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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, 2023

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 $0.00116,583,63526,665,373
(Class)Outstanding at November 17, 2017May 15, 2023


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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
iii
Item 1.Financial Statements1
iii
Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2023 and December 31, 2016 (Audited)20222
1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022
3
Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2017March 31, 2023 and 201620224
5
Condensed Consolidated StatementStatements of Stockholders’ (Deficit)Changes in Mezzanine Equity and Stockholders' Equity for the ninethree months ended September 30, 2017March 31, 2023 and 2022
6
Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2023 and 201620227
8
Notes to Unaudited Condensed Consolidated Financial Statements8
9
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations28
41
Item 3.Quantitative and Qualitative Disclosures About Market Risk46
54
Item 4.Controls and Procedures46
54
PART II - OTHER INFORMATION
56
Item 1.Legal Proceedings47
56
Item 1A.Risk Factors47
56
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds50
57
Item 3.Defaults Upon Senior Securities50
58
Item 4.Mine Safety DisclosureDisclosures50
58
Item 5.Other Information50
58
Item 6.Exhibits50
60
Signatures51
61


i
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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;
•the possibility that anticipated tax treatment and benefits of the spin-off of our enterprise apps business and subsequent Business Combination (defined below) may not be achieved;
•risks related to our recent acquisitions, the spin-off of our enterprise apps business and subsequent Business Combination that recently closed or any other strategic transactions that we may undertake;
•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 or deliver 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 increases in inflation rates and rates of interest, supply chain challenges, increased costs for materials and labor, cybersecurity attacks, other lingering impacts resulting from COVID-19, and the Russia/Ukraine conflicts;
•our ability to obtain adequate financing in the future as needed;
•our ability to consummate strategic transactions which may include acquisitions, mergers, dispositions involving us and any of our business units or other strategic investments;
•our ability to attract, retain and manage existing customers;
•our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market;
•lawsuits and other claims by third parties or investigations by various regulatory agencies that we may be subjected 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;
•impact of any changes in existing or future tax regimes; and
ii
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•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 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 indicated, all share and per share data in this Form 10-Q, including the unaudited condensed consolidated financial statements, reflect the 1 for 15

Note Regarding Reverse Stock Split
The Company effected a reverse stock split of the Company’sits authorized and issued and outstanding shares of common stock, effected on March 1, 2017.

par value $0.001, at a ratio of 1-for-75, effective as of October 7, 2022 (the "Reverse Stock Split"), for the purpose of complying with Nasdaq Listing Rule 5550(a)(2). We have reflected the Reverse Stock Split herein, unless otherwise indicated.



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, 2023 are not necessarily indicative of the results of operations for the full year. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited consolidated financial statements for the fiscal years ended December 31, 20162022 and 20152021 included in the annual report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 17, 2017.

1
2023.

iii

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,
2023		As of December 31,
2022
(Unaudited)(Audited)
Assets
Current Assets
Cash and cash equivalents$15,254 $10,235 
Accounts receivable, net of allowances of $268 and $272, respectively2,999 1,889 
Notes and other receivables430 86 
Inventory2,179 2,442 
Note receivable— 150 
Prepaid expenses and other current assets2,797 2,803 
Current assets of discontinued operations— 12,261 
Total Current Assets23,659 29,866 
Property and equipment, net1,052 1,064 
Operating lease right-of-use asset, net484 531 
Software development costs, net1,313 1,265 
Investments in equity securities364 330 
Long-term investments50 716 
Intangible assets, net2,810 2,994 
Other assets175 158 
Non-current assets of discontinued operations— 20,711 
Total Assets$29,907 $57,635 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2
Condensed Consolidated Financial Statements

1

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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


  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 

As of March 31,
2023		As of December 31,
2022
(Unaudited)(Audited)
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable$1,767 $1,503 
Accrued liabilities5,112 2,619 
Operating lease obligation, current199 211 
Deferred revenue1,382 1,323 
Short-term debt14,971 13,643 
Acquisition liability— 197 
Current liabilities of discontinued operations— 5,218 
Total Current Liabilities23,431 24,714 
Long Term Liabilities
Operating lease obligation, noncurrent297 334 
Non-current liabilities of discontinued operations— 472 
Total Liabilities23,728 25,520 
Commitments and Contingencies— — 
Stockholders’ Equity
Preferred Stock -$0.001 par value; 5,000,000 shares authorized
Series 4 Convertible Preferred Stock - 10,415 shares authorized; 1 issued and 1 outstanding as of March 31, 2023 and December 31, 2022— — 
Series 5 Convertible Preferred Stock - 12,000 shares authorized; 126 issued and 126 outstanding as of March 31, 2023 and December 31, 2022— — 
Common Stock - $0.001 par value; 500,000,000 shares authorized; 16,478,253 and 3,570,894 issued and 16,478,252 and 3,570,893 outstanding as of March 31, 2023 and December 31, 2022, respectively.16 4 
Additional paid-in capital339,148 346,668 
Treasury stock, at cost, 1 share(695)(695)
Accumulated other comprehensive (loss) income(198)1,061 
Accumulated deficit(330,586)(313,739)
Stockholders’ Equity Attributable to Inpixon7,685 33,299 
Non-controlling Interest(1,506)(1,184)
Total Stockholders’ Equity6,179 32,115 
Total Liabilities and Stockholders’ Equity$29,907 $57,635 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3
Condensed Consolidated Financial Statements

2

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

For the Three Months Ended March 31,
20232022
(Unaudited)
Revenues$3,104 $2,649 
Cost of Revenues791 797 
Gross Profit2,313 1,852 
Operating Expenses
Research and development1,983 2,124
Sales and marketing1,115 1,169
General and administrative5,613 7,334
Acquisition-related costs164 115
Transaction costs1,400 — 
Amortization of intangibles220 347
Total Operating Expenses10,495 11,089 
Loss from Operations(8,182)(9,237)
Other (Expense)/Income
Interest (expense)/income, net(1,725)1 
Other income/(expense), net29 (44)
Unrealized gain/(loss) on equity securities34 (1,503)
Total Other Expense(1,662)(1,546)
Net Loss from Continuing Operations, before tax(9,844)(10,783)
Income tax provision(2,478)— 
Net Loss from Continuing Operations(12,322)(10,783)
Loss from Discontinued Operations, Net of Tax(4,856)(774)
Net Loss(17,178)(11,557)
Net Loss Attributable to Non-controlling Interest(305)(346)
Net Loss Attributable to Stockholders of Inpixon(16,873)(11,211)
Accretion of Series 7 Preferred Stock— (4,555)
Accretion of Series 8 Preferred Stock— (548)
Deemed dividend for the modification related to Series 8 Preferred Stock— (2,627)
Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock— 1,469 
Amortization premium- modification related to Series 8 Preferred Stock— 110 
Net Loss Attributable to Common Stockholders$(16,873)$(17,362)
3

  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 share and per share data)
Net Loss Per Share - Basic and Diluted$(1.38)$(9.05)
Weighted Average Shares Outstanding
Basic and Diluted12,238,684 1,917,629 

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

4
Condensed Consolidated Financial Statements

4

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,
20232022
(Unaudited)
Net Loss$(17,178)$(11,557)
Unrealized foreign exchange loss from cumulative translation adjustments(1,259)(102)
Comprehensive Loss$(18,437)$(11,659)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5
Condensed Consolidated Financial Statements

5

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 share and per share data)


Series 4 Convertible Preferred StockSeries 5 Convertible Preferred StockCommon StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive Income (Loss)Accumulated DeficitNon-Controlling InterestTotal Stockholders’ (Deficit) Equity
SharesAmountSharesAmountSharesAmountSharesAmount
Balance - January 1, 20231 $— 126 $— 3,570,894 $4 $346,668 (1)$(695)$1,061 $(313,739)$(1,184)$32,115 
Common shares issued for extinguishment of debt— — — — 1,547,234 1 1,425 — — — — — 1,426 
Common shares issued for net cash proceeds of a public offering9,655,207 10 14,956 — — — — — 14,966 
Stock options and restricted stock awards granted to employees for services— — — — — — 329 — — — — — 329 
Deconsolidation of CXApp business as result of spin off— — — — — — (24,230)1— — — — — (24,230)
Common shares issued for net proceeds from warrants exercised— — — — 1,380,000 1 — — — — — — 1 
Common shares issued for exchange of warrants— — — — 324,918 — — — — — — — — 
Cumulative translation adjustment— — — — — — — — — (1,259)26 (17)(1,250)
Net loss— — — — — — — — — — (16,873)(305)(17,178)
Balance - March 31, 20231 $— 126 $— 16,478,253 $16 $339,148 (1)$(695)$(198)$(330,586)$(1,506)$6,179 

  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
Condensed Consolidated Financial Statements

1
6
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 share and 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
SharesAmountSharesAmountAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance - January 1, 202249,250 44,695 — — 1 $— 126 $— 1,730,140 $2 $332,761 (1)$(695)44 $(250,309)$1,688 $83,491 
Common shares issued for extinguishment of debt— — — — — — — — 57,472 — 1,500 — — — — — 1,500 
Stock options and restricted stock awards granted to employees for services— — — — — — — — — — 1,533 — — — — — 1,533 
Series 7 Preferred redeemed for cash(49,250)(49,250)— — — — — — — — — — — — — — — 
Series 8 Preferred stock issued for cash— — 53,198 41,577 — — — — — — 5,329 — — — — — 5,329 
Accretion Discount- Series 7 Preferred Shares— 4,555 — — — — — — — — (4,555)— — — — — (4,555)
Accretion Discount- Series 8 Preferred Shares— — — 548 — — — — — — (548)— — — — — (548)
Deemed dividend for the modification related to Series 8 Preferred Stock— — — 2,627 — — — — — — (2,627)— — — — — (2,627)
Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock— — — (1,469)— — — — — — 1,469 — — — — — 1,469 
Amortization Premium- modification related to Series 8 Preferred Stock— — — (110)— — — — — — 110 — — — — — 110 
Restricted stock grants withheld for taxes— — — — — — — — (12,802)— (336)— — — — — (336)
Common shares issued for CXApp earnout— — — — — — — — 144,986 — 3,697 — — — — — 3,697 
Common shares issued for exchange of warrants— — — — — — — — 184,153 — — — — — — — — 
Cumulative translation adjustment— — — — — — — — — — — — — (102)(15)15 (102)
Net loss— — — — — — — — — — — — — — (11,211)(346)(11,557)
Balance - March 31, 2022— $— 53,198 $43,173 1 $— 126 $— 2,103,949 $2 $338,333 (1)$(695)$(58)$(261,535)$1,357 $77,404 
——
The accompanying notes are an integral part of these condensed consolidated financial statements.

7
Condensed Consolidated Financial Statements

7

INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months Ended March 31,
20232022
Cash Flows Used in Operating Activities(Unaudited)
Net loss$(17,178)$(11,557)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization429 317 
Amortization of intangible assets1,025 1,489 
Amortization of right of use asset110 169 
Stock based compensation329 1,533 
Earnout expense valuation benefit— (2,827)
Amortization of debt discount834 — 
Unrealized loss on foreign currency transactions(205)(167)
Distribution of equity method investment shares to employees as compensation666 — 
Deferred income tax2,478 — 
Unrealized loss on equity securities(34)1,503 
Other— 146 
Changes in operating assets and liabilities:
Accounts receivable and other receivables(1,994)(239)
Inventory283 181 
Prepaid expenses and other current assets274 (3,607)
Other assets(4)41 
Accounts payable(534)(1,345)
Accrued liabilities3,545 (109)
Income tax liabilities(2)(40)
Deferred revenue584 (666)
Operating lease obligation(109)(141)
Net Cash Used in Operating Activities(9,503)(15,319)
Cash Flows Used in Investing Activities
Purchase of property and equipment(6)(81)
Investment in capitalized software(220)(107)
Sales of treasury bills— 28,001 
Proceeds from repayment of note receivable150 — 
Issuance of note receivable(300)— 
Net Cash (Used in) Provided By Investing Activities(376)27,813 
Cash From Financing Activities
Net proceeds from issuance of preferred stock and warrants— 46,906 
Net proceeds from promissory note125 364 
Net proceeds for registered direct offering14,966 — 
Cash paid for redemption of preferred stock series 7— (49,250)
8
INPIXON AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Taxes paid related to net share settlement of restricted stock units— (336)
Repayment of CXApp acquisition liability(197)(1,787)
Common shares issued for net proceeds from warrants1 — 
Distribution to shareholders related to spin-off of CXApp(10,003)— 
Net Cash Provided By (Used In) Financing Activities4,892 (4,103)
Effect of Foreign Exchange Rate on Changes on Cash6 (19)
Net (Decrease)/Increase in Cash and Cash Equivalents(4,981)8,372 
Cash and Cash Equivalents - Beginning of period20,235 52,480 
Cash and Cash Equivalents - End of period$15,254 $60,852 
Supplemental Disclosure of cash flow information:
Cash paid for:
Interest$— $1 
Income Taxes$— $100 
Non-cash investing and financing activities
Common shares issued for extinguishment of debt$1,426 $1,500 
Common shares issued for CXApp Earnout Payment$— $3,697 
Common shares issued in exchange for warrants$— $14 
Noncash net assets distribution to shareholders related to spin-off of CXApp$14,227 $— 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements


9
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

Note 1 - Organization and Nature of Business

Inpixon is the Indoor Intelligence™ company. Our solutions and Going Concern

technologies help organizations create and redefine exceptional experiences that enable smarter, safer and more secure environments. Inpixon through its wholly-owned subsidiaries, customers can leverage our real-time positioning, mapping and analytics technologies to achieve higher levels of productivity and performance, increase safety and security, improve worker and employee satisfaction rates and drive a more connected work environment. We have focused our corporate strategy on being the primary provider of the full range of foundational technologies needed to form a comprehensive suite of solutions that make indoor data available and actionable to organizations and their employees. Together, our technologies allow organization to create and utilize the digital twin of a physical location and to deliver enhanced experiences in their current environment and in the metaverse.


Inpixon USA, Inpixon Federal, Inc. (“Inpixon Federal”), Inpixon Canada, Inc. (“Inpixon Canada”) and the majority-owned subsidiary, Sysorex Arabia LLC (“Sysorex Arabia”) (unless otherwise stated or the context otherwise requires, the terms “Inpixon” “we,” “us,” “our” and the “Company” refer collectively to Inpixon and the above subsidiaries), provides Big Data analytics andspecializes in providing real-time location based products and related servicessystems (RTLS) for the cyber-securityindustrial sector. As the manufacturing industry has evolved, RTLS technology has become a crucial aspect of Industry 4.0. Our RTLS solution leverages cutting-edge technologies such as IoT, AI, and Internetbig data analytics to provide real-time tracking and monitoring of Things markets. The Company is headquartered in California,assets, machines, and has salespeople within industrial environments. With our RTLS, businesses can achieve improved operational efficiency, enhanced safety, and subsidiary offices in Virginia, California,reduced costs. By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and Vancouver, Canada.

On November 21, 2016,ensure compliance with industry regulations. With our RTLS, industrial businesses can transform their operations and as more fully described in Note 4, the Company completed the acquisition of substantially allstay ahead of the assets and certain liabilities of Integrio Technologies, LLC (“Integrio”), which iscurve in the U.S. Federal Government IT contracts business.

As of September 30, 2017, the Company hasdigital age.


Inpixon's full-stack industrial IoT solution provides end-to-end visibility and control over 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 realizationwide range of assets and devices. It's designed to help organizations optimize their operations and gain a competitive edge in today's data-driven world. The turn-key platform integrates a range of technologies, including RTLS, sensor networks, edge computing, and big-data analytics, to provide a comprehensive view of an organizations's operations. We help organizations to track the satisfactionlocation and status of liabilitiesassets in real-time, identify inefficiencies, and make decisions that drive business growth. Our IoT stack covers all the normal course of business. The financial statements do not include any adjustments relatingtechnology layers, from the edge devices to the recoverabilitycloud. It includes hardware components such as sensors and classificationgateways, a robust software platforms for data management and analysis, and a user-friendly dashboard for real-time monitoring and control. Our solutions also offer robust security features to help ensure the protection of asset amountssensitive data. Additionally, Inpixon's RTLS provides scalability and flexibility, allowing organizations to easily integrate it with their existing systems and add new capabilities as their needs evolve.

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

•Digital solutions (eTearsheets; eInvoice, and adDelivery) or cloud-based applications and analytics for the classificationadvertising, media and publishing industries through our advertising management platform referred to as Shoom by Inpixon; and

•A comprehensive set of liabilities that might be necessary should the Company be unabledata analytics and statistical visualization solutions for engineers and scientists referred to continue as a going concern within one year after the date theSAVES by Inpixon.

We report 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 issuedresults for three segments: Indoor Intelligence, Shoom and sold (i) an 8% Original Issue Discount Senior Convertible Debenture in an aggregate principal amountSAVES. For Indoor Intelligence, we generate revenue from sales of $5,700,000 due on August 9, 2018hardware, software licenses 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 ordersprofessional services. For Shoom 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, subjectsoftware licenses.


Enterprise Apps Spin-off and Business Combination

On March 14, 2023, we completed the Enterprise Apps Spin-off and subsequent Business Combination (the "Closing") In connection with the Closing, KINS was renamed CXApp Inc. (“New CXApp”). Pursuant to the Transaction Agreements, Inpixon contributed to CXApp cash and certain limitationsassets and liabilities constituting the Enterprise Apps Business, including certain related subsidiaries of Inpixon, to CXApp (the “Contribution”). In consideration for registrants with a market capitalizationthe Contribution, CXApp issued to Inpixon additional shares of less than $75 million. The information in this Form 10-Q concerningCXApp common stock such that the Company’s Form S-3 registration statement does not constitute an offernumber of any securities for sale. If these sources do not provideshares of CXApp common stock then outstanding equaled the capitalnumber of shares of CXApp common stock necessary to fundeffect the Company’s operations duringDistribution. Pursuant to the next twelve months,Distribution, Inpixon shareholders as of the Company may needRecord Date received one share of CXApp common stock for each share of Inpixon common stock held as of such date. Pursuant to curtail certain aspectsthe Merger Agreement, each share of its operating activities or consider other means of obtaining additional financing, such as throughLegacy CXApp common stock was thereafter exchanged for the sale of assets orright to receive 0.09752221612415190 of a business segment, although thereshare of New CXApp Class A common stock (with fractional shares rounded down to the nearest whole share) and 0.3457605844401750 of a share of New CXApp Class C common stock (with fractional shares rounded down to the nearest whole share). New CXApp Class A common stock and New CXApp Class C common stock are identical in all respects, except that New CXApp Class C common stock is no guaranteenot listed and will automatically convert into New CXApp Class A common stock on the earlier to occur of (i) the 180th day following the closing of the Merger and (ii) the day that the Company could obtain the financing necessary to continue its operations.

8
last reported sale price of New CXApp Class A common stock equals or exceeds $12.00

10

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

per share for any 20 trading days within any 30-trading day period following the closing of the Merger. Upon the closing of the Transactions, Inpixon’s existing security holders held approximately 50.0% of the shares of New CXApp common stock outstanding.The transaction is expected to be tax-free to Inpixon and its stockholders for U.S. federal income tax purposes. On March 15, 2023, New CXApp began regular-way trading on NASDAQ under the ticker symbol “CXAI.” Inpixon continues to trade under the ticker symbol “INPX.”

In accordance with applicable accounting guidance, the results of CXApp are presented as discontinued operations in the Condensed Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods presented prior to the completion of the Enterprise Apps Spin-off. The Condensed Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations. See Note 24 of the Notes to the Condensed Consolidated Statements of Operations for additional information on the Enterprise Apps Spin-off.

Reverse Stock Split

On October 7, 2022, the Company effected a 1-for-75 reverse stock split. All historical share and per share amounts reflected throughout this report have been adjusted to reflect the Reverse Stock Split.

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, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.2023. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the years ended December 31, 20162022 and 20152021 included in the annual report on Form 10-K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange CommissionSEC on April 17, 2017.

2023.

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 yearsyear ended December 31, 20162022.
Liquidity
As of March 31, 2023, the Company has a working capital surplus of approximately $0.2 million, and 2015.

cash of approximately $15.3 million. For the three months ended March 31, 2023, the Company had a net loss of approximately $17.2 million. During the three months ended March 31, 2023, the Company used approximately $9.5 million of cash for operating activities.

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, including delays in returning employees to the office, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders.
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
Note 3 - Summary of Significant Accounting Policies (continued)
Certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and Ukraine, market volatility and other general economic factors that are beyond our control may impact our results of operations. These factors can include interest rates; recession; inflation; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; and other matters that influence our customers spending. Increasing volatility in financial markets and changes in the economic climate could adversely affect our results of operations. We also expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business. While we have been able to realize growth in the three months ended March 31, 2023 as compared to the same period in 2022, the impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain. There are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected.
The Company's recurring losses and utilization of cash in its operations are indicators of going concern however with the Company's current liquidity position, including $15.3 million cash on hand plus the $4.1 million raised under the ATM Offering since April 1, 2023, approximately $3.8 million in additional funds available under the ATM Offering, and additional financing available to the Company, we believe we have the ability to mitigate such concerns for a period of at least one year from the date these financial statements are issued.
Consolidations
The consolidated financial statements have been prepared using the accounting records of Inpixon, Inpixon GmbH, Inpixon Limited, Nanotron Technologies, GmBh, Intranav GmbH, Inpixon India Limited and Game Your Game, Inc. The consolidated financial statements also include financial data of Inpixon Canada, Inc., Design Reactor, Inc. and Inpixon Philippines, Inc. through March 14, 2023, which is the date those entities were spun off in the Enterprise Apps Spin-off and Business Combination transaction discussed above. All material inter-company balances and transactions have been eliminated.
Use of Estimates

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

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

Revenue Recognition


•the valuation of stock-based compensation;
•the valuation of the Company’s common stock issued in transactions, including acquisitions;
•the allowance for credit losses;
•the valuation of equity securities;
•the valuation allowance for deferred tax assets; and
•impairment of long-lived assets and goodwill.
Business Combinations
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”accounts for business combinations under Financial Accounting Standards Board (“FASB”). In addition, the Company also records revenues in accordance with Accounting Standards Codification (“ASC”) Topic 605-45 “Principal Agent Consideration” (“ASC 605-45”).805, “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The Company evaluatesexcess of the salespurchase price over the estimated fair value is recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of productsoperations are consolidated as of 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 respectsubsequent to the products and/or services sold; (3) has latitudeacquisition date.
Investment in pricing;equity securities- fair value
Investment securities—fair value consist primarily of investments in equity securities 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 basisare carried at fair value in accordance with applicable standards.

9
ASC 321, "Investments-Equity Securities". These securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity. These securities transactions are recorded on a trade date basis. Any unrealized appreciation or depreciation on investment securities is reported in the Condensed Consolidated Statement of Operations within Unrealized Loss on Equity Securities. The unrealized gain on equity securities for the three months ended March 31, 2023 was approximately $0.03 million, and for the three months ended March 31, 2022 was a unrealized loss of approximately $1.5 million.

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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

Note 3 - Summary of Significant Accounting Policies (continued)

Revenue Recognition (continued)

Cooperative reimbursements from vendors, which are earned and available, are recorded during the period the related transaction has occurred. Cooperative reimbursements are recorded as a reduction of cost of sales in accordance 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 collections and credit memo analysis for the period.

The Company receives Marketing Development Funds from vendors based on quarterlyrecognizes revenue when control is transferred of the promised products or annual sales performanceservices to promoteits customers, in an amount that reflects the marketing of vendorconsideration the Company expects to be entitled to in exchange for those products andor services. The Company must file claims with vendors for these cooperative reimbursements by providing invoices and receipts for marketing expenses. Reimbursements are recordedderives revenue from software as a reduction of marketing expensesservice, design and other applicable selling, generalimplementation services for its Indoor Intelligence systems, and administrative expenses ratably over the periodprofessional services for work performed 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,conjunction with its systems.

Hardware 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, 2017 and 2016 revenues recognized as a result of customer contracts requiring the delivery of multiple elements were $1.6 million and $3.7 million, respectively. For the nine months ended September 30, 2017 and 2016 revenues recognized as a result of customer contracts requiring the delivery of multiple elements were $11.3 million 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 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, 2023 and 2016,2022, the Company did not incur any such losses. These amounts are based on known and estimated factors. Revenues from 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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License Revenue Recognition

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

Note 3 - Summary of Significant Accounting Policies (continued)

Maintenance

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 Professional Servicesenhancements, 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 Recognition (continued)

from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer.

Renewals or extensions of licenses are evaluated as distinct licenses (i.e., a distinct good or service), and revenue attributed to the distinct good or service cannot be recognized until (1) the entity provides the distinct license (or makes the license available) to the customer and (2) the customer is able to use and benefit from the distinct license. Renewal contracts are not combined with original contracts, and, as a result, the renewal right is evaluated in the same manner as all other additional rights granted after the initial contract. The revenue is not recognized until the customer can begin to use and benefit from the license, which is typically at the beginning of the license renewal period. Therefore, the Company recognizes revenue resulting from renewal of licensed software at a point in time, specifically, at the beginning of the license renewal period.
The Company recognizes revenue 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 $1.4 million and $1.3 million as of March 31, 2023 and December 31, 2022, respectively, related to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff. The Company expects to satisfy its remaining performance obligations for these maintenance services and professional services, and recognize the deferred revenue and 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.

11

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date and recognized over the period services are required to be provided in exchange for the award, usually the vesting period. Forfeitures of unvested stock options are recorded when they occur.

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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

Note 3 - Summary of Significant Accounting Policies (continued)

Stock-Based Compensation (continued)

The Company incurred stock-based compensation charges net of estimated forfeitures, of $288,000approximately $0.3 million and $344,000$1.5 million for the three months ended September 30, 2017March 31, 2023 and 2016, and $1,282,000 and $1,055,000 for the nine-month period ended September 30, 2017 and 2016,2022, respectively, which are included in general and administrative expenses. The following table summarizes the nature of suchStock-based compensation 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 

are related to employee compensation and related benefits.

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, 2023 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 

2022:

For the Three Months Ended March 31,
20232022
Options341,034 379,418 
Warrants3,847,109 1,737,627 
Convertible preferred stock13 1,503,728 
Rights to common stock— 52,513 
Total4,188,156 3,673,286 
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" ("ASC 480"), 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" (“ASC 815”), which states that contracts that are both, (1) indexed to its own stock and (2) classified in stockholders’ equity in its statement of financial position, are not classified as derivative instruments, and to be recorded under stockholder's equity on the balance sheet of the financial statements. Management assessed the preferred stock and determined that it did meet the scope exception under ASC 815, and would be recorded as equity, and not a derivative instrument, on the balance sheet of the Company's financial statements.

Fair Value of Financial Instruments
Financial instruments consist of cash and cash equivalents, investments in equity securities, short-term investment, accounts receivable, notes receivable, accounts payable, and short-term debt. The Company determines the estimated fair value of such financial instruments presented in these financial statements using available market information and appropriate methodologies. These financial instruments, except for short-term debt and investments in equity securities, are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. Investments in equity securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity, as necessary. Short-term debt approximates market value based on similar terms available to the Company in the market place.
Recently Issued and Adopted Accounting Standards
The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

Note 3 - Summary of Significant Accounting Policies (continued)

Reclassification

Reclassifications
Certain accounts in the prior year’s financial statementsyear amounts have been reclassified for comparative purposes to conform to the presentation inwith the current year’s financial statements.year presentation. These reclassifications havehad no material effect on previouslythe reported earnings.

Derivative Liabilities

During the year ended December 31, 2016, the Company issued a convertible debenture that included reset provisions considered to be down-round protection. In addition, the Company issued warrants that include a fundamental transaction clause which provide for the warrant holders to be paid inresults of operations or cash the fair value of the warrants as computed under a Black Scholes valuation model.flows. 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 the fair value of the warrants were computed as defined in the agreement. The instruments are marked-to-market at fair value as of each balance sheet date. Any change in fair value is recorded as a change in the fair value of derivative liabilities for each reporting period. The fair value of the conversion feature was determined using the Binomial Lattice model. 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 the date of the event that caused the reclassification. As of September 30, 2017, the fair value of the derivative liability was $350,000 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 interim periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed with a measurement date after January 1, 2017. The Company is currently evaluating the standard to determine the impact of its adoption on the consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718); Scope of Modification Accounting. The amendments in this ASU provide guidance that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. If the value, vesting conditions or classification of the award changes, modification accounting will apply. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard on its financial statements.

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement 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 reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity 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 interim periods within those years, beginning after December 15, 2018. The Company has early adopted the accounting guidance during the three months ended September 30, 2017 and accordingly has reclassified approximately $3.8 million 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 taxes 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 included approximately $1.1 million of earnings reclassified from controlling accumulated deficit to determine if anynon-controlling interest. This reclassification did not effect the Company’s total stockholders’ equity.

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Table of those events and/or transactions requires adjustment to or disclosure in the consolidated financial statements.

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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

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 and its wholly-owned subsidiary, Sysorex Government Services, Inc. (collectively, the “Buyer”), entered into an Asset Purchase Agreement, as amended by the Amendment No. 1expects to Asset Purchase Agreement (as so amended, the “Purchase Agreement”) with Integrio and Emtec Federal, LLC, a wholly-owned subsidiary of Integrio, (collectively, the “Seller”) which arebe entitled to in the business of providing IT integration and engineering services to customers, primarily government agencies.exchange for those products or services. 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 theCompany derives 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”) which consisted of the cash paid at Closing of $753,000, $400,000 cash that will be paid in two annual installments of $200,000 each on the respective anniversary dates of the Closing, $1,078,000 in contingent earnout payments and $101,000 representing the fair value 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 recordedfrom software as a reductionservice, design and implementation services for its Indoor Intelligence systems, and professional services for work performed 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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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 5 - Proforma Financial Information

The following unaudited proforma financial information presents the consolidated results of operations of the Company and Integrio for the nine months ended September 30, 2016, as if the acquisition of Integrio had occurred on January 1, 2016 instead of November 21, 2016. 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 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 $666,000 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, SCI is no longer a direct shareholder or investor in the Company. 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, the Company is in negotiationsconjunction 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, 2016its systems recognition policy. Revenues consisted of the following (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 

Note 8 - Goodwill

For the Three Months Ended March 31,
20232022
Recurring revenue
 Software1,014 1,051 
 Total recurring revenue$1,014 $1,051 
Non-recurring revenue
 Hardware$1,305 $820 
 Software42 410 
 Professional services743 368 
 Total non-recurring revenue$2,090 $1,598 
 Total Revenue$3,104 $2,649 
For the Three Months Ended March 31,
20232022
Revenue recognized at a point in time
Indoor Intelligence (1)$1,656 $820 
SAVES (1)393 368 
Total$2,049 $1,188 
Revenue recognized over time
Indoor Intelligence (2) (3)$253 $577 
SAVES (3)325 366 
Shoom (3)477 518 
Total$1,055 $1,461 
Total Revenue$3,104 $2,649 
(1) Hardware and Software's performance obligation is satisfied at a point in time where when they are shipped to the customer.
(2) Professional services are also contracted on the fixed fee and time and materials basis. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company has recorded goodwill and other indefinite-lived assetselected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date, in connection with its acquisitions of Lilien, Shoom, AirPatrol, LightMiner and Integrio. Goodwill, which represents the excess of acquisition costrevenue is recognized over time.
(3) Software As A Service Revenue's performance obligation is satisfied evenly 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 inservice period using 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,time-based measure because the Company is providing continuous access to its service and service is 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 lackover time.

17
Table of required working capital to fund our continuing operations.

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 

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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

Note 9 - Discontinued Operations

5- Goodwill and Intangible Assets


The Company reviews goodwill for impairment on a reporting unit basis on December 31 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The Company’s significant assumptions in these analyses include, but are not limited to, project revenue, the weighted average cost of capital, the terminal growth rate, derived multiples from comparable market transactions and other market data.

As of DecemberMarch 31, 2015,2023, the Company’s management decided to close its Saudi Arabia legal entity as business activities and operations have been strategically shifted accordingCompany's cumulative impairment charges are approximately $13.5 million with approximately $11.6 million related to the business plan ofIndoor Intelligence reporting unit, approximately $1.2 million related to the Company.

In accordance with ASC topic 360 “Property, PlantShoom reporting unit and Equipment”,approximately $0.7 million related to the Company has classified theSAVES reporting unit.


Intangibles 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, 2017March 31, 2023 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 and nine ended September 30, 2017 and 2016.

End of Service Indemnity Provision

In accordance with local labor laws, Sysorex Arabia is required to accrue benefits payable to its employees at the end of their services with Sysorex Arabia. For the three and nine months ended September 30, 2017 and 2016, no amounts were required to 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 as of September 30, 2017 and December 31, 20162022 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


March 31, 2023
Gross AmountAccumulated AmortizationSpin-OffNet Carrying AmountRemaining Weighted Average Useful Life
IP Agreement$165 $(103)$— $62 1.50
Trade Name/Trademarks1,792 (306)(1,367)119 3.75
Customer Relationships6,211 (843)(4,454)914 2.61
Developed Technology14,772 (1,690)(11,466)1,616 4.97
Non-compete Agreements1,837 (534)(1,204)99 0.49
Totals$24,777 $(3,476)$(18,491)$2,810 
December 31, 2022
Gross AmountAccumulated AmortizationImpairmentSpin-OffNet Carrying Value
IP Agreement$162 $(91)$— $— $71 
Trade Name/Trademarks3,590 (1,414)(593)(1,458)125 
Webstores & Websites404 (258)(146)— — 
Customer Relationships9,121 (2,776)(749)(4,636)960 
Developed Technology21,777 (5,385)(2,921)(11,781)1,690 
Non-compete Agreements4,270 (2,488)(220)(1,414)148 
Totals$39,324 $(12,412)$(4,629)$(19,289)$2,994 


Amortization Expense:

Amortization expense from continuing operations for the three months ended March 31, 2023 and 2022 was approximately $0.2 million and $0.7 million respectively.
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Table of Credit

GemCap LoanContents

INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 5 - Goodwill and Security Agreement Amendment 2

On January 24, 2017,Intangible Assets (continued)


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

Amount
December 31, 2023 (for 9 months)$627 
December 31, 2024688 
December 31, 2025605 
December 31, 2026413 
December 31, 2027326 
December 31, 2028 and thereafter151 
$2,810 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
Note 6 - Inventory
Inventory as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):
As of March 31, 2023As of December 31, 2022
Raw materials$376 $351 
Work-in-process126 127 
Finished goods1,677 1,964 
Inventory$2,179 $2,442 

Note 7 - Investments in Equity Securities

Investment securities—fair value consist of investments in the Company’s investment in shares and rights of equity securities. The composition of the Company’s investment securities—fair value was as follows (in thousands):
As of March 31, 2023
CostFair Value
Investments in equity securities- fair value
Equity shares$54,237 $362 
Equity rights11,064 2 
Total investments in equity securities- fair value$65,301 $364 

For the three months ended March 31, 2023 and 2022, the Company recognized a net unrealized gain on equity securities of $0.03 million and its U.S. wholly-owned subsidiaries, Inpixon USA and Inpixon Federal, entered into Amendment Number 2 toan unrealized loss of $1.5 million, respectively, in 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)other income/expense section of the definitioncondensed consolidated statements of “Eligible Accounts”operations.

On April 27, 2022, the Company purchased a 10% convertible note 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 for the period commencing on January 24, 2017 through and including April 24, 2017, Accounts in the aggregate only from and owed by Centene Corporation or its Affiliates may exceed twenty percent (20%) 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 theprincipal amount of $5,000 on February 2, 2017.

Payplant Accounts Receivable Bank Line

Pursuantapproximately $6.1 million for a purchase price of $5.5 million from FOXO Technologies Operating Company, formerly FOXO Technologies Inc. (“FOXO Legacy”), pursuant to the terms of a 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 Gemcapsecurities purchase agreement between FOXO Legacy and the Company and its wholly-owned subsidiaries, Inpixon USA and Inpixon Federal, Inc.(the “April 2022 Purchase Agreement”). Interest on the convertible note accrues at 12% per annum. The term of the convertible note is twelve months, however FOXO Legacy has the ability to extend the maturity date for an aggregate purchaseadditional 3 months. The convertible note is subject to certain conversion features which include qualified financing, and/or qualified transaction, as defined in the April 2022 Purchase Agreement. The Company can voluntarily convert the note after 270 days. The note is required to convert upon FOXO Legacy completing a qualified offering.


On September 15, 2022, FOXO Legacy consummated a business combination with Delwinds Insurance Acquisition Corp., now known as FOXO Technologies Inc. ("FOXO"), which qualified as a qualified offering as defined in the April 2022 Purchase Agreement. This qualified offering triggered a mandatory conversion of the convertible note to FOXO Legacy common stock which was then automatically converted into 891,124 shares of FOXO Class A common stock, par value $0.0001 (“FOXO common stock”) upon closing of the business combination. The Company recognized an unrealized gain on conversion of $0.8 million recognized in the income statement for the year ended December 31, 2022.

FOXO common stock is traded in active markets, as the security is trading under “FOXO” on the NYSE American. FOXO common stock is accounted for as available-for-sale equity securities based on “Level 1” inputs, which consist of quoted prices in active markets, with unrealized holding gains and losses included in earnings. The fair value was determined by the closing trading price of $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, datedsecurity as of August 14, 2017, betweenMarch 31, 2023. The Company recognized an unrealized gain on FOXO common stock of $0.03 million and zero on the income statement for the three months ended March 31, 2023 and 2022, respectively.


Note 8 - Other Long Term Investments
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

In 2020, the Company paid $1.8 million for 599,999 Class A Units and Payplant2,500,000 Class B Units of Cardinal Venture Holdings LLC (“CVH”). The Company is a member of CVH. CVH owns certain interests in KINS Capital, LLC, the sponsor entity (the “Loan Agreement”“Sponsor”) The Loan Agreement allows the Company to request loans from PayplantKINS Technology Group Inc., a Delaware corporation and special purpose acquisition company 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,which the Company entered into the Payplant Client AgreementBusiness Combination (see “Enterprise Apps Spin-off and Business Combination” under Note 1 above and “Recent Events - Enterprise Apps Spin-off and Business Combination” section under Part I, Item 2 herein for more details). The $1.8 million purchase price was paid on October 12, 2020 and therefore is the date the purchase of the Units was closed. On December 16, 2020, the Company increased its capital contribution by $0.7 million in exchange for an additional 700,000 Class B Units. The capital contribution was used by CVH to fund the Sponsor's purchase of securities in KINS. The underlying subscription agreement provides that each Class A Unit and each Class B Unit represents the right of the Company to receive any distributions made by the Sponsor on account of the Class A Interests and Class B Interests, respectively, of the Sponsor.
The Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income. During the period January 1, 2021 to December 31, 2021 and January 1, 2022 to March 31, 2023, CVH had no operating results as CVH is a holding company. CVH only contains units and has not been allocated shares of KINS, therefore CVH is not allocating any portion of income or expense incurred by KINS. As such, there was no share of earnings recognized by the Company in its statement of operations on its proportional equity investment.
The following component represents components of Other long-term investments as of March 31, 2023:
Ownership interest as of March 31,Ownership interest as of December 31,
20232022Instrument Held
Investee
CVH Class A— %14.1 %Units
CVH Class B38.4 %38.4 %Units
Inpixon’s investment in equity method eligible entities are represented on the balance sheet as an asset of approximately $0.1 million as of March 31, 2023 and approximately $0.7 million as of December 31, 2022.
On July 1, 2022, the Company loaned $150,000 to CVH. The loan bears no interest and is due and payable in full on the earlier of: (i) the date by which KINS has to complete a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “business combination”), and (ii) immediately prior to the date of consummation of the business combination of KINS, unless accelerated upon the occurrence of an event of default. Nadir Ali, the Company’s Chief Executive Officer and director, is also a member in CVH through 3AM, LLC, which is a member of CVH, and which may, in certain circumstances, be entitled to manage the affairs of CVH. As a result of the closing of the Business Combination, on March 15, 2023, the $150,000 loan was repaid.
On February 27, 2023, the Company entered into Limited Liability Company Unit Transfer and Joinder Agreements with certain of the Company’s employees and directors (the “Client Agreement”“Transferees”), pursuant to which (i) the Company will offer to Payplant for purchase those receivables payabletransferred all of its Class A Units of CVH (the “Class A Units”), an aggregate of 599,999 Class A Units, to the CompanyTransferees as bonus consideration in connection with the purchase orders under which advances have been made pursuant to the Loan Agreementeach Transferee’s services performed 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 assetson behalf of the Company pursuantas an employee, as applicable, and (ii) each Transferee became a member of CVH and a party to the LoanAmended and Restated Limited Liability Company Agreement and will be satisfied in accordance withof CVH, dated as of September 30, 2020. The Company recorded approximately $0.7 million of compensation expense for the termsfair market value of the Client Agreement.

17
shares transferred to the Transferees which is included in the operating expenses section of the condensed consolidated statements of operations in the quarter ended March 31, 2023.


Note 9 - Accrued Liabilities

Accrued liabilities as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022


As of March 31, 2023As of December 31, 2022
Accrued compensation and benefits$1,354 $655 
Accrued interest expense234 1,197 
Accrued bonus and commissions381 426 
Accrued transaction costs2,075 — 
Accrued other855 105 
Accrued sales and other indirect taxes payable213 236 
$5,112 $2,619 
Note 10 –- Debt (continued)

Payplant Accounts Receivable Bank Line (continued)

(B) Senior Secured Debenture

On June 2, 2017 the Company repaid $200,000

Debt as of March 31, 2023 and December 31, 2022 consisted of the debenture. following (in thousands):
Short-Term DebtMaturityMarch 31, 2023December 31, 2022
March 2020 10% Note3/18/2023$— $— 
July 2022 Promissory Note, less debt discount of $398 and $760, respectively.7/22/20236,776 6,045 
December 2022 Promissory Note , less debt discount of $1,409 and $1,880, respectively.12/30/20236,992 6,520 
Third Party Note Payable6/30/20231,203 1,078 
Total Short-Term Debt$14,971 $13,643 
Interest expense on the short-term debt totaled approximately $1.7 million and $0.1 million for the three months ended March 31, 2023 and 2022, 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 Purchase Agreement and Promissory Note

On June 30, 2017 after the close of the Capital Raise (see Note 11) the Company repaid $2.65 million of the senior secured debenture.

(C) Subordinated Convertible Promissory Notes

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
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 10- Debt (continued)
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 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%. The monitoring fee of approximately $0.3 million was added to the March 2020 10% Note balance as of that date. On March 17, 2021, the Company extended the maturity date of the March 2020 10% Note from March 18, 2021 to March 18, 2022 for which the Company agreed to pay an extension fee of approximately $0.1 million which was added to the outstanding balance of the March 2020 10% Note.
Effective as of March 16, 2022, we entered into a third amendment (the “Third Amendment”) to the March 2020 10% Note which was accounted for as a modification. Pursuant to the terms of the Third Amendment, the maturity date of the March 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 $0.1 million (the “Extension Fee”), which was added to the outstanding balance of the March 2020 10% Note.
During the year ended December 31, 2022, the Company entered into exchange agreements with Iliad, pursuant to which the Company and Iliad agreed to: (i) partition new promissory notes in the form of the March 2020 10% Note equal to approximately $3.7 million and then cause the outstanding balance of the March 2020 10% Note to be reduced by approximately $3.7 million; and (ii) exchange the partitioned notes for the delivery of 287,802 shares of the Company’s common stock, provided thatat effective prices between $4.78 and $31.47 per share. The Company analyzed the maximumexchange 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.
During the quarter ended March 31, 2023, the Company entered into exchange agreements with Iliad, pursuant to which the Company and Iliad agreed to: (i) partition new promissory notes in the form of the March 2020 10% Note equal to approximately $0.9 million and then cause the outstanding balance of the March 2020 10% Note to be reduced by approximately $0.9 million; and (ii) exchange the partitioned note for the delivery of 611,258 shares of the Company's common stock at effective prices between $1.09 and $1.68 per share. The Company analyzed the exchange of the principal under the March 2020 10% Note as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and there was no loss on the exchange for debt for equity.
July 2022 Note Purchase Agreement and Promissory Note

On July 22, 2022, the Company entered into a note purchase agreement (the "Purchase Agreement") with Streeterville Capital, LLC (the “Holder” or "Streeterville"), pursuant to which the Company agreed to issue and sell to the Holder an unsecured promissory note (the “July 2022 Note”) in an aggregate initial principal amount of interest$6.5 million (the “Initial Principal Amount”), which is payable on or before the date that is 12 months from the issuance date (the “Maturity Date”). The Initial Principal Amount includes an original issue discount of $1.5 million and $0.02 million that the Company agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the Note, the Holder paid an aggregate purchase price of $5.0 million (the “Transaction”). Interest on the Note accrued at a rate of 10% per annum, which is payable on the maturity date. We may pay all or any portion of the amount owed earlier than it is due; provided that in the event we may elect to pay in Interest Shares will not exceed an amount equal to 5%prepay all or any portion of the totaloutstanding balance, it shall pay to the Holder 115% of the portion of the outstanding balance we may elect to prepay. Beginning on the date that is 6 months from the issue date and at the intervals indicated below until the Note is paid in full, the Holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the Note for cash each month. The July 2022 Note includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%. Upon the occurrence of an event of default (except default due to the occurrence of bankruptcy or insolvency proceedings), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the July 2022 Note to be immediately due and payable. Upon the occurrence of bankruptcy-related event of default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the July 2022 Note will become immediately due and payable underat the mandatory default amount. Under the terms of the Notes.

On June 30, 2017July 2022 Note, if the Company paid $2.7 millionnote is still outstanding after 6 months from the closeissuance date, or as of January 22, 2023, a 10% monitoring fee would be added to the balance of the Capital Raise (see note. On January 31, 2023, the Holder agreed to reduce the one time monitoring fee from 10% to 5%.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 11) to settle10- Debt (continued)
During 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 equal to the number of shares of Common Stock underlying 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,quarter ended March 31, 2023, the Company entered into that certain waiverexchange agreements with Streeterville, pursuant to which the Company and consent agreement, dated June 28, 2017, (the “WaiverStreeterville agreed to: (i) partition new promissory notes in the form of the July 2022 Note equal to approximately $0.5 million and Consent Agreement”) with those purchasers (the “December 2016 Purchasers”) signatorythen cause the outstanding balance of the July 2022 Note to that certain securitiesbe reduced by approximately $0.5 million; and (ii) exchange the partitioned notes for the delivery of 935,976 shares of the Company’s common stock, at effective prices between $0.37 and $0.915 per share. The Company analyzed the exchange of the principal under the July 2022 Note as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and there was no loss on the exchange for debt for equity.


December 2022 Note Purchase Agreement and Promissory Note

On December 30, 2022, we entered into a note purchase agreement dated as of December 12, 2016with Streeterville Capital, LLC (the “December 2016 SPA”"Holder"). Pursuant, pursuant to which we agreed to issue and sell to the termsHolder an unsecured promissory note (the "December 2022 Note") in an aggregate initial principal amount of $8.4 million, which is payable on or before the Waiverdate that is 12 months from the issuance date. The initial principal amount of includes an original issue discount of $1.9 million and Consent Agreement,$0.02 million that we agreed to pay to the Holder to cover the Holder's legal fees, accounting costs, due diligence, monitoring and other transaction costs. In exchange for the Note, the Holder paid an aggregate purchase price of $6.5 million.

Interest on the December 2016 Purchasers agreed to waive (the “Waiver”)2022 Note accrues at a rate of 10% per annum and is payable on 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 issuedmaturity date or otherwise in accordance with the December 2016 SPA (the “December 2016 Warrants”) have been amended to equal the Exercise Price2022 Note. We may pay all or any portion of the warrants issuedamount owed earlier than it is due; provided that in the Offering andevent we may elect to provide for an adjustmentprepay all or any portion of the outstanding balance, it shall pay to the Exercise PriceHolder 115% of the portion of the outstanding balance we may elect to prepay. Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the December 2022 Note is paid in full, the Holder shall have the right to redeem up to an aggregate of 1/6th of the initial principal balance of the December 2022 Note plus any interest accrued thereunder each month by providing written notice delivered to us; provided, however, that if the Holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for the Holder to redeem in any further month in addition to such future month's monthly redemption amount.

Upon receipt of any monthly redemption notice, we shall pay the applicable monthly redemption amount in cash to the extent sharesHolder within five (5) business days of Common Stock are issued or soldthe Company's receipt of such monthly redemption notice. The December 2022 Note includes customary event of default provisions, subject to certain cure periods, and provides for a consideration per share that is less thandefault interest rate of 22%. Upon the exercise price then in effect; provided, thatoccurrence of an event of default (except default due to the exercise priceoccurrence of bankruptcy or insolvency proceedings), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the December 2022Note to be immediately due and payable. Upon the occurrence of bankruptcy-related event of default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the December 2022 Note will not be less than $0.50 per share. The impactbecome immediately due and payable at the mandatory default amount.

Third Party Note Payable

Game Your Game entered into promissory notes with an individual whereby it received approximately $0.2 million on October 29, 2021, approximately $0.2 million on January 18, 2022, approximately $0.1 million on March 22, 2022, approximately $0.1 million on August 26, 2022, approximately $0.1 million on September 16, 2022, approximately $0.1 million on October 26, 2022, approximately $0.1 million on November 29, 2022, approximately $0.1 million on December 22, 2022, approximately $0.03 million on January 18, 2023 and approximately $0.1 million on March 30, 2023 for funding of outside liabilities and working capital needs. All of the above modificationpromissory notes have an interest rate of 8% and are due on or before June 30, 2023. As of March 31, 2023, the balance owed under the notes was deminimis for the nine months ended September 30, 2017.

Agreement with Warrant Holders

$1.2 million.

Note 11 - Capital Raises
Registered Direct Offerings
On August 9, 2017,March 22, 2022, the Company entered into a warrant exercise agreement (the “Warrant Exercise Agreement”)Securities Purchase Agreement with certain participants in the Offering (collectively, the “Warrant Holders” and each, a “Warrant Holder”)institutional investors named therein, pursuant to which the Warrant Holders agreed to exercise, for up to an aggregate of 1,095,719Company sold in a registered direct offering (i) 53,197.7234 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”), bySeries 8 Convertible Preferred Stock 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 per share (the “Additional Warrant”) for(ii) related warrants to purchase up to an aggregate of 1,095,7191,503,726 shares of common stock.

The impact 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 modification was deemed to be deminimisoffering, the Company filed a Certificate of Designation for the nine months ended September 30, 2017.

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Series 8 Convertible Preferred Stock with the Nevada Secretary of State. Each share of Series 8 Convertible Preferred Stock has

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022


Note 11- Capital Raises (continued)
a par value of $0.001 per share and stated value of $1,000 per share. The shares of Series 8 Convertible Preferred Stock are convertible into shares of the Company’s common stock, at a conversion price of $35.38 per share. Each share of Series 8 Convertible Preferred Stock is entitled to receive cumulative dividends, payable in the same form as dividends paid on shares of the Company’s common stock. At any time beginning on October 1, 2022 and ending ninety 90 days thereafter, the holders of 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 13 for Preferred Stock and Note 15 for Warrant details. During the quarter ended December 31, 2022, the Company received cash redemption notices from the holders of the Series 8 Convertible Preferred Stock issued on March 22, 2022, totaling 53,197.72 shares of Series 8 Convertible Preferred Stock for aggregate cash paid of approximately $53.2 million which were therefore fully redeemed. In conjunction with the redemption, 751,841 warrants were forfeited.

Between March 15, 2022 and March 22, 2022, the Company received cash redemption notices from the holders of the Series 7 Convertible Preferred Stock issued on September 15, 2021, totaling 49,250 shares of Series 7 Convertible Preferred Stock for aggregate cash required to be paid of approximately $49.3 million. In addition, in accordance with the related purchase agreement, upon redemption of the Series 7 Convertible Preferred Stock, each holder forfeited 75% of the related warrants that were issued. Therefore, as of March 22, 2022, 49,250 shares of Series 7 Convertible Preferred Stock were redeemed and 394,000 related warrants were forfeited.The Company noted about 71% of the Series 7 Preferred Stock holders that redeemed shares also participated as Series 8 Convertible Preferred Stock holders (“shared holders”). The Company accounted for proceeds of the shared holders as a modification to the Series 7 and Series 8 Convertible Preferred Stock, as well as the related embedded warrants. The total change in fair value as a result of modification related to the Preferred Stock amounted to $2.6 million which were recognized as a deemed dividend at the date of the modification, upon which was amortized until the redemption period began on October 1, 2022. The total change in fair value as a result of modification related to the embedded warrants amounted to $1.5 million which was recognized as a deemed contribution at the date of the modification, upon which was accreted until the redemption period began on October 1, 2022.

On July 22, 2022, the Company entered into an Equity Distribution Agreement (the "Sales Agreement") with Maxim Group LLC (“Maxim”) under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $25 million (the “Shares”) from time to time through Maxim, acting exclusively as the Company’s sales agent (the “ATM Offering”). The Company intends to use the net proceeds of the ATM Offering primarily for working capital and general corporate purposes. During the quarter ended March 31, 2023, the Company sold 9,655,207 shares of common stock at share prices between $1.15 and $1.86 per share under the Sales Agreement for gross proceeds of approximately $15.4 million or net proceeds of $15.0 million after deducting the placement agency fees and other offering expenses. The Company is not obligated to make any sales of the Shares under the Sales Agreement and no assurance can be given that the Company will sell any additional Shares under the Sales Agreement, or if it does, as to the price or amount of Shares that the Company will sell, or the date on which any such sales will take place. The Company is currently subject to the SEC’s “baby shelf rules,” which prohibit companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company’s public float in a 12-month period. These rules may limit future issuances of shares by the Company under the Sales Agreement or other offerings pursuant to the Company’s effective shelf registration statement on Form S-3.
25
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022


Note 12 - Common Stock

During the three months ended March 31, 2017,2023, the Company issued 1,7671,547,234 shares of common stock relatedunder exchange agreements to the acquisition of Integrio Technologies, LLC which were fully vested upon the date of grant. The Company recorded an expense of $7,050 for the fair value of those shares.

settle outstanding balance and interest totaling approximately $1.4 million under partitioned notes. See Note 10.

During the three months ended March 31, 2017,2023, the Company issued 3,6139,655,207 shares of common stock for services which were fully vested uponin connection with the dateATM Offering at per share prices between $1.15 and $1.86, resulting in gross proceeds to the Company of grant. The Company recorded an expenseapproximately $15.4 million and net proceeds of $14,092 for the fair value of those shares.

$15.0 million after subtracting sales commissions and other offering expenses. See Note 11.

During the three months ended March 31, 2017,2023, the Company issued 18,905 of common stock for the settlement of $567,000 of shares held in escrow related 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 to the Company’s 8% Original Issue Discount Senior Secured Convertible Debenture in the principal amount 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 Series 1 Convertible Preferred Stock into 100,000 shares of 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 3,296,0601,380,000 shares of common stock in connection with the exercise of 3,296,0601,380,000 pre-funded warrants at $0.30$0.001 per share in connection with the October 2022 registered direct offering.

During the three months ended March 31, 2023, the Company issued 324,918 shares of common stock in connection with a share. 

warrant amendment to exchange all of the then outstanding September 2021 warrants and March 2022 warrants. See Note 1315.


Note 13 - Series 2 Preferred Stock


The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001 per share with rights, preferences, privileges and restrictions as to be determined by the Company’s Board of Directors.

Series 4 Convertible Preferred Stock

On June 29, 2017, InpixonApril 20, 2018, the Company 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 $16,740.

As of March 31, 2023, there was 1 share of Series 4 Preferred outstanding.

Series 5 Convertible Preferred Stock

On January 14, 2019, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation that created the Series 5 Convertible Preferred Stock, authorized 12,000 shares of Series 5 Convertible Preferred Stock and designated the preferences, rights and limitations of the Series 5 Convertible Preferred Stock. The Series 5 Convertible Preferred Stock is non-voting (except to the extent required by law). The Series 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
$11,238.75.


As of March 31, 2023, there were 126 shares of Series 5 Convertible Preferred Stock outstanding.

Series 7 Convertible Preferred Stock
On September 13, 2021, the Company entered into a securities purchase agreement with certain institutional investors named therein, pursuant to which the Company agreed to issue and sell in a registered direct offering (i) up to 58,750 shares of Series 7 Convertible Preferred Stock and (ii) related warrants to purchase up to an aggregate of 626,667 shares of common stock (the “Warrants”). Each share of Series 7 Convertible Preferred Stock and the related Warrants were sold at a subscription amount of $920, representing an original issue discount of 8% of the stated value for an aggregate subscription amount of $54.1 million. The shares of Series 7 Convertible Preferred Stocks were recorded as Mezzanine Equity as the holder has the option to redeem these shares for cash. The aggregate net proceeds from the offering, after deducting the placement agent fees and other estimated offering expenses, was approximately $50.6 million.
26
Table of Contents
INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022


Note 13 - Series 213- Preferred Stock (continued)

On June 30, 2017,

Between March 15, 2022 and March 22, 2022, the Company completedreceived cash redemption notices from the previously announced registered underwritten public offering and sold 4,060 Class B Units with each Class B Unit consistingholders of one share of Series 2 Preferred and one warrant to purchase the number of shares of common stock equal to the number of shares of common stock underlying the Series 2 Preferred. (See Note 11) During the three months ended7 Convertible Preferred Stock issued on September 30, 2017, the 4,06015, 2021, totaling 49,250 shares of Series 27 Convertible Preferred Stock for aggregate cash paid of approximately $49.3 million.
As of March 31, 2023, there were converted to 7,710,825zero shares of common stock (see Note 12).

Series 7 Convertible Preferred Stock outstanding.

Series 8 Convertible Preferred Stock
On August 14, 2017,March 22, 2022, 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 53,197.7234 shares of the Company’ s Series 28 Convertible Preferred Stock (the “Preferred Shares”) forand (ii) related warrants to purchase up to an aggregate of 5,606,0611,503,726 shares of common stock (the “Exchange Shares”“Warrants”). Each share of Series 8 Convertible Preferred Stock and the related Warrants (see Note 15) were sold at a subscription amount of $940, representing an original issue discount of 6% of the Company’ s common stock. Pursuant to the Exchange Agreement,stated value for so longan aggregate subscription amount of $50.0 million. The shares of Series 8 Convertible Preferred Stocks were recorded as Mezzanine Equity as the Preferred Shares remain outstanding, each outstanding Preferred Share may be exchangedholder has the option to redeem these shares for cash. The aggregate net proceeds from the number of Exchange Shares equal tooffering, after deducting the quotient obtained by dividing $1,000 by $0.33. The exchangeplacement agent fees and other estimated offering expenses, was approximately $46.9 million.
During the quarter ended December 31, 2022, the Company received cash redemption notices from the holders of the Series 8 Convertible Preferred 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 ofStock issued on March 22, 2022, totaling 53,197.72 shares of the Company’s common stock outstanding immediately after giving effect to the issuanceSeries 8 Convertible Preferred Stock for aggregate cash paid of the Exchange Shares. Upon not less than 61 days’ prior notice to the Company, Hillair may increase or decrease the ownership limitation, provided that the ownership limitation in no event exceeds 9.99%approximately $53.2 million which were therefore fully redeemed.
As of the number ofMarch 31, 2023, there were zero shares of the Company’s common stock outstanding immediately after giving effect to the issuance of the Exchange Shares. The 1,850 shares ofSeries 8 Convertible Preferred Shares were converted to common stock during the 3 months ended September 30, 2017.

Stock outstanding.

Note 14 - 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 restatedno new awards will be issued under the 2011 Plan.
In February 2018, the Company adopted the 2018 Employee Stock Incentive Plan (the “2018 Plan” and together with the 2011 Plan, the “Option Plans”), which is utilized for employees, corporate officers, directors, consultants and other key persons employed. The 2018 Plan provides for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in 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, 20162023 is 450,402.52,000,000. As of September 30, 2017, 309,609March 31, 2023, 341,034 of stock options were granted to employees, directors and consultants of the Company (including 41,667 shares1 share outside of our plan)plan and 140,79357 shares under our 2011 Plan) and 49,330,234 options were available for future grant under our plan.

the 2018 Plan.

Employee Stock Options
During the three months ended March 31, 2017, the Company granted options for the purchase of 25,627 shares of common stock to employees2023 and directors of the Company. These options vest pro-rata over 48 months and have a life of ten years and an exercise price of $3.90 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. The fair value of the common stock as of the grant date was determined to be $3.90 per share.

During the nine months ended September 30, 2017 and 2016,2022, the Company recorded a charge of $713,000 and $1,008,000, respectively, for the amortization of employee stock options.

options of approximately $0.3 million and $0.9 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, 2023, the fair value of non-vested stock options totaled $1,087,000approximately $1.7 million, which will be amortized to expense over the weighted average remaining term of 0.981.09 years.

20

27

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022

Note 14 - Stock OptionsAward Plans and Stock-Based Compensation (continued)

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, 202357 351,529 1 351,587 
Granted— — — — 
Exercised— — — — 
Expired— (1,826)— (1,826)
Forfeited— (8,727)— (8,727)
Ending balance as of March 31, 202357 340,976 1 341,034 
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, however there were no stock option grants during the ninethree months ended September 30, 2017 and 2016 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 $--  $-- 

March 31, 2023.

The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. The Company attributes the value of stock-based compensation to operations on the straight-line single option method. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods. The dividends assumptions werewas $0 as the Company historically has not declared any dividends and does not expect to.

Restricted Stock Awards
On February 19, 2022, 12,802 restricted stock grants were forfeited for employee taxes.
During the three months ended March 31, 2023 and 2022, the Company recorded a charge of $0.02 million and $0.7 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, 202342,968 
Granted— 
Exercised— 
Expired— 
Forfeited— 
Ending balance as of March 31, 202342,968 

��

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 15 – Fair Value

The Company measuresdetermined the fair value of financial assets and liabilitiesthese grants based on the guidanceclosing price of ASC 820 “Fair Value Measurementsthe Company’s common stock on the respective grant dates. The compensation expense is being amortized over the respective vesting periods.

Note 15 - Warrants
On January 28, 2022, the Company entered into an exchange agreement with the holder of certain existing warrants of the Company which were exercisable for an aggregate of 657,402 shares of the Company’s common stock. Pursuant to the exchange agreement, the Company agreed to issue to the warrant holder an aggregate of 184,153 shares of common stock and Disclosures” (“ASC 820”) which definesrights to receive an aggregate of 52,513 shares of common stock in exchange for the existing warrants. The Company accounted for the exchange agreement as a warrant modification. The Company determined the fair value establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair valueof the existing warrants as if issued on the exchange priceagreement date and compared 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 assetscommon stock issued. The Company calculated the fair value of the existing warrants using a Black-Scholes Option pricing model and determined it to be approximately $12.00 per share. The fair value of the common stock issued was based on the closing stock price of the date of the exchange. The total fair value of the warrants prior to modification was greater than the fair value of the common stock issued, and therefore, there was no incremental fair value related to the exchange.

28
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
Note 15 - Warrants (continued)
Between March 15 and March 22, 2022, we received cash redemption notices from the holders of the Company's Series 7 Convertible Preferred Stock issued on September 15, 2021, totaling 49,250 shares of Series 7 Convertible Preferred Stock for aggregate cash required to be paid of approximately $49.3 million. In addition, upon redemption of the Series 7 Convertible Preferred Stock, each holder forfeited 75% of the related warrants that were issued together with the Series 7 Convertible Preferred Stock (the "Series 7 Warrants"). 394,000 corresponding warrants issued in connection with the issuance of the Series 7 Convertible Preferred Stock have been forfeited and 232,675 related warrants remain outstanding.
On March 22, 2022, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company agreed to issue and sell, in a registered direct offering sold an aggregate of 53,197.7234 shares of the Company’s Series 8 Convertible Preferred Shares, par value $0.001 per share, and warrants to purchase up to 1,503,726 shares of common stock. Each share and related warrants were sold together at a subscription amount of $940, representing an original issue discount of 6% of the stated value for an aggregate subscription amount of $50.0 million.
During the three months ended March 31, 2023, the Company issued 1,380,000 shares of common stock in connection with the exercise of 1,380,000 pre-funded warrants at $0.001 per share in connection with the October 2022 registered direct offering.

Warrant Amendments

On February 28, 2023, the Company entered into warrant amendments (the “Warrant Amendments”) with certain holders (each, including its successors and assigns, a “Holder” and collectively, the “Holders”) of (i) those certain Common Stock Purchase Warrants issued by the Company in April 2018 (the “April 2018 Warrants”) pursuant to the registration statement on Form S-3 (File No. 333-204159), (ii) those certain Common Stock Purchase Warrants issued by the Company in September 2021 (the “September 2021 Warrants”) pursuant to the registration statement on Form S-3 (File No. 333-256827), and (iii) those certain Common Stock Purchase Warrants issued by the Company in March 2022 (the “March 2022 Warrants” and together with the April 2018 Warrants and the September 2021 Warrants, the “Existing Warrants”) pursuant to the registration statement on Form S-3 (File No. 333-256827).

Pursuant to the Warrant Amendments, the Company and the Holders have agreed to amend (i) the September 2021 Warrants and the March 2022 Warrants to provide that all of such outstanding warrants shall be automatically exchanged for shares of common stock of the Company, at a rate of 0.33 shares of Common Stock (the “Exchange Shares”) for each September 2021 Warrant or liabilities. ThisMarch 2022 Warrant, as applicable, and (ii) the April 2018 Warrants to remove the obligation of the Company to hold the portion of a Distribution (as defined in the April 2018 Warrants) in abeyance in connection with the Beneficial Ownership Limitation (as defined in the April 2018 Warrants).

In connection with the exchange of 232,675 September 2021 Warrants and 751,867 March 2022 Warrants, which were all of the then outstanding of those warrants as of the effective date of the Warrant Amendments, the Company issued 76,794 Exchange Shares and 248,124 Exchange Shares, respectively, resulting in the issuance of 324,918 Exchange Shares in the aggregate.

The Company accounted for the exchange as a warrant modification.The Company determined the fair value of the Existing Warrants as if issued on the Warrant Amendment date and compared that to the fair value of the common stock issued for the Exchange Shares.The Company calculated the fair value of the Existing Warrants using a Black-Scholes Option pricing model and determined it to be approximately $0.6 million.The fair value of the common stock issued was based on the closing stock price of the date of the Warrant Amendment.The total fair value of the Existing Warrants prior to modification was greater than the fair value of the Exchange Shares issued, and therefore, there was no incremental fair value related to the Warrant Amendments.

Note 16- Income Taxes
There is an income tax expense of approximately $2.5 million and $0.0 million for the three months ended March 31, 2023 and 2022, respectively. The income tax expense in the three months ended March 31, 2023 includes certain pricing models, discounted cash flow methodologiesa $2.6 million deferred tax expense to increase the valuation allowance, which is offset by a current tax benefit of $0.1 million, due to the Enterprise Apps Spin-off.
29
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022


Note 17 - Credit Risk and similar valuation techniques that use significant unobservable inputs.

Concentrations

Financial instruments includingthat 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 payableand, consequently, believes that its accounts receivable credit risk exposure beyond such allowances is limited.
The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits. Cash is also maintained at foreign financial institutions for its UK subsidiary, German subsidiaries and its majority-owned India subsidiary. Cash in foreign financial institutions as of March 31, 2023 and December 31, 2022 was immaterial. The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash.
During the three months ended March 31, 2023 and 2022, three customers and one customer accounted for at least 10% of revenue, respectively.
As of March 31, 2023, three customers represented approximately 49% of total accounts receivable. As of March 31, 2022, one customer represented approximately 11% of total accounts receivable.
As of March 31, 2023, one vendor represented approximately 21% of total gross accounts payable. Purchases from these vendors during the three months ended March 31, 2023 was approximately $0.4 million. As of March 31, 2022, three vendors represented approximately 48% of total gross accounts payable. Purchases from these vendors during the three months ended March 31, 2022 was approximately $0.8 million.
For the three months ended March 31, 2023, one vendor represented approximately 21%, and one vendor represented approximately 10% of total purchases. For the three months ended March 31, 2022, one vendor represented approximately 48%, and one vendor represented approximately 14% of total purchases.
Note 18 - Segments
The Company’s operations consist of three reportable segments based on similar economic characteristics, the nature of products and production processes, end-use markets, channels of distribution, and regulatory environments: Indoor Intelligence, SAVES, and Shoom.
The Company completed the Enterprise Apps Spin-off during the three months ended March 31, 2023. Design Reactor was entirely part of the Indoor Intelligence business segment. As a result, the Company met the requirements of ASC 205-20 to report the results of the Design Reactor business as discontinued operations. The operating results for Design Reactor have been reclassified to discontinued operations and are carried at cost, which management believes approximatesno longer reported in the Indoor Intelligence business segment. See Note 24 for further details. There were no changes to the Company's reportable segments as result of the Enterprise Apps Spin-off.
Gross profit is the primary measure of segment profitability used by the Company’s Chief Operating Decision Maker ("CODM").
Revenues and gross profit segments consisted of the following (in thousands):
30
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
Note 18 - Segments (continued)
For the Three Months Ended March 31,
20232022
Revenue by Segment
 Indoor Intelligence$1,909 $1,397 
 SAVES718 734 
 Shoom477 518 
 Total segment revenue$3,104 $2,649 
Gross profit by Segment
 Indoor Intelligence$1,293 $937 
SAVES619 493 
 Shoom401 422 
 Gross profit by Segment$2,313 $1,852 
Income (loss) from operations by Segment
Indoor Intelligence$(8,116)$(9,013)
Saves(295)(404)
Shoom229 180 
Loss from operations by Segment$(8,182)$(9,237)
The reporting package provided to the Company's CODM does not include the measure of assets by segment as that information isn't reviewed by the CODM when assessing segment performance or allocating resources.
31
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 19 - Fair Value of Financial Instruments
The Company's estimates of fair value duefor 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 short-term naturevaluations when available. The disclosure of these instruments. Thefair 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 othersignificant market assumptions. We classified our 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 formeasured at fair value on a recurring basis as of September 30, 2017, by level within 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. Settlementfollowing valuation hierarchy.

The Company's assets measured at fair value uponconsisted of the occurrencefollowing at March 31, 2023 and December 31, 2022:
Fair Value at March 31, 2023
TotalLevel 1Level 2Level 3
Assets:
Investments in equity securities364 353 — 11 
Total assets$364 $353 $— $11 
Fair Value at December 31, 2022
TotalLevel 1Level 2Level 3
Assets:
Investments in equity securities330 319 — 11 
Total assets$330 $319 $— $11 
The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value.

Investments in equity securities are marked to market based on the respective publicly quoted market prices of the equity securities adjusted for liquidity. The fair value for Level 1 equity investments was determined using quoted prices of the security in active markets. The fair value for Level 3 equity investments was determined using a fundamental transaction would be computedpricing model with certain significant unobservable market data inputs.

Investments in debt securities are valued using an option pricing model under the Black Scholes Option Pricing Model.

income approach methodology as the investment does not have observable inputs of identical or comparable instruments.

The Company noted that there was no change in Level 3 instruments for which significant unobservable inputs were used to determine fair value for the three months ended March 31, 2023. The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value for the three months ended March 31, 2023:

22
Level 3
Level 3 Investments
Balance at January 1, 2023$11 
Unrealized loss on equity securities— 
Balance at March 31, 2023$11 

32

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2023 AND 2016

2022


Note 15 – Fair Value (continued)

Assumptions utilized20 - Foreign Operations

The Company’s operations are located primarily in the valuationUnited States, Canada, India, Germany, Ireland, and the United Kingdom. Revenues by geographic area are attributed by country of Level 3domicile of our subsidiaries. The financial data by geographic area are as follows (in thousands):
United
States		CanadaIndiaGermanyUnited KingdomIrelandEliminationsTotal
For the Three months ended March 31, 2023:
Revenues by geographic area$1,915 $— $500 $1,155 $90 $1 $(557)$3,104 
Operating (loss) income by geographic area$(7,364)$— $104 $(830)$(4)$(89)$1 $(8,182)
Net (loss) income from continuing operations by geographic area$(11,532)$— $104 $(802)$(4)$(89)$1 $(12,322)
For the Three Months Ended March 31, 2022:
Revenues by geographic area$1,543 $— $126 $948 $118 $4 $(90)$2,649 
Operating (loss) income by geographic area$(7,670)$— $39 $(1,418)$13 $(201)$— $(9,237)
Net (loss) income from continuing operations by geographic area$(9,271)$— $39 $(1,373)$13 $(201)$10 $(10,783)
As of March 31, 2023:
Identifiable assets by geographic area$49,052 $— $704 $20,224 $295 $14 $(40,382)$29,907 
Long lived assets by geographic area$2,547 $— $24 $3,084 $1 $3 $— $5,659 
As of December 31, 2022:
Identifiable assets by geographic area$133,382 $5,484 $682 $19,599 $277 $19 $(102,223)$57,635 
Long lived assets by geographic area$2,538 $— $3 $3,308 $1 $4 $— $5,854 
33
Table of Contents
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 21 - Related Party Transactions
Cardinal Venture Holdings Investment
Nadir Ali, the Company's Chief Executive Officer and a members of its Board of Directors, is also a controlling member of 3AM, LLC ("3AM"), which is a member of Cardinal Venture Holdings LLC ("CVH"), which may, in certain circumstances, be entitled to manage the affairs of CVH. Mr. Ali’s relationship may create conflicts of interest between Mr. Ali’s obligations to the Company and its shareholders and his economic interests and possible fiduciary obligations in CVH through 3AM. For example, Mr. Ali may be in a position to influence or manage the affairs of CVH in a manner that may be viewed as contrary to the best interests of either the Company or CVH and their respective stakeholders. On July 1, 2022, the Company loaned $150,000 to CVH. See Note 8. The $150,000 loan was repaid on March 15, 2023.
Reimbursable Expenses from New CXApp
In connection with the closing of the Enterprise Apps Spin-off and Business Combination and the terms of the Merger Agreement, New CXAPP was obligated to reimburse the Company for certain transaction expenses related to the Business Combination. As of March 31, 2023, New CXApp owed the Company approximately $1.3 million for reimbursable transaction expenses which is included in the prepaid and other current assets line of the condensed Consolidated Balance Sheets.

During the three months ended March 31, 2023, the Company incurred approximately $0.08 million in reimbursable expenses payable in connection with the terms and conditions of the Transition Services Agreement, which is included in other receivables on the Company’s Condensed Consolidated Balance Sheets. This amount was repaid in April 2023.
Note 22 - Leases
The Company has operating leases for administrative offices in the United States (California), Canada, India, the United Kingdom, Germany, and the Philippines.

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 Company extended the office lease for six months, expiring on July 31, 2023. The monthly lease rate is $5,776 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 $9,373 per month.

The Company entered into two new operating leases for its administrative office in Hyderabad, India and Manila, Philippines. The Hyderabad, India and Manila, Philippines office lease expires on March 25, 2025 and May 14, 2025, respectively.

The Company early terminated one of its administrative offices in Hyderabad, India which generated an immaterial gain on lease termination which is included in the operating expenses section of the Condensed Consolidated Statements of Operations.
The Company has no other operating or financing leases with terms greater than 12 months.
Right-of-use assets are summarized below (in thousands):
34
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
Note 22 - Leases (continued)
As of March 31, 2023As of December 31, 2022
Palo Alto, CA Office$630 $630 
Hyderabad, India Office20 — 
Ratingen, Germany Office86 85 
Berlin, Germany Office516 508 
Frankfurt, Germany Office299 294 
Less accumulated amortization(1,067)(986)
Right-of-use asset, net$484 $531 
Lease expense for operating leases recorded in the balance sheet is included in operating costs and expenses and is based on the future minimum lease payments recognized on a straight-line basis over the term of the lease plus any variable lease costs. Operating lease expenses, inclusive of short-term and variable lease expenses, recognized in our condensed consolidated statement of income for the three months ended March 31, 2023 and 2022 was $0.1 million and $0.2 million, respectively.
Lease liability is summarized below (in thousands):
As of March 31, 2023As of December 31, 2022
Total lease liability$496 $545 
Less: short term portion(199)(211)
Long term portion$297 $334 
Maturity analysis under the lease agreement is as follows (in thousands):
Nines months ending December 31, 2023$162 
Year ending December 31, 2024217 
Year ending December 31, 2025110 
Year ending December 31, 202641 
Year ending December 31, 2027— 
Year ending December 31, 2028 and thereafter— 
Total$530 
Less: Present value discount(34)
Lease liability$496 
Operating lease 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 expected stock price volatility forbased on 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 lifenet present value of the instrument being valued. The dividends assumptions were $0 asremaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company historically has not declared any dividendsused its incremental borrowing rate based on the information available at the date of adoption of ASC 842, "Leases" ("ASC 842"). As of March 31, 2023, the weighted average remaining lease term is 2.6 years and does not expect to.

The following table presents the fair value reconciliation of Level 3weighted average discount rate used to determine the operating lease liabilities measured at fair value during the nine 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 
was 4.1%.

Note 16 - 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 and its majority-owned Saudi Arabia subsidiary. Cash in foreign financial institutions as of September 30, 2017 and December 31, 2016 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, 2017 and 2016 (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% 

As of September 30, 2017, Customer A represented approximately 21% and Customer B represented approximately 16% of total accounts receivable. As of September 30, 2016, Customer C represented approximately 51% of total accounts receivable.

As of September 30, 2017, two vendors represented approximately 27% and 13% of total gross accounts payable. 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 during the three months ended September 30, 2016 were $3.7 million. Purchases from this vendor during the nine months ended September 30, 2016 were $13.5 million.

24

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 17 - Segment Reporting and Foreign Operations

Effective January 1, 2017 the Company has changed the way it analyzes and assesses divisional performance of the Company. 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 categories to the prior periods presented below for comparative purposes.

●Indoor Positioning Analytics:  This 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 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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 17 - Segment Reporting and 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 and Saudi Arabia. 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

INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

Note 18 - 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.

35
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
Note 23 - Commitments and Contingencies (continued)
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


36
Table of Contents
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022





Note 24 - Discontinued Operations

On March 14, 2023, the year ended December 31, 2011,Company completed the Business Combination which divested its Enterprise Apps Business and certain related assets and liabilities through a judgment inspin-off of CXApp Holding Corp., a Delaware corporation ("Legacy CXApp") to Inpixon’s shareholders of record as of March 6, 2023 (the “Record Date”) on a pro rata basis. This Enterprise Apps Spin-off was considered a strategic shift that has a major impact on the amountCompany, and therefore, the results 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 includedoperations are recorded as a component of liabilities held for sale as"Earnings (loss) from discontinued operations, net of September 30, 2017 and December 31, 2016income taxes" in the condensed consolidated balance sheets.

On May 30, 2017, HP Inc. (“HP”) filedCondensed Consolidated Statements of Operations for all periods presented. The Company noted that Legacy CXApp was part of the Company’s Indoor Intelligence segment. The net assets distributed as a complaintresult of the Enterprise Apps Spin-off was $24.2 million. Included within the $24.2 million dividend recorded to Additional Paid in Capital as a result of the deconsolidation of CXApp through distribution to shareholders recorded during the three months ended March 31, 2023, is approximately, $1.2 million in accumulated other comprehensive income that was recognized as a result of those distributed assets and liabilities included in the Marin County Superior Court, California, against Inpixon USAforeign operations of CXApp.


The following table summarizes certain selected components of discontinued operations for goods soldthe spun-off entity:

Three Months Ended March 31, 2023Three Months Ended March 31, 2022
Revenues$1,620 $2,582 
Cost of Revenues483 589
Gross Profit1,137 1,993 
Operating Expenses
Research and development1,514 1,961 
Sales and marketing988 1,107 
General and administrative1,644 1,446 
Earnout compensation benefit— (2,827)
Acquisition related costs— 6
Transaction costs1,043 — 
Amortization of intangibles805 975 
Total Operating Expenses5,994 2,668 
Loss from Operations(4,857)(675)
Other Income (Expense)
Interest (expense)/income, net1 1
Total Other Income (Expense)1 1
Loss from discontinued operations, before tax(4,856)(674)
Income tax provision$— (100)
Loss from discontinued operations, net of tax(4,856)(774)

Cash used in operating activities by the Enterprise Apps Business totaled approximately $0.8 million and delivered, account stated,$3.0 million for the three months ended March 31, 2023 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 attachment2022, respectively. Cash provided by investing activities 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 CourtEnterprise Apps Business totaled approximately $0.1 million for the Western Districtthree months ended March 31, 2023 and cash used in investing activities by the Enterprise Apps Business totaled approximately $0.04 million for the three months ended March 31, 2022.




37
Table 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. Contents
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022









Note 24 - Discontinued Operations (continued)

The complaint alleges that Inpixon entered into an agreement with Integrio to acquirefollowing table summarizes 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 componentdiscontinued operations:

As of December 31, 2022
Current Assets of Discontinued Operations
Cash and cash equivalents$10,000 
Accounts receivable1,338 
Prepaid expenses and other current assets923 
Current Assets of Discontinued Operations$12,261 
Long Term Assets of Discontinued Operations
Property and equipment, net$202 
Operating Lease Right-of-Use Asset, net681 
Software development costs, net487 
Intangible assets, net19,289 
Other Assets52 
Long Term Assets of Discontinued Operations$20,711 
Current Liabilities of Discontinued Operations
Accounts payable$1,054 
Accrued liabilities1,736 
Operating lease obligation, current266 
Deferred revenue2,162 
Current Liabilities of Discontinued Operations$5,218 
Long Term Liabilities of Discontinued Operations
Operating lease obligation, noncurrent$444 
Other Liabilities, noncurrent28 
Long Term Liabilities of Discontinued Operations$472 
38
INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2016 in the condensed consolidated balance sheets. 

2023 AND 2022

Note 1925 - Subsequent Events

Subsequent

From April 1, 2023 through the date of this filing, the Company exchanged approximately $1.2 million of the outstanding principal and interest under the July 2022 10% Note Purchase Agreement and Promissory Note for 3,260,379 shares of the Company's common stock at prices from $0.3336 to September 30, 2017, 1,185,857$0.3966 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).
From April 1, 2023 through the date of this filing, the Company sold 12,046,742 shares of common stock at share prices between $0.22771 and $0.54 per share under the Sales Agreement for gross proceeds of approximately $4.1 million.
Warrant Purchase Agreement
On May 15, 2023, the Company entered into a Warrant Purchase Agreement (the “Purchase Agreement”) with certain institutional investors(the “Purchasers”), pursuant to which the Company agreed to issue and sell in a private placement (the “Private Placement”) up to an aggregate of 150,000,000 warrants were exercised in exchange for 1,185,857(the “Warrants”) to purchase up to 150,000,000 shares (the “Warrant Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at $0.30an offering price of $0.01 per Warrant (subject to adjustment as set forth in the Purchase Agreement) (the “Per Warrant Purchase Price”) for an aggregate warrant offering price equal to $1,500,000.

The Warrants have an initial exercise price which is equal to the Minimum Price as defined in Nasdaq Listing Rule 5635(d) (subject to adjustment as set forth in the Warrants) (the “Initial Exercise Price”), payable in cash or the cancellation of indebtedness. Upon receipt of stockholder approval, the exercise price will equal the lower of (i) the Initial Exercise Price and (ii) 90% of the lowest VWAP (as defined in the Purchase Agreement) of the Common Stock for the five Trading Days (as defined in the Purchase Agreement) immediately prior to the date on which a share.

On October 24, 2017,Notice of Exercise is submitted to the Company received notification(the “Adjusted Exercise Price” and together with the Initial Price, as applicable, the “Exercise Price”); provided, however, that any exercise of the Warrants with an Adjusted Exercise Price will be subject to the Company’s consent unless the trading price of the Common Stock as of the time the Notice of Exercise is delivered to the Company is at least 10% or more above the prior Trading Day’s Nasdaq Official Closing Price. The Purchaser may not exercise the Warrants to the extent such exercise would cause such Purchaser, together with its affiliates and attribution parties, to beneficially own a number of shares of Common Stock which would exceed 9.99% of the Company’s then outstanding Common Stock following such exercise.


Each Warrant is immediately exercisable for one share of Common Stock and will expire one year from NASDAQthe issuance date (the “Termination Date”) unless extended by the Company with the consent of the Warrant holder. Pursuant to the terms of the Warrants, at any time prior to the Termination Date, the Company may, in its sole discretion, redeem any portion of a Warrant that it has not regained compliancebeen exercised, in cash, at the Per Warrant Purchase Price, plus all liquidated damages and other costs, expenses or amounts due in respect of the Warrants (the “Redemption Amount”) upon five Trading Days’ written notice to the Warrant holder (the “Redemption Date”). On the Termination Date, the Company will be required to redeem any portion of the Warrants that has not been exercised or redeemed prior to such date through payment of the Redemption Amount in cash. The Company will be required to pay any Redemption Amount within five Trading Days after the Redemption Date or the Termination Date, as applicable.

Subject to the satisfaction of certain conditions set forth in the Warrants during a period of seven consecutive Trading Days (the “Measurement Period”), the Company may, within one Trading Day of the end of such Measurement Period (the “Forced Exercise Eligibility Date”), force the holder to exercise its Warrants into up to such aggregate number of Warrant Shares equal to 25% of the quotient obtained by dividing the Traded Value (as defined in the Warrants) by the Exercise Price then in effect (less any Warrant Shares voluntarily exercised by the holder during such Measurement Period or at any time thereafter and prior to the applicable Forced Exercise Date (as defined in the Warrants) (the “Maximum Forced Exercise Share Amount”) as designated in the applicable Forced Exercise Notice (as defined in the Warrants) (each, a “Forced Exercise”). Following any Forced Exercise, a minimum of seven Trading Days must elapse after the Forced Exercise Date prior to the Company sending the Holders a new Forced Exercise Notice. The Company’s right to a Forced Exercise shall be exercised ratably among the Warrant holders based on each Holder’s initial purchase of Warrants.

On May 15, 2023, the Company and Maxim Group LLC (the “Placement Agent”) entered into a Placement Agency Agreement (the “Placement Agency Agreement”), whereby the Placement Agent, in connection with the Minimum Stockholders’ Equity Requirement.Private Placement, agreed to act as the Company’s exclusive placement agent on a reasonable best efforts basis. Pursuant to the Placement Agency Agreement, the Company agreed to pay to the Placement Agent (i) a cash fee equal to 2.75% of the gross proceeds received by the Company from the Purchasers at the Closing, to be paid on the Closing Date and (ii) a cash fee equal to 5.5% of the gross proceeds received by the Company from a Purchaser upon the exercise of Warrants for cash, to be paid on a weekly basis
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INPIXON AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 27 - Subsequent Events (continued)
during the exercise period of the Warrants as to any exercise proceeds received by the Company from a Purchaser pursuant to the exercise of Warrants for cash during the preceding week (the "Exercise Cash Fee"). The Company is not required to pay the Exercise Cash Fee to the extent that a Purchaser exercises its Warrants through the cancellation of indebtedness owed by the Company to such Purchaser. The Company has appealedalso agreed to reimburse the Staff Delisting DeterminationPlacement Agent up to $50,000 for certain expenses 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 decisionlegal fees incurred by the hearings panel.Placement Agent. The Company is currently evaluating various alternative coursesPlacement Agency Agreement contains customary representations and warranties and agreements 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 $1,500,000 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 millionPlacement Agent and customary indemnification rights and obligations of the 50 million shares set forth in Proposal 8parties.

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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, 2016,2022, 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 experiences that enable smarter, safer and more secure environments. Inpixon customers can leverage our Business

real-time positioning, mapping and analytics technologies to achieve higher levels of productivity and performance, increase safety and security, improve worker and employee satisfaction rates and drive a more connected work environment. We 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 Companyfull range of foundational technologies needed to form a comprehensive suite of solutions that make indoor data available and actionable to organizations and their employees. Together, our technologies allow organizations to create and utilize the digital twin of a physical location and to deliver enhanced experiences in their current environment and in the metaverse.


Inpixon specializes in providing real-time location systems (RTLS) for the industrial sector. As the manufacturing industry has therefore re-aligned its operating segments along those division business linesevolved, RTLS technology has become a crucial aspect of Industry 4.0. Our RTLS solution leverages cutting-edge technologies such as IoT, AI, and now operates 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 andbig data analytics thatto provide rich positional information, similar to a global positioning system,real-time tracking and browser-like intelligence for the indoors. Other productsmonitoring of assets, machines, and services that we provide include enterprise computingpeople within industrial environments. With our RTLS, businesses can achieve improved operational efficiency, enhanced safety and storage, virtualization, business continuity, data migration, custom application development, networkingreduced costs. By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and information technology,ensure compliance with industry regulations. With our RTLS, industrial businesses can transform their operations 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 becausestay ahead 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 ondigital age.


Inpixon's full-stack industrial IoT solution provides end-to-end visibility and control over 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 scope of information technology development and implementation services with expertise in a broadwide range of IT practices including project designassets and management, systems integration, outsourcing, independent validationdevices. It's designed to help organizations optimize their operations and verification, cyber security and more. 

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        Inpixon has many key vendor, technology, wholesale distribution and strategic partner relationships. These relationships are critical for us to deliver solutions to our customers. We havegain a variety of vendors and also products that we provide to our customers, and most of these products are purchased through our distribution partners. We also have joint venture partnerships and teaming agreements with various technology and service providers for this segment as well as our other business segments. These relationships range 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 customerscompetitive edge in particular havetoday's data-driven world. The turn-key platform integrates a range of regulatory requirementstechnologies, including ITAR certifications, DCAA compliancyRTLS, sensor networks, edge computing, and big data analytics, to provide a comprehensive view of an organization's operations. We help organizations to track the location and status of assets in real-time, identify inefficiencies, and make decisions that drive business growth. Our IoT stack covers all the technology layers, from the edge devices to the cloud. It includes hardware components such as sensors and gateways, a robust software platforms for data management and analysis, and a user-friendly dashboard for real-time monitoring and control. Our solutions also offer robust security features, to help ensure the protection of sensitive data. Additionally, Inpixon's RTLS provides scalability and flexibility, allowing organizations to easily integrate it with their existing systems and add new capabilities as their needs evolve.


In addition to our government contractsIndoor Intelligence technologies and other technicalsolutions, we also offer:

• Digital solutions (eTearsheets; eInvoice, and adDelivery) or security clearance requirementscloudbased applications and analytics for the advertising, media and publishing industries through our advertising management platform referred to as may be requiredShoom by Inpixon; and

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

We report financial results for three segments: Indoor Intelligence, Shoom and SAVES. For Indoor Intelligence, we generate revenue from time to time.

sales of hardware, software licenses and professional services. For Shoom and SAVES, we generate revenue from the sale of software licenses.


We experienced a net loss from continuing operations of approximately $22.5$12.3 million and approximately $10.8 million for the ninethree months ended September 30, 2017.March 31, 2023 and 2022, respectively. We cannot assure that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In order to continue our operations, we have
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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 or prospective customers continue to be challenged by the lasting effects of the pandemic, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders. While we have been able to realize growth in the three months ended March 31, 2023 as compared to the same periods in 2022, the impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain. There are no 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.

We anticipate that certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and whenUkraine, and inflation on our customers and partners in regions throughout the world, we need itexpect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business. A further discussion of the impact of the COVID-19 pandemic and the Russia and Ukraine conflict on our business is set forth below in Part II, Item 1A. Risk Factors.

Corporate Strategy Update

In order to continue to respond to rapid changes and required technological advancements, as well as increase our operations. Ifshareholder value, we cannot raise funds asare exploring strategic transactions and whenopportunitiesthat we need them, we may be required to scale back our business operations by further reducing expenditures for employees, consultants, business development and marketing efforts, selling assetsbelieve will enhance shareholder value. Our board of directors has authorized a review of strategic alternatives, including a possible asset sale, merger with another company or spin-off of one or more segments of our business units.We will also be opportunistic and may consider other strategic and/or otherwise severely curtailing our operations.

Recent Events

Hillair Share Issuance

On April 19, 2017, Inpixonattractive transactions, which may include, but not be limited to other alternative investment opportunities, such as minority investments, joint ventures or special purpose acquisition companies. If we make any acquisitions in the future, we expect that we may pay for such acquisitions with cash, equity securities and/or debt in combinations appropriate for each acquisition. In September of 2022, we entered into an exchange agreementAgreement and Plan of Merger in connection with the spin-off and sale of our enterprise apps business which was consummated on March 14, 2023. (See “Recent Events” below for more details). In addition, we have entered into a non-binding letter of intent and are in the due diligence and negotiation stages with another third party in connection with a potential transaction involving the remainder of our business. We may enter into one or more additional non-binding letters of intent in connection with our due diligence and evaluation process.


Recent Events

Financings

At-The-Market (ATM) Program

On July 22, 2022, we entered into an Equity Distribution Agreement (the “First Exchange“Sales Agreement”) with Hillair Capital Investments L.P.Maxim Group LLC ("Maxim") under which we may offer and sell shares of our common stock having an aggregate offering price of up to $25 million (the “Note Holder”"Shares") from time to time through Maxim, acting exclusively as our sales agent (the “ATM Offering”). Maxim is entitled to compensation at a fixed commission rate of 3.0% of the gross sales price per Share sold excluding Maxim's costs and out-of-pocket expenses incurred in connection with an interest payment due on May 9, 2017its services, including the fees and out-of-pocket expenses of its legal counsel. During the quarter ended March 31, 2023, the Company sold 9,655,207 shares of common stock at share prices between $1.15 and $1.86 per share under the Sales Agreement for gross proceeds of approximately $15.4 million. From April 1, 2023 through the date of this filing, the Company sold 12,046,742 shares of common stock at share prices between $0.22771 and $0.54 per share under the Sales Agreement for gross proceeds of approximately $4.1 million. The Company is currently subject to the SEC’s “baby shelf rules,” as of April 17, 2023, which prohibits companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company’s public float in a 12-month period. These rules may limit future issuances of shares by the Company under the Sales Agreement or other offerings pursuant to the Company’s 8% Original Issue Discount Senior Secured Convertible Debentureeffective shelf registration statement on Form S-3.

Note Exchanges

During the quarter ended March 31, 2023, the Company exchanged approximately $0.9 million of the outstanding principal and interest under the March 2020 10% Note Purchase Agreement and Promissory Note for 611,258 shares of the
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Company's common stock at prices from $1.09 to $1.682 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).This note was fully satisfied as of January 31, 2023.

During the quarter ended March 31, 2023, the Company exchanged approximately $0.5 million of the outstanding principal amountand interest under the July 2022 10% Note Purchase Agreement and Promissory Note for 935,976 shares of $5,700,000the Company's common stock at prices from $0.37 to $0.915 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).
From April 1, 2023 through the date of this filing, the Company exchanged approximately $1.2 million of the outstanding principal and interest under the July 2022 10% Note Purchase Agreement and Promissory Note for 3,260,379 shares of the Company's common stock at prices from $0.3336 to $0.3966 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).

Enterprise Apps Spin-off and Business Combination

On March 14, 2023, Inpixon completed (the “Debenture”“Closing”). The Debenture was issued the separation (the “Separation”) of its enterprise apps business (including its workplace experience technologies, indoor mapping, events platform, augmented reality and related business solutions) (the “Enterprise Apps Business”) through a spin-off of CXApp Holding Corp., a Delaware corporation ("CXApp"), to certain holders of Inpixon securities as of March 6, 2023 (the “Record Date”) on August 9, 2016a pro rata basis (the “Distribution” or “Enterprise Apps Spin-off”) and merger (the “Merger”) of CXApp with a wholly owned subsidiary of KINS Technology Group Inc., a Delaware corporation (“KINS”), in a Reverse Morris Trust transaction (collectively, the “Transactions”) pursuant to that certain securities purchase agreement(i) an Agreement and Plan of Merger, dated as of that same date (the “Securities Purchase Agreement”),September 25, 2022, by and betweenamong Inpixon, KINS, CXApp, and KINS Merger Sub Inc. (the "Merger Agreement") and (ii) a Separation and Distribution Agreement, dated as of September 25, 2022, among KINS, Inpixon, CXApp and Design Reactor, Inc. (the "Separation Agreement”, and collectively with the CompanyMerger Agreement and the Note Holder. In accordance withother related transaction documents, 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”“Transaction Agreements”). The shares were issued on April 20, 2017.

In addition, the Note Holder also waived the Equity Condition (as defined in the Debenture) in connection with the issuanceClosing, KINS was renamed CXApp Inc. (“New CXApp”). Pursuant to the Transaction Agreements, Inpixon contributed cash sufficient to ensure CXApp had $10 million in cash and cash equivalents prior to the deduction of transaction expenses at closing and certain assets and liabilities constituting the Interest Shares.

Capital Raise

On June 30, 2017,Enterprise Apps Business, including certain related subsidiaries of Inpixon, to CXApp (the “Contribution”). In consideration for the Company completed the previously announced registered underwritten public offering (the “Offering”)Contribution, CXApp issued to Inpixon additional shares of an aggregate of (i) 1,849,460 Class A Units (the “Class A Units”), with each Class A Unit consisting of one share ofCXApp common stock and one warrant to purchase one share of common stock at an exercise price of $1.3125 per share (“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 Stock and one warrant to purchasesuch that the number of shares of CXApp common stock equal tothen outstanding equaled the number of shares of CXApp common stock underlyingnecessary to effect the Series 2 Preferred Stock atDistribution. Pursuant to the Exercise Price. The warrants issuedDistribution, Inpixon shareholders as of the Record Date received one share of CXApp common stock for each share of Inpixon common stock held as of such date. Pursuant to the Merger Agreement, each share of Legacy CXApp common stock was thereafter exchanged for the right to receive 0.09752221612415190 of a share of New CXApp Class A common stock (with fractional shares rounded down to the nearest whole share) and 0.3457605844401750 of a share of New CXApp Class C common stock (with fractional shares rounded down to the nearest whole share). New CXApp Class A common stock and New CXApp Class C common stock are identical in all respects, except that New CXApp Class C common stock is not listed and will automatically convert into New CXApp Class A common stock on the offering contained aearlier to occur of (i) the 180th day following the closing of the Merger and (ii) the day that the last reported sale price protection provision pursuant to which the Exercise Price would be reduced in the event the Company issued additional securities at a priceof New CXApp Class A common stock equals or exceeds $12.00 per share that was less thanfor any 20 trading days within any 30-trading day period following the Exercise Price, provided however, the adjustment would not be less than $0.50. 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, if any, from the exerciseclosing of the warrants was approximately $5,711,850. Immediately after completionMerger. Upon the closing of the Offering,Transactions, Inpixon’s existing security holders held approximately 50.0% of the Company redeemed outstanding indebtednessshares of New CXApp common stock outstanding.


Employee Matters Agreement

On March 14, 2023, in the amount of approximately $5,512,000.

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In connection with the Offering,consummation of the CompanyBusiness Combination and as contemplated by the Separation Agreement, CXApp, Legacy CXApp, Inpixon and Merger Sub entered into that certain waiver and consent agreement, dated June 28, 2017,the Employee Matters Agreement (the “Waiver and Consent“Employee Matters 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 ConsentThe Employee Matters 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 setsets 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 1,095,719 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 per share (the “Additional Warrant”) for warrants to purchase up to an aggregate of 1,095,719 shares of common stock.

The Warrant Holders agreed to exercise up to 1,095,719 shares of common stock underlying the Warrants (the “Exercised Shares”) for aggregate gross proceeds of $328,715.70 from the exercise of the Warrants which will be used for general working capital purposes, including the payment of outstanding debt and trade payablescertain employee related matters 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 exercisetransaction, including, but not limited to the participation in benefits for each of the Warrants,respective companies as relevant, and the Company issued a 5-year warrantassumption and retention of benefit plan assets and liabilities, worker's compensation, payroll taxes, regulatory filings, and the sharing of employee information.


Tax Matters Agreement

On March 14, 2023, in connection with the consummation of the Business Combination and as contemplated by the Separation Agreement, CXApp, Legacy CXApp and Inpixon entered into the Tax Matters Agreement (the “Tax Matters Agreement”) which governs each party’s respective rights, responsibilities and obligations with respect to each Warrant Holdertax liabilities and
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benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes.

Allocation of Taxes

In general, KINS and CXApp will be liable for the number of shares of common stock equalall U.S. federal, state, local and foreign taxes (and any related interest, penalties or audit adjustments) that are (i) imposed with respect to tax returns that include both CXApp and Inpixon, to the numberextent such taxes are attributable to CXApp or the Enterprise Apps Business, or (ii) imposed with respect to tax returns that include CXApp but not Inpixon, in each case, for tax periods (or portions thereof) beginning after the Distribution. Inpixon will generally be liable for taxes described in clauses (i) and (ii) above for tax periods (or portions thereof) ending on the date of exercised shares purchasedor prior to the Distribution, and any and all Distribution Taxes, as defined in the Tax Matters Agreement (generally, taxes imposed with respect to the Separation, Contribution, and Distribution). However, CXApp and KINS may be liable for certain taxes pursuant to indemnity obligations described below.

Indemnification Obligations

The Tax Matters Agreement generally provides for indemnification obligations between New CXApp and KINS, on the one hand, and Inpixon, on the other hand. In particular, CXApp and KINS must indemnify Inpixon for taxes allocated to CXApp or KINS, as described above, and Inpixon must indemnify New CXApp and KINS for taxes as allocated to Inpixon as described above, which would generally include Distribution Taxes. The Tax Matters Agreements, however, provides that KINS and CXApp may be liable for certain taxes to the extent such taxes result from a breach of certain representations or restrictive covenants made by such Warrant Holder (the “Warrant Shares”), at an exercise price of $0.55 per share. We incorporate by referenceKINS and CXApp, as described below.

Transition Services Agreement

On March 14, 2023, in connection with the information included at Item 1.01consummation of the Current Report on Form 8-K filed with the SEC on August 9, 2017 WaiverBusiness Combination and Consent from Hillair Capital Investments L.P.

As a result of the transactions consummatedas contemplated by the Warrant ExerciseSeparation Agreement, the Exercise Price of the December 2016 Warrants was adjusted to $0.50.

On August 9, 2017, the CompanyLegacy CXApp and the Note HolderInpixon entered into a waiver and consent agreementTransition Services Agreement (the “Hillair Waiver”“Transition Services Agreement”) pursuant to which Inpixon and certain employees and representatives and CXApp and certain employees and representatives will provide services to each other primarily related to payroll and benefits administration, IT support, finance and accounting services, contract administration and management services, and other administrative support services that may be required on an as needed basis, which services are of the Note Holder waivedtype that CXApp and Inpixon provided to, and received from, each other prior to the prohibition on issuing any securities at an effective per share price that is less than $7.05 containedSeparation. The fees for each of the transition services are set forth in the securities purchase agreement pursuant to whichTransition Services Agreement. The Transition Services Agreement will terminate on the Debenture was issued to Note Holderexpiration of the term of the last service provided under it, and consented toif no expiration date is provided for any transition service, then such transition service will terminate twelve months after the transactions contemplated bydate of the Warrant ExerciseTransition Services Agreement, andprovided that the Warrant Agreement Amendment. 

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Exchange Right Agreement with Hillair Capital Investments L.P.

On August 14, 2017, the Company entered into an exchange right agreement (the “Second Exchange Agreement”) with the Note Holder, pursuant to which the Company granted the Note Holderreceiving party shall have the right to exchange 1,850an extension of the Company’s Series 2 Convertible Preferred Stock (the “Preferred Shares”)each or any transition service for up to an aggregate of 5,606,061 shares (the “Exchange Shares”)six months by providing written notice to providing party in advance of the Company’soriginal termination date for such transition service if, prior to such request for extension, the receiving party has used commercially reasonable efforts to establish analogous capabilities of its own.


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

On March 15, 2023, New CXApp began regular-way trading on NASDAQ under the ticker symbol “CXAI.” Inpixon continues to trade under the ticker symbol “INPX.”
Compliance with Nasdaq Continued Listing Requirement
On April 14, 2023, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock. Pursuantstock for the last 30 consecutive business days beginning on March 2, 2023, and ending on April 13, 2023, the Company no longer meets the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided a period of 180 calendar days, or until October 11, 2023, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1 per share for a minimum of ten consecutive business days during this 180-day period. In the event that the Company does not regain compliance within this 180-day period, the Company may be eligible to seek an additional compliance period of 180 calendar days if it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and provides written notice to Nasdaq of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Second Exchange Agreement, for so long asNasdaq staff that the Preferred Shares remain outstanding, each outstanding Preferred Share may be exchanged for the number of Exchange Shares equal to the quotient obtained by dividing $1,000 by $0.33. The exchange of the Preferred SharesCompany will not be effectedable to cure the deficiency, or if after giving effect to the exchange the Note Holder, 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 to the issuance of the Exchange Shares. UponCompany is otherwise not less than 61 days’ prioreligible, Nasdaq will provide notice to the Company that our common stock will
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be subject to delisting. The letter does not result in the Note Holder may increase or decreaseimmediate delisting of our common stock from the ownership limitation, providedNasdaq Capital Market. The Company intends to monitor the closing bid price of our common stock and consider its available options in the event that the ownership limitation in no event exceeds 9.99%closing bid price of the number of shares of the Company’sour common stock outstanding immediately after giving effect to the issuance of the Exchange Shares.

Loan and Security Agreement

Pursuant to the terms of a Commercial Loan Purchase Agreement, dated as of August 14, 2017 (the “Purchase Agreement”), Gemcap Lending I, LLC (“GemCap”) sold and assigned to Payplant LLC, as agent for Payplant Alternatives Fund LLC (“Payplant” or “Lender”), 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 (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”) for an aggregate purchase price of $1,402,770.16.

In connection with the purchase and assignment of the Gemcap Loan in accordance with the Purchase Agreement, 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 (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”), calculatedremains below $1 per day on the basis of a year of 360 days and, when combined with all fees that may be characterized as interest will not exceed the maximum rate allowed by law Upon the occurrence and during the continuance of any event of default, interest shall accrue at a rate equal to the Interest Rate plus 0.42% per 30 days. All computations of interest shall be made on the basis of a year of 360 days. In accordance with the terms of the Loan Agreement, the Company 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.

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 subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

share.


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, 2022.

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, LightMiner and Integrio Technologies, LLC (“Integrio”).historical acquisitions. 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 assets with indefinite lives are evaluated for potential impairment during the fourth quarter of each year and in certain other circumstances. The evaluation of impairment involves comparing the current fair value of the business to the recorded value, including goodwill. To determine the fair value of the business, we utilize both the income approach, which is based on estimates 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 determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a detailed goodwill impairment test as required. The more-likely-than-not threshold is defined as having 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, we continue to experience weakness in market conditions, a depressed stock price, 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 a 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 of 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. 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 amounts 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 thanindicate that 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 whether it is more likely than not that some portion, or all, of the deferred tax asset may not be realized. Ultimately, the realizationrecoverable. A significant amount of deferred tax assetsjudgment is dependent upon the generationinvolved in determining if an indicator of future taxable income during those periods in which temporary differences become deductible and/or tax credits 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)goodwill impairment has occurred. We have determined that we have had historical losseswill operate and report in the prior yearsthree reporting units: Indoor Intelligence, SAVES, and cannot anticipate generating a sufficient level of future profits in order to realize the benefits of 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.

Shoom. As of SeptemberJune 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 to2022, 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 areCompany's previously 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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goodwill has been fully impaired.


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, 2023 compared to the Three Months Ended September 30, 2016

March 31, 2022

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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Net

For the Three Months Ended March 31,
20232022
(in thousands, except percentages)Amount% of
Revenues		Amount% of
Revenues		$ Change%
Change*
Revenues$3,104 100 %$2,649 100 %$455 17 %
Cost of revenues$791 25 %$797 30 %$(6)(1)%
Gross profit$2,313 75 %$1,852 70 %$461 25 %
Operating expenses$10,495 338 %$11,089 419 %$(594)(5)%
Loss from operations$(8,182)(264)%$(9,237)(349)%$1,055 11 %
Other income (expense)$(1,662)(54)%$(1,546)(58)%$(116)(8)%
Provision for income taxes$(2,478)(80)%$— — %$(2,478)— %
Net loss from continuing operations$(12,322)(397)%$(10,783)(407)%$(1,539)(14)%
Loss from Discontinued Operations, Net of Tax$(4,856)(156)%$(774)(29)%$(4,082)(527)%
Net loss attributable to stockholders of Inpixon$(16,873)(544)%$(11,211)(423)%$(5,662)(51)%
*    Amounts used to calculate dollar and percentage changes are based on numbers in the thousands. Accordingly, calculations in this item, which may be rounded to the nearest hundred thousand, may not produce the same results.
Revenues

Net revenues

Revenues for the three months ended September 30, 2017March 31, 2023 were $11.9$3.1 million compared to $11.2$2.6 million for the comparable period in the prior year.year for an increase of approximately $0.5 million, or approximately 17%. 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 $1.6 million is primarily attributable to the increase in revenues due toIndoor Intelligence sales from the Integrio acquisition in November 2016. Indoor Positioning Analytics costAware and RTLS component product lines.

Cost of netRevenues and Gross Profit
Cost of 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, 2017March 31, 2023 and $7.7 million for the prior period.

2022 were $0.8 million. The gross profit margin for the three months ended September 30, 2017March 31, 2023 was 19%75% 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 forMarch 31, 2022. This increase in gross profit margin is due to the Infrastructure segment forsales mix during the three months ended September 30, 2017 and 2016 were 15% and 22%, respectively.

period.


Operating Expenses


Operating expenses for the three months ended September 30, 2017March 31, 2023 were $16.8$10.5 million compared to $7.2and $11.1 million for the prior year period.comparable period ended March 31, 2022. This increasedecrease of approximately $9.6$0.6 million is primarily a result of a an impairment of goodwill charge of $8.4 million, an increaseattributable to lower compensation, professional fees and legal expense 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.

Loss from Operations

Loss from operations for the three months ended September 30, 2017 was $14.6 million compared to $4.1 million for the prior year period. This increase in loss of $10.5 million was primarily attributable to an impairment of goodwill charge of $8.4 million, increase in amortization of intangibles and depreciation costs, additional costs incurred for the Integrio operations offset by a reduction in operating expenses related to Inpixon USA and the lower gross profit.

March 31, 2023.

Other Income/Expense

Total otherIncome (Expense)

Other income/expense for the three months ended September 30, 2017 and 2016March 31, 2023 was ($38,000) and ($578,000), respectively. This decrease in net other expensea loss of $540,000 is primarily attributable$1.7 million as compared to a $561,000 gain on earnout from the Integrio acquisition.

Provision for Income Taxes

There was no provision for income taxesloss of $1.5 million for the three months ended September 30, 2017March 31, 2022. The three months ended March 31, 2023 included higher interest expense on short term debt and 2016. Deferredthe three months ended March 31, 2022 included a $1.5 million unrealized loss on equity securities.

Provision for Income Taxes
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There is an income tax assets resulting from such losses are fully reserved asexpense of September 30, 2017approximately $2.5 million 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$0.0 million for the three months ended September 30, 2017March 31, 2023 and 2016 was $4,000.

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2022, respectively. The income tax expense in the three months ended March 31, 2023 includes a $2.6 million deferred tax expense to increase the valuation allowance, which is offset by a current tax benefit of $0.1 million, due to the Enterprise Apps Spin-off.

Loss from Discontinued Operations, Net of Tax

Loss Attributable To Common Stockholders

Net loss attributable to common stockholdersfrom discontinued operations, net of tax for the three months ended September 30, 2017March 31, 2023 was $14.6$4.9 million compared to $4.7a loss of $0.8 million for the prior year period. This increase in net 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 ninethree months ended September 30, 2017 were $40.5 million compared to $38.7 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. 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 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.March 31, 2022. This increase in loss of $12.8$4.1 million was primarily attributabledue to a $8.4approximately $1.0 million goodwill impairment charge, an increaseof spin off transaction costs in amortization of intangibles, depreciation, additional operating expenses for 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 ninethree months ended September 30, 2017March 31, 2023 and 2016 was ($1.9 million) and ($929,000), respectively. This increasethe earnout compensation benefit of $993,000 was primarily attributable to interest attributable toapproximately $2.8 million in the Debenture, higher interest 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 ninethree 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.

March 31, 2022.

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, 2023 was a loss of $3.1$7.7 million compared to a loss of $2.4$8.8 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 and three months ended September 30, 2017March 31, 2023 and 20162022 (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,
20232022
Net loss attributable to stockholders of Inpixon$(16,873)$(17,362)
Interest expense/(income), net1,724 (2)
Income tax provision2,478 100 
Depreciation and amortization1,454 1,806 
EBITDA(11,217)(15,458)
Adjusted for:
Non-recurring one-time charges:
Unrealized (gain)/loss on equity securities(34)1,503 
Acquisition transaction/financing costs164 121 
Earnout compensation benefit— (2,827)
Professional service fees— 8 
Transaction costs2,443 — 
Accretion of Series 7 Preferred Stock— 4,555 
Accretion of Series 8 Preferred Stock— 548 
Deemed dividend for the modification related to Series 8 Preferred Stock— 2,627 
Deemed contribution for the modification related to warrants issued in connection with Series 8 Preferred Stock— (1,469)
Amortization premium- modification related to Series 8 Preferred Stock— (110)
Distribution of equity method investment shares to employees as compensation666 — 
Unrealized foreign exchange (gains)/losses(205)89 
Stock-based compensation - compensation and related benefits329 1,533 
Severance costs127 111 
Adjusted EBITDA$(7,727)$(8,769)
•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 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.

•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
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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, 2023 was a loss of $1.38 compared to loss of $9.05 for the prior year period. 
Proforma non-GAAP net income (loss) per share is used by our Company’s management as an evaluation tool as it manages the business and is defined as net income (loss) per basic and diluted share adjusted for non-cash items including stock based compensation, amortization of intangibles and one time charges including 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, 2023 was ($0.46)a loss of $1.01 per share compared to ($1.92)a loss of $4.79 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)20232022
Net loss attributable to stockholders of Inpixon$(16,873)$(17,362)
Adjustments:
Non-recurring one-time charges:
Unrealized (gain)/loss on equity securities(34)1,503 
Acquisition transaction/financing costs164 121 
Earnout compensation benefit— (2,827)
Professional service fees— 8 
    Transaction costs2,443 — 
Accretion of Series 7 Preferred Stock— 4,555 
Accretion of Series 8 Preferred Stock— 548 
Deemed dividend for the modification related to Series 8 Preferred Stock— 2,627 
Deemed contribution for the modification related to warrants issued in connection with Series 8 Preferred Stock— (1,469)
Amortization premium- modification related to Series 8 Preferred Stock— (110)
Distribution of equity method investment shares to employees as compensation666 — 
Unrealized foreign exchange (gains)/losses(205)89 
Stock-based compensation - compensation and related benefits329 1,533 
Severance costs127 111 
Amortization of intangibles1,025 1,489 
Proforma non-GAAP net loss$(12,358)$(9,184)
Proforma non-GAAP net loss per common share - Basic and Diluted$(1.01)$(4.79)
Weighted average basic and diluted common shares outstanding12,238,684 1,917,629 

•We rely on proforma non-GAAP net lossincome (loss) per share, which is a non-GAAP financial measure:
•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, 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.
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•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, 2017 Compared With September 30, 2016

March 31, 2023

Our current capital resources and operating results as of and through March 31, 2023, consist of:
1)an overall working capital surplus of approximately $0.2 million;
2)cash of approximately $15.3 million;
3)net cash used by operating activities for the three months ended March 31, 2023 of $9.5 million.
The breakdown of our overall working capital surplus as of March 31, 2023 is as follows (in thousands):
Working CapitalAssetsLiabilitiesNet
Cash and cash equivalents$15,254 $— $15,254 
Accounts receivable, net / accounts payable2,999 1,767 1,232 
Inventory2,179 — 2,179 
Accrued liabilities— 5,112 (5,112)
Operating lease obligation— 199 (199)
Deferred revenue— 1,382 (1,382)
Notes and other receivables / Short-term debt430 14,971 (14,541)
Other2,797 — 2,797 
Total$23,659 $23,431 $228 

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, 2023, the total obligation for capitalized operating leases is approximately $0.5 million, of which approximately $0.2 million is expected to be paid in the next twelve months.
As of March 31, 2023, we owed approximately $15.0 million in principal under promissory notes with third parties. This balance excludes intercompany amounts that are eliminated in the financial statements. These notes are payable within the next twelve months and the interest rate charged under the notes range from 8% to 10%. See Note 10 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.
Net cash used in operating activities during the three months ended March 31, 2023 of $9.5 million consists of a net loss of $17.2 million offset by non-cash adjustments of approximately $5.6 million less net cash changes in operating assets and liabilities of approximately $2.0 million. Although the Company has sustained significant losses during three months ended March 31, 2023, in addition to the cash we had on hand, we raised gross proceeds of approximately $19.6 million since January 1, 2023, in connection with the ATM Offering described above. Given our current cash balances, financing facilities and budgeted cash flow requirements, the Company believes such funds are sufficient to satisfy its working capital needs, capital asset purchases, debt repayments and other liquidity requirements associated with its existing operations for the next 12 months from the issuance date of the financial statements.
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. 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
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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. 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.
Certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and Ukraine, and other general economic factors that are beyond our control may impact our results of operations. These factors can include interest rates; recession; inflation; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; and other matters that influence our customers spending. Increasing volatility in financial markets and changes in the economic climate could adversely affect our results of operations. We also expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business. While we have been able to realize growth in the three months ended March 31, 2023 as compared to the same periods in 2022, the impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain. There are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected. 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 transaction.
Liquidity and Capital Resources
The Company’s net cash flows used in operating, investing and financing activities for the three months ended September 30, 2017March 31, 2023 and 20162022 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,
20232022
Net cash used in operating activities$(9,503)$(15,319)
Net cash provided by (used in) investing activities(376)27,813 
Net cash provided by (used in) financing activities4,892 (4,103)
Effect of foreign exchange rate changes on cash6 (19)
Net (decrease)/increase in cash and cash equivalents$(4,981)$8,372 

As of March 31,
2023		As of December 31,
2022
Cash and cash equivalents$15,254 $10,235 
Working capital surplus$228 $5,152 
Operating Activities:

Net cash provided by operating activities duringActivities for the ninethree months ended September 30, 2017 was $218,000. March 31, 2023

Net cash used in operating activities during the ninethree months ended September 30, 2016March 31, 2023 was $1.1approximately $9.5 million. NetThe cash used in operating activities duringflows related to the ninethree months ended September 30, 2017March 31, 2023 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 

Net income (loss)$(17,178)
Non-cash income and expenses5,632 
Net change in operating assets and liabilities2,043 
Net cash used in operating activities$(9,503)
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The non-cash income and expensesexpense of $17.5approximately $5.6 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

$1,454 Depreciation and amortization expenses
110 Amortization of right of use asset
329 Stock-based compensation expense attributable, warrants, restricted stock grants and options issued as part of Company operations
834 Amortization of debt discount
666 Distribution of equity method investment shares to employees as compensation
2,478 Deferred income tax
(34)Unrealized loss on equity securities
(205)Other
$5,632 Total non-cash expenses
The net use of cash due to changesused in the change in operating assets and liabilities totaled $9.9aggregated approximately $2.0 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:

$(1,994)Increase in accounts receivable and other receivables
553 Decrease in inventory, prepaid expenses and other current assets and other assets
(534)Decrease in accounts payable
3,543 Increase in accrued liabilities, income tax liabilities and other liabilities
(109)Decrease in operating lease liabilities
584 Increase in deferred revenue
$2,043 Net cash used in the changes in operating assets and liabilities

Operating Activities for the three months ended March 31, 2022
Net cash used in operating activities during the three months ended March 31, 2022 was approximately $15.3 million. The cash flows related to the three months ended March 31, 2022 consisted of the following (in thousands):
Net income (loss)$(11,557)
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 expense of approximately $2.2 million consisted primarily of the following (in thousands):
$1,806 Depreciation and amortization expenses
169 Amortization of right of use asset
1,533 Stock-based compensation expense attributable to warrants and options issued as part of Company operations
(2,827)Earnout payment expense
(167)Unrealized loss on foreign currency transactions
1,503 Unrealized loss on equity securities
146 Other
$2,163 Total non-cash expenses
The net use of cash in the change in operating assets and liabilities aggregated approximately $5.9 million and consisted primarily of the following (in thousands):
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$(239)Increase in accounts receivable and other receivables
(3,385)Increase in inventory, prepaid expenses and 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 use of cash used in the changes in operating assets and liabilities
Cash Flows from Investing Activities as of March 31, 2023 and 2022
Net cash flows used in investing activities during the ninethree months ended September 30, 2017March 31, 2023 was $1.2approximately $0.4 million compared to net cash used in investing activities of $1.6 million for the prior year period. The net cash used inflows provided by investing activities during the ninethree months ended September 30, 2017 was comprisedMarch 31, 2022 of $91,000approximately $27.8 million. Cash flows related to investing activities during the three months ended March 31, 2023 include $0.01 million for the purchase of property and equipment, $0.2 million for investment in capitalized software, $0.3 million for the issuance of a note receivable, and $0.2 million of proceeds from a $1.1note receivable. Cash flows related to investing activities during the three months ended March 31, 2022 include $0.1 million for the purchase of property and equipment, $0.1 million investment in capitalized software.

software, and $28.0 million from sales of treasury bills.

Cash Flows from Financing Activities:

Activities as of March 31, 2023 and 2022

Net cash flows provided by financing activities during the three months ended March 31, 2023 was $4.9 million. Net cash flows used in financing activities during the ninethree months ended September 30, 2017March 31, 2022 was approximately $763,000. Net$4.1 million. During the three months ended March 31, 2023, the Company received incoming cash used in financing activitiesflows of $0.1 million from a promissory note, $15.0 million from a registered direct offering, paid $0.2 million of the CXApp acquisition liability, and distributed $10.0 million to the shareholders related to the spin-off of CXApp. During the three months ended March 31, 2022, the Company received incoming cash flows $46.9 million for the nine months ended September 30, 2016 was $832,000. The net cash used in financing activities during the nine months ended September 30, 2017 was primarily comprised of $3.3 million of repayments to the Credit Facility, $6.1 million of proceeds from issuance of common stock, preferred series 8 stock and warrants, $3paid $49.3 million repaymentfor the redemption 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 $1,500,000 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 25preferred series 7 stock, paid $1.8 million of the 50CXApp acquisition liability, received $0.4 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 anniversarynet proceeds from promissory notes and paid $0.3 million 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 reducedtaxes related to the pricenet share settlement 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.

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restricted stock units.

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.
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.


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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, 2023 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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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 secured2022, filed with the SEC on April 17, 2023, 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 rate on any advances made pursuant to the Payplant Loan Agreement, the right to accelerate the payment of any outstanding advances made pursuant to the Payplant Loan Agreement, the right 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.

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With respect to Hillair, such rights include the right to accelerate all amounts outstanding under the Debenture and demand a mandatory default payment in an amount equal to the greater of (i) the outstanding principal amount 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 unpaid 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 or other securities that we own as a change in control, or failure to deliver stock certificates in a timely manner.

The exerciseresult of any of these rights upon an event 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 limited in our business activities and access to credit or may default under the Payplant Loan Agreement.

Provisions in the Payplant Loan Agreement impose restrictions or require prior approval on our ability, and the ability of certain of our subsidiaries to, among other things:

●sell, lease, transfer, convey, or otherwise dispose of any or all of our assets or collateral, except in 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.

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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 covenantsstrategic investments may result in material fluctuations (increases or decreases) in our total asset value and net income on a quarterly basis.


On September 15, 2022, we acquired 891,124 shares of Class A common stock, par value $0.0001 (“FOXO common stock”) of Foxo Technologies Inc. ("FOXO") in connection with the declarationconversion of a 10% convertible note acquired on April 27, 2022 in an eventaggregate principal amount of default$6.1 million for a purchase price of $5.5 million as a result of the closing of a business combination. FOXO common stock is traded in active markets, as the security is trading under “FOXO” on the NYSE American. FOXO common stock is accounted for as available-for-sale equity securities based on “Level 1” inputs, which consist of quoted prices in active markets, with unrealized holding gains and cause uslosses included in earnings. The fair value of the FOXO common stock was determined by the closing trading price of the security as of March 31, 2023. The Company recognized an unrealized gain on FOXO common stock of $0.03 million for the three months ended March 31, 2023.

Consequently, the investment securities we own, are inherently volatile. Accordingly, the value of our total assets and as a consequence, the price of our common stock may decline or increase regardless of our operating performance, which may result in losses for investors purchasing shares of our common stock. Further, to the extent that we experience unrealized losses in connection with such 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 borrow undersell the Payplant Loan Agreement. In addition to preventing additional borrowings under the Payplant Loan Agreement, an event of default, if not curedaforementioned securities at favorable prices quickly 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.

when desired.


Our common stock may be delisted from The NASDAQNasdaq Capital Market if we cannot satisfy NASDAQ’swhich could negatively impact the price of our common stock, liquidity and our ability to access the capital markets.

Our common stock is currently listed on The Nasdaq Capital Market under the symbol “INPX.” The listing standards of The Nasdaq Capital Market provide that a company, in order to qualify for 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 tomust maintain a minimum stock price of $2,500,000 in$1.00 and satisfy standards relative to minimum stockholders’ equity, (the “Minimum Stockholders’ Equity Requirement”)minimum market value of publicly held shares and various additional requirements. If The Nasdaq Stock Market LLC, or any alternativesNasdaq, delists our securities from trading on its exchange for failure to such requirement. We reported stockholders’ equitymeet the listing standards, we and our stockholders could face significant negative consequences including:


•limited availability of ($2,483,000) inmarket quotations for our Quarterly Report on Form 10-Q forsecurities;
•a determination that 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,is a “penny stock” which could makewould require brokers trading ourin the common stock to adhere to more difficultstringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for investors, potentially leadingshares of common stock;

•a limited amount of analyst coverage, if any; and
•a decreased ability to declinesissue additional securities or obtain additional financing in our share price and liquidity. Without a NASDAQ listing, stockholders may have a difficult time getting a quote for the sale or purchasefuture.

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Delisting from NASDAQThe Nasdaq Capital Market could also result in other negative publicityconsequences, including the potential loss of confidence by suppliers, customers and could also make it more difficult foremployees, the loss of institutional investor interest and fewer business development opportunities.

In several instances in the past, including as recently as on April 14, 2023, we received written notification from Nasdaq informing us to raise additional capital. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limitthat because the market liquidityclosing 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 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.


In connection with the April 14, 2023 notice, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until October 11, 2023, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price 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 do not regain compliance by February 12, 2018,within this 180-day period, we may be affordedeligible 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. If we failHowever, if it appears to regain compliance after the second grace period,Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice to the Company that our common stock will be subject to delisting. The letter does not result in the immediate delisting of our common stock from the Nasdaq Capital Market.

We intend to monitor the closing bid price of our common stock and consider its available options in the event that the closing bid price of our common stock remains below $1 per share. While we have regained compliance within the applicable time periods in the past, we cannot be certain that we will be able to regain compliance in connection with the April 14, 2023 notice, or that we will be able to comply with the other continued listing requirements.

If our shares of common stock lose their status on Nasdaq, we believe that they would likely be eligible to be quoted on the inter-dealer electronic quotation and trading system operated by NASDAQ. 

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OTC Markets Group Inc., commonly referred to as the Pink Open Market and we may also qualify to be traded on their OTCQB market (The Venture Market). These markets are generally not considered to be as efficient as, and not as broad as, Nasdaq. Selling our shares on these markets could be more difficult because smaller quantities of shares would likely be bought and sold, and transactions could be delayed. In addition, in the event our shares are delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our common stock or even holding our common stock, further limiting the liquidity of our common stock. These factors could result in lower prices and larger spreads in the bid and ask prices for our common stock.



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


During the quarter ended March 31, 2023, the Company issued 97,753an aggregate of 611,258 shares of common stock (the “2020 Note Exchange Shares”) to an entity for services. The Company recorded an expensethe holder of $87,000 for the fair valuethat certain outstanding promissory note of those shares.

On November 17, 2017, the Company issued on March 20, 2020 (the “March 2020 Note”), at a $1,745,000 principal face amount note to an accredited investor which yielded net proceeds of $1,500,000price between $1.09 and $1.68 per share, in each case at a price per share equal to the Company.

The securities above were issuedMinimum Price as restricted securitiesdefined in transactions that were exempt fromNasdaq Listing Rule 5635(d) in connection with the registration requirementsterms and conditions of certain Exchange Agreements, pursuant to which we and the holder agreed to (i) partition new promissory notes in the form of the Securities ActMarch 2020 Note in the aggregate original principal amount equal to approximately $0.9 million and then cause the outstanding balance of the March 2020 Note to be reduced by an aggregate of approximately $0.9 million; and (ii) exchange the partitioned notes for the delivery of the 2020 Note Exchange Shares.


During the quarter ended March 31, 2023, the Company issued an aggregate of 935,976 shares of common stock (the “2022 Note Exchange Shares," and together with the 2020 Note Exchange Shares, the "Exchange Common Shares”) to the holder of that certain outstanding promissory note of the Company issued on July 22, 2022 (the “July 2022 Note”), at a price between approximately $0.37 and $0.915 per share, in each case at a price per share equal to the Minimum Price as defined in Nasdaq Listing Rule 5635(d) in connection with the terms and conditions of certain Exchange Agreements, pursuant to Section 4(a)(2)which we and the holder agreed to (i) partition new promissory notes in the form of the Securities Act, which exempts transactionsJuly 2022 Note in the aggregate original principal amount equal to approximately $0.5 million and then cause the outstanding balance of the July 2022 Note to be reduced by an issuer not involving any public offering. aggregate of approximately $0.5 million; and (ii) exchange the partitioned notes for the delivery of the 2022 Note Exchange Shares.
57

The Company relied onoffer and sale of the representations made in the transaction documents signed by the applicable securities holders. No commissions were paid and no underwriter or placement agentExchange Common Shares was involved in these transactions.

The Company has not issued any additional securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on an exemption from registration under Section 3(a)(9) of the Securities Act, in that (a) the Exchange Common Shares were issued in exchanges for partitioned notes which has not previously been disclosedare other outstanding securities of the Company; (b) there was no additional consideration of value delivered by the holder in a Current Report on Form 8-K.

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


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

Item 5.    Other Information

The information set forth below is included herein for the quarter ended Septemberpurpose of providing the disclosure required under "Item 1.01 - Entry into a Material Definitive Agreement." and "Item 3.02 – Unregistered Sales of Equity Securities.” of Form 8-K.

On May 15, 2023, the Company entered into a Warrant Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell in a private placement (the “Private Placement”) up to an aggregate of 150,000,000 warrants (the “Warrants”) to purchase up to 150,000,000 shares (the “Warrant Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an offering price of $0.01 per Warrant (subject to adjustment as set forth in the Purchase Agreement) (the “Per Warrant Purchase Price”) for an aggregate warrant offering price equal to $1,500,000.

Exercise Price: The Warrants have an initial exercise price which is equal to the Minimum Price as defined in Nasdaq Listing Rule 5635(d) (subject to adjustment as set forth in the Warrants) (the “Initial Exercise Price”), payable in cash or the cancellation of indebtedness. Upon receipt of stockholder approval, the exercise price will equal the lower of (i) the Initial Exercise Price and (ii) 90% of the lowest VWAP (as defined in the Purchase Agreement) of the Common Stock for the five Trading Days (as defined in the Purchase Agreement) immediately prior to the date on which a Notice of Exercise is submitted to the Company (subject to adjustment as set forth in the Warrants) (the “Adjusted Exercise Price” and together with the Initial Price, as applicable, the “Exercise Price”); provided, however, that any exercise of the Warrants with an Adjusted Exercise Price will be subject to the Company’s consent unless the trading price of the Common Stock as of the time the Notice of Exercise is delivered to the Company is at least 10% or more above the prior Trading Day’s Nasdaq Official Closing Price. The Purchasers may not exercise the Warrants to the extent such exercise would cause such Purchaser, together with its affiliates and attribution parties, to beneficially own a number of shares of Common Stock which would exceed 9.99% of the Company’s then outstanding Common Stock following such exercise (the “Beneficial Ownership Limitation”).

Term: Each Warrant is immediately exercisable for one share of Common Stock and will expire one year from the issuance date (the “Termination Date”), unless extended by the Company with the consent of the holder.

Stockholder Approval: The exercise of the Warrants at the Adjusted Exercise Price is subject to stockholder approval in accordance with Nasdaq Listing Rule 5635. In addition, to the extent stockholder approval is determined to be required by Nasdaq Listing Rule 5635 for issuances at the Initial Exercise Price, then the Company may not issue Warrant Shares or Right Shares, which, in the aggregate, would exceed 19.99% of the number of shares of Common Stock outstanding on the Trading Day immediately preceding the date of the Purchase Agreement (subject to adjustment as set forth in the Warrants) (such number of shares, the “Issuable Maximum”).

Forced Exercise: Subject to the satisfaction of certain conditions set forth in the Warrants during a period of seven consecutive Trading Days (the “Measurement Period”), the Company may, within one Trading Day of the end of such Measurement Period (the “Forced Exercise Eligibility Date”), force the holder to exercise its Warrants into up to such aggregate number of Warrant Shares equal to 25% of the quotient obtained by dividing the Traded Value (as defined in the Warrants) by the Exercise Price then in effect (less any Warrant Shares voluntarily exercised by the holder during such Measurement Period or at any time thereafter and prior to the applicable Forced Exercise Date (as defined in the Warrants) (the “Maximum Forced Exercise Share Amount”) as designated in the applicable Forced Exercise Notice (as defined in the Warrants) (each, a “Forced Exercise”).
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Among other conditions set forth in the Warrants, the Company may not deliver a Forced Exercise Notice, unless, from the beginning of the Measurement Period through the Forced Exercise Date, the Registration Statement (as defined below) is effective as to all Warrant Shares and the prospectus thereunder is available for use by the Warrant holder for the resale of all such Warrant Shares and the Company has not withheld its consent to an exercise by the holder anytime during the Measurement Period. In the event that the issuance of Warrant Shares as a result of a Forced Exercise would result in a Warrant holder exceeding the Beneficial Ownership Limitation (such shares, the “Excess Shares”), then, in lieu of the issuance of such Excess Shares, the Company will issue such holder rights to receive such number of Excess Shares (the “Rights”), which such holder may exercise for shares of Common Stock (the “Rights Shares”) at any time pursuant to the terms and conditions of the Warrants, provided that such exercise would not result in such holder exceeding the Beneficial Ownership Limitation. Following any Forced Exercise, a minimum of seven Trading Days must elapse after the Forced Exercise Date prior to the Company sending the Holders a new Forced Exercise Notice. The Company’s right to a Forced Exercise shall be exercised ratably among the Warrant holders based on each Holder’s initial purchase of Warrants.

Redemption Right: .At any time prior to the Termination Date, the Company may, in its sole discretion, redeem any portion of a Warrant that has not been exercised, in cash, at the Per Warrant Purchase Price, plus all liquidated damages and other costs, expenses or amounts due in respect of the Warrants (the “Redemption Amount”) upon five Trading Days’ written notice to the Warrant holder (the “Redemption Date”). On the Termination Date, the Company will be required to redeem any portion of the Warrants that has not been exercised or redeemed prior to such date through payment of the Redemption Amount in cash. The Company will be required to pay any Redemption Amount within five Trading Days after the Redemption Date or the Termination Date, as applicable.

Exercise Standstill: The Warrant holder will not be permitted to exercise their Warrants upon two Trading Days’ written notice from the Company to the holders (the “Exercise Standstill”) in connection with an offering of the Company’s Common Stock or Common Stock Equivalents (as defined in the Warrants) that results in gross proceeds to the Company in excess of $1,000,000 for such period of time as set forth in such written notice. Each Warrant holder will only be subject to the Exercise Standstill to the extent that the holders of the other Warrants issued pursuant to the Purchase Agreement are also bound to the Exercise Standstill.

Registration Rights: The Purchase Agreement requires the Company to (i) as soon as practicable (and in any event within 30 2017. The press release is included as Exhibit 99.1 to this Quarterly Report on Form 10-Qcalendar days of the date of the Purchase Agreement), file a registration statement (the “Registration Statement”) with the U.S. Securities and is incorporatedExchange Commission (the “SEC”) providing for the resale by reference herein,the Purchasers of the Warrant Shares and the Rights Shares issued and issuable upon exercise of the Warrants and the Rights, as applicable, (ii) use commercially reasonable efforts to cause such Registration Statement to become effective no later than the later of (a) 30 days following the filing thereof and (b) 60 days following the Closing Date, and (iii) keep such Registration Statement effective at all times until no Purchaser owns any Warrants.

Closing Date: The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchasers, customary conditions to closing and customary indemnification rights and obligations of the parties. The closing of the Private Placement (the “Closing”) is expected to occur on or about May 17, 2023 (the “Closing Date”), subject to the satisfaction of customary closing conditions.

Placement Agent Agreement: On May 15, 2023, the Company and Maxim Group LLC (the “Placement Agent”) entered into a Placement Agency Agreement (the “Placement Agency Agreement”), whereby the Placement Agent, in connection with the Private Placement, agreed to act as the Company’s exclusive placement agent on a reasonable best efforts basis. Pursuant to the Placement Agency Agreement, the Company agreed to pay to the Placement Agent (i) a cash fee equal to 2.75% of the gross proceeds received by the Company from the Purchasers at the Closing, to be paid on the Closing Date and (ii) a cash fee equal to 5.5% of the gross proceeds received by the Company from the Purchaser upon the exercise of Warrants for cash, to be paid on a weekly basis during the exercise period of the Warrants as to any exercise proceeds received by the Company from the Purchaser pursuant to the exercise of Warrants for cash during the preceding week (the "Exercise Cash Fee"). The Company is not required to pay the Exercise Cash Fee to the extent that a Purchaser exercises its Warrants through the cancellation of indebtedness owed by the Company to such Purchaser. The Company has also agreed to reimburse the Placement Agent up to $50,000 for certain expenses and legal fees incurred by the Placement Agent. The Placement Agency Agreement contains customary representations and warranties and agreements of the Company and the Placement Agent and customary indemnification rights and obligations of the parties.

Registration Exemption: The Warrants, the Rights, the Warrant Shares and the Rights Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are instead being offered pursuant to the exemption provided in Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

The foregoing description of the press releasePurchase Agreement, the Placement Agency Agreement and the form of Warrants does not purport to be complete and is subject to, and qualified in its entirety by reference to such Exhibit.

the Purchase Agreement, the Placement Agency Agreement and the form of Warrants, which are filed as Exhibits 10.6, 10.7 and 4.7, respectively, to this Form 10-Q and incorporated herein by reference. The press releasePurchase Agreement has been included to provide security holders with

59
information regarding its terms but it is furnished under this Item 2.02not intended to provide any other factual information about the Company or its affiliates. The Purchase Agreement contains representations, warranties and shallcovenants by the Company and the Purchasers. These representations, warranties and covenants were made solely for the benefit of the other party to the Purchase Agreement and (a) are not intended to be deemed filedtreated as categorical statements of fact, but rather as a way of allocating risk to one of the parties if those statements prove to be inaccurate, (b) may have been qualified in the Purchase Agreement by confidential disclosure schedules that were delivered to the other party in connection with the U.S. Securities and Exchange Commission for purposes of Section 18signing of the Securities Exchange Act of 1934, as amended. ThePurchase Agreement, which disclosure schedules contain 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 $1,500,000that modifies, qualifies and creates exceptions to the Company. The note bears interest at the rate of 10% per yearrepresentations, warranties 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 sharescovenants set forth in Proposal 8the Purchase Agreement, (c) may be subject to standards of materiality applicable to the Definitive Schedule 14A filed with the SEC in October 2017. Redemptions may occur at any time after the 6 month anniversaryparties that differ from what might be viewed as material to stockholders and (d) were made only as 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 mustPurchase Agreement or such other date or dates as may 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 definedspecified in the Purchase Agreement), other than those specifically set forth in this Section 4.1Agreement. Accordingly, you should not rely on the representations, warranties and Section 4covenants or any descriptions thereof as characterizations of the Purchase Agreement; 10)any representation, warrantyactual state of facts 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 4condition 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.

Company.

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.

50



60
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 15, 2023By:/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)

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Table of Contents
EXHIBIT INDEX

Exhibit No.Description
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).
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).
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*XBRL Taxonomy Extension Schema Document.
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

** Furnished herewith.

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Exhibit NumberExhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
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
3.118-K001-364043.1November 19, 2021
3.128-K001-364043.1October 6, 2022
3.138-K001-364043.1December 2, 2022
62
Table of Contents
Exhibit NumberExhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
3.14S-1333-1905743.2August 12, 2013
3.158-K001-364043.2September 13, 2021
3.168-K001-364043.1April 24, 2018
3.178-K001-364043.1January 15, 2019
3.188-K001-364043.1September 15, 2021
3.198-K001-364043.1March 24, 2022
4.18-K001-364044.1April 24, 2018
4.28-K001-364044.1March 20, 2020
4.38-K001-364044.1July 22, 2022
4.48-K001-364044.1October 20, 2022
4.58-K001-364044.2October 20, 2022
4.68-K001-364044.1December 30, 2022
4.7X
10.18-K001-3640410.1February 28, 2023
10.28-K001-3640410.2February 28, 2023
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Table of Contents
Exhibit NumberExhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
10.3†8-K001-3640410.1March 20, 2023
10.48-K001-3640410.2March 20, 2023
10.5†8-K001-3640410.3March 20, 2023
10.6†X
10.7X
31.1X
31.2X
32.1#X
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
101.SCHInline XBRL Taxonomy Extension Schema Document.X
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.X
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.X
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.X
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.X
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.
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Table of Contents

#    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