# XTI Aerospace, Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [XTI Aerospace, Inc.](/companies/xtia.md) (CIK 1529113)
- Form: 10-Q
- Filed: 2023-05-16
- Accepted by EDGAR: May 16, 2023, 01:11 ET
- Period: 2023-03-31
- Accession: 0001628280-23-018311
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1529113/000162828023018311/inpx-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1529113/000162828023018311/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $3.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $791.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $2.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $2.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$8.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $2.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$16.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$1.38 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$1.38 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 12,238,684 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$9.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $6.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $15.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $23.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $29.9m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $23.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $23.7m | us-gaap:Liabilities |
| Short-term borrowings | at 2023-03-31 | $15.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-03-31 | $7.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,428 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, 2022, as filed with the SEC. In addition to our historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q, particularly in Part II, Item 1A, “Risk Factors.”*

### Overview of Our Business

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

Inpixon specializes in providing real-time location systems (RTLS) for the industrial sector. As the manufacturing industry has evolved, RTLS technology has become a crucial aspect of Industry 4.0. Our RTLS solution leverages cutting-edge technologies such as IoT, AI, and big data analytics to provide real-time tracking and monitoring of assets, machines, and people within industrial environments. With our RTLS, businesses can achieve improved operational efficiency, enhanced safety and reduced costs. By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and ensure compliance with industry regulations. With our RTLS, industrial businesses can transform their operations and stay ahead of the curve in the digital age.

Inpixon's full-stack industrial IoT solution provides end-to-end visibility and control over a wide range of assets and devices. It's designed to help organizations optimize their operations and gain a competitive edge in today's data-driven world. The turn-key platform integrates a range of technologies, including RTLS, sensor networks, edge computing, and big data analytics, to provide a comprehensive view of an organization's operations. We help organizations to track the location and status of assets in real-time, identify inefficiencies, and make decisions that drive business growth. Our IoT stack covers all the technology layers, from the edge devices to the cloud. It includes hardware components such as sensors and gateways, a robust software platforms for data management and analysis, and a user-friendly dashboard for real-time monitoring and control. Our solutions also offer robust security features, to help ensure the protection of sensitive data. Additionally, Inpixon's RTLS provides scalability and flexibility, allowing organizations to easily integrate it with their existing systems and add new capabilities as their needs evolve.

In addition to our 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 through our advertising management platform 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 from continuing operations of approximately $12.3 million and approximately $10.8 million for the three months ended March 31, 2023 and 2022, respectively. We cannot assure that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In order to continue our operations, we have 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 three months ended March 31, 2023 as compared to the same periods in 2022, the impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain. There are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected.

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

In order to continue to respond to rapid changes and required technological advancements, as well as increase our shareholder value, we are exploring strategic transactions and opportunities that we believe will enhance shareholder value. Our board of directors has authorized a review of strategic alternatives, including a possible asset sale, merger with another company or spin-off of one or more of our business units. We will also be opportunistic and may consider other strategic and/or attractive transactions, which may include, but not be limited to other alternative investment opportunities, such as minority investments, joint ventures or special purpose acquisition companies. If we make any acquisitions in the future, we expect that we may pay for such acquisitions with cash, equity securities and/or debt in combinations appropriate for each acquisition. In September of 2022, we entered into an Agreement and Plan of Merger in connection with the spin-off and sale of our enterprise apps business which was consummated on March 14, 2023. (See “Recent Events” below for more details). In addition, we have entered into a non-binding letter of intent and are in the due diligence and negotiation stages with another third party in connection with a potential transaction involving the remainder of our business. We may enter into one or more additional non-binding letters of intent in connection with our due diligence and evaluation process.

### Recent Events

### Financings

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

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

### Note Exchanges

During the quarter ended March 31, 2023, the Company exchanged approximately $0.9 million of the outstanding principal and interest under the March 2020 10% Note Purchase Agreement and Promissory Note for 611,258 shares of the

Company's common stock at prices from $1.09 to $1.682 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d). This note was fully satisfied as of January 31, 2023.

During the quarter ended March 31, 2023, the Company exchanged approximately $0.5 million of the outstanding principal and interest under the July 2022 10% Note Purchase Agreement and Promissory Note for 935,976 shares of the Company's common stock at prices from $0.37 to $0.915 per share, calculated in accordance with Nasdaq's “minimum price” as defined by Nasdaq Listing Rule 5635(d).

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

### Enterprise Apps Spin-off and Business Combination

On March 14, 2023, Inpixon completed (the “Closing”) the separation (the “Separation”) of its enterprise apps business (including its workplace experience technologies, indoor mapping, events platform, augmented reality and related business solutions) (the “Enterprise Apps Business”) through a spin-off of CXApp Holding Corp., a Delaware corporation ("CXApp"), to certain holders of Inpixon securities as of March 6, 2023 (the “Record Date”) on a pro rata basis (the “Distribution” or “Enterprise Apps Spin-off”) and merger (the “Merger”) of CXApp with a wholly owned subsidiary of KINS Technology Group Inc., a Delaware corporation (“KINS”), in a Reverse Morris Trust transaction (collectively, the “Transactions”) pursuant to (i) an Agreement and Plan of Merger, dated as of September 25, 2022, by and among Inpixon, KINS, CXApp, and KINS Merger Sub Inc. (the "Merger Agreement") and (ii) a Separation and Distribution Agreement, dated as of September 25, 2022, among KINS, Inpixon, CXApp and Design Reactor, Inc. (the "Separation Agreement”, and collectively with the Merger Agreement and the other related transaction documents, the “Transaction Agreements”).

In connection with the Closing, KINS was renamed CXApp Inc. (“New CXApp”). Pursuant to the Transaction Agreements, Inpixon contributed cash sufficient to ensure CXApp had $10 million in cash and cash equivalents prior to the deduction of transaction expenses at closing and certain assets and liabilities constituting the Enterprise Apps Business, including certain related subsidiaries of Inpixon, to CXApp (the “Contribution”). In consideration for the Contribution, CXApp issued to Inpixon additional shares of CXApp common stock such that the number of shares of CXApp common stock then outstanding equaled the number of shares of CXApp common stock necessary to effect the Distribution. Pursuant to the Distribution, Inpixon shareholders as of the Record Date received one share of CXApp common stock for each share of Inpixon common stock held as of such date. Pursuant to the Merger Agreement, each share of Legacy CXApp common stock was thereafter exchanged for the right to receive 0.09752221612415190 of a share of New CXApp Class A common stock (with fractional shares rounded down to the nearest whole share) and 0.3457605844401750 of a share of New CXApp Class C common stock (with fractional shares rounded down to the nearest whole share). New CXApp Class A common stock and New CXApp Class C common stock are identical in all respects, except that New CXApp Class C common stock is not listed and will automatically convert into New CXApp Class A common stock on the earlier to occur of (i) the 180th day following the closing of the Merger and (ii) the day that the last reported sale price of New CXApp Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period following the closing of the Merger. Upon the closing of the Transactions, Inpixon’s existing security holders held approximately 50.0% of the shares of New CXApp common stock outstanding.

Employee Matters Agreement

On March 14, 2023, in connection with the consummation of the Business Combination and as contemplated by the Separation Agreement, CXApp, Legacy CXApp, Inpixon and Merger Sub entered into the Employee Matters Agreement (the “Employee Matters Agreement”). The Employee Matters Agreement sets forth the terms and conditions of certain employee related matters in connection with the transaction, including, but not limited to the participation in benefits for each of the respective companies as relevant, and the assumption and retention of benefit plan assets and liabilities, worker's compensation, payroll taxes, regulatory filings, and the sharing of employee information.

Tax Matters Agreement

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

Allocation of Taxes

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

Indemnification Obligations

The Tax Matters Agreement generally provides for indemnification obligations between New CXApp and KINS, on the one hand, and Inpixon, on the other hand. In particular, CXApp and KINS must indemnify Inpixon for taxes allocated to CXApp or KINS, as described above, and Inpixon must indemnify New CXApp and KINS for taxes as allocated to Inpixon as described above, which would generally include Distribution Taxes. The Tax Matters Agreements, however, provides that KINS and CXApp may be liable for certain taxes to the extent such taxes result from a breach of certain representations or restrictive covenants made by KINS and CXApp, as described below.

Transition Services Agreement

On March 14, 2023, in connection with the consummation of the Business Combination and as contemplated by the Separation Agreement, Legacy CXApp and Inpixon entered into a Transition Services Agreement (the “Transition Services Agreement”) pursuant to which Inpixon and certain employees and representatives and CXApp and certain employees and representatives will provide services to each other primarily related to payroll and benefits administration, IT support, finance and accounting services, contract administration and management services, and other administrative support services that may be required on an as needed basis, which services are of the type that CXApp and Inpixon provided to, and received from, each other prior to the Separation. The fees for each of the transition services are set forth in the Transition Services Agreement. The Transition Services Agreement will terminate on the expiration of the term of the last service provided under it, and if no expiration date is provided for any transition service, then such transition service will terminate twelve months after the date of the Transition Services Agreement, provided that the receiving party shall have the right to an extension of each or any transition service for up to six months by providing written notice to providing party in advance of the original termination date for such transition service if, prior to such request for extension, the receiving party has used commercially reasonable efforts to establish analogous capabilities of its own.

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

On March 15, 2023, New CXApp began regular-way trading on NASDAQ under the ticker symbol “CXAI.” Inpixon continues to trade under the ticker symbol “INPX.”

### Compliance with Nasdaq Continued Listing Requirement

On April 14, 2023, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days beginning on March 2, 2023, and ending on April 13, 2023, the Company no longer meets the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided a period of 180 calendar days, or until October 11, 2023, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1 per share for a minimum of ten consecutive business days during this 180-day period. In the event that the Company does not regain compliance within this 180-day period, the Company may be eligible to seek an additional compliance period of 180 calendar days if it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and provides written notice to Nasdaq of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice to the Company that our common stock will be subject to delisting. The letter does not result in the immediate delisting of our common stock from the Nasdaq Capital Market. The Company intends to monitor the closing bid price of our common stock and consider its available options in the event that the closing bid price of our common stock remains below $1 per share.

### 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, 2022.

### 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. As of June 30, 2022, the Company's previously recorded goodwill has been fully impaired.

### RESULTS OF OPERATIONS

### Three Months Ended March 31, 2023 compared to the Three Months Ended March 31, 2022

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

*(in thousands, except percentages)*

|  | For the Three Months Ended March 31, 2023 Amount | % of Revenues | 2022 Amount | % of Revenues | $ Change | % Change\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $3,104 | 100% | $2,649 | 100% | $455 | 17% |
| Cost of revenues | $791 | 25% | $797 | 30% | $(6) | (1)% |
| Gross profit | $2,313 | 75% | $1,852 | 70% | $461 | 25% |
| Operating expenses | $10,495 | 338% | $11,089 | 419% | $(594) | (5)% |
| Loss from operations | $(8,182) | (264)% | $(9,237) | (349)% | $1,055 | 11% |
| Other income (expense) | $(1,662) | (54)% | $(1,546) | (58)% | $(116) | (8)% |
| Provision for income taxes | $(2,478) | (80)% | $— | —% | $(2,478) | —% |
| Net loss from continuing operations | $(12,322) | (397)% | $(10,783) | (407)% | $(1,539) | (14)% |
| Loss from Discontinued Operations, Net of Tax | $(4,856) | (156)% | $(774) | (29)% | $(4,082) | (527)% |
| Net loss attributable to stockholders of Inpixon | $(16,873) | (544)% | $(11,211) | (423)% | $(5,662) | (51)% |

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

### Revenues

Revenues for the three months ended March 31, 2023 were $3.1 million compared to $2.6 million for the comparable period in the prior year for an increase of approximately $0.5 million, or approximately 17%. This increase is primarily attributable to the increase in Indoor Intelligence sales from the Aware and RTLS component product lines.

### Cost of Revenues and Gross Profit

Cost of revenues for the three months ended March 31, 2023 and 2022 were $0.8 million. The gross profit margin for the three months ended March 31, 2023 was 75% compared to 70% for the three months ended March 31, 2022. This increase in gross profit margin is due to the sales mix during the period.

### Operating Expenses

Operating expenses for the three months ended March 31, 2023 were $10.5 million and $11.1 million for the comparable period ended March 31, 2022. This decrease of $0.6 million is primarily attributable to lower compensation, professional fees and legal expense in the three months ended March 31, 2023.

### Other Income (Expense)

Other income/expense for the three months ended March 31, 2023 was a loss of $1.7 million as compared to a loss of $1.5 million for the three months ended March 31, 2022. The three months ended March 31, 2023 included higher interest expense on short term debt and the three months ended March 31, 2022 included a $1.5 million unrealized loss on equity securities.

### Provision for Income Taxes

There is an income tax expense of approximately $2.5 million and $0.0 million for the three months ended March 31, 2023 and 2022, respectively. The income tax expense in the three months ended March 31, 2023 includes a $2.6 million deferred tax expense to increase the valuation allowance, which is offset by a current tax benefit of $0.1 million, due to the Enterprise Apps Spin-off.

### Loss from Discontinued Operations, Net of Tax

Loss from discontinued operations, net of tax for the three months ended March 31, 2023 was $4.9 million compared to a loss of $0.8 million for the three months ended March 31, 2022. This increase in loss of $4.1 million was due to approximately $1.0 million of spin off transaction costs in the three months ended March 31, 2023 and the earnout compensation benefit of approximately $2.8 million in the three months ended March 31, 2022.

### Non-GAAP Financial information

### EBITDA

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

Adjusted EBITDA for the three months ended March 31, 2023 was a loss of $7.7 million compared to a loss of $8.8 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 three months ended March 31, 2023 and 2022 (in thousands):

|  | For the Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss attributable to stockholders of Inpixon | $(16,873) | $(17,362) |
| Interest expense/(income), net | 1,724 | (2) |
| Income tax provision | 2,478 | 100 |
| Depreciation and amortization | 1,454 | 1,806 |
| EBITDA | (11,217) | (15,458) |
| Adjusted for: |  |  |
| Non-recurring one-time charges: |  |  |
| Unrealized (gain)/loss on equity securities | (34) | 1,503 |
| Acquisition transaction/financing costs | 164 | 121 |
| Earnout compensation benefit | — | (2,827) |
| Professional service fees | — | 8 |
| Transaction costs | 2,443 | — |
| Accretion of Series 7 Preferred Stock | — | 4,555 |
| Accretion of Series 8 Preferred Stock | — | 548 |
| Deemed dividend for the modification related to Series 8 Preferred Stock | — | 2,627 |
| Deemed contribution for the modification related to warrants issued in connection with Series 8 Preferred Stock | — | (1,469) |
| Amortization premium- modification related to Series 8 Preferred Stock | — | (110) |
| Distribution of equity method investment shares to employees as compensation | 666 | — |
| Unrealized foreign exchange (gains)/losses | (205) | 89 |
| Stock-based compensation - compensation and related benefits | 329 | 1,533 |
| Severance costs | 127 | 111 |
| Adjusted EBITDA | $(7,727) | $(8,769) |

- 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 March 31, 2023 was a loss of $1.38 compared to loss of $9.05 for the prior year period.

Proforma non-GAAP net income (loss) per share is used by our Company’s management as an evaluation tool as it manages the business and is defined as net income (loss) per basic and diluted share adjusted for non-cash items including stock based compensation, amortization of intangibles and one time charges including 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 March 31, 2023 was a loss of $1.01 per share compared to a loss of $4.79 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 March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss attributable to stockholders of Inpixon | $(16,873) | $(17,362) |
| Adjustments: |  |  |
| Non-recurring one-time charges: |  |  |
| Unrealized (gain)/loss on equity securities | (34) | 1,503 |
| Acquisition transaction/financing costs | 164 | 121 |
| Earnout compensation benefit | — | (2,827) |
| Professional service fees | — | 8 |
| Transaction costs | 2,443 | — |
| Accretion of Series 7 Preferred Stock | — | 4,555 |
| Accretion of Series 8 Preferred Stock | — | 548 |
| Deemed dividend for the modification related to Series 8 Preferred Stock | — | 2,627 |
| Deemed contribution for the modification related to warrants issued in connection with Series 8 Preferred Stock | — | (1,469) |
| Amortization premium- modification related to Series 8 Preferred Stock | — | (110) |
| Distribution of equity method investment shares to employees as compensation | 666 | — |
| Unrealized foreign exchange (gains)/losses | (205) | 89 |
| Stock-based compensation - compensation and related benefits | 329 | 1,533 |
| Severance costs | 127 | 111 |
| Amortization of intangibles | 1,025 | 1,489 |
| Proforma non-GAAP net loss | $(12,358) | $(9,184) |
| Proforma non-GAAP net loss per common share - Basic and Diluted | $(1.01) | $(4.79) |
| Weighted average basic and diluted common shares outstanding | 12,238,684 | 1,917,629 |

- 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 March 31, 2023

Our current capital resources and operating results as of and through March 31, 2023, consist of:

1\) an overall working capital surplus of approximately $0.2 million;

2\) cash of approximately $15.3 million;

3\) net cash used by operating activities for the three months ended March 31, 2023 of $9.5 million.

The breakdown of our overall working capital surplus as of March 31, 2023 is as follows (in thousands):

| Working Capital | Assets | Liabilities | Net |
| --- | ---: | ---: | ---: |
| Cash and cash equivalents | $15,254 | $— | $15,254 |
| Accounts receivable, net / accounts payable | 2,999 | 1,767 | 1,232 |
| Inventory | 2,179 | — | 2,179 |
| Accrued liabilities | — | 5,112 | (5,112) |
| Operating lease obligation | — | 199 | (199) |
| Deferred revenue | — | 1,382 | (1,382) |
| Notes and other receivables / Short-term debt | 430 | 14,971 | (14,541) |
| Other | 2,797 | — | 2,797 |
| Total | $23,659 | $23,431 | $228 |

### Contractual Obligations and Commitments

Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered during our course of business. Our contractual obligations consists of operating lease liabilities and acquisition liabilities that are included in our consolidated balance sheet and vendor commitments associated with agreements that are legally binding. As of March 31, 2023, the total obligation for capitalized operating leases is approximately $0.5 million, of which approximately $0.2 million is expected to be paid in the next twelve months.

As of March 31, 2023, we owed approximately $15.0 million in principal under promissory notes with third parties. This balance excludes intercompany amounts that are eliminated in the financial statements. These notes are payable within the next twelve months and the interest rate charged under the notes range from 8% to 10%. See Note 10 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Net cash used in operating activities during the three months ended March 31, 2023 of $9.5 million consists of a net loss of $17.2 million offset by non-cash adjustments of approximately $5.6 million less net cash changes in operating assets and liabilities of approximately $2.0 million. Although the Company has sustained significant losses during three months ended March 31, 2023, in addition to the cash we had on hand, we raised gross proceeds of approximately $19.6 million since January 1, 2023, in connection with the ATM Offering described above. Given our current cash balances, financing facilities and budgeted cash flow requirements, the Company believes such funds are sufficient to satisfy its working capital needs, capital asset purchases, debt repayments and other liquidity requirements associated with its existing operations for the next 12 months from the issuance date of the financial statements.

However, general economic or other conditions resulting from COVID 19 or other events materially may impact the liquidity of our common stock or our ability to continue to access capital from the sale of our securities to support our growth plans. While the impact of the COVID-19 pandemic is generally subsiding, the lasting impact on our business and results of operations continues to remain uncertain. While we were able to continue operations remotely throughout the pandemic, we have experienced supply chain cost increases and constraints and delays in the receipt of certain components of our hardware products impacting delivery times for our products. In addition, to the extent that certain customers continue to be challenged by the lasting effects of the pandemic, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders. Our business has been impacted by the COVID-19 pandemic and may continue to be impacted. While we have been able to continue operations remotely, we have and continue to experience supply chain cost increases and constraints and delays in the receipt of certain components of our products impacting delivery times for our products. We have also seen some impact in the demand of certain products and delays in certain projects and customer orders either because they require onsite services which could not be performed as a result of new rules and regulations resulting from the pandemic, customer facilities being partially or fully closed during the pandemic or because of the uncertainty of the customer’s financial position and ability to invest in our technology.

Certain global events, such as the continued impact of the pandemic, the recent military conflict between Russia and Ukraine, and other general economic factors that are beyond our control may impact our results of operations. These factors can include interest rates; recession; inflation; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; and other matters that influence our customers spending. Increasing volatility in financial markets and changes in the economic climate could adversely affect our results of operations. We also expect that supply chain interruptions and constraints, and increased costs on parts, materials and labor may continue to be a challenge for our business. While we have been able to realize growth in the three months ended March 31, 2023 as compared to the same periods in 2022, the impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain. There are no assurances that we will be able to continue to experience the same growth or not be materially adversely effected. The Company may continue to pursue strategic transactions and may raise such additional capital as needed, using our equity securities and/or cash and debt financings in combinations appropriate for each transaction.

### Liquidity and Capital Resources

The Company’s net cash flows used in operating, investing and financing activities for the three months ended March 31, 2023 and 2022 and certain balances as of the end of those periods are as follows (in thousands):

|  | For the Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(9,503) | $(15,319) |
| Net cash provided by (used in) investing activities | (376) | 27,813 |
| Net cash provided by (used in) financing activities | 4,892 | (4,103) |
| Effect of foreign exchange rate changes on cash | 6 | (19) |
| Net (decrease)/increase in cash and cash equivalents | $(4,981) | $8,372 |

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

### Operating Activities for the three months ended March 31, 2023

Net cash used in operating activities during the three months ended March 31, 2023 was approximately $9.5 million. The cash flows related to the three months ended March 31, 2023 consisted of the following (in thousands):

|  |  |
| --- | ---: |
| Net income (loss) | $(17,178) |
| Non-cash income and expenses | 5,632 |
| Net change in operating assets and liabilities | 2,043 |
| Net cash used in operating activities | $(9,503) |

52

The non-cash income and expense of approximately $5.6 million consisted primarily of the following (in thousands):

|  |  |
| ---: | --- |
| $1,454 | Depreciation and amortization expenses |
| 110 | Amortization of right of use asset |
| 329 | Stock-based compensation expense attributable, warrants, restricted stock grants and options issued as part of Company operations |
| 834 | Amortization of debt discount |
| 666 | Distribution of equity method investment shares to employees as compensation |
| 2,478 | Deferred income tax |
| (34) | Unrealized loss on equity securities |
| (205) | Other |
| $5,632 | Total non-cash expenses |

The net cash used in the change in operating assets and liabilities aggregated approximately $2.0 million and consisted primarily of the following (in thousands):

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

### Operating Activities for the three months ended March 31, 2022

Net cash used in operating activities during the three months ended March 31, 2022 was approximately $15.3 million. The cash flows related to the three months ended March 31, 2022 consisted of the following (in thousands):

|  |  |
| --- | ---: |
| Net income (loss) | $(11,557) |
| Non-cash income and expenses | 2,163 |
| Net change in operating assets and liabilities | (5,925) |
| Net cash used in operating activities | $(15,319) |

The non-cash income and expense of approximately $2.2 million consisted primarily of the following (in thousands):

|  |  |
| ---: | --- |
| $1,806 | Depreciation and amortization expenses |
| 169 | Amortization of right of use asset |
| 1,533 | Stock-based compensation expense attributable to warrants and options issued as part of Company operations |
| (2,827) | Earnout payment expense |
| (167) | Unrealized loss on foreign currency transactions |
| 1,503 | Unrealized loss on equity securities |
| 146 | Other |
| $2,163 | Total non-cash expenses |

The net use of cash in the change in operating assets and liabilities aggregated approximately $5.9 million and consisted primarily of the following (in thousands):

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

### Cash Flows from Investing Activities as of March 31, 2023 and 2022

Net cash flows used in investing activities during the three months ended March 31, 2023 was approximately $0.4 million compared to net cash flows provided by investing activities during the three months ended March 31, 2022 of approximately $27.8 million. Cash flows related to investing activities during the three months ended March 31, 2023 include $0.01 million for the purchase of property and equipment, $0.2 million for investment in capitalized software, $0.3 million for the issuance of a note receivable, and $0.2 million of proceeds from a note receivable. Cash flows related to investing activities during the three months ended March 31, 2022 include $0.1 million for the purchase of property and equipment, $0.1 million investment in capitalized software, and $28.0 million from sales of treasury bills.

### Cash Flows from Financing Activities as of March 31, 2023 and 2022

Net cash flows provided by financing activities during the three months ended March 31, 2023 was $4.9 million. Net cash flows used in financing activities during the three months ended March 31, 2022 was $4.1 million. During the three months ended March 31, 2023, the Company received incoming cash flows of $0.1 million from a promissory note, $15.0 million from a registered direct offering, paid $0.2 million of the CXApp acquisition liability, and distributed $10.0 million to the shareholders related to the spin-off of CXApp. During the three months ended March 31, 2022, the Company received incoming cash flows $46.9 million for the issuance of preferred series 8 stock and warrants, paid $49.3 million for the redemption of preferred series 7 stock, paid $1.8 million of the CXApp acquisition liability, received $0.4 million of net proceeds from promissory notes and paid $0.3 million of taxes related to the net share settlement of restricted stock units.

### 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, 2,463 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 March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Company’s management determined that there were no material changes needed to internal controls as a result of the COVID-19 pandemic.

### Limitations of the Effectiveness of Control

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

## Risk factors

As filed, 7,717 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, 2022, filed with the SEC on April 17, 2023, which report is incorporated by reference herein, all of which could materially affect our business, financial condition and future results.

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

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

Consequently, the investment securities we own, are inherently volatile. Accordingly, the value of our total assets and as a consequence, the price of our common stock may decline or increase regardless of our operating performance, which may result in losses for investors purchasing shares of our common stock. Further, to the extent that we experience unrealized losses in connection with such securities from declines in securities values that management determines to be other than temporary, the book value of those securities will be adjusted to their estimated recovery value and we will recognize a charge to earnings in the quarter during which we make that determination. Additionally, the Company has no control over the price the Company will eventually receive as a result of the disposition of such assets and may be unable to 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.

In several instances in the past, including as recently as on April 14, 2023, 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. Each time, we were given a period of 180 days from the date of the notification to regain compliance with Nasdaq’s listing requirements by having the closing bid price of our common stock listed on Nasdaq be at least $1.00 for at least 10 consecutive trading days.

In connection with the April 14, 2023 notice, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until October 11, 2023, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1.00 per share for a minimum of ten consecutive business days during this 180-day period. In the event that we do not regain compliance within this 180-day period, we may be eligible to seek an additional compliance period of 180 calendar days 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. However, if it appears to the Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice to the Company that our common stock will be subject to delisting. The letter does not result in the immediate delisting of our common stock from the Nasdaq Capital Market.

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

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

Filed May 16, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-018311. Last ingested by Listed: Oct 24, 2026, 15:13 ET. No prices; not investment advice.