# XTI Aerospace, Inc.: Form 10-Q for the period ended Sep 30, 2022

- Company: [XTI Aerospace, Inc.](/companies/xtia.md) (CIK 1529113)
- Form: 10-Q
- Filed: 2022-11-14
- Accepted by EDGAR: Nov 14, 2022, 22:08 ET
- Period: 2022-09-30
- Accession: 0001628280-22-029904
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1529113/000162828022029904/inpx-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1529113/000162828022029904/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $4.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $14.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $1.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $4.0m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $2.9m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $10.1m | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-07-01 to 2022-09-30 | $4.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-01-01 to 2022-09-30 | $13.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$10.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$40.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $84.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$17.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$48.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | −$10.21 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | −$31.08 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$10.21 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$31.08 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 2,216,544 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 2,086,633 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$26.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $221.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-09-30 | $63.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $72.3m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $108.6m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $20.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $21.6m | us-gaap:Liabilities |
| Short-term borrowings | at 2022-09-30 | $6.2m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2022-09-30 | $33.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 65,665 characters.

*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, 2021, as filed with the SEC. In addition to our historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q, particularly in Part II, Item 1A, “Risk Factors.”*

### Overview of Our Business

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

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

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

- Digital solutions (eTearsheets; eInvoice, and adDelivery) or cloudbased applications and analytics for the advertising, media and publishing industries referred to as Shoom by Inpixon; and
- A comprehensive set of data analytics and statistical visualization solutions for engineers and scientists referred to as SAVES by Inpixon.

We report financial results for three segments: Indoor Intelligence, Shoom and SAVES. For Indoor Intelligence, we generate revenue from sales of hardware, software licenses and professional services. For Shoom and SAVES we generate revenue from the sale of software licenses.

We experienced a net loss of approximately $49.9 million and approximately $32.0 million for the nine months ended September 30, 2022 and 2021, respectively. We cannot assure that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In order to continue our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and debt securities and proceeds from loans and bank credit lines.

### 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 nine months ended September 30, 2022 as compared to the same periods in 2021, 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.

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

### Corporate Strategy Update

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

We believe these transactions have positioned us as a market leader with a comprehensive suite of products and solutions allowing us to provide organizations with actionable indoor intelligence to make their indoor spaces smarter, safer and more secure. We also operate and compete in an industry that is characterized by rapid technological innovation, changing customer needs, evolving industry standards and frequent introductions of new products, product enhancements, services and distribution methods. Our success will depend on our ability to develop expertise with these new products, product enhancements, services and distribution methods and to implement solutions that anticipate and respond to rapid changes in technology, the industry, and customer needs. In order to continue to respond to rapid changes and required technological advancements, as well as increase shareholder value, we intend to continue to evaluate various strategic transactions and opportunities that we believe will enhance shareholder value and/or support our commitment to delivering exceptional experiences and continued innovation with technologies that combine the physical and digital worlds with augmented reality and location based technologies. We are primarily focused on identifying potential targets or other opportunities that we believe will increase shareholder value, 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 addition, at the end of last year, our board of directors authorized a review of strategic alternatives, including a possible asset sale, merger with another company or spin-off of one or more of our business units. In this regard, we have entered into the Separation Agreement and the Merger Agreement (each as defined below under “Proposed Spin-Off of our Enterprise Apps Business”), pursuant to which we plan to separate our enterprise apps business into our wholly-owned subsidiary and combine such subsidiary with a special purpose acquisition corporation, resulting in the subsidiary becoming a separate publicly traded company in exchange for the issuance of shares to certain holders of Inpixon securities of the post-merger company valued at $69 million as of the date of the Merger Agreement. For more details, see “Proposed Spin-Off of our Enterprise Apps Business” below.

In addition, we have and may enter into one or more non-binding letters of intent in connection with our due diligence and evaluation process. In this regard, we have entered into a non-binding letter of intent and are in the due diligence stages with another third party in connection with a potential transaction involving the remainder of our business. We may also retain an investment bank as our financial advisor in order to evaluate strategic options that may be available to us.

### Recent Events

### Financings

### At-The-Market (ATM) Program

On July 22, 2022, we entered into an Equity Distribution Agreement (the “Sales Agreement”) with 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 from time to time through Maxim, acting exclusively our sales agent (the “ATM”). We are not obligated to make any sales of shares under the Sales Agreement and no assurance can be given that we will sell any shares under the Sales Agreement, or if we do, as to the price or amount of shares that we will sell, or the date on which any such sales will take place.

### Note Purchase Agreement and Promissory Note

On July 22, 2022, we entered into a note purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC (the “Holder”) pursuant to which we issued and sold to the Holder an unsecured promissory note (the “Note”) in an aggregate initial principal amount of approximately $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 approximately $1.5 million and $15,000 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 $5 million (the “Transaction”). Interest on the note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the note. We may pay all or any portion of the amount owed earlier than it is due in an amount equal to 115% of the portion of the outstanding balance the Company elects to prepay.

Redemption. Beginning on the date that is 6 months from the issuance 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 each month (each monthly exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption 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.

Monitoring Fee. If the Note is still outstanding on the date that is six (6) months from the issuance date, then a one-time monitoring fee equal to ten percent (10%) of the then-current outstanding balance shall be added to the Note.

Default Events. The 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 a default due to the occurrence of bankruptcy or insolvency proceedings (the “Bankruptcy-Related Event of Default”)), the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the 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 Note will become immediately due and payable at the Mandatory Default Amount.

In addition, at any time while the Note is outstanding, if the Company intends to enter into a financing pursuant to which it will issue securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Company’s common stock, or (B) are or may become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the common stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition (a “Future Offering”), then the Company must first offer such opportunity to the Holder to provide such financing to the Company on the same terms no later than five (5) trading days immediately prior to the trading day of the expected announcement of the Future Offering (the “Right of First Refusal”). If the Holder is unwilling or unable to provide such financing to the Company within five (5) trading days from the Holder’s receipt of notice of the Future Offering from the Company, then the Company may obtain such financing upon the exact same terms and conditions offered by the Company to the Holder, which transaction must be completed within 30 days after the date of the notice. If the Company does not receive the financing within 30 days after the date of the notice, then the Company must again offer the financing opportunity to the Holder as described above, and the process detailed above will be repeated. The Right of First Refusal does not apply to an Exempt Issuance (as defined in the Purchase Agreement) or to a registered offering made pursuant to a registration statement on Form S-1 or Form S-3.

In addition, pursuant to the terms of the Purchase Agreement, so long as the Note is outstanding, the Holder has the right to participate in any offering of securities by the Company which contains any term or condition more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder (the “Participation Right”). The Participation Right does not apply in connection with an offering of securities which qualifies as an Exempt Issuance, a transaction under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), a registered offering made pursuant to a registration statement on Form S-1 or Form S-3, or in connection with the satisfaction of outstanding trade payables.

### Note Exchanges

Since August 15, 2022, we have issued an aggregate of 103,553 shares of common stock to the holder of that certain outstanding promissory note of the Company issued on March 18, 2020 (the “March 2020 Note”), at exchange rates between $4.78 and $10.07 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 exchange agreements pursuant to which we and the holder agreed to (i) partition new promissory notes in the form of the March 2020 Note in the aggregate original principal amount equal to approximately $0.6 million and then cause the outstanding balance of the March 2020 Note to be reduced by an aggregate of approximately $0.6 million; and (ii) exchange the partitioned notes for the delivery of the shares of common stock.

### Investments

### FOXO Debenture

On April 27, 2022, the Company entered into and consummated the transactions contemplated by a securities purchase agreement (the “Purchase Agreement”) with FOXO Technologies Operating Company, formerly FOXO Technologies Inc. (“FOXO Legacy”), an unaffiliated company operating in the insurance technology sector, pursuant to which the Company purchased a 10% Original Issue Discount Senior Convertible Debenture (a “Debenture”) issued by FOXO Legacy in an aggregate principal amount of approximately $6.1 million for a purchase price of $5.5 million. The Purchase Agreement is one of a series of securities purchase agreements which FOXO Legacy entered into under a private placement of Debentures commenced in February 2022. Interest on the Debenture accrues at a rate of 12% per annum, of which 12 months will be guaranteed, and is payable on each conversion date (as to the principal amount being converted) and on the maturity date, in cash, or in shares of FOXO Legacy's Class A common stock upon a conversion of all or a portion of the outstanding principal amount on the Debenture. The Debenture will mature on the date that is 12 months from the original issue date, which may be extended or accelerated pursuant to the terms of the Debenture.

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 Purchase Agreement. This qualified offering triggered a mandatory conversion of the convertible note to FOXO Legacy Class A common stock, which was then automatically converted into 891,124 shares of FOXO's Class A common stock. The Company recognized a realized loss on conversion of $2.4 million to be recognized on the income statement for the three and nine months ended September 30, 2022.

### GYG Promissory Notes

Pursuant to the terms of Securities Purchase Agreements, dated October 29, 2021, January 18, 2022, March 22, 2022, May 17, 2022, June 29, 2022, July 28, 2022, August 17, 2022, September 16, 2022 and October 26, 2022, Game Your Game, Inc., a majority owned subsidiary of the Company ("GYG") issued promissory notes in an aggregate principal amount equal to approximately $2.3 million (the "GYG Notes"), including an aggregate of approximately $1.5 million to the Company and approximately $0.8 million to a third party. All of the GYG Notes have an interest rate of 8% and are due on or before December 31, 2022. The proceeds received from the issuance of the GYG Notes were used to satisfy GYG working capital requirements.

### CVH Loan

On July 1, 2022, we loaned $150,000 to Cardinal Venture Holdings LLC (“CVH”). We are a member of CVH. CVH owns certain interests in KINS Capital, LLC, the sponsor entity (the “Sponsor”) to KINS Technology Group Inc., a Delaware corporation and special purpose acquisition company with which the Company anticipates entering into the Business Combination (see “Proposed Spin-Off of our Enterprise Apps Business” below for more details). 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, our 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.

### Proposed Spin-Off of our Enterprise Apps Business

As previously disclosed in our Current Report on Form 8-K dated September 26, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 25, 2022, by and among the Company, KINS Technology Group Inc., a Delaware corporation (“KINS”), CXApp Holding Corp., a Delaware corporation and newly formed wholly-owned subsidiary of the Company (“CXApp”), and KINS Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of KINS (“Merger Sub”), pursuant to which KINS will acquire our enterprise apps business (including its workplace experience technologies, indoor mapping, events platform, augmented reality and related business solutions) (the “Enterprise Apps Business”) in exchange for the issuance of shares of KINS capital stock valued at $69 million (the “Business Combination”). The proposed Business Combination is expected to be completed in the fourth quarter of 2022.

Immediately prior to the Merger (as defined below) and pursuant to a Separation and Distribution Agreement, dated as of September 25, 2022, by and among KINS, the Company, CXApp and Design Reactor, Inc., a California corporation and wholly-owned subsidiary of the Company (“Design Reactor”) (the “Separation Agreement”), and other ancillary conveyance documents, we will, among other things and on the terms and subject to the conditions of the Separation Agreement, transfer the Enterprise Apps Business, including certain of our related subsidiaries, including Design Reactor, to CXApp, and, in connection therewith, will distribute (the “Distribution”) to our stockholders and other security holders 100% of the common stock of CXApp, par value $0.00001.

Immediately following the Distribution, in accordance with and subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into CXApp (the “Merger”), with CXApp continuing as the surviving company in the Merger and as a wholly-owned subsidiary of KINS.

Following the Business Combination, we will retain the remainder of our products including the Industrial Internet of Things (IIoT) business line.

The Business Combination has not yet occurred and will be subject to various conditions.

### Reverse Stock Split

On October 4, 2022, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse stock split of the Company’s authorized and issued and outstanding shares of common stock at a ratio of one (1) share of common stock for every seventy five (75) shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split was effective October 7, 2022. The Reverse Stock Split was primarily intended to bring the Company into compliance with the minimum bid price requirement for maintaining its listing on the Nasdaq Capital Market. The Company has reflected the Reverse Stock Split herein, unless otherwise indicated.

### Series 8 Preferred Stock Redemptions

During October 2022, the Company received cash redemption notices from the holders of the Series 8 Convertible Preferred Stock issued on March 22, 2022, totaling 45,755.72 shares of Series 8 Convertible Preferred Stock for aggregate cash required to be paid of approximately $45.8 million.

### Registered Direct Offering

On October 18, 2022, the Company entered into a Securities Purchase Agreement with an institutional investor named therein (the “Purchaser”), pursuant to which the Company agreed to issue and sell, in a registered direct offering, 253,112 shares of the Company’s common stock and warrants to purchase up to 3,846,153 shares of common stock (the “Purchase Warrants”) at a combined offering price of $5.85 per share. The Purchase Warrants have an exercise price of $5.85 per share. Each Purchase Warrant is exercisable for one share of common stock and will be immediately exercisable and will expire five years from the issuance date.

The Company also offered and sold to the Purchaser pre-funded warrants to purchase up to 2,310,990 shares of common stock, in lieu of shares of common stock at the Purchaser’s election. Each Pre-Funded Warrant is exercisable for one share of Common Stock. The purchase price of each Pre-Funded Warrant is $5.849, and the exercise price of each Pre-Funded Warrant is $0.001 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

The Company raised net proceeds of $14.2 million after deduction of sales commissions and other offering expenses.

### Critical Accounting Policies and Estimates

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

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.

There have been no significant changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

### Goodwill, Acquired Intangible Assets and Other Long-Lived Assets - Impairment Assessments

We have recorded goodwill and other indefinite-lived assets in connection with our 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. The recoverability of goodwill is evaluated at least annually and when events or changes in circumstances indicate that the carrying amount may not be recoverable. A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred. We have determined that we will operate and report in three reporting units: Indoor Intelligence, SAVES, and Shoom.

We have selected December 31 as the date to perform our annual goodwill impairment test. Goodwill is the only intangible asset with an indefinite useful life. Circumstances that could indicate impairment and require us to perform a quantitative impairment test include a significant decline in our financial results, a significant decline in our enterprise value relative to our net book value, a sustained decline in our stock price, or an unanticipated change in competition or our market share and a significant change in our strategic plans. As of December 31, 2021, we concluded that our fair value did not exceed our carrying value in our Indoor Intelligence reporting unit and an impairment charge of $14.8 million was recorded. At December 31, 2021, the fair value of the SAVES reporting unit exceeded its carrying value by greater than 100%. There is no goodwill assigned to the Shoom reporting unit. Since December 31, 2021, the price of our common stock has declined significantly and may continue to fluctuate in future periods. A sustained decrease in the price of our common stock is one of the qualitative factors to be considered as part of an impairment test when evaluating whether events or changes in circumstances may indicate that it is more likely than not that a potential goodwill impairment exists. Primarily because of the sustained decrease in stock price, we determined there to be trigger indicators of impairment. At June 30, 2022, the Company completed a quantitative test and concluded to record an impairment charge for $7.6 million in goodwill which resulted in remaining goodwill being fully impaired.

### RESULTS OF OPERATIONS

### Three Months Ended September 30, 2022 compared to the Three Months Ended September 30, 2021

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

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2022 Amount | % of Revenues | 2021 Amount | % of Revenues | $ Change | % Change\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $4,177 | 100% | $4,450 | 100% | $(273) | (6)% |
| Cost of revenues | $1,255 | 30% | $1,186 | 27% | $69 | 6% |
| Gross profit | $2,922 | 70% | $3,264 | 73% | $(342) | (10)% |
| Operating expenses | $13,315 | 319% | $15,720 | 353% | $(2,405) | (15)% |
| Loss from operations | $(10,393) | (249)% | $(12,456) | (280)% | $2,063 | 17% |
| Other income (expense) | $(7,600) | (182)% | $(22,347) | (502)% | $14,747 | 66% |
| Provision for income taxes | $— | —% | $854 | 19% | $(854) | (100)% |
| Net (loss) income | $(17,993) | (431)% | $(33,949) | (763)% | $15,956 | 47% |
| Net income (loss) attributable to stockholders of Inpixon | $(17,591) | (421)% | $(33,640) | (756)% | $16,049 | 48% |

\* 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

Revenues for the three months ended September 30, 2022 were $4.2 million compared to $4.5 million for the comparable period in the prior year for a decrease of approximately $0.3 million, or approximately 6%. This decrease is primarily attributable to the decrease in Indoor Intelligence sales due to delayed shipments in the IIoT product line and lower sales for the SAVES product line.

### Cost of Revenues

Cost of revenues for the three months ended September 30, 2022 were $1.3 million compared to $1.2 million for the comparable period in the prior year. This increase in cost of revenues of approximately $0.1 million, or approximately 6%, was primarily attributable to the sales mix during the quarter.

### Gross Profit

The gross profit margin for the three months ended September 30, 2022 was 70% compared to 73% for the three months ended September 30, 2021. This decrease in margin is primarily due to the sales mix during the quarter.

### Operating Expenses

Operating expenses for the three months ended September 30, 2022 were $13.3 million and $15.7 million for the comparable period ended September 30, 2021. This decrease of approximately $2.4 million is primarily attributable to lower compensation, professional fees and legal expenses.

### Other Income (Expense)

Other income/expense for the three months ended September 30, 2022 was a loss of $7.6 million compared to a loss of $22.3 million for the comparable period in the prior year. This decrease in loss of approximately $14.7 million is primarily attributable to the lower unrealized loss on equity securities in the three months ended September 30, 2022.

### Provision for Income Taxes

There was no income tax provision for the three months ended September 30, 2022 and an income tax benefit of $0.9 million for the three months ended September 30, 2021.

### Nine Months Ended September 30, 2022 compared to the Nine Months Ended September 30, 2021

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

*(in thousands, except percentages)*

|  | For the Nine Months Ended September 30, 2022 Amount | % of Revenues | 2021 Amount | % of Revenues | $ Change | % Change\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $14,133 | 100% | $10,857 | 100% | $3,276 | 30% |
| Cost of revenues | $4,037 | 29% | $2,966 | 27% | $1,071 | 36% |
| Gross profit | $10,096 | 71% | $7,891 | 73% | $2,205 | 28% |
| Operating expenses | $50,443 | 357% | $46,060 | 424% | $4,383 | 10% |
| Loss from operations | $(40,347) | (285)% | $(38,169) | (352)% | $(2,178) | (6)% |
| Other income (expense) | $(9,449) | (67)% | $7,537 | 69% | $(16,986) | (225)% |
| Provision for income taxes | $(84) | (1)% | $(1,350) | (12)% | $1,266 | 94% |
| Net (loss) income | $(49,880) | (353)% | $(31,982) | (295)% | $(17,898) | (56)% |
| Net (loss) income attributable to stockholders of Inpixon | $(48,674) | (344)% | $(31,438) | (290)% | $(17,236) | (55)% |

\* 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

Revenues for the nine months ended September 30, 2022 were $14.1 million compared to $10.9 million for the comparable period in the prior year for an increase of approximately $3.3 million, or approximately 30%. This increase is primarily attributable to the increase in Indoor Intelligence sales including the addition of the CXApp product line during the second quarter of 2021 and the addition of the IIoT product line in the fourth quarter of 2021.

### Cost of Revenues

Cost of revenues for the nine months ended September 30, 2022 were $4.0 million compared to $3.0 million for the comparable period in the prior year. This increase in cost of revenues of approximately $1.1 million, or approximately 36%, was primarily attributable to the increased sales during the quarter.

### Gross Profit

The gross profit margin for the nine months ended September 30, 2022 was 71% compared to 73% for the nine months ended September 30, 2021. This decrease in gross profit margin is due to the sales mix during the period.

### Operating Expenses

Operating expenses for the nine months ended September 30, 2022 were $50.4 million and $46.1 million for the comparable period ended September 30, 2021. This increase of $4.4 million is primarily attributable to the $7.6 million of goodwill impairment, offset by lower compensation, professional fees and legal expense in the nine months ended September 30, 2022.

### Other Income (Expense)

Other income/expense for the nine months ended September 30, 2022 was a loss of $9.4 million compared to a gain of $7.5 million for the comparable period in the prior year. This increase in other loss of approximately $17.0 million is primarily attributable to the unrealized losses on equity securities of $7.1 million, and unrealized foreign exchange losses of $2.8 million in the nine months ended September 30, 2022 as compared to the discounted net unrealized loss of approximately $1.4 million on the Sysorex note, a $7.5 million release on the valuation allowance on the Sysorex note and approximately $1.6 million of interest received on the Sysorex note were included in other income for the nine months ended September 30, 2021.

### Provision for Income Taxes

There is an income tax expense of approximately $0.1 million and $1.4 million for the nine months ended September 30, 2022 and 2021, respectively.

### 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, 2022 was a loss of $8.2 million compared to a loss of $6.7 million for the prior year period.

Adjusted EBITDA for the nine months ended September 30, 2022 was a loss of $26.9 million compared to a loss of $18.5 million for the prior year period.

The following table presents a reconciliation of net income (loss) attributable to stockholders of Inpixon, which is our GAAP operating performance measure, to Adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021 (in thousands):

|  | For the Three Months Ended September 30, 2022 | 2021 | For the Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Net loss attributable to stockholders of Inpixon | $(17,591) | $(33,640) | $(48,674) | $(31,438) |
| Interest expense/(income), net | 240 | 15 | 62 | (1,191) |
| Income tax (benefit)/provision | — | (854) | 84 | 1,350 |
| Depreciation and amortization | 1,891 | 1,903 | 5,567 | 4,541 |
| EBITDA | (15,460) | (32,576) | (42,961) | (26,738) |
| Adjusted for: |  |  |  |  |
| Non-recurring one-time charges: |  |  |  |  |
| Loss on exchange of debt for equity | — | — | — | 30 |
| Provision for valuation allowance on held for sale loan | — | — | — | (7,345) |
| Gain on related party loan held for sale | — | — | — | (49,817) |
| Unrealized loss on equity securities | 5,854 | 22,285 | 7,110 | 51,250 |
| Acquisition transaction/financing costs | 2 | 93 | 270 | 1,098 |
| Earnout compensation expense/(benefit) | — | 835 | (2,827) | 2,893 |
| Professional service fees | — | 418 | 8 | 1,189 |
| Impairment of goodwill | — | — | 7,570 | — |
| Unrealized losses/(gains) on notes, loans, investments | — | (6) | 124 | (497) |
| Bad debts expense/provision | 5 | 100 | 5 | 100 |
| Reserve for inventory obsolescence | — | 300 | — | 300 |
| Stock-based compensation - compensation and related benefits | 688 | 1,664 | 2,962 | 8,813 |
| Severance costs | 127 | 210 | 248 | 210 |
| Restructuring costs | 597 | — | 597 | — |
| Adjusted EBITDA | $(8,187) | $(6,677) | $(26,894) | $(18,514) |

- We rely on Adjusted EBITDA, which is a non-GAAP financial measure for the following:
- 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, depreciation and amortization and other non-cash items including stock based compensation, amortization of intangibles, change in the fair value of shares to be issued, change in the fair value of derivative liability, impairment of goodwill and one time charges including gain/loss on the settlement of obligations, severance costs, provision for doubtful accounts, acquisition costs and the costs associated with the public offering.
- We believe that it is useful to provide to investors with a standard operating metric used by management to evaluate our operating performance; and
- We believe that the use of Adjusted EBITDA is helpful to compare our results to other companies.

Even though we believe Adjusted EBITDA is useful for investors, it does have limitations as an analytical tool. Thus, we strongly urge investors not to consider this metric in isolation or as a substitute for net income (loss) and the other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include the fact that:

- Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
- 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 Income (Loss) per Share

Basic and diluted net income (loss) per share for the three months ended September 30, 2022 was a loss of $10.21 compared to a loss of $22.31 for the prior year period. The decrease in loss per share in 2022 was attributable to the changes discussed in our results of operations.

Basic and diluted net income (loss) per share for the nine months ended September 30, 2022 was a loss of $31.08 compared to loss of $23.95 for the prior year period. The increase in loss per share in 2022 was attributable to the changes discussed in our results of operations.

Proforma non-GAAP net income (loss) per share is used by our Company’s management as an evaluation tool as it manages the business and is defined as net income (loss) per basic and diluted share adjusted for non-cash items including stock based compensation, amortization of intangibles and one time charges including 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.

Proforma non-GAAP net loss per basic and diluted common share for the three months ended September 30, 2022 was a loss of $3.96 per share compared to a loss of $3.77 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, 2022 was a loss of $13.44 per share compared to a loss of $13.68 per share for the prior year period.

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 (in thousands, except per share data):

*(thousands, except per share data)*

|  | For the Three Months Ended September 30, 2022 | 2021 | For the Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Net loss attributable to stockholders of Inpixon | $(17,591) | $(33,640) | $(48,674) | $(31,438) |
| Adjustments: |  |  |  |  |
| Non-recurring one-time charges: |  |  |  |  |
| Loss on the exchange of debt for equity | — | — | — | 30 |
| Provision for valuation allowance on held for sale loan | — | — | — | (7,345) |
| Gain on related party loan held for sale | — | — | — | (49,817) |
| Unrealized loss on equity securities | 5,854 | 22,285 | 7,110 | 51,250 |
| Acquisition transaction/financing costs | 2 | 93 | 270 | 1,098 |
| Earnout compensation expense/(benefit) | — | 835 | (2,827) | 2,893 |
| Professional service fees | — | 418 | 8 | 1,189 |
| Impairment of goodwill | — | — | 7,570 | — |
| Unrealized losses/(gains) on notes, loans, investments | — | (6) | 124 | (497) |
| Bad debts expense/provision | 5 | 100 | 5 | 100 |
| Reserve for inventory obsolescense | — | 300 | — | 300 |
| Stock-based compensation - compensation and related benefits | 688 | 1,664 | 2,962 | 8,813 |
| Severance costs | 127 | 210 | 248 | 210 |
| Restructuring costs | 597 | — | 597 | — |
| Amortization of intangibles | 1,533 | 1,560 | 4,559 | 3,571 |
| Proforma non-GAAP net loss | (8,785) | (6,181) | (28,048) | (19,643) |
| Proforma non-GAAP net loss per common share - Basic and Diluted | $(3.96) | $(3.77) | $(13.44) | $(13.68) |
| Weighted average basic and diluted common shares outstanding | 2,216,544 | 1,640,971 | 2,086,633 | 1,436,093 |

- We rely on proforma non-GAAP net income (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 strategic decisions; and
- To evaluate internally the performance of our personnel.

We have presented proforma non-GAAP net income (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 income (loss) per share as supplemental disclosure because:

- 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.
- 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, 2022

Our current capital resources and operating results as of and through September 30, 2022, consist of:

1\) an overall working capital surplus of approximately $51.6 million;

2\) cash of approximately $63.2 million;

3\) net cash used by operating activities for the nine months ended September 30, 2022 of $26.9 million.

The breakdown of our overall working capital surplus as of September 30, 2022 is as follows (in thousands):

| Working Capital | Assets | Liabilities | Net |
| --- | ---: | ---: | ---: |
| Cash and cash equivalents | $63,153 | $— | $63,153 |
| Accounts receivable, net / accounts payable | 2,879 | 2,559 | 320 |
| Inventory | 2,702 | — | 2,702 |
| Accrued liabilities | — | 4,370 | (4,370) |
| Operating lease obligation | — | 514 | (514) |
| Deferred revenue | — | 3,730 | (3,730) |
| Notes and other receivables / Short-term debt | 287 | 6,179 | (5,892) |
| Other | 3,258 | 3,376 | (118) |
| Total | $72,279 | $20,728 | $51,551 |

On July 22, 2022, we also entered into an Equity Distribution Agreement pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $25 million. We are not obligated to make any sales under the Equity Distribution Agreement and no assurance can be given we will sell any shares or if we do, as to the price or amount of shares that we will sell, or the date on which any such sales will take place. In addition, subsequent to the quarter ended September 30, 2022, we entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company agreed to issue and sell, in a registered direct offering, the Company’s common stock, warrants and pre-funded warrants for net proceeds of $14.2 million after deduction of sales commissions and other offering expenses.

### 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 September 30, 2022, the total obligation for operating leases is approximately $1.5 million, of which approximately $0.6 million is expected to be paid in the next twelve months. Our vendor commitments are approximately $0.5 million all of which is expected in the next twelve months. As of September 30, 2022, our obligation for acquisition liabilities is approximately $3.4 million of which approximately $3.4 million is expected to be paid in the next twelve months. In addition, any time during the

Series 8 Redemption Period, each holder of our Series 8 Shares is entitled to require us to redeem all or part of the Series 8 Shares then held by such holder in cash for a redemption price per share equal to the Series 8 Redemption Amount. Any holder that elects to redeem its shares of Series 8 Preferred Stock will be required to forfeit 50% of the corresponding warrants held by such holder. During October 2022, the Company was required to redeem 45,755.72 shares of its Series 8 Preferred Stock for an aggregate amount of $45.8 million. The remaining aggregate Redemption Amount that we may be required to pay is equal to $7.4 million (which may be increased to $8.2 million in the event of certain events of default) plus any accrued but unpaid dividends, liquidated damages and other costs, expenses, or amounts due in respect of the shares, to the extent applicable.

As of September 30, 2022, we owed approximately $6.2 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 12 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-Q.

Net cash used in operating activities during the nine months ended September 30, 2022 of $26.9 million consists of a net loss of $49.9 million offset by non-cash adjustments of approximately $22.2 million less net cash changes in operating assets and liabilities of approximately $0.7 million. Although the Company has sustained significant losses during nine months ended September 30, 2022, in addition to the cash we had on hand, we raised net proceeds of approximately $14.2 million after placement agent commissions in connection with a registered direct offering in October 2022 and in July 2022 raised $5 million in connection with the debt offering described above. The Company has also filed an At-The-Market financing facility having an aggregate offering price of up to $25 million that it can access should the Company deem necessary. 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 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 operation. 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 nine months ended September 30, 2022 as compared to the same periods in 2021, 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 nine months ended September 30, 2022 and 2021 and certain balances as of the end of those periods are as follows (in thousands):

|  | For the Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(26,943) | $(24,018) |
| Net cash provided by (used in) investing activities | 36,748 | (52,708) |
| Net cash provided by financing activities | 902 | 125,425 |
| Effect of foreign exchange rate changes on cash | (34) | 90 |
| Net increase in cash and cash equivalents | $10,673 | $48,789 |

|  | As of September 30, 2022 | As of December 31, 2021 |
| --- | ---: | ---: |
| Cash and cash equivalents | $63,153 | $52,480 |
| Working capital surplus | $51,551 | $78,831 |

### Operating Activities for the nine months ended September 30, 2022

Net cash used in operating activities during the nine months ended September 30, 2022 was approximately $26.9 million. The cash flows related to the nine months ended September 30, 2022 consisted of the following (in thousands):

|  |  |
| --- | ---: |
| Net income (loss) | $(49,880) |
| Non-cash income and expenses | 22,192 |
| Net change in operating assets and liabilities | 745 |
| Net cash used in operating activities | $(26,943) |

The non-cash income and expense of approximately $22.2 million consisted primarily of the following (in thousands):

|  |  |
| ---: | --- |
| $5,567 | Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, Jibestream, Systat, Ten Degrees, Nanotron, Game Your Game, Visualix, CXApp and IntraNav, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, August 15, 2019, June 30, 2020, August 19, 2020, October 6, 2020, April 9, 2021, April 23, 2021, April 30, 2021, December 9, 2021 respectively. |
| 536 | Amortization of right of use asset |
| 2,962 | Stock-based compensation expense attributable, warrants, restricted stock grants and options issued as part of Company operations |
| (2,827) | Earnout expense valuation benefit |
| 121 | Amortization of issued discount |
| 1,870 | Unrealized loss(gain) on note |
| (791) | Loss on conversion of note receivable |
| (278) | Accrued interest income, related party |
| 5 | Provision for doubtful accounts |
| (1) | Deferred income tax |
| 7,110 | Unrealized loss on equity securities |
| 7,570 | Impairment of goodwill |
| 348 | Other |
| $22,192 | Total non-cash expenses |

The net cash used in the change in operating assets and liabilities aggregated approximately $0.7 million and consisted primarily of the following (in thousands):

|  |  |
| ---: | --- |
| $336 | Decrease in accounts receivable and other receivables |
| 571 | Decrease in inventory, other current assets and other assets |
| 237 | Increase in accounts payable |
| 1,021 | Increase in accrued liabilities, income tax liabilities and other liabilities |
| (505) | Decrease in operating lease liabilities |
| (915) | Decrease in deferred revenue |
| $745 | Net cash used in the changes in operating assets and liabilities |

### Operating Activities for the nine months ended September 30, 2021

Net cash used in operating activities during the nine months ended September 30, 2021 was approximately $24.0 million. The cash flows related to the nine months ended September 30, 2021 consisted of the following (in thousands):

|  |  |
| --- | ---: |
| Net income (loss) | $(31,982) |
| Non-cash income and expenses | 1,988 |
| Net change in operating assets and liabilities | 5,976 |
| Net cash used in operating activities | $(24,018) |

The non-cash income and expense of approximately $2.0 million consisted primarily of the following (in thousands):

|  |  |
| ---: | --- |
| $4,541 | Depreciation and amortization expenses (including amortization of intangibles) primarily attributable to the Shoom, AirPatrol, LightMiner, Locality, GTX, Jibestream, Systat, Ten Degrees, Nanotron, Game Your Game, Visualix and CXApp, which were acquired effective August 31, 2013, April 16, 2014, November 21, 2016, May 21, 2019, June 27, 2019, August 15, 2019, June 30, 2020, August 19, 2020, October 6, 2020, April 9, 2021, April 23, 2021 and April 30, 2021, respectively. |
| 527 | Amortization of right of use asset |
| 8,813 | Stock-based compensation expense attributable to warrants and options issued as part of Company operations |
| 30 | Loss on exchange of debt for equity |
| 224 | Amortization of debt discount |
| (7,345) | Recovery for valuation allowance for held for sale loan |
| (1,627) | Accrued interest income, related party |
| 100 | Provision for doubtful accounts |
| 300 | Provision for inventory accounts |
| (49,817) | Gain on settlement of related party note and receivable |
| (4,507) | Income tax expense |
| 51,250 | Unrealized loss on equity securities |
| (501) | Other |
| $1,988 | Total non-cash expenses |

The net use of cash in the change in operating assets and liabilities aggregated approximately $6.0 million and consisted primarily of the following (in thousands):

|  |  |
| ---: | --- |
| $(678) | Increase in accounts receivable and other receivables |
| (369) | Increase in inventory,other current assets and other assets |
| (653) | Decrease in accounts payable |
| 3,510 | Increase in accrued liabilities and other liabilities |
| 3,471 | Increase in income tax liabilities |
| (519) | Decrease in operating lease liabilities |
| 1,214 | Increase in deferred revenue |
| $5,976 | Net use of cash used in the changes in operating assets and liabilities |

66

### Cash Flows from Investing Activities as of September 30, 2022 and 2021

Net cash flows provided by investing activities during the nine months ended September 30, 2022 was approximately $36.7 million compared to net cash flows used in investing activities during the nine months ended September 30, 2021 of approximately $52.7 million. Cash flows related to investing activities during the nine months ended September 30, 2022 include $0.2 million for the purchase of property and equipment, $0.6 million for investment in capitalized software, $5.5 million for the purchase of a convertible note, $0.2 million for the issuance of a note receivable, $0.2 million for the sales of equity securities and $43.0 million of sales of treasury bills. Cash flows related to investing activities during the nine months ended September 30, 2021 include $0.3 million for the purchase of property and equipment, $0.9 million investment in capitalized software, $63.4 million for the purchase of treasury bills, $2.0 million for the purchase of short term investments, $2.0 million sale of short term investment, $28.0 million from sales of treasury bills, $0.2 million from the acquisition of Game Your Game, $15.2 million for the acquisition of CXApp, $0.9 million for the purchase of the Systat licensing agreement, $0.3 million for the issuance of a note receivable and $0.1 million for the acquisition of Visualix.

### Cash Flows from Financing Activities as of September 30, 2022 and 2021

Net cash flows provided by financing activities during the nine months ended September 30, 2022 was $0.9 million. Net cash flows provided by financing activities during the nine months ended September 30, 2021 was $125.4 million. During the nine months ended September 30, 2022, the Company received incoming cash flows of $46.9 million for the issuance of preferred stock and warrants, paid $49.3 million for the redemption of preferred series 7 stock, paid $2.0 million of the CXApp acquisition liability, received $5.5 million net proceeds from promissory note, and paid $0.3 million for the settlement of employee taxes on restricted stock. During the nine months ended September 30, 2021, the Company received incoming cash flows of $77.9 million from the issuance of common stock and warrants, received incoming cash flows of $50.6 million for the issuance of preferred stock and warrants, loaned $0.1 million to a related party, paid $1.7 million of taxes related to the net share settlement of restricted stock units, paid a $0.2 million liability related to the CXApp acquisition, paid a $0.5 million acquisition liability to the pre-acquisition shareholders of Nanotron, and paid a $0.5 million acquisition liability to the pre-acquisition shareholders of Locality.

### 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 Note 3 to our financial statements, which are included in this report beginning on page F-1.

## Controls and procedures

As filed, 2,468 characters.

### 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 GAAP.

In connection with the preparation of this Form 10-Q, management, with the participation of our Principal Executive Officer and Principal Financial Officer, 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, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Company’s management determined that there were no material changes needed to internal controls as a result of the COVID-19 pandemic.

### Limitations of the Effectiveness of Control

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

## Risk factors

As filed, 20,856 characters.

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. In addition to the risk factors set forth below and the other 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 Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 16, 2022, and Part II, Item 1A, "Risk Factors," in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, filed with the SEC on May 16, 2022, and Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 15, 2022, which reports are incorporated by reference herein, all of which could materially affect our business, financial condition and future results.

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

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

On March 1, 2020, we agreed to extend the maturity date of the note from December 31, 2020 to December 31, 2022. On April 14, 2021, we entered into a Securities Settlement Agreement (the “SSA”) and a Rights Letter Agreement (the “RLA”), with Sysorex, whereby it agreed to satisfy in full its outstanding debt, in the aggregate amount of $9,088,176 as of March 31, 2021, owed to the Company, including but, not limited to, amounts outstanding under the Sysorex Note (the “Debt Settlement”). To effect the Debt Settlement, Sysorex agreed to issue to us (i) pursuant to the terms of the SSA, 12,972,189 shares of its common stock and (ii) rights to acquire 3,000,000 additional shares of its common stock pursuant to the terms of the RLA. The Debt Settlement was entered into in connection with Sysorex’s closing of a reverse triangular merger with TTM Digital Assets & Technologies, Inc.

The Company recorded $7.5 million benefit for the release of the previously recorded valuation allowance related to the Sysorex Note, $1.6 million of interest income, and a gain on settlement of $49.8 million equal to the difference in the carry value of the Sysorex Note, including interest, and the value of the common stock and rights to acquire additional shares received in the settlement. As of September 30, 2022, the value of these securities decreased to approximately $0.05 million as a result of the corresponding decrease in Sysorex's common stock price. Accordingly, a $1.8 million unrealized loss on the Sysorex note for the nine months ended September 30, 2022 was included in the condensed consolidated statements of operations.

Consequently, the shares of common stock of Sysorex we own, which 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 sell the aforementioned securities at favorable prices quickly or when desired.

***Our common stock may be delisted from The Nasdaq Capital Market which 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, must maintain a minimum stock price of $1.00 and satisfy standards relative to minimum stockholders’ equity, minimum market value of publicly held shares and various additional requirements. If The Nasdaq Stock Market LLC, or Nasdaq, delists our securities from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant negative consequences including:

- limited availability of market quotations for our securities;
- a determination that the common stock is a “penny stock” which would require brokers trading in the common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of common stock;
- a limited amount of analyst coverage, if any; and
- a decreased ability to issue additional securities or obtain additional financing in the future.

Delisting from The Nasdaq Capital Market could also result in other negative consequences, including the potential loss of confidence by suppliers, customers and employees, the loss of institutional investor interest and fewer business development opportunities.

As previously reported, on October 25, 2021, we received written notification from Nasdaq informing us that because the closing bid price of our common stock was below $1.00 for 30 consecutive trading days, our shares no longer complied with the minimum closing bid price requirement for continued listing on Nasdaq under the Nasdaq Listing Rules. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until April 25, 2022, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1.00 per share for a minimum of ten consecutive business days. We were not able to regain compliance within this 180-day period, and were eligible to seek an additional 180 calendar days to meet the minimum bid price requirement if we meet 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 provide written notice to Nasdaq of our intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. We provided Nasdaq written notice of our intention to cure the bid price deficiency during the second compliance period and on April 26, 2022, we received notice from Nasdaq that we were granted an additional 180 days, or until October 24, 2022 to regain compliance with this requirement.

We effected a 1-for-75 reverse stock split of our common stock on October 7, 2022, and on November 1, 2022, we were informed by Nasdaq that we had regained compliance with the minimum bid price requirement and that we were back in compliance with the applicable Nasdaq continued listing criteria.

Notwithstanding the reverse stock split and our compliance with The Nasdaq Capital Market requirements, we cannot be certain that our share price will comply with the requirements for continued listing of our common stock on The Nasdaq Capital Market in the future, 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 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.

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

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

### Risks Related to the Business Combination

***The Merger with KINS is subject to the satisfaction of certain conditions, which may not be satisfied on a timely basis, if at all.***

The consummation of the Merger is subject to customary closing conditions for transactions involving special purpose acquisition companies, including, among others:

- there is not in force any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority of competent jurisdiction, statute, rule or regulation enjoining or prohibiting the consummation of the Merger;
- KINS shall have at least $5,000,001 of net tangible assets as of the closing;
- the KINS Class A common stock issuable pursuant to the Business Combination shall have been approved for listing on the Nasdaq Capital Market;
- CXApp and KINS shall each have performed and complied in all material respects with the covenants required by the Merger Agreement to be performed by it as of or prior to closing;
- customary bring down conditions related to the accuracy of the CXApp’s and KINS’s respective representations and warranties in the Merger Agreement;
- the consummation of the Separation and other transactions contemplated by the Separation Agreement;
- KINS’s registration statement to be filed with the SEC shall have become effective (and no stop order suspending effectiveness have been issued and no proceedings for that purpose has been initiated or threatened by the SEC);
- each of KINS’s and CXApp’s stockholder approvals shall have been obtained; and
- the sum of (A) the aggregate amount of cash available in KINS’s trust account following KINS’s stockholders’ meeting, after deducting the amount required to satisfy the Acquiror Share Redemption Amount (as defined in the Merger Agreement) (but prior to payment of any transaction expenses), (B) the aggregate gross purchase price of any other purchase of shares of KINS common stock (or securities convertible or exchangeable for KINS common stock) actually received by KINS prior to or substantially concurrently with the closing of the Merger, and (C) the aggregate gross purchase price of any other purchase of shares of CXApp common stock (or securities convertible or exchangeable for CXApp common stock) actually received by CXApp prior to or substantially concurrently with the closing of the Merger, shall be equal to or greater than $9.5 million.

Additionally, KINS’s obligation to consummate the Business Combination is also conditioned on there having been no event that has had, or would reasonably be expected to have, individually or in the aggregate, a “Material Adverse Effect” on CXApp.

There can be no assurance that such closing conditions will be satisfied or waived, or that the Merger will be consummated. Further, Inpixon cannot assure you that the approval of KINS’ stockholders will be obtained. Inpixon, CXApp and KINS may be subject to shareholder lawsuits, or other actions filed in connection with or in opposition to the Merger, which could prevent or delay the consummation of the Merger.

***If the Distribution (as defined in the Separation Agreement), together with certain related transactions, fails to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), or the Merger fails to qualify as a reorganization under Section 368(a) of the Code, Inpixon and its stockholders could incur significant tax liabilities, and KINS and CXApp could be required to indemnify Inpixon for taxes that could be material, pursuant to indemnification obligations under the Tax Matters Agreement.***

Although the Distribution and Merger are not conditioned on its receipt, Inpixon expects to receive a tax opinion, which will provide that the Contribution (as defined in the Separation Agreement) and Distribution, taken together, will qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code. The tax opinion will be based on, among other things, certain facts, assumptions, representations and undertakings from Inpixon, CXApp and KINS, including those regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations, or undertakings are incorrect or not satisfied, Inpixon may not be able to rely on such opinion. Moreover, even if Inpixon receives the opinion, such opinion will not be binding on the IRS or the courts, and no assurance can be given that the IRS will not challenge its conclusions or otherwise determine on audit that the Distribution or Merger does not qualify for its respective intended tax treatment, including as a result of a change in stock or asset ownership of Inpixon, CXApp or KINS after the Distribution.

If the Distribution does not qualify under Section 355 of the Code, the Distribution would be treated as a taxable dividend to Inpixon securityholders equal to the fair market value of the CXApp stock to the extent of Inpixon’s earnings and profits. If the dividend exceeds such earnings and profits, the amount of such excess will be treated as a return of capital to the extent of an Inpixon Stockholder’s basis in its Inpixon stock, and then a capital gain. To the extent that the Merger does not qualify as a reorganization under Section 368(a) of the Code, Inpixon securityholders would recognize taxable income equal to the difference between the fair market value of the KINS shares received and their tax basis in the CXApp Shares. In either such case, Inpixon securityholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities.

In addition, if the Contribution and Distribution, taken together, do not qualify under Section 355 and 368(a)(1)(D) of the Code, Inpixon would recognize taxable income on the Distribution equal to the difference between the fair market value of the CXApp shares distributed by Inpixon to the Inpixon securityholders and Inpixon’s basis in such shares. Inpixon does not anticipate that it would have net operating losses to offset any taxable income triggered as a result of failure to qualify under Section 355 and 368(a)(1)(D) of the Code because its net operating losses will be limited by Section 382 of the Code.

Even if the Contribution and Distribution, taken together, otherwise qualify as a transaction described in Sections 355 and 368(a)(1)(D) of the Code, the Distribution would be taxable to Inpixon (but not to Inpixon securityholders) pursuant to Section 355(e) of the Code if one or more persons acquire a 50% or greater interest (measured by vote or value) in the stock of Inpixon or CXApp, directly or indirectly (including through acquisitions of the stock of the combined company after the Merger), as part of a plan or series of related transactions that includes the Distribution. Pursuant to the tax matters agreement to be entered into prior to the Separation, Inpixon will bear the responsibility for this tax if such tax relates to or arises out of the failure of the intended tax treatment or to certain actions taken by Inpixon. If, however, such tax is attributable to certain actions or omissions by KINS or CXApp, inaccuracies, misrepresentations or misstatements relating to KINS or CXApp, or certain events involving the stock of KINS or CXApp or assets of CXApp post-Distribution, KINS and CXApp will be obligated to indemnify Inpixon for such taxes. Further, even if KINS and CXApp are not responsible for tax liabilities of Inpixon under the tax matters agreement, CXApp nonetheless could be liable under applicable U.S. federal tax law for such liabilities if Inpixon were to fail to pay them.

### The anticipated benefits of the Business Combination may not be achieved.

Inpixon may not be able to achieve the full strategic and financial benefits expected to result from the Business Combination, including the potential that the Business Combination will:

- allow each business to pursue its own operational and strategic priorities and more quickly respond to trends, developments and opportunities in its respective markets;
- increase the potential value for Inpixon securityholders to receive shares of the combined company post-Merger based on a pre-transaction equity value of CXApp of $69.0 million, which was greater than the market capitalization of Inpixon as of the date of the Merger Agreement;
- create two separate and distinct management teams focused on each business’s unique strategic priorities, target markets and corporate development opportunities;
- give each business opportunity and flexibility by pursuing its own investment, capital allocation and growth strategies consistent with its long-term objectives;
- allow investors to separately value each business based on the unique merits, performance and future prospects of each business, providing investors with two distinct investment opportunities;
- enhance the ability of each business to attract and retain qualified management and to better align incentive-based compensation with the performance of each separate business; and
- give each of CXApp and Inpixon its own equity currency for use in connection with acquisitions.

Inpixon may not achieve the anticipated benefits of the Business Combination for a variety of reasons. Further, such benefits, if ultimately achieved, may be delayed. In addition, the Business Combination could materially and adversely affect Inpixon’s business, financial condition and results of operations.

***The Separation and Distribution may expose Inpixon to potential liabilities arising out of legal dividend requirements.***

The Distribution of CXApp common stock is subject to review under state corporate distribution statutes. Under the Nevada Revised Statutes (“NRS”), no distribution (including dividends on, or redemption or repurchases of, shares of capital stock) may be made if, after giving effect to such distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed at the time of a liquidation to satisfy the preferential rights of preferred stockholders. Although Inpixon intends to make the Distribution of CXApp common stock in compliance with the NRS, Inpixon cannot assure you that a court will not later determine that some or all of the Distribution to Inpixon security holders was unlawful.

Filed Nov 14, 2022.
Source: SEC EDGAR, the filing index for accession 0001628280-22-029904. Last ingested by Listed: Oct 24, 2026, 15:13 ET. No prices; not investment advice.