremental fair value duringrelated to the nineexchange.

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"). 29,550,000 corresponding warrants issued in connection with the issuance of the Series 7 Convertible Preferred Stock been forfeited and 17,450,000 related warrants remain outstanding.
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 112,778,720 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.

Note 18- Income Taxes
There is an income tax expense of approximately $0.1 million and $0.01 million for the three months ended September 30, 2017 (in thousands):

  Warrant Liability  Embedded Conversion
Feature		  Total Derivative Liabilities 
          
Balance at January 1, 2017 $209  $1  $210 
Fair value of warrants issued  350   --   350 
Reclassification of warrants to derivative liabilities  3,773   --   3,773 
Reclassification of warrants from derivative liabilities to APIC  (3,773)  --   (3,773)
Change in fair value of derivative  (209)  (1)  (210)
Balance at September 30, 2017 $350  $--  $350 
March 31, 2022 and 2021, respectively. The income tax expense relates primarily to corporate income tax liabilities of Inpixon India.

Note 1619 - Credit Risk and Concentrations

Financial instruments that subject the Company to credit risk consist principally of trade accounts receivable and cash and cash equivalents. The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for uncollectible accounts and, consequently, believes that its accounts receivable credit risk exposure beyond such allowances is limited.

The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits. Cash is also maintained at foreign financial institutions for its Canadian subsidiary, UK subsidiary, German subsidiaries and its majority-owned Saudi ArabiaIndia subsidiary. Cash in foreign financial institutions as of September 30, 2017March 31, 2022 and December 31, 20162021 was immaterial. The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash.

The following table sets forth the percentages of revenue derived by the Company from those customers which accounted for at least 10% of revenues during the nine months ended September 30, 2017 and 2016 (in thousands):

  For the Nine Months Ended
September 30,
2017		  

For the Nine Months Ended

September 30,
2016

 
  $  %  $  % 
Customer A  6,345   16%   --   -- 
Customer B  --   --   10,180   26% 

23

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 16 - Credit Risk and Concentrations (continued)

The following table sets forth the percentages of revenue derived by the Company from those customers, which accounted for at least 10% of revenues during the three months ended September 30, 2017March 31, 2022 and 20162021 (in thousands):

  

For the Three Months Ended

September 30,
2017

  For the Three Months Ended
September 30,
2016		 
  $  %  $  % 
Customer C  1,424   12%   --   -- 
Customer D  1,237   10%   --   -- 
Customer B  --   --   1,463   13% 
Customer E  --   --   1,857   17% 

33
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 19 - Credit Risk and Concentrations (continued)
For the three months ended March 31, 2022For the three months ended March 31, 2021
$%$%
Customer F41211%——%
Customer B——%31311%
As of September 30, 2017, Customer AMarch 31, 2022, two customers represented approximately 21% and Customer B represented approximately 16%22% of total accounts receivable.
As of September 30, 2016, Customer C represented approximately 51% of total accounts receivable.

As of September 30, 2017, twoMarch 31, 2022, three vendors represented approximately 27% and 13%48% of total gross accounts payable. PurchasesThere were no purchases from these vendors during the three months ended September 30, 2017 were $0.7 million and $2.8 million. Purchases from these vendors during the nine months ended September 30, 2017 were $6.5 million and $2.8 million.  As of September 30, 2016, one vendor represented approximately 56% of total gross accounts payable. Purchases from this vendor duringMarch 31, 2022. 

For the three months ended September 30, 2016 were $3.7 million. Purchases from this vendor duringMarch 31, 2022, two vendors represented approximately 48%,and 14% of total purchases. For the ninethree months ended September 30, 2016 were $13.5 million.

24
March 31, 2021, three vendors represented approximately 33%, 25%, and 18% of total purchases.

Segments

The Company’s operations consist of 3 reportable segments based on similar economic characteristics, the nature of products and production processes, end-use markets, channels of distribution, and regulatory environments: Indoor Intelligence, Saves, and Shoom.
During the second quarter of 2021, the Company changed the level of detail at which its Chief Executive Officer (“CEO”) acting as the Chief Operating Decision Maker, or “CODM”) regularly reviews and manages certain of its businesses, resulting in the bifurcation of its former 1 segment into 3 standalone reportable segments: Indoor Intelligence, Saves, and Shoom. The Company now manages and reports its operating results through these 3 reportable segments. This change allows the Company to enhance its customer focus and better align its business models, resources, and cost structure to the specific current and future growth drivers of each business, while providing increased transparency to the Company’s shareholders. The historical segment information has been recast to conform to the current segment structure.
Gross profit is the primary measure of segment profitability used by the Company’s CODM.
Revenues and gross profit segments consisted of the following (in thousands):
34
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016

2021

Note 1719 - Segment ReportingCredit Risk and Foreign Operations

Effective January 1, 2017 the Company has changed the way it analyzes and assesses divisional performance of the Company. Concentrations (continued)

For the Three Months Ended March 31,
20222021
Revenue by Segment
 Indoor Intelligence$3,979 $1,617 
 Saves734 832 
 Shoom518 505 
 Total segment revenue$5,231 $2,954 
Gross profit by Segment
 Indoor Intelligence$2,931 $1,015 
 Saves492 632 
 Shoom422 423 
 Gross profit by Segment$3,845 $2,070 
Income (loss) from operations by Segment
Indoor Intelligence$(10,033)$(12,584)
Saves(253)(67)
Shoom222 231 
Income (loss) from operations by Segment$(10,064)$(12,420)
The Company has therefore re-aligned its operating segments along those division business lines and has created the following operating segments. The Company has retroactively applied these new segment categoriesreporting package provided to the prior periods presented below for comparative purposes.

●Indoor Positioning Analytics:  ThisCompany's CODM does not include the measure of assets by segment includes Inpixon’s proprietary products and services delivered on premise or in the Cloud as well as our hosted Software-as-a-Service (SaaS) based solutions. Our Indoor Positioning Analytics product is based on a unique and patented sensor technology that detects and locates accessible cellular, Wi-Fi and Bluetooth devices and then uses a lightning fast data-analytics engine to deliver actionable insights and intelligent reports for security, marketing, asset management, etc.
●Infrastructure: This segment includes third party hardware, software and related maintenance/warranty products and services that Inpixon resells to commercial and government customers. It includes but is not limited to products for enterprise computing; storage; virtualization; networking; etc. as well as services including custom application/software design; architecture and development; staff augmentation and project management.

The following tables present key financial information isn't reviewed by the CODM when assessing segment performance or allocating resources.

35
Table of the Company’s reportable segments before unallocated corporate expenses (in thousands):

  Indoor Positioning
Analytics		  Infrastructure  Consolidated 
          
For the Three Months Ended September 30, 2017:    
     
Net revenues $871  $11,053  $11,924 
Cost of net revenues $(266) $(9,407) $(9,673)
Gross profit $605  $1,646  $2,251 
Gross margin %  69%  15%  19%
Depreciation and amortization $122  $369  $491 
Amortization of intangibles $808  $519  $1,327 
             
For the Three Months Ended September 30, 2016:            
             
Net revenues $1,368  $9,872  $11,240 
Cost of net revenues $(488) $(7,654) $(8,142)
Gross profit $880  $2,218  $3,098 
Gross margin %  64%  22%  28%
Depreciation and amortization $128  $206  $334 
Amortization of intangibles $864  $192  $1,056 
             
For the Nine Months Ended September 30, 2017:            
             
Net revenues $3,006  $37,496  $40,502 
Cost of net revenues $(990) $(30,588) $(31,578)
Gross profit $2,016  $6,908  $8,924 
Gross margin %  67%  18%  22%
Depreciation and amortization $290  $1,034  $1,324 
Amortization of intangibles $2,537  $1,557  $4,094 
             
For the Nine Months Ended September 30, 2016:            
             
Net revenues $3,674  $34,985  $38,659 
Cost of net revenues $(1,065) $(27,105) $(28,170)
Gross profit $2,609  $7,880  $10,489 
Gross margin %  71%  23%  27%
Depreciation and amortization $309  $575  $884 
Amortization of intangibles $2,593  $576  $3,169 

25
Contents

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2021 AND 2016

2020

Note 1720 - Segment ReportingFair Value of Financial Instruments
The Company's estimates of fair value for financial assets and financial liabilities are based on the framework established in ASC 820. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the ASC 820 hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. We classified our financial instruments measured at fair value on a recurring basis in the following valuation hierarchy.
The Company's assets measured at fair value consisted of the following at March 31, 2022 and December 31, 2021:
Fair Value at March 31, 2022
TotalLevel 1Level 2Level 3
Assets:
Short-term investments$15,035 $15,035 $— $— 
Investments in equity securities335 — — 335 
Total assets$15,370 $15,035 $— $335 
Fair Value at December 31, 2021
TotalLevel 1Level 2Level 3
Assets:
Short-term investments$43,125 $43,125 $— $— 
Investments in equity securities1,838 — — 1,838 
Total assets$44,963 $43,125 $— $1,838 
The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value.

Short-term investments represent U.S. treasury bills with maturities greater than three months. The fair value of the U.S. treasury bills are based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The market for U.S. treasury bills is an actively traded market given the high level of daily trading volume.

Investments in equity securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity. The fair value was determined using a pricing model with certain significant unobservable market data inputs.

The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value For the Three Months Ended March 31, 2022:

Level 3
Level 3 Investments
Balance at beginning of period$1,838 
Unrealized loss on equity securities(1,503)
Balance at end of period$335 
36
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Note 21 - Foreign Operations (continued)

Reconciliation of reportable segments’ combined income from operations to the consolidated loss before income taxes is as follows (in thousands):

  For the Three Months Ended
September 30,		  For the Nine Months Ended
September 30,		 
  2017  2016  2017  2016 
Income from operations of reportable segments $2,251  $3,098  $8,924  $10,489 
Unallocated operating expenses  (16,845)  (7,240)  (34,105)  (22,761)
Interest expense  (694)  (639)  (2,721)  (1,037)
Other income (expense)  656   61   799   108 
Loss from discontinued operations  (9)  --   (26)  -- 
Consolidated loss before income taxes $(14,641) $(4,720) $(27,129) $(13,201)

The Company’s operations are located primarily in the United States, Canada, India, Germany, Ireland, and Saudi Arabia.the United Kingdom. Revenues by geographic area are attributed by country of domicile of our subsidiaries. The financial data by geographic area are as follows (in thousands):

  United     Saudi       
  States  Canada  Arabia  Eliminations  Total 
For the Three Months Ended September 30, 2017:               
Revenues by geographic area $11,917  $7  $--  $--  $11,924 
Operating loss by geographic area $(14,097) $(497) $--  $--  $(14,594)
Net income (loss) by geographic area $(14,135) $(497) $(9) $--  $(14,641)
                     
For the Three Months Ended September 30, 2016:                    
Revenues by geographic area $11,231  $9  $--  $--  $11,240 
Operating loss by geographic area $(3,622) $(511) $(9) $--  $(4,142)
Net loss by geographic area $(4,200) $(511) $(9) $--  $(4,720)
                     
For the Nine Months Ended September 30, 2017:                    
Revenues by geographic area $40,368  $134  $--  $--  $40,502 
Operating loss by geographic area $(23,834) $(1,347) $--  $--  $(25,181)
Net loss by geographic area $(25,756) $(1,347) $(26) $--  $(27,129)
                     
For the Nine Months Ended September 30, 2016:                    
Revenues by geographic area $38,605  $54  $--  $--  $38,659 
Operating loss by geographic area $(10,903) $(1,344) $(25) $--  $(12,272)
Net loss by geographic area $(11,832) $(1,344) $(25) $--  $(13,201)
                     
As of September 30, 2017:                    
Identifiable assets by geographic area $34,591  $591  $23  $--  $35,205 
Long lived assets by geographic area $16,981  $397  $--  $--  $17,378 
                     
As of December 31, 2016:                    
Identifiable assets by geographic area $66,050  $400  $23  $--  $66,473 
Long lived assets by geographic area $29,843  $319  $--  $--  $30,162 

26

United
States		CanadaIndiaGermanyUnited KingdomIrelandEliminationsTotal
For the Three Months Ended March 31, 2022:
Revenues by geographic area$3,711 $601 $397 $948 $118 $3 $(547)$5,231 
Operating (loss) income by geographic area$(7,399)$(1,276)$110 $(1,340)$12 $(161)$(10)$(10,064)
Net (loss) income by geographic area$(8,869)$(1,139)$12 $(1,373)$14 $(202)$— $(11,557)
For the Three Months Ended March 31, 2021:
Revenues by geographic area$1,661 $755 $441 $895 $78 $— $(876)$2,954 
Operating (loss) income by geographic area$(10,568)$(1,213)$113 $(747)$(5)$— $— $(12,420)
Net (loss) income by geographic area$(10,947)$(959)$102 $(725)$(10)$— $— $(12,539)
As of March 31, 2022:
Identifiable assets by geographic area$200,969 $7,201 $673 $19,595 $268 $76 $(91,557)$137,225 
Long lived assets by geographic area$26,479 $5,758 $149 $4,270 $2 $2 $— $36,660 
Goodwill by geographic area$5,914 $487 $— $1,255 $— $— $— $7,656 
As of December 31, 2021:
Identifiable assets by geographic area$216,338 $7,191 $675 $20,238 $283 $69 $(88,121)$156,673 
Long lived assets by geographic area$27,773 $5,864 $181 $4,624 $2 $4 $— $38,448 
Goodwill by geographic area$5,914 $480 $— $1,278 $— $— $— $7,672 

37
Table of Contents
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBERMARCH 31, 2022 AND 2021

Note 22 - Related Party Transactions
Nadir Ali, the Company’s Chief Executive Officer and a member of its Board of Directors, was a member of the Board of Directors of Sysorex, Inc. ("Sysorex") until he resigned on May 14, 2021. In addition, Nadir Ali previously entered into a consulting agreement with Sysorex, pursuant to which he agreed to provide certain business services specified in the agreement for the benefit of Sysorex in exchange for shares of Sysorex's common stock. The consulting agreement was terminated on October 14, 2021.
Sysorex Note Purchase Agreement
On December 31, 2018, the Company and Sysorex entered into a note purchase agreement (the “Note Purchase Agreement”) pursuant to which the Company agreed to purchase from Sysorex at a purchase price equal to the Loan Amount (as defined below), a secured promissory note (the “Secured Note”) for up to an aggregate principal amount of $3 million (the “Principal Amount”), including any amounts advanced through the date of the Secured Note (the “Prior Advances”), to be borrowed and disbursed in increments (such borrowed amount, together with the Prior Advances, collectively referred to as the “Loan Amount”), with interest to accrue at a rate of 10% percent per annum on all such Loan Amounts, beginning as of the date of disbursement with respect to any portion of such Loan Amount. In addition, Sysorex agreed to pay $20,000 to the Company to cover the Company’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Secured Note (the “Transaction Expense Amount”), all of which amount is included in the Principal Amount. Sysorex may borrow repay and borrow under the Secured Note, as needed, for a total outstanding balance, exclusive of any unpaid accrued interest, not to exceed the Principal Amount at any one time.
All sums advanced by the Company to the Maturity Date (as defined below) pursuant to the terms of the Note Purchase Agreement will become part of the aggregate Loan Amount underlying the Secured Note. All outstanding principal amounts and accrued unpaid interest owing under the Secured Note shall become immediately due and payable on the earlier to occur of (i) 24 month anniversary of the date the Secured Note is issued (the “Maturity Date”), (ii) at such date when declared due and payable by the Company upon the occurrence of an Event of Default (as defined in the Secured Note), or (iii) at any such earlier date as set forth in the Secured Note. All accrued unpaid interest shall be payable in cash. On February 4, 2019, April 2, 2019, and May 22, 2019, the Secured Note was amended to increase the Principal Amount from $3 million to $5 million, $5 million to $8 million and $8 million to $10 million, respectively. On March 1, 2020, the Company extended the maturity date of the Secured Note to December 31, 2022. In addition, the Secured Note was amended to increase the default interest rate from 18% to 21% or the maximum rate allowable by law and to require a cash payment to the Company by Sysorex against the Loan Amount in an amount equal to no less than 6% of the aggregate gross proceeds raised following the completion of any financing, or series of related financings, in which Sysorex raises aggregate gross proceeds of at least $5 million.
In accordance with the terms of the Systat License Agreement, on June 30, 20172020, the Company partitioned a portion of the outstanding balance of the Secured Note into a new note in an amount equal to $3 million in principal plus accrued interest (the “Closing Note”) and assigned the Closing Note and all rights and obligations thereunder to Systat in accordance with the terms and conditions of that certain Promissory Note Assignment and Assumption Agreement ("Assignment Agreement"). An additional $2.3 million of the principal balance underlying the Sysorex Note was partitioned into a new note and assigned to Systat as consideration payable for the rights granted under the license as of December 31, 2020. During the year ended December 31, 2020, an additional amount of approximately $2.6 million was advanced under the Secured Note and approximately $200,000 was repaid. The amount owed for principal as of December 31, 2020 and accrued interest through September 30, 2019 by Sysorex to the Company as of December 31, 2020 was approximately $7.7 million. These amounts excludes $275,000 of additional interest that the Company is contractually entitled to accrue from October 1, 2019 through December 31, 2019 and approximately $1.1 million of additional interest from January 1, 2020 through December 31, 2020 in accordance with the terms of the Sysorex Note, but did not accrue due to the uncertainty of repayment.
During the three months ended March 31, 2020 an additional $117,000 was advanced under the Secured Note and the Company was entitled to an additional $251,806 of interest in accordance with the terms of the Note, but did not accrue due to the uncertainty of repayment. An additional $1 million of the principal balance under the Secured Note was assigned to Systat on March 19, 2021, as the final portion of the total consideration due in connection with the license.
As of April 14, 2021, the Sysorex Note Purchase Agreement was settled, see Sysorex Securities Settlement Agreement below.
38
INPIXON AND 2016

SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 22 - Related Party Transactions (continued)
Sysorex Receivable
On February 20, 2019, the Company, Sysorex and Atlas Technology Group, LLC (“Atlas”) entered into a settlement agreement resulting in a net award of $941,796 whereby Atlas agreed to accept an aggregate of 16,655 shares of freely-tradable common stock of the Company in full satisfaction of the award. The Company and Sysorex each agreed pursuant to the terms and conditions of that certain Separation and Distribution Agreement, dated August 7, 2018, as amended, that 50% of the costs and liabilities related to the arbitration action would be shared by each party following the Spin-off. As a result, Sysorex owes the Company $0.6 million for the settlement plus the interest accrued during the fiscal year ended December 31, 2020 of $0.1 million.. The total owed to the Company for this settlement as of December 31, 2021 and 2020 was $0 and $0.6 million, respectively. The Company established a full valuation allowance against this balance as of December 31, 2020.
As of April 14, 2021, the Sysorex Receivable was settled, see Sysorex Securities Settlement Agreement below.
Sysorex Securities Settlement Agreement
On April 14, 2021, the Company entered into a Securities Settlement Agreement (the “SSA”) and a Rights Letter Agreement (the “RLA”), each with Sysorex, whereby Sysorex agreed to satisfy in full its outstanding debt, in the aggregate amount of $9,088,176 as of March 31, 2021, owed to the Company under that certain secured promissory note, originally dated December 31, 2018, as amended from time to time, and in connection with that certain settlement agreement, dated February 20, 2019, by and among the Company, Sysorex and Atlas Technology Group, LLC (the “Debt Settlement”). To effect the Debt Settlement, Sysorex agreed to issue to the Company (i) pursuant to the terms of the SSA, 12,972,189 shares of its common stock, $0.00001 par value per share, and (ii) rights to acquire 3,000,000 additional shares of its common stock pursuant to the terms of the RLA. The Debt Settlement was entered into in connection with Sysorex’s closing of a reverse triangular merger with TTM Digital Assets & Technologies, Inc.

The Company recorded $7.5 million for the release of the previously recorded valuation allowance, $1.6 million of interest income, anda gain on settlement of $49.8 million equal to the difference in the carry value of the promissory note, including interest and value of the common stock and rights to acquire additional shares received in the settlement.
In connection with the Debt Settlement, the Company also entered into a Registration Rights Agreement, dated as of April 14, 2021 (the “RRA”), with Sysorex and certain other shareholders of Sysorex (the “Holders”). Pursuant to the terms of the RRA, Sysorex must, subject to certain limitations, register the resale of the shares of common stock held by the Company and the Holders, with the U.S. Securities and Exchange Commission (the “SEC”), during the period that begins on the 90th day following April 14, 2021. In the event Sysorex fails to register such shares within that timeframe, or otherwise fails to meet its obligations under the RRA, then, subject to certain limitations, the Company and the Holders may be entitled to receive from Sysorex an amount in cash equal to the product of 1.5% multiplied by the value of their shares (as set forth in the RRA), which amount is payable each month following the date of such failure for so long as the failure continues; provided that the shares are considered "Registrable Securities" as defined by the RRA. The shares of Sysorex common stock were not deemed Registrable Securities as defined by the RRA as of the date of the registration obligation.
Also, under the RRA, if Sysorex determines to prepare and file with the SEC a registration statement relating to an offering of any of its equity securities, for its own account or the account of others, then the Company and the Holders will have the right, subject to certain limitations, to require Sysorex to include in such registration statement all or any part of the shares of common stock held by them.
Systat License Agreement
Nadir Ali, the Company's Chief Executive Officer and a member of its Board of Directors, is a related party in connection with the acquisition of the Licenses as a result of his prior service as a director of Sysorex, the issuer of the Sysorex Note that was assigned in accordance with the terms and conditions of the License Agreement. In addition, Tanveer Khader and Kareem Irfan, members of the Company's Board of Directors, may also be deemed related parties in connection with the acquisition of the Licenses as a result of their respective employment relationships with the Systat Parties.
39
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 22 - Related Party Transactions (continued)
Inpixon Canada Promissory Note
As of March 31, 2022, Inpixon Canada owed the Company $18.0 million. This note is recorded as a current note receivable on the Company books, however, it is eliminated in the consolidated financial statements.
Cardinal Ventures 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 which is a member of Cardinal Ventures Holdings ("CVH"), which may, in certain circumstances, be entitled to manage the affairs of CVH. Mr. Ali’s relationship may create conflicts of interest between Mr. Ali’s obligations to the Company and its shareholders and his economic interests and possible fiduciary obligations in CVH through 3AM. For example, Mr. Ali may be in a position to influence or manage the affairs of CVH in a manner that may be viewed as contrary to the best interests of either the Company or CVH and their respective stakeholders.
Director Services Agreement
The Company and Kareem Irfan, a director of the Company, have amended Mr. Irfan's 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. Irfan.
Note 23 - Leases
The Company has operating leases for administrative offices in the United States (California), Canada, India, United Kingdom and Germany.

The Company terminated the lease in Ratingen, Germany in January 2021. The Company entered into two new operating leases for its administrative offices in Ratingen, Germany, both from February 1, 2021 through January 1, 2023. The monthly lease rate is $2,789 and $1,122 per month.

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 $9,753 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):
As of March 31, 2022As of December 31, 2021
Palo Alto, CA Office$631 $631 
Hyderabad, India Office352 359 
Coquitlam, Canada Office98 97 
Westminster, Canada Office— 10 
Toronto, Canada Office611 949 
Ratingen, Germany Office88 90 
Berlin, Germany Office526 536 
Slough, United Kingdom Office— 34 
Frankfurt, Germany Office306 312 
Less accumulated amortization(1,054)(1,282)
Right-of-use asset, net$1,558 $1,736 
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
Note 23 - Leases (continued)
Lease expense for operating leases recorded in the balance sheet is included in operating costs and expenses and is based on the future minimum lease payments recognized on a straight-line basis over the term of the lease plus any variable lease costs. Operating lease expenses, inclusive of short-term and variable lease expenses, recognized in our consolidated statement of income for the three months ended March 31, 2022 and 2021 was $0.4 million and $0.3 million, respectively.
Lease liability is summarized below (in thousands):
As of March 31, 2022As of December 31, 2021
Total lease liability$1,601 $1,751 
Less: short term portion(619)(643)
Long term portion$982 $1,108 
Maturity analysis under the lease agreement is as follows (in thousands):
Year ending December 31, 2022$566 
Year ending December 31, 2023467 
Year ending December 31, 2024376 
Year ending December 31, 2025258 
Year ending December 31, 2026103 
Total$1,770 
Less: Present value discount(169)
Lease liability$1,601 
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 March 31, 2022, the weighted average remaining lease term is 3.2 years and the weighted average discount rate used to determine the operating lease liabilities was 6.1%.

Note 1824 - Commitments and Contingencies

Litigation

Certain conditions may exist as of the date the condensed 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 Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

During the year ended December



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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2011, a judgment in the amount of $936,000 was levied against Sysorex Arabia in favor of Creative Edge, Inc. in connection with amounts advanced for operations. Of that amount, $214,000 has been repaid, and the remaining $722,000 has been accrued and is included as a component of liabilities held for sale as of September 30, 2017 and December 31, 2016 in the condensed consolidated balance sheets.

On May 30, 2017, HP Inc. (“HP”) filed a complaint in the Marin County Superior Court, California, against Inpixon USA for goods sold and delivered, account stated, and quantum meruit. The complaint alleges that Inpixon USA had purchased HP’s products on credit, which led to an unpaid balance in the sum of $744,184.12 as of December 13, 2016. The complaint further alleges that although Inpixon USA entered into two payment agreements with HP and made partial payments, it defaulted under the payment program and the unpaid amount totaled $636,046.60 as of January 17, 2017. In the complaint, HP demands that Inpixon USA pay damages in the principal amount of $636,046.60 plus any interest accruing from and after January 17, 2017 at the rate of 10% per annum. On the same day of filing the complaint, HP also applied for a right to attach order and order for issuance of writ of attachment from the court to prevent Inpixon USA from dissipating assets prior to the time of judgement. Inpixon USA and HP Inc. settled this matter on November 9, 2017 and the case is in the process of being dismissed. The liability has been accrued and is included as a component of accounts payable as of September 30, 2017 and December 31, 2016 in the condensed consolidated balance sheets. 

On August 10, 2017, Embarcadero Technologies, Inc. (“Embarcedero”) and Idera, Inc. (“Idera”) filed a complaint in the U.S. Federal District Court for the Western District of Texas against Inpixon Federal, Inc. (“Inpixon”) and Integrio Technologies, LLC (“Integrio”) for failure to pay for purchased software and services pursuant to certain reseller agreements. The complaint alleges that Inpixon entered into an agreement with Integrio to acquire certain assets and assume certain liabilities of Integrio and are therefore responsible for any amounts due. In the complaint, Embarcadero and Idera demand that Inpixon and Integrio pay $1,100,000.00 in damages. The liability has been accrued and is included as a component of accounts payable as of September 30, 2017 and December 31, 2016 in the condensed consolidated balance sheets. 

2021 AND 2020

Note 1925 - Subsequent Events

Subsequent


Debenture Investment

On April 27, 2022, the Company entered into and consummated the transactions contemplated by a securities purchase agreement (the “Purchase Agreement”) with an unaffiliated company operating in the insurance technology sector (“Debenture Seller”), pursuant to September 30, 2017, 1,185,857 warrants were exercisedwhich it purchased a 10% Original Issue Discount Senior Convertible Debenture (a “Debenture”) issued by the Debenture Seller in exchangean aggregate principal amount of approximately $6.1 million for 1,185,857a purchase price of $5.5 million. The Purchase Agreement is one of a series of securities purchase agreements which Debenture Seller has or will enter into under a private placement of Debentures commenced in February 2022. Interest on the Debenture accrues at a rate of 12% per annum, of which 12 months will be guaranteed, and is payable on each conversion date (as to the principal amount being converted) and on the maturity date, in cash, or in shares of Class A common stock of the Company’s common stock at $0.30Debenture Seller upon a share.

On October 24, 2017,conversion of all or a portion of the Company received notificationoutstanding principal amount on the Debenture. The Debenture will mature on the date that is 12 months from NASDAQ that it has not regained compliance with the Minimum Stockholders’ Equity Requirement. The Company has appealed the Staff Delisting Determination and requested a hearingoriginal issue date, which is currently scheduled for December 7, 2017. As a result, the suspension and delisting willmay be stayed until pending the issuance of a written decision by the hearings panel. The Company is currently evaluating various alternative courses of action to regain compliance with the Minimum Stockholders’ Equity Requirement. 

On November 17, 2017, the Company issued a $1,745,000 principal face amount note to an accredited investor which yielded net proceeds of $1,500,000extended or accelerated pursuant to the Company. The note bears interest at the rate of 10% per year and is due 10 months after the date of issuance. There is a fixed conversion price of $0.45 per share, and the Company is required to reserve 25 millionterms of the 50 million shares set forth in Proposal 8Debenture.


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Table of the Definitive Schedule 14A filed with the SEC in October 2017. Redemptions may occur at any time after the 6 month anniversary of the date of issuance of the note with a minimum redemption price of $0.57 per share, and if the conversion rate is less than the market price, then the redemptions must be made in cash. The note contains standard events of default and a schedule of redemption premiums. There is also a most favored nations clause for the term of the note. 

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Contents

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016,2021, as filed with the SEC. In addition to our historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q, particularly in Part II, Item 1A, “Risk Factors.”


Overview of Our Business

Inpixon is the Indoor Intelligence™ company. Our solutions and technologies help organizations create and redefine exceptional workplace experiences that enable smarter, safer and more secure environments. We leverage our Business

positioning, mapping, analytics and app technologies to achieve higher levels of productivity and performance, increase safety and security, improve worker and employee satisfaction rates and drive a more connected workplace. We provide a number of different technology products and services to private and public sector customers. Effective January 1, 2017,have focused our corporate strategy on being the Company has changed the way it analyzes and assesses divisional performanceprimary provider of the Company. The Company has therefore re-aligned its operating segments along those division business lines and now operatesfull range of foundational technologies needed in two segments, namely Indoor Positioning Analytics and Infrastructure. Our premier proprietary product secures, digitizes and optimizes the interior of any premises with indoor positioning and data analytics that provide rich positional information, similarorder to a global positioning system, and browser-like intelligence for the indoors. Other products and services that we provide include enterprise computing and storage, virtualization, business continuity, data migration, custom application development, networking and information technology, and business consulting services.

Indoor Positioning Analytics Segment

Revenues from our Indoor Positioning Analytics (IPA) segment is expected to be flat in 2017 as a result of our limited capital and financial challenges. However, we do expect to grow this segment in 2018. The IPA segment does currently have long sales cycles which are a result of customer related issues such as budget and procurement processes but also because of the early stages of indoor-positioning technology and the learning curve required for customers to implement such solutions. Customers also engage in a pilot program first, which further prolongs sales cycles and is typical of most emerging technology adoption curves. We anticipate sales cycles to improve in 2018 as our customer base moves from innovators to mainstream customer adoption. The sales cycle is also improving with the increased presence and awareness of beacon and wi-fi locationing technologies in the market. IPA segment sales can be licensed-based with government customers but are primarily on a Software-as-a-Service (“SaaS”) model with commercial customers. Our other SaaS products include cloud-based applications for media customers, which allow us to generate industry analytics that complement our indoor-positioning solutions.

Infrastructure Segment

The storage and computing component of our Infrastructure segment revenues is typically driven by purchase orders that are received on a monthly basis. Approximately 38% of Company revenues are from these purchase orders, which are recurring contracts that range from one to five years for warranty and maintenance support. For these contracts the customer is invoiced one time and pays Inpixon upfront for the full term of the warranty and maintenance contract. Revenue from these contracts is determinable ratably over the contract period, with the unearned revenue recorded as deferred revenue and amortized over the contract period. We have a 30-year history and a high repeat customer rate of approximately 55% annually. Our revenues are diversified over hundreds of customers and typically no one customer exceeds 15% of revenues, however from time to time a large order from a customer could put it temporarily above 15%. During the nine months ended September 30, 2017, one customer generated sales of 16% of our total revenues. Management believes this diversification provides stability to our revenue streams.

Our professional services group provides consulting services ranging from enterprise architecture design to custom application development to data modeling. We offer a full scopecomprehensive suite of information technology developmentsolutions that make indoor data available and implementation services with expertise in a broad range of IT practices including project designmeaningful to organizations and management, systems integration, outsourcing, independent validation and verification, cyber security and more. 

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their employees.


        Inpixon has many key vendor, technology, wholesale distribution and strategic partner relationships. These relationships

Our Indoor Intelligence solutions are criticalused by our customers for us to deliver solutions to our customers. We have a variety of vendorsuse cases including, but not limited to, employee and alsovisitor experience enhancement through a customer branded app with features such as desk booking, wayfinding and navigation, and the delivery of content to tens of thousands of attendees in hybrid events. Our real time location (RTLS) and asset tracking products that we provideoffer manufacturing and warehouse logistics optimization and automation, increase workforce productivity, and enhance worker safety and security.

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

• Digital solutions (eTearsheets; eInvoice, adDelivery) or cloudbased applications and analytics for the advertising, media and publishing industries y advertising management platform referred to as Shoom by Inpixon; and

• A comprehensive set of these products are purchased through our distribution partners. data analytics and statistical visualization solutions for engineers and scientists referred to as SAVES by Inpixon.

We also have joint venture partnershipsreport financial results for three segments: Indoor Intelligence, Shoom and teaming agreements with various technologySAVES. For Indoor Intelligence, we generate revenue from sales of hardware, software licenses and service providers for this segment as well as our other business segments. These relationships rangeprofessional services. For Shoom and SAVES we generate revenue from joint-selling activities to product integration efforts. We have been facing serious credit challenges with these vendors given our financial circumstances, but are working on solving these issues as we move forward and improve our liquidity.

In addition, our business is required to meet certain regulatory requirements. Our federal government customers in particular have a rangethe sale of regulatory requirements including ITAR certifications, DCAA compliancy in our government contracts and other technical or security clearance requirements as may be required from time to time.

software licenses.


We experienced a net loss of approximately $22.5$11.6 million for the nineand $12.5 million three months ended September 30, 2017.March 31, 2022 and 2021, respectively. We cannot assure that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In order to continue our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds from loans and bank credit lines. Furthermore, except as discussed in this report,

Global Events

While the impact of the COVID-19 pandemic is generally subsiding, the lasting impact on our business and results of operations continues to remain uncertain. While we were able to continue operations remotely throughout the pandemic, we have experienced supply chain cost increases and constraints and delays in the receipt of certain components of our hardware products impacting delivery times for our products. In addition, to the extent that certain customers continue to be challenged by the lasting effects of the pandemic, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders. Despite these challenges, we were able to realize growth in revenue for the first quarter of 2022 when compared to the same period of 2021 as a result of an increase in sales associated with our indoor intelligence platform including the CXApp and Intranav acquisitions completed in April and December 2021 respectively.

We anticipate that certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and Ukraine, and inflation on our customers and partners in regions throughout the world, we expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business. The impact that these global events will have on general economic conditions is continuously evolving and the
43
ultimate that they will have on our results of operations continues to remain uncertain and there are no committed source of financing and we cannot assureassurances that we will be able to raise moneycontinue to experience the same growth or not be materially adversely effected. A further discussion of the impact of the COVID-19 pandemic and the Russia and Ukraine conflict on our business is set forth below in Part II, Item 1A. Risk Factors.

Corporate Strategy Update

Since 2019, management has pursued a corporate strategic acquisition strategy focused on building and developing its business as the Indoor IntelligenceTM provider with the ability to provide end to end solutions ranging from the collection of data to delivering insights from that data to our customers with a focus on securing, digitizing and whenoptimizing premises with our indoor positioning, mapping and analytics solutions for businesses and governments. In furtherance of this strategy, we need ithave completed a series of strategic transactions to enhance our products and solution offerings, including, the acquisition of (1) technologies allowing for wireless device positioning and radio frequency augmentation of video surveillance systems; (2) GPS tracking products, software, technologies, and related intellectual property to provide ground positioning, asset tracking, and situational awareness monitoring for those whose intelligence needs expand outdoors; (3) our indoor mapping solution, Inpixon Mapping, to provide users with the tools to add intelligence to complex indoor spaces by integrating business data with geospatially accurate indoor maps to create relevant views of indoor environments; (4) a suite of on-device “blue dot” indoor location and motion technologies, including patents, trademarks, software and related intellectual property; (5) IoT solutions for real-time location systems (RTLS) and indoor and outdoor positioning solutions utilizing both industry-standard technologies, such as ultra-wideband (UWB), and patented proprietary wireless communication technologies, such as Chirp Spread Spectrum (CSS); (6) a suite of augmented reality, computer vision, localization, navigation, mapping, and 3D reconstruction technologies, including patents, trademarks, software and related intellectual property; (7) a leading SaaS app platform that enables corporate enterprise organizations to provide a custom-branded, location-aware employee app focused on enhancing the workplace experience and hosting virtual and hybrid events and (8) an industrial IoT, RTLS, and sensor data services provider..

We believe these transactions have positioned us as a market leader with a comprehensive suite of products and solutions allowing us to provide organizations with actionable indoor intelligence to make their indoor spaces smarter, safer and more secure. We also operate and compete in an industry that is characterized by rapid technological innovation, changing customer needs, evolving industry standards and frequent introductions of new products, product enhancements, services and distribution methods. Our success will depend on our ability to develop expertise with these new products, product enhancements, services and distribution methods and to implement solutions that anticipate and respond to rapid changes in technology, the industry, and customer needs. In order to continue to respond to rapid changes and required technological advancements, as well as increase shareholder value, we intend to continue to evaluate various strategic transactions and opportunities that we believe will enhance shareholder value and support our operations. Ifcommitment to delivering exceptional experiences and continued innovation with technologies that combine the physical and digital worlds with augmented reality and location based technologies. We are primarily focused on identifying potential targets with business value and operational synergies, however, we cannot raise fundswill also be opportunistic and may consider other strategic and/or attractive transactions that we believe may increase overall shareholder value, which may include, but not be limited to other alternative investment opportunities, such as and when we need them, we may be required to scale backminority investments, joint ventures or special purpose acquisition companies. In addition, at the end of last year, our business operations by further reducing expenditures for employees, consultants, business development and marketing efforts, selling assetsboard of directors authorized a review of strategic alternatives, including a possible asset sale, merger with another company or spin-off of one or more segments of our business units. We have received an inbound preliminary indication of interest which we are currently evaluating. We also intend to retain an investment bank as our financial advisor in order to evaluate any available strategic options that may be available to us, If we make any acquisitions in the future, we expect that we may pay for such acquisitions with cash, equity securities and/or otherwise severely curtailing our operations.

debt in combinations appropriate for each acquisition.


Recent Events

Hillair Share Issuance


Series 8 Preferred Shares

On April 19, 2017, Inpixon entered into an exchange agreementMarch 22, 2022, we filed a Certificate of Designation (the “First Exchange Agreement”“Certificate of Designation”) establishing the preferences, rights, and limitations of our Series 8 Convertible Preferred Stock, par value $0.001 per share the (the “Series 8 Shares”) with Hillair Capital Investments L.P. (the “Note Holder”) in connectionthe Secretary of State of the State of Nevada.

The Series 8 Shares rank, with an interest payment due on May 9, 2017 pursuantrespect to the Company’s 8% Original Issue Discount Senior Secured Convertible Debenture in the principal amountpayment of $5,700,000 (the “Debenture”). The Debenture was issued on August 9, 2016 pursuant to that certain securities purchase agreement dated asdividends, redemption or distribution of that same date (the “Securities Purchase Agreement”), by and between the Company and the Note Holder. In accordance with the First Exchange Agreement, solely in respect of the interest payment in the amount of $343,267 due on May 9, 2017 under the Debenture, the Company and the Note Holder agreed that $315,700 of such interest payment will be made in the form of 110,000 shares of the Company’s common stock issued at an interest conversion rate equal to $2.87 per share (the “Interest Shares”). The shares were issued on April 20, 2017. In addition, the Note Holder also waived the Equity Conditionassets upon a Liquidation (as defined in the Debenture)Certificate of Designation): (i) senior to the Company’s Series 7 Convertible Preferred Stock (subsequent to June 14, 2022), common stock, Series 4 Convertible Preferred Stock and Series 5 Convertible Preferred Stock and to any class of stock it may issue in connectionthe future that is not expressly stated to be on parity with or senior to the Series 8 Shares with respect to such dividends, redemption or distributions; (ii) on parity with any class of stock it has issued and may issue in the future that is expressly stated to be on parity with the Series 8 Shares with respect to such dividends, redemption
44
and distributions; and (iii) junior to any class of stock we may issue in the future that is expressly stated to be senior to the Series 8 Shares with respect to such dividends, redemption or distributions, if the issuance is approved by the affirmative vote of the Interestholders of a majority of the then outstanding Series 8 Shares.

Capital Raise

On June 30, 2017, the Company completed the previously announced registered underwritten public offering


At any time beginning on October 1, 2022 (the “Offering”“Series 8 Redemption Triggering Date”) of an aggregate of (i) 1,849,460 Class A Unitsand ending ninety (90) days thereafter (the “Class A Units”"Series 8 Redemption Period"), each holder of Series 8 Shares may require us to redeem all or part of the Series 8 Shares then held by such holder in cash for a redemption price per share equal to the Series 8 Stated Value (defined below) plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses, or amounts due in respect of such shares (the “Series 8 Redemption Amount”), provided that in certain instances of default more particularly described in the Certificate of Designation, the Series 8 Redemption Amount may be increased to 110% of the Series 8 Stated Value plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses, or amounts due in respect of such shares. If we fail to pay the full Series 8 Redemption Amount timely, we will be obligated to pay interest at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law, accruing daily from the due date until the redemption amount and all interest thereon are paid in full. Correspondingly, beginning on the Series 8 Redemption Triggering Date for so long as the Series 8 Shares remain outstanding we may, at our option redeem all or part of the Series 8 Shares then held by a holder for the Series 8 Redemption Amount, subject to certain equity conditions described in the Certificate of Designation. In the event, we elect to exercise our redemption right, the holder will have an option to convert the Series 8 Shares subject to redemption into common stock in accordance with each Class A Unit consistingthe Certificate of one shareDesignation within thirty (30) days following a written notice sent to the holder. Upon the receipt of the Series 8 Redemption Amount, the holder of the Series 8 Shares will forfeit 50% of the Series 8 Warrants (defined below) issued to the holder.

Under the terms of the Series 8 Shares, until the earlier of the date on which no Series 8 Shares remain outstanding or the end of the Series 8 Redemption Period, unless the holders of at least 51% in Series 8 Stated Value of the then outstanding shares of Series 8 Shares shall have otherwise given prior written consent, we cannot pay cash dividends or distributions on the common stock and one warrant to purchase one share ofall other common stock at an exercise priceequivalents other than those securities which are explicitly senior or pari passu to the Series 8 Shares in dividend rights or liquidation preference.

Until the earlier of $1.3125 per share (“Exercise Price”)the conversion or redemption of all Series 8 Shares and January 1, 2023, we are required to maintain a cash balance (in the form of cash and cash equivalents equal to the sum of (i) the Series 8 Stated Value of all of the Series 8 Shares then outstanding, (ii) 4,060 Class B Units (the “Class B Units”)the stated value of the Company’s Series 7 Convertible Preferred Stock then outstanding as set forth in the Series 7 Convertible Preferred Stock Certificate of Designation (provided, however, this will not apply following June 14, 2022), (iii) the aggregate amount of any debt (including trade payables), (iv) the aggregate stated value of any other equity securities that are issued that are senior to, or pari passu with, each Class B Unit consistingthe Series 8 Shares and (v) the aggregate amount of one sharemonetary judgments with respect to the Company, any subsidiary or any of their respective property or assets.

The holders of Series 2 Preferred Stock8 Shares have full voting rights and one warrantpowers, except as otherwise required by the Articles of Incorporation or applicable law. The holders of Series 8 Shares shall vote together with all other classes and series of stock as a single class on all actions to purchasebe taken by the stockholders. Each holder of the Series 8 Shares is entitled to the number of shares of common stockvotes equal to the number of shares of common stock underlyinginto which the Series 2 Preferred Stock at8 Shares then held by such holder could be converted on the Exercise Price. The warrants issuedrecord date for the vote which is being taken, provided, however, that the voting power of a holder together with its Attribution Parties (as defined in the offering containedCertificate of Designation), may not exceed 19.99% (or such greater percentage allowed by the Nasdaq Listing Rules without any shareholder approval requirements).

Financings

On March 22, 2022 (the “Effective Date”), we entered into a price protection provisionSecurities Purchase Agreement (the “March 2022 Purchase Agreement”) with certain institutional investors named therein (the “March 2022 Purchasers”), pursuant to which we issued and sold in a registered direct offering (i) 53,197.7234 shares of our Series 8 Shares convertible into approximately 112,778,720 shares of our common stock, which is equal to the Exercise Price would be reduced inSeries 8 Stated Value divided by the event the Company issued additional securities at aconversion price of $0.4717 per share, that was less than the Exercise Price, provided however, the adjustment would not be less than $0.50. The net proceedsand (ii) related warrants to the Company from the transactions, after deducting the placement agent’s fees and expenses but before paying the Company’s estimated offering expenses, and excluding the proceeds, if any, from the exercise of the warrants was approximately $5,711,850. Immediately after completion of the Offering, the Company redeemed outstanding indebtedness in the amount of approximately $5,512,000.

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In connection with the Offering, the Company entered into that certain waiver and consent agreement, dated June 28, 2017, (the “Waiver and Consent Agreement”) with those purchasers (the “December 2016 Purchasers”) signatory to that certain securities purchase agreement, dated as of December 12, 2016 (the “December 2016 SPA”). Pursuant to the terms of the Waiver and Consent Agreement, the December 2016 Purchasers agreed to waive (the “Waiver”) the variable rate transaction prohibition contained in the December 2016 SPA, which, if not waived, prohibits the adjustment to the exercise price set forth in the Warrants. In consideration of the Waiver, the warrants held by the December 2016 Purchasers issued in accordance with the December 2016 SPA (the “December 2016 Warrants”) were amended to equal the Exercise Price of the warrants issued in the Offering and to provide for an adjustment to the Exercise Price to the extent shares of Common Stock are issued or sold for a consideration per share that is less than the exercise price then in effect; provided, that the exercise price will not be less than $0.50 per share. As of September 30, 2017 all Series 2 Preferred Stock had been converted to shares of Common Stock.

Agreement with Warrant Holders

On August 9, 2017, the Company entered into a warrant exercise agreement (the “Warrant Exercise Agreement”) with certain participants in the Offering (collectively, the “Warrant Holders” and each, a “Warrant Holder”) pursuant to which the Warrant Holders agreed to exercise, for up to an aggregate of 1,095,719112,778,720 shares of common stock the warrants (the “Warrants”“Series 8 Warrants”) issued pursuant to that certain warrant agency agreement, dated as of June 30, 2017 (the “Warrant Agency Agreement”), by and between the Company and Corporate Stock Transfer, as warrant agent (the “Warrant Agent”), provided that the Company will agree to:

(a)      amend the Warrant Agency Agreement to reduce the. The Series 8 Warrants have an exercise price of the Warrants from $1.325$0.4717 per share, to $0.30 per share in accordance withwill be immediately exercisable and will expire five years from the termsissuance date. Each Series 8 Share and conditionsrelated Series 8 Warrants will be sold together at a subscription amount of Amendment No. 1$940, representing an original issue discount of 6% of the Series 8 Stated Value for an aggregate subscription amount of $50.0 million. The closing of the transactions pursuant to the Warrant AgencyMarch 2022 Purchase Agreement dated August 9, 2017 between the Companyoccurred on March 24, 2022 (the "Closing Date") and the Warrant Agent (“Warrant Agreement Amendment”), with the consent of Aegis Capital Corp. and the registered holders of a majority of the outstanding Warrants; and

(b)      issue additional warrantsnet proceeds received were approximately $46.9 million after placement agent commissions.


Pursuant to the Warrant Holders, forMarch 2022 Purchase Agreement, subject to certain exceptions, we agreed not to (i) issue, enter into any agreement to issue or announce the numberissuance or proposed issuance of any shares of common stock that will be equalor securities convertible into common stock or (ii) file any registration statement or any amendment or supplement thereto, or a registration statement on
45
Form S-8, until the forty-fifth (45th) day after the Closing Date (as defined below) (such period, the “Standstill Period”). We also agreed not to enter into any “variable rate transactions” until the numberearlier of exercised shares purchased by(i) such Warrant Holder (the “Additional Warrant Shares”), at an exercise pricetime as none of $0.55 per share (the “Additional Warrant”) for warrants to purchase up to an aggregatethe March 2022 Purchasers holds any of 1,095,719 shares of common stock.

The Warrant Holders agreed to exercise up to 1,095,719 sharesthe Warrants or (ii) December 31, 2023, other than the issuance of common stock underlyingin an “at-the-market” offering; provided, that any such issuance shall not occur until the Warrants (the “Exercised Shares”) for aggregate gross proceeds of $328,715.70 from the exerciseexpiration of the Warrants which will be used for general working capital purposes, includingStandstill Period.


Maxim Group LLC acted as the payment of outstanding debt and trade payablessole placement agent (the “Placement Agent”) on a “reasonable best efforts” basis, in the ordinary course of the Company’s business and prior practices. The Warrants and Exercised Shares were registered on the Registration Statement on Form S-1 filed by the Company (333-218173) and declared effective on June 28, 2017.

In connection with the exerciseSeries 8 offering pursuant to a placement agency agreement (the “Placement Agency Agreement”), dated and entered as of March 22, 2022. In accordance with the Placement Agency Agreement, the Placement Agent received a cash fee of 6% of the Warrants,gross proceeds raised in the Companyoffering and reimbursement of certain out-of-pocket expenses including attorney’s fees.


Series 7 Preferred Stock Redemption and Warrant Forfeiture

Between March 15 and March 22, 2022, we received cash redemption notices from the holders of our Series 7 Convertible Preferred Stock issued a 5-year warranton September 15, 2021 (the "Series 7 Shares"), totaling 49,250 Series 7 Shares for aggregate cash required to be paid of approximately $49.25 million. In addition, upon redemption of the Series 7 Shares, each Warrant Holder forholder forfeited 75% of the numberrelated warrants that were issued together with the Series 7 Shares (the "Series 7 Warrants"). Therefore, as of the date of this report, no shares of common stock equal toSeries 7 Shares remain outstanding, 29,550,000 corresponding warrants issued in connection with the number of exercised shares purchased by such Warrant Holder (the “Warrant Shares”), at an exercise price of $0.55 per share. We incorporate by reference the information included at Item 1.01issuance of the Current Report on Form 8-K filed with the SEC on August 9, 2017 WaiverSeries 7 Shares been forfeited and Consent from Hillair Capital Investments L.P.

As a result17,450,000 Series 7 Warrants remain outstanding. Following such redemption, there will be no shares of the transactions consummated by the Series 7 Convertible Preferred Stock outstanding.


Warrant Exercise Agreement, the Exercise Price of the December 2016 Warrants was adjusted to $0.50.

and Note Exchanges

On August 9, 2017, the Company and the Note Holder entered into a waiver and consent agreement (the “Hillair Waiver”) pursuant to which the Note Holder waived the prohibition on issuing any securities at an effective per share price that is less than $7.05 contained in the securities purchase agreement pursuant to which the Debenture was issued to Note Holder and consented to the transactions contemplated by the Warrant Exercise Agreement and the Warrant Agreement Amendment. 

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Exchange Right Agreement with Hillair Capital Investments L.P.

On August 14, 2017,January 28, 2022, the Company entered into an exchange right agreement (the “Second Exchange Agreement”)Agreement with the Note Holder, pursuant to whichholder of certain existing warrants of the Company granted the Note Holder the right to exchange 1,850 of the Company’s Series 2 Convertible Preferred Stock (the “Preferred Shares”"Warrant Holder") which were exercisable for up to an aggregate of 5,606,06149,305,088 shares (the “Exchange Shares”) of the Company’s common stock. Pursuant to the Second Exchange Agreement, for so long as the Preferred Shares remain outstanding, each outstanding Preferred Share may be exchangedCompany has agreed to issue an aggregate of 13,811,407 shares of common stock and rights to receive an aggregate of 3,938,424 shares of common stock to the Warrant Holder in exchange for the numberexisting warrants.


On February 1, 2022, the Company entered into an exchange agreement with Iliad Research and Trading, L.P. ("Iliad"), pursuant to which the Company: (i) partitioned a new promissory note in the form of Exchange Sharesthe promissory note issued by the Company to Iliad in March of 2020 (the "March 2020 10% Note") in a principal amount equal to $0.5 million and then cause the quotient obtained by dividing $1,000 by $0.33. The exchangeoutstanding balance of the Preferred Shares will notMarch 2020 10% Note to be effected if, after giving effect to thereduced by $0.5 million; and (ii) exchange the Note Holder, together with its affiliates, would beneficially own in excesspartitioned note for the delivery of 4.99% of the number of1,191,611 shares of the Company’s common stock, outstanding immediately after giving effectat an effective price per share equal to $0.4196.

On February 18, 2022, the issuanceCompany entered into an exchange agreement with Iliad, pursuant to which the Company and Iliad: (i) partitioned a new promissory note in the form of the Exchange Shares. Upon not less than 61 days’ prior noticeMarch 2020 10% Note equal to $0.4 million and then cause the Company, the Note Holder may increase or decrease the ownership limitation, provided that the ownership limitation in no event exceeds 9.99%outstanding balance of the numberMarch 2020 10% Note to be reduced by $0.4 million; and (ii) exchange the partitioned note for the delivery of 966,317 shares of the Company’s common stock, at an effective price per share equal to $0.3622.

On March 15, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the Company and Iliad: (i) partitioned a new promissory note in the form of the March 2020 10% Note equal to $0.7 million and then cause the outstanding immediately after giving effectbalance of the March 2020 10% Note to be reduced by $0.7 million; and (ii) exchange the partitioned note for the delivery of 2,152,317 shares of the Company’s common stock, at an effective price per share equal to $0.3020.

Effective as of March 16, 2022, we entered into a third amendment (the “Third Amendment”) to the issuanceMarch 2020 10% Note, pursuant to which the maturity date of the Exchange Shares.

Loan and Security Agreement

PursuantMarch 2020 10% Note was extended from March 18, 2022 to March 18, 2023 (the “Maturity Date Extension”). In exchange for the Maturity Date Extension, we agreed to pay a 2% extension fee in the amount of approximately $56,860 (the “Extension Fee”), which was added to the termsoutstanding balance of the Original Note.


Investments

Debenture

On April 27, 2022, the Company entered into and consummated the transactions contemplated by a Commercial Loan Purchase Agreement, dated as of August 14, 2017securities purchase agreement (the “Purchase Agreement”), Gemcap Lending I, LLC (“GemCap”) sold and assigned to Payplant LLC, as agent for Payplant Alternatives Fund LLC (“Payplant” or “Lender” with an unaffiliated company operating in the insurance technology sector (the “Debenture Seller”), all of its right, title and interestpursuant to that certain revolving Secured Promissory Notewhich it purchased a 10% Original Issue Discount Senior Convertible Debenture (a “Debenture”) issued by the Debenture Seller in an aggregate principal amount of up to $10,000,000 (the “GemCap Note”) issued in accordance with that certain Loan and Security Agreement, dated as of November 14, 2016 (the “GemCap Loan”), by and among Gemcap and Inpixon (“INPX”) and its wholly-owned subsidiaries, Inpixon USA (“INPXUSA” or “Inpixon USA”) and Inpixon Federal, Inc. (“INPXF” or “Inpixon Federal,” and together with INPX and INPXUSA, the “Company”)approximately $6.1 million for an aggregatea purchase price of $1,402,770.16.

In connection with the purchase and assignment of the Gemcap Loan in accordance with the$5.5 million. The Purchase Agreement is one of a series of securities purchase agreements which the GemCap Loan was amended and restatedDebenture Seller has or will enter into under a private placement of Debentures commenced in accordance with the terms and conditions of the Payplant Loan and Security Agreement, dated as of August 14, 2017, between the Company and Payplant (the “Loan Agreement”). The Loan Agreement allows the Company to request loans (each a “Loan” and collectively the “Loans”) from the Lender (in the manner provided therein) with a term of no greater than 360 days in amounts that are equivalent to 80% of the face value of purchase orders received (“Aggregate Loan Amount”). The Lender is not obligated to make the requested loan, however, if the Lender agrees to make the requested loan, before the loan is made, the Company must provide Lender with (i) one or more promissory notes (“Notes”) for the amount being loaned in favor of Lender, (ii) one or more guaranties executed in favor of Lender and (iii) other documents and evidence of the completion of such other matters as Lender may request. The principal amount of each Loan shall accrue interest at a 30 day rate of 2% (the “Interest Rate”), calculated per dayFebruary 2022. Interest on the basisDebenture accrues

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at a rate equalof 12% per annum, of which 12 months will be guaranteed, and is payable on each conversion date (as to the Interest Rate plus 0.42% per 30 days. All computations of interest shall be madeprincipal amount being converted) and on the basismaturity date, in cash, or in shares of Class A common stock of the Debenture Seller upon a yearconversion of 360 days. In accordance withall or a portion of the outstanding principal amount on the Debenture. The Debenture will mature on the date that is 12 months from the original issue date, which may be extended or accelerated pursuant to the terms of the Loan Agreement,Debenture.

GYG Promissory Notes

Pursuant to the terms of Securities Purchase Agreements, dated January 18, 2022 and March 2022, Game Your Game, Inc., a majority owned subsidiary of the Company ("GYG") issued promissory notes in an aggregate principal amount equal to $875,000 (the "2022 GYG Notes"), including an aggregate of $511,000 to the Company and $364,000 to a third party. The 2022 GYG Notes are in addition to promissory note to Payplant with a term of 30 daysnotes in an aggregate principal amount of $995,472.61 in connection with a purchase order received. The promissory note is subject to the interest rates described in the Loan Agreement and is secured$500,000 issued by the assets of the Company pursuant to the Loan Agreement and will be satisfied in accordance with the terms of the Client Agreement.

JOBS Act

Pursuant to Section 107 of the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected to opt out of this exemption from new or revised accounting standards and, therefore, are subjectGYG to the same newparties on October 29, 2021 (the "2021 GYG Notes", together with the 2022 GYG Notes, the "GYG Notes"), of which $261,000 was issued to the Company and $239,000 was issued to a third party, All of the GYG Notes have an interest rate of 8% and are due on or revised accounting standards as other public companies that are not emerging growth companies.

before December 31, 2022. The proceeds received from the issuance of the GYG Notes were used to satisfy GYG working capital requirements.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP.generally accepted accounting principles (“GAAP”). In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

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Our significant accounting policies are discussed in Note 3 of the condensed consolidated financial statements. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. There have been no changes to estimates during the periods presented in the filing. Historically changes in management estimates have not been material.

Revenue Recognition

We provide IT solutions

There have been no significant changes to our critical accounting policies and services to customers with revenues currently derived primarilyestimates from the saleinformation provided in Item 7, "Management's Discussion and Analysis of third-party hardwareFinancial Condition and software products, software, assurance, licenses and other consulting services, including maintenance services. The products and services we sell, andResults of Operations," included in the manner in which they are bundled, are technologically complex and the characterization of these products and services requires judgment in order to apply revenue recognition policies. For all of these revenue sources, we determine whether we are the principal or the agent in accordance with Accounting Standards Codification Topic, 605-45 Principal Agent Considerations.

We allocate the total arrangement consideration to the deliverables basedCompany's Annual Report on an estimated selling price of our products and services and report revenues containing multiple deliverable arrangements under Accounting Standards Codification (“ASC”) 605-25 “Revenue Arrangements with Multiple Deliverables” (“ASC-605-25”). These multiple deliverable arrangements primarily consist of the following deliverables: third-party computer hardware, third-party software, hardware and software maintenance (a.k.a. support), and third-party services. We determine the estimated selling price using cost plus a reasonable margin for each deliverable, which was based on our established policies and procedures for providing customers with quotes, as well as historical gross margins for our products and services. From time to time our personnel are contracted to perform installation and servicesForm 10-K for the customer. In situations where we bundle all or a portion of the separate elements, Vendor Specific Objective Evidence (“VSOE”) is determined based on prices when sold separately. Our revenue recognition policies vary based upon these revenue sourcesyear ended December 31, 2021.


Goodwill, Acquired Intangible Assets and the mischaracterization of these products and services could result in misapplication of revenue recognition polices. 

We recognize revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) shipment (software or hardware) or fulfillment (maintenance) has occurred and applicable services have been rendered; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Generally, these criteria are met upon shipment to customers with respect to the sales of hardware and software products. With respect to our maintenance and other service agreements, this criteria is met once the service has been provided. Revenue from the sales of our services on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended. We recognize revenue for sales of all services on a fixed fee ratably over the term of the arrangement as such services are provided. The Company evaluates whether the revenues it receives from the sale of hardware and software products, licenses, and services, including maintenance and professional consulting services, should be recognized on a gross or net basis on a transaction by transaction basis. We maintain primary responsibility for the materials and procedures utilized to service our customers, even in connection with the sale of third party-products and maintenance services as we are responsible for the fulfillment and acceptability of the products and services purchased by our customers. In addition, the nature of the products sold to our customers are such that they need configuration in order to be utilized properly for the purposes intended by the customer and therefore we assume certain responsibility for product staging, configuration, installation, modification, and integration with other client systems, or retain general inventory risk upon customer return or rejection. Our customers rely on us to develop the appropriate solutions and specifications applicable to their specific systems and then integrate any such required products or services into their systems. As described above, we are responsible for the day to day maintenance and warranty services provided in connection with all of our existing customer relationships, whether such services are ultimately provided directly by the Company and its employees or by the applicable third party service provider. As of the date of this filing, after an evaluation of all of our existing customer relationships, we have concluded that we are the primary obligor to all of our existing customers and therefore recognize all revenues on a gross basis.

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Other Long-Lived Assets - Impairment Assessments

Long-lived Assets

We account for our long-lived assets in accordance with ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“ASC 360”), which requires that long-lived assets be evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. Some of the events or changes in circumstances that would trigger an impairment test include, but are not limited to:

●significant under-performance relative to expected and/or historical results (negative comparable sales growth or operating cash flows for two consecutive years);
●significant negative industry or economic trends;

●knowledge of transactions involving the sale of similar property at amounts below our carrying value; or
●our expectation to dispose of long-lived assets before the end of their estimated useful lives, even though the assets do not meet the criteria to be classified as “held for sale.”

Long-lived assets are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. The impairment test for long-lived assets requires us to assess the recoverability of our long-lived assets by comparing their net carrying value to the sum of undiscounted estimated future cash flows directly associated with and arising from our use and eventual disposition of the assets. If the net carrying value of a group of long-lived assets exceeds the sum of related undiscounted estimated future cash flows, we would be required to record an impairment charge equal to the excess, if any, of net carrying value over fair value. 

When assessing the recoverability of our long-lived assets, which include property and equipment and finite-lived intangible assets, we make assumptions regarding estimated future cash flows and other factors. Some of these assumptions involve a high degree of judgment and also bear a significant impact on the assessment conclusions. Included among these assumptions are estimating undiscounted future cash flows, including the projection of comparable sales, operating expenses, capital requirements for maintaining property and equipment and the residual value of asset groups. We formulate estimates from historical experience and assumptions of future performance based on business plans and forecasts, recent economic and business trends, and competitive conditions. In the event that our estimates or related assumptions change in the future, we may be required to record an impairment charge. Based on our evaluation, we did not record a charge for impairment for the nine months ended September 30, 2017 and 2016.

The benefits to be derived from our acquired intangibles, will take additional financial resources to continue the development of our technology. Management believes our technology has significant long-term profit potential, and to date, management continues to allocate existing resources to the develop products and services to seek returns on its investment. We continue to seek additional resources, through both capital raising efforts and meeting with industry experts, as part of our continued efforts.  Although there can be no assurance that these efforts will be successful, we intend to allocate financial and personnel resources when deemed possible and/or necessary. If we choose to abandon these efforts, or if we determine that such funding is not available, the related development of our technology (resulting in our lack of ability to expand our business), may be subject to significant impairment.

As described previously, we continue to experience weakness in market conditions, a depressed stock price, and challenges in executing our business plans.  The Company will continue to monitor these uncertainties in future periods, to determine the impact.

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We evaluate the remaining useful lives of long-lived assets and identifiable intangible assets whenever events or circumstances indicate that a revision to the remaining period of amortization is warranted. Such events or circumstances may include (but are not limited to): the effects of obsolescence, demand, competition, and/or other economic factors including the stability of the industry in which we operate, known technological advances, legislative actions, or changes in the regulatory environment. If the estimated remaining useful lives change, the remaining carrying amount of the long-lived assets and identifiable intangible assets would be amortized prospectively over that revised remaining useful life. We have determined that there were no events or circumstances during the nine months ended September 30, 2017 and 2016 which would indicate a revision to the remaining amortization period related to any of our long lived assets. Accordingly, we believe that the current estimated useful lives of long-lived assets reflect the period over which they are expected to contribute to future cash flows and are therefore deemed appropriate.

Goodwill and Indefinite-lived Assets

We have recorded goodwill and other indefinite-lived assets in connection with our acquisitions of Lilien, Shoom, AirPatrol, LightMinerLocality, Jibestream, GTX, the Systat Parties, Nanotron, CXApp, Game Your Game and Integrio Technologies, LLC (“Integrio”).IntraNav. Goodwill, which represents the excess of acquisition cost over the fair value of the net tangible and intangible assets of the acquired company, is not amortized. Indefinite-lived intangible assets are stated at fair value as of the date acquired in a business combination. OurThe recoverability of goodwill balanceis evaluated at least annually and other assetswhen events or changes in circumstances indicate that the carrying amount may not be recoverable. A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred. We have determined that it operates and reports in three reporting units: Indoor Intelligence, Saves, and Shoom. Goodwill as of March 31, 2022 is approximately $7.7 million.


We have selected December 31 as the date to perform our annual goodwill impairment test. Goodwill is the only intangible asset with an indefinite lives are evaluated for potentialuseful life. Circumstances that could indicate impairment during the fourth quarterand require us to perform a quantitative impairment test include a significant decline in our financial results, a significant decline in our enterprise value relative to our net book value, a sustained decline in our stock price, or an unanticipated change in competition or our market share and a significant change in our strategic plans. As of each year and in certain other circumstances. The evaluation of impairment involves comparing the currentDecember 31, 2021, we concluded that our fair value did not exceed our carrying value in our Indoor Intelligence reporting unit and an impairment charge of the business to the recorded value, including goodwill. To determine$14.8 million was recorded. At December 31, 2021, the fair value of the business, we utilize bothSaves reporting unit exceeded its carrying value by greater than 100%. There is no goodwill assigned to the income approach, whichShoom reporting unit. Since December 31, 2021, the price of our common stock has declined
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significantly and may continue to fluctuate in future periods. A sustained decrease in the price of our common stock is based on estimatesone of future net cash flows, and the market approach, which observes transactional evidence involving similar businesses. During the nine months ended September 30, 2017 we recognized a $8.4 million non-cash goodwill impairment charge.

We review our goodwill for impairment annually, but may need to review goodwill more frequently, if facts and circumstances warrant a review.

We analyze goodwill first to assess qualitative factors to determinebe 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 fair valueanalysis of a reporting unit is less than its carrying amountthe qualitative and quantitative factors used as a basis for determining whether it is necessary to perform a detailedthe goodwill impairment test as required. The more-likely-than-not threshold is defined as havingduring fiscal year 2022. In performing the assessment, we performed a likelihood of more than 50 percent.

Events and circumstances for an entity to consider in conducting the qualitative assessment are:

●Macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets.

●Industry and market considerations such as a deterioration in the environment in which an entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for an entity’s products or services, or a regulatory or political development.

●Cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows.

●Overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods.

●Other relevant entity-specific events such as changes in management, key personnel, strategy, or customers, contemplation of bankruptcy, or litigation.

●Events affecting a reporting unit such as a change in the composition or carrying amount of its net assets, a more-likely-than-not expectation of selling or disposing of all, or a portion, of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit.

●If applicable, a sustained decrease in share price (considered in both absolute terms and relative to peers).

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As described previously,and determined there were no indicators of impairment. To corroborate this conclusion, we continuecompared our equity carrying value to experience weakness inour market conditions, a depressed stock price,capitalization and challenges in executing our business plans.  We also require significant funds to operate and continue to experience losses.  If these conditions continue, it may necessitate a requirement to record aconcluded that there was no goodwill impairment charges.  The Company will continue to monitor these uncertainties in future periods.  

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

 In accordance with authoritative guidance, we recognize IPR&D at fair value as ofduring the acquisition date, and subsequently account 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.three months ended March 31, 2022. If the IPR&D asset is abandoned, the remaining carrying value is written off. During fiscal year 2014, we acquired IPR&D through the acquisition of AirPatrol and in 2015 through the acquisition of the assets of LightMiner. Our IPR&D is comprised of AirPatrol and LightMiner technology, which was valued on the date of the acquisition. It will take additional financial resources to continue development of these technologies.

We continue to seek additional resources, through both capital raising efforts and meeting with industry experts, for further development of the AirPatrol and LightMiner technologies. Through September 30, 2017, we have made some progress with raising capital since these acquisitions, building our pipeline and getting industry acknowledgment. We are being recognized by leading industry analysts in their report on leading indoor positioning companies and also was awarded the IoT Security Excellence award by TMC. However, management is focused on growing revenue from these products and continues to actively and aggressively pursue efforts to recognize the value of the AirPatrol and LightMiner technologies. Although there can be no assurance that these efforts will be successful, we intend to allocate financial and personnel resources when deemed possible and/or necessary. If we choose to abandon these efforts, or if we determine that such funding is not available, the related IPR&D will be subject to significant impairment.

 Impairment of Long-Lived Assets Subject to Amortization

We amortize intangible assets with finite lives over their estimated useful lives and review them for impairment whenever an impairment indicator exists. We continually monitor events and changes in circumstances that could indicate carrying amountsnegative volatility of our long-lived assets, including our intangible assets, may not be recoverable. When such events or changes in circumstances occur, we assess recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. We did not recognize any intangible asset impairment charges for the nine month period ended September 30, 2017. See “Acquired In-Process Research and Development (“IPR&D”)” for further information.

Deferred Income Taxes

In accordance with ASC 740 “Income Taxes” (“ASC 740”), management routinely evaluates the likelihood of the realization of its income tax benefits and the recognition of its deferred tax assets. In evaluating the need for any valuation allowance, management will assess whethermarket capitalization is sustained, it is more likely than notpossible that some portion, or all, of the deferred tax asset may not be realized. Ultimately, the realization of deferred tax assets is dependent upon the generation of future taxable income during those periodsour remaining goodwill could become impaired, which could result in which temporary differences become deductible and/or tax creditsa material charge and tax loss carry-forwards can be utilized. In performing its analyses, management considers both positive and negative evidence including historical financial performance, previous earnings patterns, future earnings forecasts, tax planning strategies, economic and business trends and the potential realization of net operating loss carry-forwards within a reasonable timeframe. To this end, management considered (i) that we have had historical losses in the prior years and cannot anticipate generating a sufficient level of future profits in order to realize the benefits ofadversely affect our deferred tax asset; (ii) tax planning strategies; and (iii) the adequacy of future income as of and for the nine months ended September 30, 2017, based upon certain economic conditions and historical losses through September 30, 2017. After consideration of these factors management deemed it appropriate to establish a full valuation allowance.

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A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax filings that do not meet these recognition and measurement standards. For the nine months ended September 30, 2017 or 2016 no liability for unrecognized tax benefits was required to be reported. The guidance also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the nine months ended September 30, 2017 or 2016.

Allowance for Doubtful Accounts

We maintain our reserves for credit losses at a level believed by management to be adequate to absorb potential losses inherent in the respective balances. We assign an internal credit quality rating to all new customers and update these ratings regularly, but no less than annually. Management’s determination of the adequacy of the reserve for credit losses for our accounts and notes receivable is based on the age of the receivable balance, the customer’s credit quality rating, an evaluation of historical credit losses, current economic conditions, and other relevant factors.

As of September 30, 2017 and December 31, 2016, allowance for credit losses included an allowance for doubtful accounts of approximately $1.1 million and $378,000, respectively, due to the aging of the items greater than 120 days outstanding and other potential non-collections.

Business Combinations

We account for business combinations using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is recorded as goodwill. Any changes in the estimated fair values of the net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will change the amount of the purchase price allocable to goodwill. Any subsequent changes to any purchase price allocations that are material to our consolidated financial results will be adjusted. All acquisition costs are expensed as incurred and in-process research and development costs are recorded at fair value as an indefinite-lived intangible asset and assessed for impairment thereafter until completion, at which point the asset is amortized over its expected useful life. Separately recognized transactions associated with business combinations are generally expensed subsequent to the acquisition date. The application of business combination and impairment accounting requires the use of significant estimates and assumptions.

Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date and are included in our Consolidated Financial Statements from the acquisition date.

Stock-Based Compensation

We account for equity instruments issued to non-employees in accordance with accounting guidance which requires that such equity instruments are recorded at their fair value on the measurement date, which is typically the date the services are performed.

We account for equity instruments issued to employees in accordance with accounting guidance that requires that awards are recorded at their fair value on the date of grant and are amortized over the vesting period of the award. We recognize compensation costs over the requisite service period of the award, which is generally the vesting term of the equity instrument issued.

The Black-Scholes option valuation model is used to estimate the fair value of the options or the equivalent security granted. The model includes subjective input assumptions that can materially affect the fair value estimates. The model was developed for use in estimating the fair value of traded options or warrants. The expected volatility is estimated based on the average of historical volatilities for industry peers.

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operations.


The principal assumptions used in applying the Black-Scholes model along with the results from the model were as follows:

  

For the Nine Months Ended

September 30,

 
  2017  2016 
Risk-free interest rate  2.27%  1.41%
Expected life of option grants  7   7 
Expected volatility of underlying stock  47.34%  47.47%
Dividends  -   - 

For the nine months ended September 30, 2017 and 2016, the Company incurred stock-based compensation charges of $1,282,000 and $1,055,000, respectively.

Operating Segments

Effective January 1, 2017, the Company changed the way it analyzes and assesses divisional performance of the Company. The Company therefore re-aligned its operating segments along those division business lines and created the operating segments described below. The Company retroactively applied these new segment categories to the prior periods presented below for comparative purposes.

●Indoor Positioning Analytics:  This segment includes Inpixon’s proprietary products and services delivered on premises or in the Cloud as well as our hosted SaaS based solutions. Our Indoor Positioning Analytics product is based on a unique and patented sensor technology that detects and locates accessible cellular, Wi-Fi and Bluetooth devices and then uses a lightning fast data-analytics engine to deliver actionable insights and intelligent reports for security, marketing, asset management, etc.
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●Infrastructure: This segment includes third party hardware, software and related maintenance/warranty products and services that Inpixon resells to commercial and government customers and includes but is not limited to products for enterprise computing; storage; virtualization; networking; etc. as well as services including custom application/software design; architecture and development; staff augmentation and project management.

Rounding

All dollar amounts in this section have been rounded to the nearest thousand.

Results of Operations




RESULTS OF OPERATIONS
Three Months Ended September 30, 2017 ComparedMarch 31, 2022 compared to the Three Months Ended September 30, 2016

March 31, 2021

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

  For the Three Months Ended    
  September  30, 2017  September 30, 2016    
(in thousands, except percentages) Amount  % of Revenues  Amount  % of Revenues  % 
Change		 
                
Product revenues $9,566   80% $8,366   74%  14%
Services revenues $2,358   20% $2,874   26%  (18)%
Cost of net revenues - products $8,519   71% $6,873   61%  24%
Cost of net revenues - services $1,154   10% $1,269   11%  (9)%
Gross profit $2,251   19% $3,098   28%  (27)%
Operating expenses $16,845   141% $7,240   64%  133%
Loss from operations $(14,594)  (122)% $(4,142)  (37)%  252%
Net loss $(14,632)  (123)% $(4,720)  (42)%  210%
Net loss attributable to common stockholders $(14,637)  (123)% $(4,716)  (42)%  210%

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For the Three Months Ended March 31,
20222021
(in thousands, except percentages)Amount% of
Revenues		Amount% of
Revenues		$ Change%
Change*
Revenues$5,231 100 %$2,954 100 %$2,277 77 %
Cost of revenues$1,386 27 %$884 30 %$502 57 %
Gross profit$3,845 73 %$2,070 70 %$1,775 86 %
Operating expenses$13,909 266 %$14,490 491 %$(581)(4)%
Loss from operations$(10,064)(192)%$(12,420)(420)%$2,356 (19)%
Net income (loss)$(11,557)(221)%$(12,539)(424)%$982 (8)%
Net income (loss) attributable to stockholders of Inpixon$(11,211)(214)%$(12,557)(425)%$1,346 (11)%

Net

*    Amounts used to calculate dollar and percentage changes are based on numbers in the thousands. Accordingly, calculations in this item, which may be rounded to the nearest hundred thousand, may not produce the same results.
Revenues

Net

Revenues for the three months ended March 31, 2022 were $5.2 million compared to $2.95 million for the comparable period in the prior year for an increase of approximately $2.3 million, or approximately 77%. This increase is primarily attributable to the increase in Indoor Intelligence sales including the addition of the CXApp product line during the second quarter of 2021 and the addition of the IIoT product line in the fourth quarter of 2021.
Cost of Revenues
Cost of revenues for the three months ended September 30, 2017March 31, 2022 were $11.9$1.4 million compared to $11.2$0.9 million for the comparable period in the prior year. This $700,000 increase in revenues was primarily attributable to the acquisition of Integrio Technologies in November 2016. For the three months ended September 30, 2017, Indoor Positioning Analytics revenue was $871,000 compared to $1.4 million for the prior year period. Infrastructure revenue was $11.1 million for the three months ended September 30, 2017, and $9.9 million for the prior year period.

Cost of Net Revenues

Cost of net revenues for the three months ended September 30, 2017 was $9.7 million compared to $8.1 million for the prior year period. The increase in cost of revenues of $1.6approximately $0.5 million, isor approximately 57%, was primarily attributable to the increase in revenues due toincreased sales during the Integrio acquisition in November 2016. Indoor Positioning Analytics cost of net revenues was $266,000 for the three months ended September 30, 2017 as compared to $488,000 for the prior period. Infrastructure cost of net revenues was $9.4 million for the three months ended September 30, 2017 and $7.7 million for the prior period.

quarter.


Gross Profit

The gross profit margin for the three months ended September 30, 2017March 31, 2022 was 19%73% compared to 28% during the three months ended September 30, 2016. The decrease in gross margin was primarily attributable to lower gross margins on the Integrio revenue, which is included in the Infrastructure segment, during the quarter ended September 30, 2017. Indoor Positioning Analytics gross margins70% for the three months ended September 30, 2017 and 2016 were 69% and 64%, respectively. Gross margins for the Infrastructure segment for the three months ended September 30, 2017 and 2016 were 15% and 22%, respectively.

March 31, 2021.


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Operating Expenses


Operating expenses for the three months ended September 30, 2017March 31, 2022 were $16.8$13.9 million compared to $7.2and $14.5 million for the prior year period.comparable period ended March 31, 2021. This increasedecrease of approximately $9.6$0.6 million is primarily attributable to lower stock-based compensation and the benefit on the earnout payable due to the change in common share value offset by higher compensation, professional fees, infrastructure costs and amortization of intangibles primarily as a result of a an impairment of goodwill charge of $8.4 million, an increasethe entities acquired in amortization of intangibles and depreciation related to the Integrio acquisition and an increase in operating expenses related to the Integrio acquisition offset by a decrease in salaries, commissions and bonuses, travel expenses and other operating expenses related to Inpixon USA.

2021.

Loss fromFrom Operations

Loss from operations for the three months ended September 30, 2017March 31, 2022 was $14.6$10.06 million as compared to $4.1$12.42 million for the comparable period in the prior year period.year. This increasedecrease in loss of $10.5approximately $2.4 million was primarily attributable to an impairment of goodwill charge of $8.4 million, increase in amortization of intangiblesincreased gross profit and depreciationlower operating costs additional costs incurred for the Integrio operations offset by a reduction in operating expenses related to Inpixon USA and the lower gross profit.

as described above.

Other Income/Expense

Total otherIncome (Expense)

Other income/expense for the three months ended September 30, 2017 and 2016March 31, 2022 was ($38,000) and ($578,000), respectively.a loss of $1.4 million compared to a loss of $0.1 million for the comparable period in the prior year. This decreaseincrease in net other expenseloss of $540,000approximately $1.3 million is primarily attributable to a $561,000 gainthe unrealized loss on earnout from the Integrio acquisition.

Sysorex shares.

Provision for Income Taxes

There was nois an income tax provision for income taxesof approximately $0.1 million and $0.01 million for the three months ended September 30, 2017March 31, 2022 and 2016. Deferred2021, respectively. The income tax assets resulting from such losses are fully reserved asexpense relates primarily to corporate income tax liabilities of September 30, 2017 and 2016 since, at present, we have no history of taxableInpixon India.
Net Income (Loss) Attributable To Non-Controlling Interest
Net income and it is more likely than not that such assets will not be realized.

Net Loss Attributable to Non-Controlling Interest

Net loss(loss) attributable to non-controlling interest for the three months ended September 30, 2017March 31, 2022 and 20162021 was $4,000.

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a loss of $346,000 and income of $18,000, respectively. This increase in loss of $364,000 was attributable to the loss of the Game Your Game entity.

Net Loss Attributable To Common Stockholders

of Inpixon

Net loss attributable to common stockholders for theof Inpixon three months ended September 30, 2017March 31, 2022 was $14.6a loss of $11.21 million compared to $4.7 million for the prior year period. This increase in neta loss of $9.9 million was attributable to the changes discussed above.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

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

  Nine Months ended    
  September 30, 2017  September 30, 2016    
(in thousands, except percentages) Amount  % of Revenues  Amount  % of Revenues  %
Change		 
                
Product Revenues $31,225   77% $27,871   72%  12%
Services Revenues $9,277   23% $10,788   28%  (14)%
Cost of net revenues - products $26,805   66% $22,363   58%  20%
Cost of net revenues - services $4,773   12% $5,807   15%  (18)%
Gross profit $8,924   22% $10,489   27%  (15)%
Operating expenses $34,105   84% $22,761   59%  50%
Loss from operations $(25,181)  (62)% $(12,272)  (32)%  105%
Net loss $(27,129)  (67)% $(13,201)  (34)%  106%
Net loss attributable to common stockholders $(27,116)  (67)% $(13,189)  (34)%  106%

Net Revenues

Net revenues for the nine months ended September 30, 2017 were $40.5 million compared to $38.7$12.56 million for the comparable period in the prior year. The increase in revenues of $1.8 million are primarily attributable to the Integrio acquisition in November 2016. For the nine months ended September 30, 2017, Indoor Positioning Analytics revenue was $3 million compared to $3.7 million for the prior year period. Infrastructure revenue was $37.5 million for the nine months ended September 30, 2017 and $35 million for the prior year period.

Cost of Net Revenues

Cost of net revenues for the nine months ended September 30, 2017 was $31.6 million compared to $28.2 million for the prior year period. The increase in cost of revenues of $3.4 million is primarily attributable to the increase in revenues due to the Integrio acquisition in November 2016. Indoor Positioning Analytics cost of net revenues was $990,000 for the nine months ended September 30, 2017 as compared to $1.1 million for the prior period. Infrastructure cost of net revenues was $30.6 million for the nine months ended September 30, 2017 and $27.1 million for the prior period. 

The gross profit margin for the nine months ended September 30, 2017 was 22% compared to 27% during the nine months ended September 30, 2016. TheThis decrease in gross margin was primarily attributable to lower gross margins on the Integrio revenue which is included in the Infrastructure segment during the quarter ended September 30, 2017. Indoor Positioning Analytics gross margins for the nine months ended September 30, 2017 and 2016 were 67% and 71%, respectively. Gross margins for the Infrastructure segment for the nine months ended September 30, 2017 and 2016 were 18% and 23%, respectively. 

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Operating Expenses

Operating expenses for the nine months ended September 30, 2017 were $34.1 million compared to $22.8 million for the prior year period. This increase of $11.3 million is primarily due to a $8.4 million goodwill impairment charge, an increase in operating expense related to the Integrio acquisition and amortization related to the Integrio acquisition offset by lower operating expenses in the remaining Inpixon business.

Loss from Operations

Loss from operations for the nine months ended September 30, 2017 was $25.1 million compared to $12.3 million for the prior year period. This increase in loss of $12.8approximately $1.3 million was primarily attributable to a $8.4increased gross profit of $1.8 million, goodwill impairment charge, an increase in amortizationlower operating costs of intangibles, depreciation, additional operating expenses for$0.6 million and higher non-controlling interest of $0.4 million offset by the Integrio acquisition, increase in professional services fees, and lower gross margins from the Integrio acquisition.

Other Income/Expense

Net other income/expense for the nine months ended September 30, 2017 and 2016 was ($1.9 million) and ($929,000), respectively. This increase of $993,000 was primarily attributable to interest attributable to the Debenture, higher interest$1.5 million unrealized loss on the Company’s Credit Facility, and amortization of debt discount and deferred financing fees.

Provision for Income Taxes

There was no provision for income taxes for the nine months ended September 30, 2017 and 2016. Deferred tax assets resulting from such losses are fully reserved as of September 30, 2017 and 2016 since, at present, we have no history of taxable income and it is more likely than not that such assets will not be realized.

Net Loss Attributable to Non-Controlling Interest

Net loss attributable to non-controlling interest for the nine months ended September 30, 2017 was $13,000 compared to a net loss of $12,000 for the prior year period. This increase of $1,000 was attributable to an increase in losses for Sysorex Arabia LLC and was not material.

Net Loss Attributable To Common Stockholders

Net loss attributable to common stockholders for the nine months ended September 30, 2017 was $27.1 million compared to $13.2 million for the prior year period. This increase in net loss of $13.9 million was attributable to the changes discussed above.

shares.

Non-GAAP Financial information

EBITDA

EBITDA is defined as net income (loss) before interest, provision for (benefit from) income taxes, and depreciation and amortization. Adjusted EBITDA is used by our management as the matrix in which it manages the business. It is defined as EBITDA plus adjustments for other income or expense items, non-recurring items and non-cash stock-based compensation.

Adjusted EBITDA for the three months ended September 30, 2017March 31, 2022 was a loss of $3.1$8.8 million compared to a loss of $2.4$5.6 million for the prior year period. Adjusted EBITDA for the nine months ended September 30, 2017 was a loss
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The following table presents a reconciliation of net income/lossincome (loss) attributable to stockholders of Inpixon, which is our GAAP operating performance measure, to Adjusted EBITDA for the fiscal quartersthree months ended September 30, 2017March 31, 2022 and 20162021 (in thousands):

  

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

 
  2017  2016  2017  2016 
Net loss attributable to common stockholders $(14,637) $(4,716) $(27,116) $(13,189)
Adjustments:                
Non-recurring one-time charges:                
Acquisition transaction/financing costs  --   22   5   52 
Costs associated with public offering  159   --   159   -- 
Impairment of goodwill  8,392   --   8,392   -- 
Gain on earnout  (561)  --   (561)  -- 
Change in the fair value of shares to be issued  --   (5)  --   (13)
Change in the fair value of derivative liability  (46)  (41)  (254)  (41)
Severance  --   --   27   -- 
Stock based compensation – acquisition costs  --   --   7   -- 
Bad debt expense  773   --   773   -- 
Stock-based compensation - compensation and related benefits  288   344   1,275   1,055 
Interest expense  694   639   2,721   1,037 
Depreciation and amortization  1,817   1,391   5,418   4,054 
Adjusted EBITDA $(3,121) $(2,366) $(9,154) $(7,045)

For the Three Months Ended March 31,
20222021
Net income loss attributable to common stockholders$(17,362)$(12,557)
Adjustments:
Non-recurring one-time charges:
Loss on exchange of debt for equity— 30 
Provision for valuation allowance on held for sale loan— 117 
Unrealized loss on equity securities1,503 — 
Acquisition transaction/financing costs121 470 
Earnout compensation benefit(2,827)— 
  Accretion of series 7 preferred stock4,555 — 
  Accretion of series 8 preferred stock548 — 
  Deemed dividend for the modification related to series 8 preferred stock2,627 — 
  Deemed contribution for the modification related to warrants issued in connection with series 8 preferred stock(1,469)— 
  Amortization premium- modification related to series 8 preferred stock(110)— 
  Professional service fees8 349 
Unrealized losses/(gains) on notes, loans, investments89 (363)
Stock-based compensation - compensation and related benefits1,533 5,096 
Severance Costs111 — 
Interest (income)/expense, net(2)349 
Income tax provision100 9 
Depreciation and amortization1,806 943 
Adjusted EBITDA$(8,769)$(5,557)
We rely on Adjusted EBITDA, which is a non-GAAP financial measure for the following:

●to review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment Reporting;

●to compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

●as a basis for allocating resources to various projects;

●as a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions; and

●to evaluate internally the performance of our personnel.

•To review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment Reporting;
•To compare our current operating results with corresponding periods and with the operating results of other companies in our industry;
•As a basis for allocating resources to various projects;
•As a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions; and
•To evaluate internally the performance of our personnel.
We have presented Adjusted EBITDA above because we believe it conveys useful information to investors regarding our operating results. We believe it provides an additional way for investors to view our operations, when considered with both our GAAP results and the reconciliation to net income (loss). By including this information, we can provide investors with a more complete understanding of our business. Specifically, we present Adjusted EBITDA as supplemental disclosure because of the following:

●We believe Adjusted EBITDA is a useful tool for investors to assess the operating performance of our business without the effect of interest, income taxes, and other non-operating expenses as well as depreciation and amortization which are non-cash expenses;

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

●We believe that the use of Adjusted EBITDA is helpful to compare our results to other companies.

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•We believe Adjusted EBITDA is a useful tool for investors to assess the operating performance of our business without the effect of interest, income taxes, depreciation and amortization and other non-cash items including stock based compensation, amortization of intangibles, change in the fair value of shares to be issued, change in the fair value of derivative liability, impairment of goodwill and one time charges including gain/loss on the settlement of obligations, severance costs, provision for doubtful accounts, acquisition costs and the costs associated with the public offering.
•We believe that it is useful to provide to investors with a standard operating metric used by management to evaluate our operating performance; and
•We believe that the use of Adjusted EBITDA is helpful to compare our results to other companies.
Even though we believe Adjusted EBITDA is useful for investors, it does have limitations as an analytical tool. Thus, we strongly urge investors not to consider this metric in isolation or as a substitute for net income (loss) and the other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include the fact that:

●Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

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•Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

●Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

●Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

●although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

●Adjusted EBITDA does not reflect income or other taxes or the cash requirements to make any tax payments; and

●other companies in our industry may calculate Adjusted EBITDA differently than we do, thereby potentially limiting its usefulness as a comparative measure.

•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
•Adjusted EBITDA does not reflect income or other taxes or the cash requirements to make any tax payments; and
•Other companies in our industry may calculate Adjusted EBITDA differently than we do, thereby potentially limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business or as a measure of performance in compliance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and providing Adjusted EBITDA only as supplemental information.

Proforma Non-GAAP Net LossIncome (Loss) per Share

Basic and diluted net income (loss) per share for the three months ended March 31, 2022 was a loss of $0.13 compared to a loss of $0.16 for the prior year period. The decrease in loss per share in 2022 was attributable to the changes discussed in our results of operations.
Proforma non-GAAP net income (loss) per share is used by our Company’s management as an evaluation tool as it manages the business and is defined as net income (loss) per basic and diluted share adjusted for non-cash items including stock based compensation, amortization of intangibles and one time charges including acquisition costs,gain on the costs associated with the public offering,settlement of obligations, severance costs, and changesprovision for doubtful accounts, change in the fair value of shares to be issued.

issued, acquisition costs and the costs associated with the public offering.

Proforma non-GAAP net loss per basic and diluted common share for the three months ended September 30, 2017March 31, 2022 was ($0.46)a loss of $0.07 per share compared to ($1.92)a loss of $0.08 per share for the prior year period. Proforma non-GAAP net loss per basic and diluted common share for the nine months ended September 30, 2017 was ($2.81) compared to ($5.28) for the prior year period. These decreases were attributable to the changes discussed in our results
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The following table presents a reconciliation of net loss per basic and diluted share, which is our GAAP operating performance measure, to proforma non-GAAP net loss per share for the periods reflected:

(thousands, except per share data) 

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

 
  2017  2016  2017  2016 
Net loss attributable to common stockholders $(14,637) $(4,716) $(27,116) $(13,189)
Adjustments:                
Non-recurring one-time charges:                
Acquisition transaction/financing costs  --   22   5   52 
Costs associated with public offering  159   --   159   -- 
Impairment of goodwill  8,392   --   8,392   -- 
Gain on earnout  (561)  --   (561)  -- 
Change in the fair value of shares to be issued  --   (5)  --   (13)
Change in the fair value of derivative liability  (46)  (41)  (254)  (41)
Severance  --   --   27   -- 
Stock based compensation – acquisition costs  --   --   7   -- 
Bad debt expense  773   --   773   -- 
Stock-based compensation - compensation and related benefits  288   344   1,275   1,055 
Amortization of intangibles  1,327   1,056   4,094   3,169 
Proforma non-GAAP net loss $(4,305) $(3,340) $(13,199) $(8,967)
Proforma non-GAAP net loss per basic and diluted common share $(0.46) $(1.92) $(2.81) $(5.28)
Weighted average basic and diluted common shares outstanding  9,449,102   1,743,451   4,690,876   1,697,645 

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reflected (in thousands, except per share data):

For the Three Months Ended March 31,
(thousands, except per share data)20222021
Net loss attributable to common stockholders$(17,362)$(12,557)
Adjustments:
Non-recurring one-time charges:
Loss on the exchange of debt for equity— 30 
Provision for valuation allowance on held for sale loan— 117 
Unrealized loss on equity securities1,503 — 
Acquisition transaction/financing costs121 470 
Earnout compensation benefit(2,827)— 
Accretion of series 7 preferred stock4,555 — 
Accretion of series 8 preferred stock548 — 
Deemed dividend for the modification related to series 8 preferred stock2,627 — 
Deemed contribution for the modification related to warrants issued in connection with series 8 preferred stock(1,469)— 
Amortization premium- modification related to series 8 preferred stock(110)— 
Professional service fees8 349 
Unrealized losses/(gains) on investments89 (363)
Stock-based compensation - compensation and related benefits1,533 5,096 
Severance Costs111 — 
Amortization of intangibles1,489 650 
Proforma non-GAAP net loss(9,184)(6,208)
Proforma non-GAAP net loss per common share - Basic and Diluted$(0.07)$(0.08)
Weighted average basic and diluted common shares outstanding138,502,493 78,942,697 

We rely on proforma non-GAAP net lossincome (loss) per share, which is a non-GAAP financial measure:
•To review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment Reporting;
•To compare our current operating results with corresponding periods and with the operating results of other companies in our industry;
•As a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and not a substitution for GAAP:

●to review and assess the operating performance of our Company as permitted by Accounting Standards Codification Topic 280, Segment Reporting;

●to compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

●as a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions; and

●to evaluate internally the performance of our personnel.

strategic decisions; and

•To evaluate internally the performance of our personnel.
We have presented proforma non-GAAP net lossincome (loss) per share above because we believe it conveys useful information to investors regarding our operating results. We believe it provides an additional way for investors to view our operations, when considered with both our GAAP results and the reconciliation to net income (loss), and that by including this information we can provide investors with a more complete understanding of our business. Specifically, we present proforma non-GAAP net lossincome (loss) per share as supplemental disclosure because:

●we believe proforma non-GAAP net loss per share is a useful tool for investors to assess the operating performance of our business without the effect of non-cash items including stock based compensation, amortization of intangibles and one time charges including acquisition costs, costs associated with the public offering, severance costs and changes in the fair value of shares to be issued;

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

●we believe that the use of proforma non-GAAP net loss per share is helpful to compare our results to other companies.

•We believe proforma non-GAAP net income (loss) per share is a useful tool for investors to assess the operating performance of our business without the effect of non-cash items including stock based compensation,
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amortization of intangibles and one time charges including gain on the settlement of obligations, severance costs, provision for doubtful accounts, change in the fair value of shares to be issued, acquisition costs and the costs associated with the public offering.
•We believe that it is useful to provide to investors a standard operating metric used by management to evaluate our operating performance; and
•We believe that the use of proforma non-GAAP net income (loss) per share is helpful to compare our results to other companies.
Liquidity and Capital Resources as of September 30, 2017March 31, 2022
Our current capital resources and operating results as of and through March 31, 2022, consist of:
1)an overall working capital surplus of approximately $74.3 million;
2)cash of approximately $60.9 million and short-term investments of approximately $15.0 million;
3)net cash used by operating activities for the three months ended March 31, 2022 of $15.3 million.
The breakdown of our overall working capital deficit is as follows (in thousands):
Working CapitalAssetsLiabilitiesNet
Cash and cash equivalents$60,852 $— $60,852 
Accounts receivable, net / accounts payable3,454 1,066 2,388 
Inventory1,766 — 1,766 
Short-term investments15,035 — 15,035 
Accrued liabilities— 3,863 (3,863)
Operating lease obligation— 619 (619)
Deferred revenue— 4,133 (4,133)
Notes and other receivables / Short-term debt284 2,411 (2,127)
Other8,474 3,436 5,038 
Total$89,865 $15,528 $74,337 

Contractual Obligations and Commitments

Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered during our course of business. Our contractual obligations consists of operating lease liabilities and acquisition liabilities that are included in our consolidated balance sheet and vendor commitments associated with agreements that are legally binding. As of March 31, 2022, the total obligation for operating leases is approximately $1.8 million, of which approximately $0.7 million is expected to be paid in the next twelve months. Our vendor commitments are approximately $0.5 million all of which is expected in the next twelve months. As of March 31, 2022, our obligation for acquisition liabilities is approximately $3.5 million of which approximately $3.4 million is expected to be paid in the next twelve months. In addition, any time during the Series 8 Redemption Period, each holder of our Series 8 Shares is entitled to require us to redeem all or part of the Series 8 Shares then held by such holder in cash for a redemption price per share equal to the Series 8 Redemption Amount. Any holder that elects to redeem its shares of Series 8 Preferred Stock will be required to forfeit 50% of the corresponding warrants held by such holder. The aggregate Redemption Amount that we may be required to pay is equal to $53.2 million (which may be increased to $58.5 million in the event of certain events of default) plus any accrued but unpaid dividends, liquidated damages and other costs, expenses, or amounts due in respect of the shares, to the extent applicable.
Promissory Notes
As of March 31, 2022, the Company owed approximately $2.4 million in principal under promissory notes with which is payable within the next twelve months inclusive of interest owed. The interest rate charged under the notes range from 8% to 10%. See Note 11 of the Notes to Consolidated Financial Statements included elsewhere in this quarterly Report.
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Net cash used in operating activities during the three months ended March 31, 2022 of $15.3 million consists of a net loss of $11.6 million offset by non-cash adjustments of approximately $2.2 million less net cash changes in operating assets and liabilities of approximately $5.9 million. Although the Company has sustained significant losses during three months ended March 31, 2022, we raised net proceeds of approximately $46.9 million after placement agent commissions and other offering costs from the sale of our securities in connection with a registered direct offering. Given our current cash balances and budgeted cash flow requirements, the Company believes such funds are sufficient to satisfy its working capital needs, capital asset purchases, debt repayments and other liquidity requirements associated with its existing operations for the next 12 months from the issuance date of the financial statements. However, general economic or other conditions resulting from COVID 19 or other events materially may impact the liquidity of our common stock or our ability to continue to access capital from the sale of our securities to support our growth plans. Our business has been impacted by the COVID-19 pandemic and may continue to be impacted. While we have been able to continue operations remotely, we have and continue to experience supply chain cost increases and constraints and delays in the receipt of certain components of our products impacting delivery times for our products. We have also seen some impact in the demand of certain products and delays in certain projects and customer orders either because they require onsite services which could not be performed as a result of new rules and regulations resulting from the pandemic, customer facilities being partially or fully closed during the pandemic or because of the uncertainty of the customer’s financial position and ability to invest in our technology.

Despite these challenges, we were able to realize growth in revenue for the first quarter of 2022 when compared to the same period of 2021 as a result of an increase in sales associated with our indoor intelligence platform including the CXApp and Intranav acquisitions completed in April and December 2021 respectively. The total impact that COVID-19 will have on general economic conditions is continuously evolving and the impact it may continue to have on our results of operations continues to remain uncertain and there are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected. The Company may continue to pursue strategic transactions and may raise such additional capital as needed, using our equity securities and/or cash and debt financings in combinations appropriate for each acquisition.
Liquidity and Capital Resources as of March 31, 2022 Compared With September 30, 2016

March 31, 2021

The Company’s net cash flows used in operating, investing and financing activities for the three months ended September 30, 2017March 31, 2022 and 20162021 and certain balances as of the end of those periods are as follows (in thousands):

  For the Nine Months Ended
September 30,		 
(thousands, except per share data) 2017  2016 
Net cash provided by (used in) operating activities $218  $(1,136)
Net cash used in investing activities  (1,154)  (1,621)
Net cash used in financing activities  (763)  (832)
Effect of foreign exchange rate changes on cash  (15)  34 
Net decrease in cash $(1,714) $(3,555)

  September 30,
2017		  December 31,
2016		 
       
Cash and cash equivalents $107  $1,821 
Working capital deficit $(30,796) $(21,023)

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For the Three Months Ended March 31,
20222021
Net cash used in operating activities$(15,319)$(5,661)
Net cash used in investing activities27,813 (43,321)
Net cash provided by financing activities(4,103)77,269 
Effect of foreign exchange rate changes on cash(19)(10)
Net increase in cash and cash equivalents$8,372 $28,277 

As of March 31,
2022		As of December 31,
2021
Cash and cash equivalents$60,852 $52,480 
Working capital surplus$74,337 $78,831 
Operating Activities:

Net cash provided by operating activities duringActivities for the ninethree months ended September 30, 2017 was $218,000. March 31, 2022

Net cash used in operating activities during the ninethree months ended September 30, 2016March 31, 2022 was $1.1approximately $15.3 million. NetThe cash used in operating activities duringflows related to the ninethree months ended September 30, 2017March 31, 2022 consisted of the following (in thousands):

Net loss $(27,129)
Non-cash income and expenses  17,502 
Net change in operating assets and liabilities  9,845 
Net cash provided by operating activities $218 

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Net income (loss)$(11,557)
Non-cash income and expenses2,163 
Net change in operating assets and liabilities(5,925)
Net cash used in operating activities$(15,319)
The non-cash income and expensesexpense of $17.5approximately $2.2 million consisted primarily of the following (in thousands):

$1,324  Depreciation and amortization expense
 4,094  Amortization of intangibles primarily attributable to the Lilien, Shoom, AirPatrol, LightMiner and Integrio operations, which were acquired effective March 1, 2013, August 31, 2013, April 16, 2014, April 24, 2015 and November 21, 2016, respectively.
 8,392  Goodwill impairment
 1,282  Stock-based compensation expense attributable to warrants and options issued as part of Company operations and prior acquisitions
 1,545  Amortization of debt discount
 (254) Change in fair value of derivative liability
 773  Provision for doubtful accounts
 346  Other
$17,502  Total non-cash income and expenses

$1,806 Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, Jibestream, Systat, Ten Degrees, Nanotron, Game Your Game, Visualix, CXApp and IntraNav, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, August 15, 2019, June 30, 2020, August 19, 2020, October 6, 2020, April 9, 2021, April 23, 2021, April 30, 2021, December 9, 2021 respectively.
169 Amortization of right of use asset
1,533 Stock-based compensation expense attributable, warrants, restricted stock grants and options issued as part of Company operations
(2,827)Earnout payment expense
(167)Unrealized gain/loss on note
1,503 Unrealized loss on equity securities
146 Other
$2,163 Total non-cash expenses
The net use of cash due to changesused in the change in operating assets and liabilities totaled $9.9aggregated approximately $5.9 million and consisted primarily of the following (in thousands):

$5,223  Decrease in accounts receivable and other receivables
 9,787  Decrease in prepaid licenses and maintenance contracts
 4,751  Increase in accounts payable
 (10,704) Decrease in deferred revenue
 17  Increase in accrued liabilities and other liabilities
 771  Increase in inventory and other assets
$9,845  Net use of cash in the changes in operating assets and liabilities

Investing Activities:

$(239)Increase in accounts receivable and other receivables
(3,385)Increase in inventory, other current assets and other assets
(1,345)Decrease in accounts payable
(149)Decrease in accrued liabilities, income tax liabilities and other liabilities
(141)Decrease in operating lease liabilities
(666)Decrease in deferred revenue
$(5,925)Net cash used in the changes in operating assets and liabilities

Operating Activities for the three months ended March 31, 2021
Net cash used in operating activities during the three months ended March 31, 2021 was approximately $5.7 million. The cash flows related to the three months ended March 31, 2021 consisted of the following (in thousands):
Net income (loss)$(12,539)
Non-cash income and expenses6,237 
Net change in operating assets and liabilities641 
Net cash used in operating activities$(5,661)
The non-cash income and expense of approximately $6.2 million consisted primarily of the following (in thousands):
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$943 Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, Jibestream, Systat, Ten Degrees and Nanotron, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, August 15, 2019, June 30, 2020, August 19, 2020 and October 6, 2020, respectively.
181 Amortization of right of use asset
5,096 Stock-based compensation expense attributable to warrants and options issued as part of Company operations
30 Loss on exchange of debt for equity
224 Amortization of debt discount
117 Provision for the valuation allowance for held for sale loan
(363)Related Party note, gain of foreign currency transaction
9 Income tax expense
$6,237 Total non-cash expenses
The net use of cash in the change in operating assets and liabilities aggregated approximately $0.6 million and consisted primarily of the following (in thousands):
$426 Decrease in accounts receivable and other receivables
(371)Increase in inventory,other current assets and other assets
480 Increase in accounts payable
517 Increase in accrued liabilities and other liabilities
(176)Decrease in operating lease liabilities
(235)Decrease in deferred revenue
$641 Net use of cash used in the changes in operating assets and liabilities
Cash Flows from Investing Activities as of March 31, 2022 and 2021
Net cash flows used in investing activities during the ninethree months ended September 30, 2017March 31, 2022 was $1.2approximately $27.8 million compared to net cash used in investing activities of $1.6 million for the prior year period. The net cashflows used in investing activities during the ninethree months ended September 30, 2017 was comprisedMarch 31, 2021 of $91,000approximately $43.3 million. Cash flows related to investing activities during the three months ended March 31, 2022 include $0.08 million for the purchase of property and equipment, $0.1 million for investment in capitalized software, and a $1.1$28.0 million of sales of treasury bills. Cash flows related to investing activities during the three months ended March 31, 2021 include $0.1 million for the purchase of property and equipment, $0.3 million investment in capitalized software.

software, $42.1 million for the purchase of short term investments, and $0.9 million for cash paid for the Systat License Agreement.

Cash Flows from Financing Activities:

Activities as of March 31, 2022 and 2021

Net cash flows used in financing activities during the ninethree months ended September 30, 2017March 31, 2022 was approximately $763,000.$4.1 million. Net cash used in financing activities for the nine months ended September 30, 2016 was $832,000. The net cash used inflows provided by financing activities during the ninethree months ended September 30, 2017March 31, 2021 was primarily comprised$77.3 million. During the three months ended March 31, 2022, the Company received incoming cash flows of $3.3$46.9 million for the issuance of preferred stock and warrants, paid $49.3 million for the redemption of preferred series 7 stock, paid $1.8 million of repayments to the Credit Facility, $6.1CXApp acquisition liability, and paid $0.3 million for the settlement of proceedsemployee taxes on restricted stock. During the three months ended March 31, 2021, the Company received incoming cash flows of $77.9 million from the issuance of common stock, preferred stockloaned $0.1 million to a related party, and warrants, $3paid a $0.5 million repayment of the Debenture and a net repayment of a convertible promissory note of $662,000.

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Liquidity and Capital Resources - General:

Our current capital resources and operating results as of September 30, 2017, as described in the preceding paragraphs, consist of:

1)an overall working capital deficit of $30.8 million;

2)cash of $107,000;

3)the unlimited Payplant Credit Facility which we may borrow against based on eligible assets with a maturity date of August 15, 2018, of which $3.4 million is utilized; and

4)net cash provided by operating activities year-to-date of $218,000.

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

Working Capital Assets  Liabilities  Net 
Cash and cash equivalents $107  $--  $107 
Accounts receivable, net / accounts payable  5,738   27,778   (22,040)
Notes and other receivables  419   --   419 
Prepaid licenses and maintenance contracts / deferred revenue  5,746   6,859   (1,113)
Short-term debt  --   3,519   (3,519)
Derivative liabilities  --   350   (350)
Other  2,125   6,425   (4,300)
Total $14,135  $44,931  $(30,796)

Deferred revenue exceeds the related prepaid contracts by $1.1 million and other liabilities exceed other assets by $4.3 million. These deficits are expected to be funded by our anticipated cash flow from operations and financing activities, as described below, over the next twelve months.

Net cash provided by operating activities during the nine months ended September 30, 2017 of $218,000 consists of net loss of $27.1 million less non-cash expenses of $17.5 million and net cash provided by changes in operating assets and liabilities of $9.8 million. We expect net cash from operations to increase during 2017 as a result of the following:

1)We significantly reduced our cost of operations in mid-August 2017 by reducing headcount and office locations. We estimate this to have a $6 million impact on an annual basis.
2)We are working with our key distributors and financing partners to address our credit limitation issues. Revenues during the nine months ended September 30, 2017 could have been higher but were negatively impacted by our inability to timely process orders due to past due amounts and credit limitations with various vendors.  We expect to relieve some of these issues during the year ending December 31, 2017 if are able to secure additional financing, continue to grow our services revenue and as sales of our Inpixon product line increase.

The Company’s capital resources as of September 30, 2017, availability on the unlimited Payplant Facility to finance purchase orders and invoices, higher margin business line expansion and credit limitation improvements, may not be sufficient to fund planned operations during 2017. The Company will need to raise $10-15 million outside capital under structures available to it including debt and/or equity offerings this year. The Company also has an effective registration statement on Form S-3 which may allow it to raise additional capital from the sale of its securities, subject to certain limitations for registrants with a market capitalization of less than $75 million. The information in this Form 10-Q concerning the Company’s Form S-3 registration statement does not constitute an offer of any securities for sale. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months, the Company may need to curtail certain aspects of its expansion activities or consider other means of obtaining additional financing, such as through the sale of assets or of a business segment, although there is no guarantee that the Company could obtain the financing necessary to continue its operations.

Subsequent Financing Event

On November 17, 2017, the Company issued a $1,745,000 principal face amount note to an accredited investor which yielded net proceeds of $1,500,000acquisition liability to the Company. The note bears interest at the ratepre-acquisition shareholders of 10% per year and is due 10 months after the date of issuance. There is a fixed conversion price of $0.45 per share, and the Company is required to reserve 25 million of the 50 million shares set forth in Proposal 8 of the Definitive Schedule 14A filed with the SEC in October 2017. Redemptions may occur at any time after the 6 month anniversary of the date of issuance of the note with a minimum redemption price of $0.57 per share, and if the conversion rate is less than the market price, then the redemptions must be made in cash. The note contains standard events of default and a schedule of redemption premiums. There is also a most favored nations clause for the term of the note.

The note contains customary events of default (defined terms as defined in the Note): 1)The Company fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; 2)The Company fails to deliver any Lender Conversion Shares in accordance with the terms hereof; 3)The Company fails to deliver any Redemption Conversion Shares (as defined below) in accordance with the terms hereof; 4)a receiver, trustee or other similar official shall be appointed over The Company or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; 5)The Company becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; 6)The Company makes a general assignment for the benefit of creditors; 7)The Company files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); 8)an involuntary bankruptcy proceeding is commenced or filed against The Company; 9)The Company defaults or otherwise fails to observe or perform any covenant, obligation, condition or agreement of The Company contained herein or in any other Transaction Document (as defined in the Purchase Agreement), other than those specifically set forth in this Section 4.1 and Section 4 of the Purchase Agreement; 10)any representation, warranty or other statement made or furnished by or on behalf of The Company to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note is false, incorrect, incomplete or misleading in any material respect when made or furnished; 11)the occurrence of a Fundamental Transaction without Lender’s prior written consent; 12)The Company fails to maintain the Share Reserve as required under the Purchase Agreement; 13)The Company effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Lender; 14)any money judgment, writ or similar process is entered or filed against The Company or any subsidiary of The Company or any of its property or other assets for more than $600,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; 15)The Company fails to be DWAC Eligible; 16)The Company fails to observe or perform any covenant set forth in Section 4 of the Purchase Agreement; and 17)The Company breaches any covenant or other term or condition contained in any Other Agreements.

There is also a most favored nations clause for six months from the date of issuance of the note such that if during that term, the Company enters into a transaction with terms more favorable than the terms under the note transaction, the note holder has a right to substitute the existing note terms with the more favorable terms in the new transaction. Furthermore, so long as the note is outstanding, if the Company issues a lower priced security than the conversion price of the note, the conversion price of the note is reduced to the price of that lower priced security.

Prepayments may be made on the note as follows:

Prepayment DatePrepayment Amount

On or before December 31, 2017

100% of the Outstanding Balance

On or after January 1, 2018 until February 1, 2018

115% of the Outstanding  Balance

On or after February 1, 2018 until the Maturity Date

120% of the Outstanding Balance

The note documents are governed by Utah law and jurisdiction for disputes is Utah. Furthermore, the parties agree to settle all disputes through binding arbitration.

45
Locality.

Our condensed consolidated financial statements as of September 30, 2017 have been prepared under the assumption that we will continue as a going concern for the next twelve months from the date the financial statements are issued. Our financial statements as of December 31, 2016 and September 30, 2017 include an explanatory paragraph referring to our recurring and continuing losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. 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, attain further operating efficiency, reduce expenditures, and, ultimately, to generate sufficient levels of revenue, which together represent the principal conditions that raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements as of September 30, 2017 do not include any adjustments that might result from the outcome of this uncertainty.

As a result of our recurring and continuing losses from operations there is substantial doubt about our ability to continue as a going concern without additional capital becoming available. 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, attain further operating efficiency, reduce expenditures, and, ultimately, to generate sufficient levels of revenue, which together represent the principal conditions that raise substantial doubt about our ability to continue as a going concern. At this time, management cannot provide any assurance they will be successful in their efforts to alleviate substantial doubt for the next 12 months from the issuance date of this report. Our condensed consolidated financial statements as of September 30, 2017 do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Recently Issued Accounting Standards

For a discussion of recently issued accounting pronouncements, please see the Recent Accounting Standards section of Note 3 to our condensed consolidated financial statements, which are included in this Form 10-Q under Item 1.

report beginning on page F-1.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.Controls and Procedures

Item 4.    Controls and Procedures

Disclosure Controls and Procedures


Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our condensed consolidated financial statements in conformity with United States generally accepted accounting principles.

GAAP.


In connection with the preparation of this Form 10-Q, management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures were effective.


Changes in Internal Controls


There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended September 30, 2017March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company’s management determined that there were no material changes needed to internal controls as a result of the COVID-19 pandemic.


Limitations of the Effectiveness of Control


A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

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57

PART II—II — OTHER INFORMATION


Item 1.Legal Proceedings

On May 30, 2017, HP Inc. (“HP”) filed

Item 1.    Legal Proceedings

There are no material pending legal proceedings as defined by Item 103 of Regulation S-K, to which we are a complaint inparty or of which any of our property is the Marin County Superior Court, California, against Inpixon USA for goods sold and delivered, account stated, and quantum meruit. The complaint alleges that Inpixon USA had purchased HP’s products on credit, which led to an unpaid balance in the sum of $744,184.12 as of December 13, 2016. The complaint further alleges that although Inpixon USA entered into two payment agreements with HP and made partial payments, it defaulted under the payment program and the unpaid amount totaled $636,046.60 as of January 17, 2017. In the complaint, HP demands that Inpixon USA pay damages in the principal amount of $636,046.60 plus any interest accruing from and after January 17, 2017 at the rate of 10% per annum. On the same day of filing the complaint, HP also applied for a right to attach order and order for issuance of writ of attachment from the court to prevent Inpixon USA from dissipating assets priorsubject, other than ordinary routine litigation incidental to the timeCompany’s business.

There are no proceedings in which any of judgement. Inpixon USA and HP Inc. settled this matter on November 9, 2017 and the casedirectors, officers or affiliates of the Company, or any registered or beneficial holder of more than 5% of the Company’s voting securities, is inan adverse party or has a material interest adverse to that of the process of being dismissed. 

On August 10, 2017, Embarcadero Technologies, Inc. (“Embarcedero”) and Idera, Inc. (“Idera”) filed a complaint in the U.S. Federal District Court for the Western District of Texas against Inpixon Federal, Inc. (“Inpixon”) and Integrio Technologies, LLC (“Integrio”) for failure to pay for purchased software and services pursuant to certain reseller agreements. The complaint alleges that Inpixon entered into an agreement with Integrio to acquire certain assets and assume certain liabilities of Integrio and are therefore responsible for any amounts due. In the complaint, Embarcadero and Idera demand that Inpixon and Integrio pay $1,100,000.00 in damages. The Company is in settlement discussions with Idera and Embarcadero.

Company.

Item 1A.Risk Factors

Item 1A.    Risk Factors

We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations and financial condition could be materially adversely affected by these risks. Except asIn addition to the risk factors set forth below there have been no material changes toand the Risk Factorsother information set forth in this Form 10-Q, you should carefully consider the factors disclosed in Part I, Item 1A, “Risk Factors,” in our annual reportAnnual Report on Form 10-K for the year ended December 31, 2016.

Risks Related to Our Securities

Our obligations to our senior secured lender, Payplant LLC are secured2021, filed with the SEC on March 16, 2022, which report is incorporated by a security interest in substantiallyreference herein, all of our assets, so if we default on those obligations, the lenderswhich could foreclose on, liquidate and/or take possession of our assets. If that were to happen, we could be forced to curtail, or even to cease, our operations.

We issued a revolving Secured Promissory Note to GemCap Lending I, LLC dated as of November 14, 2016 which was assigned to Payplant LLC, or Payplant, on August 14, 2017 together with the Amended and Restated GemCap Loan and Security Agreement: Payplant Loan and Security Agreement, dated as of August 14, 2017 (the “Payplant Loan Agreement”). As of September 30, 2017, we had approximately $3.4 million in outstanding revolving credit loans. All amounts due under the Secured Promissory Note are secured by our assets. As a result, if we default on our obligations under the Secured Promissory Note, Payplant could foreclose on its security interest and liquidate or take possession of some or all of these assets, which would harmmaterially affect our business, financial condition and results of operations and could require us to curtail, or even to cease, operations.

Payplant and Hillair have certain rights upon an event of default under their respective agreements that could harm our business, financial condition and results of operations and could require us to curtail or cease our operations.

Payplant and Hillair have certain rights upon an event of default. With respect to Payplant, such rights include an increasefuture results.

Changes in the interest ratevalue of the Sysorex common stock we own may result in material fluctuations (increases or decreases) in our total asset value and net income on any advances madea quarterly basis.

We entered into a note purchase agreement with Sysorex, as amended from time to time, pursuant to which we agreed to loan Sysorex up to an aggregate principal amount of $10,000,000 on a revolving credit basis (the "Sysorex Note").

On March 1, 2020, we agreed to extend the Payplant Loanmaturity date of the note from December 31, 2020 to December 31, 2022. On April 14, 2021, we entered into a Securities Settlement Agreement (the “SSA”) and a Rights Letter Agreement (the “RLA”), with Sysorex, whereby it agreed to satisfy in full its outstanding debt, in the right to accelerate the paymentaggregate amount of any outstanding advances made pursuant$9,088,176 as of March 31, 2021, owed to the Payplant Loan Agreement, the rightCompany, including but, not limited to, directly receive payments made by account debtors and the right to foreclose on our assets, among other rights. The Payplant Loan Agreement includes in its definition of an event of default, among other occurrences, the failure to pay any principal when due within two business days, the termination, winding up, liquidation or dissolution of any borrower, the filing of a tax lien by a governmental agency against any borrower, and any reduction in ownership of our wholly owned subsidiaries, Inpixon USA and Inpixon Federal.

47

With respect to Hillair, such rights include the right to accelerate all amounts outstanding under the DebentureSysorex Note (the “Debt Settlement”). To effect the Debt Settlement, Sysorex agreed to issue to us (i) pursuant to the terms of the SSA, 12,972,189 shares of its common stock and demand(ii) rights to acquire 3,000,000 additional shares of its common stock pursuant to the terms of the RLA. The Debt Settlement was entered into in connection with Sysorex’s closing of a mandatory default payment in an amountreverse triangular merger with TTM Digital Assets & Technologies, Inc.


The Company recorded $7.5 million for the release of the previously recorded valuation allowance related to the Sysorex Note, $1.6 million of interest income, and a gain on settlement of $49.8 million equal to the greater of (i)difference in the outstanding principal amountcarry value of the Debenture, plus all accrued and unpaid interest, divided by the conversion price on the date the mandatory default amount is either (A) demanded (if demand or notice is required to create an event of default) or otherwise due or (B) paid in full, whichever has a lower conversion price, multiplied by the VWAP (as defined in the Debenture) on the date the mandatory default amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, or (ii) 125% of the outstanding principal amount plus 100% of accrued and unpaidSysorex Note, including interest, and (b) all other amounts, costs, expenses and liquidated damages due in respect of the Debenture. Each of the following events shall constitute an event of default: failure to make a payment obligation, failure to observe certain covenants of the Debenture or related agreements (subject to applicable cure periods), breach of representation or warranty, bankruptcy, default under another significant contract or credit obligation, delistingvalue of the common stock a changeand rights to acquire additional shares received in control, or failure to deliver stock certificates in a timely manner.

The exercisethe settlement. As of anyMarch 31, 2022, the value of these rights upon an eventsecurities decreased to approximately $0.3 millionas a result of default could substantially harm our financial condition and force us to curtail, or even to cease, our operations.

If we are unable to comply with certain financial and operating restrictions required by the Payplant Loan Agreement, we may be limitedcorresponding decrease in our business activities and access to credit or may default underSysorex's common stock price. Accordingly, a $1.5 million unrealized loss on the Payplant Loan Agreement.

ProvisionsSysorex note was included in the Payplant Loan Agreement impose restrictions or require prior approval on our ability, andcondensed consolidated statements of operations.


Consequently, the abilityshares of certaincommon stock of Sysorex we own, which are inherently volatile. Accordingly, the value of our subsidiaries to, among other things:

●sell, lease, transfer, convey, or otherwise dispose of any or all of our assets or collateral, except intotal assets and as a consequence, the ordinary course of business;

●make any loans to any person, as that term is defined in the Payplant Loan Agreement, with the exception of employee loans made in the ordinary course of business;

●declare or pay cash dividends, make any distribution on, redeem, retire or otherwise acquire directly or indirectly, any of our Equity Interests, as defined in the Payplant Loan Agreement;

●guarantee the indebtedness of any person;

●compromise, settle or adjust any claims in any amount relating to any of the collateral;

●incur, create or permit to exist any lien on any of our property or assets;

●engage in new lines of business;

●change, alter or modify, or permit any change, alteration or modification of our organizational documents in any manner that might adversely affect Payplant’s rights;

●sell, assign, transfer, discount or otherwise dispose of any accounts or any promissory note payable to us, with or without recourse;

●incur, create, assume, or permit to exist any indebtedness or liability on account of either borrowed money or the deferred purchase price of property; and

●make any payments of cash or other property to any affiliate.

48

The Payplant Loan Agreement also contains other customary covenants. We may not be able to comply with these covenants in the future. Our failure to comply with these covenants may result in the declaration of an event of default and cause us to be unable to borrow under the Payplant Loan Agreement. In addition to preventing additional borrowings under the Payplant Loan Agreement, an event of default, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding under the Loan Agreement, which would require us to pay all amounts outstanding. If the maturity of our indebtedness is accelerated, we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay the indebtedness would result in Payplant foreclosing on all or a portion of our assets and force us to curtail, or even to cease, our operations.

Our common stock may be delisted from The NASDAQ Capital Market if we cannot satisfy NASDAQ’s continued listing requirements in the future.

On May 19, 2017, we received written notice from the Listing Qualifications Staff of NASDAQ notifying us that we no longer comply with NASDAQ Listing Rule 5550(b)(1) due to our failure to maintain a minimum of $2,500,000 in stockholders’ equity (the “Minimum Stockholders’ Equity Requirement”) or any alternatives to such requirement. We reported stockholders’ equity of ($2,483,000) in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017.

On October 24, 2017, the Company received notification (the “Staff Delisting Determination”) from NASDAQ that it has not regained compliance with the Minimum Stockholders’ Equity Requirement. The Company has appealed the Staff Delisting Determination and requested a hearing which is currently scheduled for December 7, 2017. As a result, the suspension and delisting will be stayed until pending the issuance of a written decision by the hearings panel. The Company is currently evaluating various alternative courses of action to regain compliance with the Minimum Stockholders’ Equity Requirement.

If we are unable to comply with the Minimum Stockholders’ Equity Requirement, our common stock may be delisted,decline or increase regardless of our operating performance, which could make tradingmay result in losses for investors purchasing shares of our common stock more difficult for investors, potentially leadingstock. Further, to declines in our share price and liquidity. Without a NASDAQ listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult and the trading volume and liquidity of our stock could decline. Delisting from NASDAQ could also result in negative publicity and could also make it more difficult for us to raise additional capital. Further, ifextent that we are delisted, we would also incur additional costs under state blue sky lawsexperience unrealized losses in connection with any salessuch securities from declines in securities values that management determines to be other than temporary, the book value of those securities will be adjusted to their estimated recovery value and we will recognize a charge to earnings in the quarter during which we make that determination. Additionally, the Company has no control over the price the Company will eventually receive as a result of the disposition of such assets and may be unable to sell the aforementioned securities at favorable prices quickly or when desired.



We previously received a notice of failure to satisfy a continued listing rule from the Nasdaq which may ultimately result in delisting of our securities. These requirements could severely limitcommon stock.

In several instances in the market liquiditypast, including as recently as on October 25, 2021, we received written notification from Nasdaq informing us that because the closing bid price of our common stock and the ability of our stockholders to sell our common stock in the secondary market. If our common stock is delisted by NASDAQ, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our common stock. We cannot assure you that our common stock, if delisted from NASDAQ, will be listed on another national securities exchange or quoted on an over-the counter quotation system.

On August 14, 2017, we received a deficiency letter from NASDAQ indicating that, based on our closing bid pricewas below $1.00 for the last 30 consecutive businesstrading days, we do not comply with the minimum bid price requirement of $1.00 per share, as set forth in NASDAQ Listing Rule 5550(a)(2). The notification hasour shares no immediate effect on the listing of our common stock on The NASDAQ Capital Market.

In accordance with NASDAQ Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until February 12, 2018, to regain compliancelonger complied with the minimum closing bid price requirement for continued listing.listing on Nasdaq under the Nasdaq Listing Rules. Each time, we were given a period of 180 days from the date of the notification to regain compliance

58
with Nasdaq’s listing requirements by having the closing bid price of our common stock listed on Nasdaq be at least $1.00 for at least 10 consecutive trading days.

While we have regained compliance within the applicable time periods in the past but not in connection with the October 25, 2021 notice. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until April 25, 2022, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price per share of our common stock must be at least $1.00 per share for a minimum of ten consecutive business days.days during this 180-day period. In the event INPX doesthat we did not regain compliance by February 12, 2018,within this 180-day period, we may be affordedwere eligible to seek an additional 180-day compliance period provided it demonstrates that it meetsof 180 calendar days if we meet the continued listing requirement for market value of publicly held shares and all other applicableinitial listing standards for initial listing on The NASDAQthe Nasdaq Capital Market, (exceptwith the exception of the bid price requirement),requirement, and provide written notice to Nasdaq of its intentionour intent to cure the minimum bid price deficiency during thethis second gracecompliance period, by effecting a reverse stock split, if necessary. IfWe provided Nasdaq written notice of our intention to cure the bid price deficiency during the second compliance period and on April 26, 2022, we failreceived notice from Nasdaq that we were granted an additional 180 days, or until October 24, 2022 to regain compliance afterwith this requirement. If we are not able to cure the second grace period,deficiency prior to October 24, 2022, Nasdaq will provide notice to us that our common stock will be subject to delistingdelisting.

Delisting could adversely affect our ability to raise additional capital through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by NASDAQ. 

49
employees, the loss of institutional investor interest and fewer business development opportunities.


The shares of our Series 8 Shares are subject to a holder’s redemption right and requires us to maintain a minimum cash balance.

At any time beginning on October 1, 2022 and ending ninety (90) days thereafter, each holder of such shares may require us to redeem all or part of the Series 8 Shares then held by such holder in cash for a redemption price per share equal to the stated value plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses, or amounts due in respect of such shares (the “Series 8 Redemption Amount”), provided that in certain instances of our default more particularly described in the Series 8 Preferred Stock Certificate of Designation, the Redemption Amount is increased to 110% of the stated value plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses, or amounts due in respect of such shares. If we fail to pay the full Redemption Amount timely, we will be obligated to pay interest thereon at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law, accruing daily from the due date until the Redemption Amount and all interest thereon are paid in full. Until the earlier of the conversion or redemption of all shares of Series 8 Preferred Stock and January 1, 2023, we will maintain a cash balance (in the form of cash and cash equivalents equal to the sum of (i) the stated value of all of the Series 8 Preferred Stock then outstanding, (ii) the stated value of the Company’s Series 7 Convertible Preferred Stock then outstanding as set forth in the Series 7 Convertible Preferred Stock Certificate of Designation (provided, however, this will not apply following June 14, 2022), (iii) the aggregate amount of any debt (including trade payables), (iv) the aggregate stated value of any other equity securities that are issued that are senior to, or pari passu with, the Series 8 Preferred Stock and (v) the aggregate amount of monetary judgments with respect to the Company, any subsidiary or any of their respective property or assets.

The covenants of the Certificate of Designation of the Series 8 Shares may limit our operating and financial flexibility and hinder our ability to deploy capital.

Pursuant to the Certificate of Designation of the Series 8 Shares, until the earlier of the conversion or redemption of all Series 8 Shares and January 1, 2023, we have to maintain a cash balance (in the form of cash and cash equivalents equal to the sum of (i) the stated value of all of the Series 8 Shares then outstanding, (ii) the aggregate amount of any debt (including trade payables) and other securities that are issued that are senior to, or pari passu with, Series 8 Shares, and (iii) the aggregate amount of monetary judgments with respect to us and our subsidiaries or any of our respective property or assets. As such, the Certificate of Designation of the Series 8 Shares may significantly limit our ability to deploy capital which may leave us with may leave us with insufficient cash resources to operate our business.

If we are required to redeem the Series 8 Shares pursuant to the Certificate of Designation of the Series 8 Shares, our business, operating results, and financial condition would be adversely affected.

Pursuant to the Certificate of Designation of the Series 8 Shares, at any time beginning on October 1, 2022 and ending ninety (90) days thereafter, each holder of Series 8 Shares may require us to redeem all or part of such shares then held by such holder in cash for a redemption price per share equal to the stated value plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses, or amounts due in respect of such shares, provided that in certain instances of our default more particularly described in the Series 8 Preferred Stock Certificate of Designation, the such amount is increased to
59
110% of the stated value plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses, or amounts due in respect of such shares. In the event that we are required to redeem such Series 8 Shares this could have a material adverse effect on our business, financial condition, and results of operations.

The lasting effects of the COVID-19 pandemic could adversely affect our business, operations, financial condition and results of operations, and the extent to which the effects of the pandemic will impact our business, operations, financial condition and results of operations remains uncertain.

While the unprecedented challenges posed by the COVID-19 pandemic over the last few years is subsiding, there continue to be lasting effects that may continue to result in significant volatility and business and economic disruptions and uncertainty. We have taken steps to protect our employees and we continue to operate all of our services, but the extent to which the remaining effects of the pandemic will impact our business, operations, financial condition and results of operations is uncertain, and hard to predict and will depend on numerous evolving factors that we may not be able to control or predict, including:

    ●    the duration and scope of the pandemic;

    ●    the extent and effectiveness of responsive actions by authorities and the impact of these and other factors on our employees, customers and vendors;

    ●    the impact of the pandemic on our employees, including key personnel;

    ●    the extent to which we are able to maintain and replace critical internet infrastructure components, when necessary;

    ●    any disruption of our supply chain and the impact of such disruptions on our suppliers or our ability to deliver products and services to our customers;

    ●    our continued ability to execute on business continuity plans for the maintenance of our critical internet infrastructure, to allow our employees to work remotely; and

    ●    any negative impact on the demand for our services and products resulting from the economic disruption caused by the pandemic and responses thereto.

If we are unable to successfully respond to and manage the lasting effects of the pandemic, and the resulting responses to it, our business, operations, financial condition and results of operations could be adversely impacted.

The impact of the the military conflict between Russia and Ukraine has resulted in an increase in the likelihood of supply chain constraints, contributed to inflation driving up the cost of material and labor required to make our products, the effects of which remains uncertain and may have a material adverse impact on our business, operations and financial condition.

The military conflict between Russia and Ukraine has increased the likelihood of supply interruptions which may hinder our ability to find the materials we need to make our products. Supply disruptions are making it harder for us to find favorable pricing and reliable sources for the materials we need, putting upward pressure on our costs and increasing the risk that we may be unable to acquire the materials and services we need to continue to make certain products. The wider implications of the conflict has contributed to inflation driving up the costs of labor and materials required to make our products.. The fluidity and continuation of the conflict may result in additional economic sanctions and other impacts which could have a negative impact on the Company’s financial condition, results of operations and cash flows, including decreased sales; supply chain and logistics disruptions; volatility in foreign exchange rates and interest rates; inflationary pressures on materials and labor; and heightened cybersecurity threats. The overall impact on our business of these events continues to remain uncertain and there are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected.


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

a)    Sales of Unregistered Securities

On July 19, 2017


60
During the quarter ended March 31, 2022, the Company issued 97,753 shares to an entity for services. The Company recorded an expense of $87,000 for the fair value of those shares.

On November 17, 2017, the Company issued a $1,745,000 principal face amount note to an accredited investor which yielded net proceeds of $1,500,000 to the Company.

The securities above were issued as restricted securities in transactions that were exempt from the registration requirementsexchanged approximately $1.5 million of the Securities Act pursuant to Section 4(a)(2)outstanding principal and interest under the March 2020 10% Note Purchase Agreement and Promissory Note for 4,310,245 shares of the Securities Act, which exempts transactionsCompany's common stock at exchange rates between $0.3020 and $0.4196 per share, in each case calculated in accordance with Nasdaq’s “minimum price” as defined by an issuer not involving any public offering. Nasdaq Listing Rule 5635(d).


The Company relied on the representations made in the transaction documents signed by the applicable securities holders. No commissions were paidoffer and no underwriter or placement agentsale of such shares was involved in these transactions.

The Company has not issued any additional securities that were not registered under the Securities Act in reliance on an exemption from registration under Section 3(a)(9) of the Securities Act, in that (a) the shares of common stock were issued in exchange for a partitioned note which has not previously been disclosedwas another outstanding security of the Company; (b) there was no additional consideration of value delivered in a Current Report on Form 8-K.

connection with the exchange; and (c) there were no commissions or other remuneration paid by the Company in connection with the exchange.


c)    Issuer Purchases of Equity Securities


None.


Item 3.Defaults Upon Senior Securities

Item 3.    Defaults Upon Senior Securities

Not applicable.


Item 4.Mine Safety Disclosure

Item 4.    Mine Safety Disclosure

Not applicable.


Item 5.Other Information

On November 20, 2017, Inpixon issued a press release announcing the results for the quarter ended September 30, 2017. The press release is included as Exhibit 99.1 to this Quarterly Report on Form 10-Q and is incorporated by reference herein, and the description of the press release is qualified in its entirety by reference to such Exhibit.

The press release is furnished under this

Item 2.02 and shall not be deemed filed with the U.S. Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. The information contained in the press release shall not be incorporated by reference into any filing we make regardless of general incorporation language in the filing, unless expressly incorporated by reference in such filing.

Subsequent Financing Event

On November 17, 2017, the Company issued a $1,745,000 principal face amount note to an accredited investor which yielded net proceeds of $1,500,000 to the Company. The note bears interest at the rate of 10% per year and is due 10 months after the date of issuance. There is a fixed conversion price of $0.45 per share, and the Company is required to reserve 25 million of the 50 million shares set forth in Proposal 8 of the Definitive Schedule 14A filed with the SEC in October 2017. Redemptions may occur at any time after the 6 month anniversary of the date of issuance of the note with a minimum redemption price of $0.57 per share, and if the conversion rate is less than the market price, then the redemptions must be made in cash. The note contains standard events of default and a schedule of redemption premiums. There is also a most favored nations clause for the term of the note.

The note contains customary events of default (defined terms as defined in the Note): 1)The Company fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; 2)The Company fails to deliver any Lender Conversion Shares in accordance with the terms hereof; 3)The Company fails to deliver any Redemption Conversion Shares (as defined below) in accordance with the terms hereof; 4)a receiver, trustee or other similar official shall be appointed over The Company or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; 5)The Company becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; 6)The Company makes a general assignment for the benefit of creditors; 7)The Company files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); 8)an involuntary bankruptcy proceeding is commenced or filed against The Company; 9)The Company defaults or otherwise fails to observe or perform any covenant, obligation, condition or agreement of The Company contained herein or in any other Transaction Document (as defined in the Purchase Agreement), other than those specifically set forth in this Section 4.1 and Section 4 of the Purchase Agreement; 10)any representation, warranty or other statement made or furnished by or on behalf of The Company to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note is false, incorrect, incomplete or misleading in any material respect when made or furnished; 11)the occurrence of a Fundamental Transaction without Lender’s prior written consent; 12)The Company fails to maintain the Share Reserve as required under the Purchase Agreement; 13)The Company effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Lender; 14)any money judgment, writ or similar process is entered or filed against The Company or any subsidiary of The Company or any of its property or other assets for more than $600,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; 15)The Company fails to be DWAC Eligible; 16)The Company fails to observe or perform any covenant set forth in Section 4 of the Purchase Agreement; and 17)The Company breaches any covenant or other term or condition contained in any5.    Other Agreements.

There is also a most favored nations clause for six months from the date of issuance of the note such that if during that term, the Company enters into a transaction with terms more favorable than the terms under the note transaction, the note holder has a right to substitute the existing note terms with the more favorable terms in the new transaction. Furthermore, so long as the note is outstanding, if the Company issues a lower priced security than the conversion price of the note, the conversion price of the note is reduced to the price of that lower priced security.

Prepayments may be made on the note as follows:

Prepayment DatePrepayment Amount

On or before December 31, 2017

100% of the Outstanding Balance

On or after January 1, 2018 until February 1, 2018

115% of the Outstanding  Balance

On or after February 1, 2018 until the Maturity Date

120% of the Outstanding Balance

The note documents are governed by Utah law and jurisdiction for disputes is Utah. Furthermore, the parties agree to settle all disputes through binding arbitration.

Information

None.

Item 6.Exhibits

Item 6.    Exhibits

See the Exhibit Indexindex following the signature page to this Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

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61
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 20, 2017INPIXON
INPIXON
By:
Date: May 16, 2022By:/s/ Nadir Ali

Nadir Ali


Chief Executive Officer


(Principal Executive Officer)

By:/s/ Wendy Loundermon
Wendy Loundermon

VP of Finance


Chief Financial Officer
(Principal Financial and Accounting Officer)

51

62

Table of Contents
EXHIBIT INDEX



Exhibit NumberExhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
2.1†8-K001-364042.1May 6, 2021
2.2†8-K001-364042.1December 13, 2021
2.38-K001-364042.1December 30, 2021
3.1S-1333-1905743.1August 12, 2013
3.2S-1333-2181733.2May 22, 2017
3.38-K001-364043.1April 10, 2014
3.48-K001-364043.1December 18, 2015
3.58-K001-364043.1March 1, 2017
3.68-K001-364043.2March 1, 2017
3.78-K001-364043.1February 5, 2018
3.88-K001-364043.1February 6, 2018
3.98-K001-364043.1November 1, 2018
3.108-K001-364043.1January 7, 2020
63
Table of Contents
Exhibit NumberExhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
3.118-K001-364043.1November 19, 2021
3.12S-1333-1905743.2August 12, 2013
3.138-K001-364043.2September 13, 2021
3.148-K001-364043.1April 24, 2018
3.158-K001-364043.1January 15, 2019
3.168-K001-364043.1September 15, 2021
3.178-K001-364043.1March 24, 2022
4.18-K001-364044.1March 22, 2022
10.18-K001-3640410.1January 28, 2022
10.2†8-K001-3640410.1March 22, 2022
10.38-K001-3640410.2March 22, 2022
31.1X
31.2X
32.1#X
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Table of Contents
Exhibit No.Description
Exhibit NumberExhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
3.1Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registration statement on Form S-1 (SEC File No. 333-190574) of Inpixon, filed with the U.S. Securities and Exchange Commission on August 12, 2013).
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X
3.2Amendment No. 1 to Amended and Restated Bylaws of Softlead, Inc. (renamed Sysorex Global Holdings Corp.) (incorporated by reference to Exhibit 3.2 to the registration statement on Form S-1 (SEC File No. 333-190574) of Inpixon, filed with the U.S. Securities and Exchange Commission on August 12, 2013).
101.SCH
3.3Articles of Merger (renamed Sysorex Global) (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on December 18, 2015).
3.4Certificate of Designation of Preferences, Rights and Limitations of Series 1 Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 10, 2016).
3.5Certificate of Correction (incorporated by reference to Exhibit 3.2 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 10, 2016).
3.6Articles of Merger (renamed Inpixon) (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on March 1, 2017).
3.7Certificate of Amendment to Articles of Incorporation (Reverse Split) (incorporated by reference to Exhibit 3.2 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on March 1, 2017).
3.8Certificate of Designation of Preferences, Rights and Limitations of Series 2 Convertible Preferred Stock (incorporated by reference to Exhibit 3.9 to the Registration Statement on Form S-1 of Inpixon, filed with the U.S. Securities and Exchange Commission on June 23, 2017).
4.1Form of Subordinated Convertible Note issued on May 31, 2017 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on June 1, 2017.).
4.2Form of Warrant Agency Agreement (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-1 of Inpixon, filed with the U.S. Securities and Exchange Commission on June 23, 2017).
4.3Promissory Note issued by Inpixon Federal to Payplant Alternatives Fund, LLC dated August 14, 2017 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 14, 2017).
10.1Exchange Agreement by and between Inpixon and Hillair Capital Investments L.P., dated April 19, 2017 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on April 20, 2017).
10.2Form of Securities Purchase Agreement dated May 31, 2017 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on June 1, 2017).
10.3Waiver and Consent Agreement dated May 31, 2017 with GemCap Lending I, LLC (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on June 1, 2017).
10.4Waiver and Consent Agreement dated May 31, 2017 with Hillair Capital Investments L.P. (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on June 1, 2017).

52

Exhibit No.Description
10.5Form of Waiver and Consent Agreement, dated June 28, 2017 with those purchasers signatory to that certain securities purchase agreement, dated December 12, 2016. (incorporated by reference to Exhibit 10.5 to the June 30, 2017 Form 10-Q of Inpixon, filed with the U.S. Securities and Exchange Commission on August 21, 2017).
10.6Warrant Exercise Agreement, dated August 9, 2017 with those warrant holders signatory thereto (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 9, 2017).
10.7Form of Additional Warrant (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 9, 2017).
10.8Waiver and Consent Agreement dated August 9, 2017 with Hillair Capital Investments L.P. (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 9, 2017).
10.9Exchange Right Agreement by and between Inpixon and Hillair Capital Investments L.P., dated August 14, 2017 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 14, 2017).
10.10Payplant Loan and Security Agreement between Inpixon and Payplant dated August 14, 2017 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 18, 2017).
10.11Payplant Client Agreement among Inpixon, Inpixon USA, Inpixon Federal and Payplant dated August 14, 2017 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Inpixon, filed with the U.S. Securities and Exchange Commission on August 18, 2017).
10.12*Securities Purchase Agreement by and between Inpixon and Chicago Venture Partners, L.P. dated November 17, 2017.
10.13*Convertible Promissory Note by and between Inpixon and Chicago Venture Partners, L.P. dated November 17, 2017.
31.1*Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.
31.2*Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.
32.1**Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1**Press Release dated November 20, 2017.
101.INS*XBRL Instance Document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.X
101.CAL*101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.X
101.DEF*101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.X
101.LAB*101.LABInline XBRL Taxonomy Extension LabelsLabel Linkbase Document.X
101.PRE*101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.X

* Filed herewith.

** Furnished herewith.

53
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).X

†    Exhibits, schedules and similar attachments have been omitted pursuant to Item 601 of Regulation S-K and the registrant undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the SEC.

#    This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
65