Exhibit 99.3

 

Inpixon and Subsidiaries

Unaudited Pro Forma Condensed Combined Financial Information

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2019 and the unaudited pro forma condensed combined statements of operations for each of the six months ended June 30, 2019 and for the year ended December 31, 2018 combine the financial statements of Inpixon and Subsidiaries (“Inpixon”) and Jibestream Inc. (“Jibestream”), giving effect to the acquisition of Jibestream as described in the Acquisition Agreement, as amended, plus the completion of a minimum capital raise as required by the Acquisition Agreement (collectively the “Transactions”), as if they had occurred on January 1, 2018 in respect of the unaudited pro forma condensed combined statements of operations and on June 30, 2019 in respect of the unaudited pro forma condensed combined balance sheet.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with:

 

● Inpixon’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2018, as contained in its Annual Report on Form 10-K filed on March 28, 2019 with the United States Securities and Exchange Commission (the “SEC”).

 

● Inpixon’s unaudited condensed consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2019, as contained in its Quarterly Report on Form 10-Q filed on August 14, 2019 with the SEC.

 

●

Jibestream’s audited financial statements as of and for the years ended December 31, 2018 and 2017, as contained in Inpixon’s Current Report on Form 8-K/A filed with the SEC on July 25, 2019.

 

● Jibestream’s unaudited condensed financial statements as of and for the six months ended June 30, 2019 and 2018, contained elsewhere in this filing.

 

● the other information contained in or incorporated by reference into this filing.

 

The financial statements of Jibestream were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements of Inpixon were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The unaudited pro forma condensed combined financial information includes adjustments to convert the financial information of Jibestream from IFRS to U.S. GAAP as issued by the Financial Accounting Standards Board (“FASB”), as well as reclassifications to conform Jibestream’s historical accounting presentation to Inpixon’s accounting presentation.

 

In addition, the consolidated financial statements of Inpixon are presented in US dollars (“USD”) whereas, the financial statements of Jibestream are presented in Canadian Dollars (“CAD”). Therefore, the unaudited pro forma condensed combined financial information includes adjustments to convert Jibestream’s financial information from CAD to USD.

 

The final purchase consideration and the allocation of the purchase consideration may materially differ from that reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized following the completion of the acquisition.

 

The unaudited pro forma adjustments give effect to events that are directly attributable to the Transactions and are based on available data and certain assumptions that management believes are factually supportable. In addition, with respect to the unaudited condensed combined statement of operations, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and to aid you in your analysis of the financial aspects of the Transactions. The unaudited pro forma condensed combined financial information described above has been derived from the historical financial statements of Inpixon and Jibestream and the related notes included elsewhere in this filing. The unaudited pro forma condensed combined financial information is based on Inpixon’s accounting policies. Further review may identify additional differences between the accounting policies of Jibestream and Inpixon. The unaudited pro forma adjustments and the pro forma condensed combined financial information don’t reflect the impact of synergies or post-transaction management actions and are not necessarily indicative of the financial position or results of operations that may have actually occurred had the Transaction taken place on the dates noted, or of Inpixon’s future financial position or operating results.

 

 

 

 

Inpixon and Subsidiaries

Unaudited Pro Forma Condensed Combined Balance Sheet

June 30, 2019

(USD 000’s)

 

    Inpixon     Jibestream     Capital Raise     Acquisition       Pro Forma Combined  
    Note A     Note B     Note C     Note D          
Assets                                
                                 
Current assets:                                
Cash and cash equivalents   $ 1,651       -     $ 4,041 (a)     (3,879 ) (b), (d)   $ 1,813  
Accounts receivable, net     2,384       438       -       -         2,822  
Notes and other receivables     -       50       -       -         50  
Restricted short-term investments     -       252       -       (252 ) (b)     -  
Inventory     680       -       -       -         680  
Prepaid assets and other current assets     444       43       -       -         487  
                                           
Total current assets     5,159       783       4,041       (4,131 )       5,852  
                                           
Non-current assets:                                          
Property and equipment, net     138       11       -       -         149  
Operating lease right-of-use asset, net     473       503       -       4   (d)     980  
Software development costs, net     1,641       -       -       -         1,641  
Intangible assets, net     5,609       -       -       5,075   (d)     10,684  
Goodwill     634       -       -       3,554   (d)     4,188  
Loan to related party     10,031       -       -       -         10,031  
Other assets     201       -       -       -         201  
                                           
Total non-current assets     18,727       514       -       8,633         27,874  
                                           
Total assets   $ 23,886       1,297     $ 4,041       4,502       $ 33,726  
                                        -  
Liabilities, temporary equity and stockholders’ equity                                          
                                           
Current liabilities:                                          
Accounts payable and accrued liabilities   $ 2,578       274     $ -       219   (e)   $ 3,071  
Operating lease obligation     282       258       -       -         540  
Deferred lease inducement     -       63       -       (63 ) (d)     -  
Deferred revenue     195       1,382       -       -         1,577  
Convertible promissory notes     -       699       -       (699 ) (c)     -  
Convertible debenture     -       536       -       (536 ) (b)     -  
Acquisition liability     460       -       -       -         460  
Long-term debt, current portion     -       436       -       (436 ) (b)     -  
Other indebtedness     7,094       572       -       (572 ) (b)     7,094  
Total current liabilities     10,609       4,221       -       (2,087 )       12,743  
                                           
Non-current liabilities:                                          
Promissory notes     -       -       -       -         -  
Long-term debt     73       -       -       -         73  
Other liabilities     491       -       -       -         491  
Acquisition liability, noncurrent     750       -       -       -         750  
Deferred tax liability     -       -       -       1,345   (d)     1,345  
Operating lease obligation     220       249       -       -         469  
                                           
Total non-current liabilities     1,534       249       -       1,345         3,128  
                                           
Total liabilities     12,143       4,470       -       (742 )       15,871  
                                           
Temporary equity:                                          
Preferred stock     -       1,454       -       (1,454 ) (b), (c)     -  
                                           
Stockholders’ equity:                                          
Preferred stock     -       -       - (a)     -         -  
Common stock     13       115       6 (a)     (107 ) (b), (c), (d)     27  
Additional paid-in capital     140,503       144       4,035 (a)     2,139   (b), (c), (d)     146,821  
Treasury stock     (695 )     -       -       -         (695 )
Accumulated other comprehensive income     57       -       -       -         57  
Accumulated deficit     (128,157 )     (4,885 )     -       4,666   (b), (c), (d), (e)     (128,376 )
Non-controlling interests     22       -       -       -         22  
                                           
Total stockholders’ equity     11,743       (4,627 )     4,041       6,698         17,856  
                                           
Total liabilities, temporary equity and stockholders’ equity   $ 23,886       1,297     $ 4,041       4,502       $ 33,726  

 

See notes to the unaudited pro forma condensed combined financial information

 

2

 

 

Inpixon and Subsidiaries

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2019

(USD 000’s except for shares and per share amounts)

 

    Inpixon     Jibestream     Pro Forma Adjustments     Pro Forma Combined  
    Note A     Note B     Note C        
                         
Revenues   $ 2,854     $ 1,013     $ -     $ 3,867  
                                 
Cost of revenues     727       279       -       1,006  
Gross profit     2,127       735       -       2,862  
                                 
Operating expenses                                
Research and development     1,752       -       -       1,752  
Sales and marketing     1,314       22       -       1,336  
General and administrative     6,368       1,084       -       7,452  
Acquisition related costs     647       -       (82 )(d)     565  
Amortization of intangibles     1,633       6       120 (a)     1,759  
                                 
Total operating expenses     11,714       1,112       38       12,864  
                                 
Loss from operations     (9,587 )     (377 )     (38 )     (10,002 )
                                 
Other income/(expense)                                
Interest expense     (865 )     (112 )     112 (b)     (865 )
Loss on exchange of debt for equity     (160 )     -       -       (160 )
Other income     232       -       -       232  
                                 
Total other expense     (793 )     (112 )     112       (793 )
                                 
Pre-tax loss     (10,380 )     (489 )     74       (10,795 )
Income tax benefit     -       -       32 (a)     32  
Net loss     (10,380 )     (489 )     106       (10,763 )
Net loss attributable to non-controlling interest     4       -       -       4  
Net loss attributable to stockholders of Inpixon     (10,384 )     (489 )     106       (10,767 )
Deemed dividend for triggering of warrant down round feature     (1,250 )     -       -       (1,250 )
Net loss attributable to common stockholders   $ (11,634 )   $ (489 )   $ 106     $ (12,017 )
                                 
Loss per share:                                
- basic and diluted   $ (1.69 )                   $ (0.66 )
                                 
Weighted average number of common shares outstanding:                                
- basic and diluted     6,889,873               11,257,193 (c)     18,147,066  

 

See notes to the unaudited pro forma condensed combined financial information

 

3

 

 

Inpixon and Subsidiaries

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2018

(USD 000’s except for shares and per share amounts)

 

    Inpixon     Jibestream     Pro Forma Adjustments     Pro Forma Combined  
    Note A     Note B     Note C        
                         
Revenues   $ 3,756     $ 2,441     $ -     $ 6,197  
                                 
Cost of revenues     1,076       671       -       1,747  
Gross profit     2,680       1,770       -       4,450  
                                 
Operating expenses                                
Research and development     1,231       -       -       1,231  
Sales and marketing     1,726       97       -       1,823  
General and administrative     14,149       2,546       -       16,695  
Acquisition related costs     108       -       -       108  
Impairment of goodwill     636       -       -       636  
Amortization of intangibles     3,232       19       240 (a)     3,491  
                                 
Total operating expenses     21,082       2,662       240       23,984  
                                 
Loss from operations     (18,402 )     (893 )     (240 )     (19,535 )
                                 
Other income/(expense)                                
Interest expense     (1,241 )     (132 )     132 (b)     (1,241 )
Gain on sale of Sysorex Arabia     23       -       -       23  
Change in fair value of derivative liabilities     48       -       -       48  
Other expense     (211 )     -       -       (211 )
                                 
Total other expense     (1,381 )     (132 )     132       (1,381 )
                                 
Pre-tax loss from continuing operations     (19,783 )     (1,025 )     (108 )     (20,916 )
Income tax benefit     -       -       64 (a)     64  
Net loss from continuing operations     (19,783 )     (1,025 )     (44 )     (20,852 )
Deemed dividend to preferred stockholders     (6,407 )     -       -       (6,407 )
Deemed dividend for triggering of warrant down round feature     (13,645 )     -       -       (13,645 )
                                 
Net loss from continuing operations attributable to common stockholders   $ (39,835 )   $ (1,025 )   $ (44 )   $ (40,904 )
                                 
Loss per share:                                
- basic and diluted   $ (51.62 )                   $ (3.40 )
                                 
Weighted average number of common shares outstanding:                                
- basic and diluted     771,688               11,257,193 (c)     12,028,881  

 

See notes to the unaudited pro forma condensed combined financial information

 

4

 

 

Inpixon and Subsidiaries

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

Basis of Presentation

 

The unaudited pro forma condensed combined financial information set forth herein is based upon the consolidated financial statements of Inpixon and Jibestream. The unaudited pro forma condensed combined financial information is presented as if the Transactions had been completed on January 1, 2018 with respect to the unaudited pro forma condensed combined statements of operations for each of the six months ended June 30, 2019 and for the year ended December 31, 2018 and on June 30, 2019 in respect of the unaudited pro forma condensed combined balance sheet.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations had the Transactions occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the combined company will experience after the completion of the Transactions.

 

We have accounted for the acquisition in this unaudited pro forma condensed combined financial information using the acquisition method of accounting, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we used our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

 

Inpixon’s consolidated financial information is prepared in accordance with U.S. GAAP as issued by the FASB and is presented in USD. Jibestream’s financial information has been historically prepared in accordance with IFRS as issued by the IASB and was presented in CAD and has been converted for the purpose of this unaudited pro forma condensed consolidated financial information to be consistent with the Inpixon presentation.

 

Pro forma adjustments reflected in the unaudited pro forma condensed combined statements of operations are based on items that are factually supportable, directly attributable to the Transactions and expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from the acquisition, including potential synergies that may be generated in future periods.

 

All Monetary Amounts Other Than Per Share Information Are Presented in 000’s Unless Otherwise Indicated

 

Pro Forma Adjustments

 

The following pro forma adjustments give effect to the transaction.

 

Unaudited Pro Forma Condensed Combined Balance Sheet – As of June 30, 2019

 

  Note A Derived from the unaudited condensed consolidated balance sheet of Inpixon as of June 30, 2019, as contained in its Quarterly Report on Form 10-Q filed on August 14, 2019 with the SEC.
     
  Note B

Derived from the unaudited condensed U.S. GAAP balance sheet of Jibestream as of June 30, 2019 included on the next page and translated from CAD to USD. The indicated exchange rate used to translate CAD to USD at June 30, 2019 was the rate of 0.7636 as set out in the table below.

 

5

 

 

CAD to USD Translation:

 

          EXCHANGE        
    Jibestream
GAAP		     RATE
0.7636		     Jibestream
GAAP		  
                   
    (CAD)           (USD)  
Assets                  
                   
Current assets:                  
Restricted short-term investments   $ 330                   $ 252  
Accounts receivable     574               438  
Investment tax credits receivable     66               50  
Prepaid expenses and deposits     57               43  
                         
Total current assets     1,026               783  
                         
Non-current assets:                        
Property and equipment     15               11  
Right of use asset     658               503  
                         
Total non-current assets     673               514  
                         
Total assets   $ 1,699             $ 1,297  
                         
Liabilities, temporary equity and shareholders’ equity                        
                         
Current liabilities:                        
Bank indebtedness   $ 749             $ 572  
Accounts payable and accrued liabilities     359               274  
Deferred lease inducement     83               63  
Deferred revenue     1,810               1,382  
Convertible promissory notes     548               418  
Current portion of long-term debt     571               436  
Current portion of convertible debenture     702               536  
Current portion of promissory notes-shareholders     368               281  
Current portion of lease obligation     338               258  
Total current liabilities     5,528               4,221  
                         
Non-current liabilities:                        
Lease obligation     326               249  
                         
Total non-current liabilities     326               249  
                         
Total liabilities     5,854               4,470  
                         
Temporary equity:                        
Preferred stock     1,904               1,454  
                         
Shareholders’ equity:                        
Share capital     150               115  
Deficit     (6,398 )             (4,885 )
Contributed surplus     188               144  
                         
Total shareholders’ equity     (6,059 )             (4,627 )
                         
Total liabilities, temporary equity and shareholders’ equity   $ 1,699             $ 1,297  

 

The Jibestream U.S. GAAP balance sheet was derived from the unaudited condensed financial balance sheet of Jibestream as of June 30, 2019, prepared in accordance with IFRS as issued by the IASB and adjusted to conform with U.S. GAAP, as issued by the FASB. The table below provides a reconciliation between the unaudited condensed IFRS balance sheet and the unaudited condensed U.S. GAAP balance sheet.

 

6

 

 

IFRS to U.S. GAAP Adjustments:

 

    Jibestream
IFRS		     GAAP Adjustments     Jibestream
GAAP		  
                   
    (CAD)     (CAD)     (CAD)  
Assets                  
                   
Current assets:                  
Restricted short-term investments   $ 330     $ -     $ 330  
Accounts receivable     574       -       574  
Investment tax credits receivable     66       -       66  
Prepaid expenses and deposits     57       -       57  
                         
Total current assets     1,026       -       1,026  
                         
Non-current assets:                        
Property and equipment     15       -       15  
Right of use asset     658       -       658  
                         
Total non-current assets     673       -       673  
                         
Total assets   $ 1,699     $ -     $ 1,699  
                         
Liabilities, temporary equity and shareholders’ equity                        
                         
Current liabilities:                        
Bank indebtedness   $ 749     $ -     $ 749  
Accounts payable and accrued liabilities     359       -       359  
Deferred lease inducement     83       -       83  
Deferred revenue     1,810       -       1,810  
Convertible promissory notes     267       281 (a)     548  
Current portion of long-term debt     571       -       571  
Current portion of convertible debenture     676       26 (b)     702  
Current portion of promissory notes-shareholders     368       -       368  
Current portion of lease obligation     338       -       338  
Derivative liability-convertible debenture     127       (127 )(c)     -  
Derivative liability-convertible promissory notes     830       (830 )(d)     -  
Total current liabilities     6,178       (650 )     5,528  
                         
Non-current liabilities:                        
Lease obligation     326       -       326  
Preferred shares     1,904       (1,904 )(e)     -  
                         
Total non-current liabilities     2,230       (1,904 )     326  
                         
Total liabilities     8,408       (2,554 )     5,854  
                         
Temporary equity:                        
Preferred stock     -       1,904 (e)     1,904  
                         
Shareholders’ equity:                        
Share capital     150       -       150  
Deficit     (7,048 )     650 (a)(b)(c)(d)     (6,398 )
Contributed surplus     188       -       188  
                         
Total shareholders’ equity     (6,709 )     650       (6,059 )
                         
Total liabilities, temporary equity and shareholders’ equity   $ 1,699     $ -     $ 1,699  

 

a) To reverse convertible promissory notes’ debt discount related to its bifurcated embedded conversion option under IFRS which, pursuant to the terms of their respective agreements, does not require bifurcation under U.S. GAAP.

 

7

 

 

b) To reverse convertible debentures’ debt discount under IFRS which, pursuant to the terms of their respective agreements, does not require bifurcation under U.S. GAAP.

 

c) To reverse convertible debentures’ bifurcated embedded conversion options under IFRS which, pursuant to the terms of their respective agreements, does not require bifurcation under U.S. GAAP.

 

d) To reverse convertible promissory notes’ bifurcated embedded conversion options under IFRS which, pursuant to the terms of their respective agreements, does not require bifurcation under U.S.GAAP.

 

e) To reclassify redeemable preferred stock accounted for as a liability under IFRS to temporary equity under U.S. GAAP.

 

Note C – Capital Raise

 

Pro Forma Adjustments:

 

  (a)

The Acquisition Agreement required the completion of an offering whereby Inpixon would raise enough cash to pay the cash portion of the purchase consideration associated with the acquisition. On August 15, 2019, Inpixon closed an offering whereby Inpixon raised approximately $4,800 in gross proceeds in cash for the issuance of 6,497,410 shares of common stock, 2,997 shares of Series 6 preferred stock, and Series A warrants to purchase an aggregate of 17,297,410 shares of Inpixon common stock.

 

The placement agent fee was $384 was withheld from the proceeds of the transactions. This transaction also includes approximately $375 in deferred offering costs paid in cash charged to additional paid in capital upon closing.

 

Note D – Acquisition

 

  (b) To record a portion of the cash purchase consideration used to pay down $1,544 of certain debt. $252 of restricted short term investments will also be used to pay down certain debt.
     
  (c) To give effect to the convertible promissory notes that will be converted into redeemable preferred stock prior to closing.
     
  (d) The following table summarizes the purchase consideration and the preliminary allocation of the assets acquired and liabilities assumed, based on their fair values on the acquisition date. The purchase consideration constitutes the following: the payment of approximately $3,818 of cash (CAD 5,000), $61 of net cash adjustments to the purchase price and the issuance of 7,932,972 shares of Inpixon common stock plus warrants, with an aggregate value of approximately $2,291 (CAD 3,000) (collectively the “Purchase Consideration”).

 

8

 

 

Jibestream Purchase Price Allocation      
(000’s) USD      
       
Cash   $ 3,818  
Common stock     2,291  
Working capital adjustment- cash     176  
Deferred revenue adjustment-cash     (115 )
Purchase consideration   $ 6,170  
         
Less:        
         
Net working capital deficit   $ (1,125 )
Property and equipment     11  
Proprietary technology (1)     3,963  
Customer relationships (2)     800  
Non-compete (3)     312  
Deferred tax liability (4)     (1,345 )
Fair value of net assets acquired   $ 2,616  
         
Goodwill value   $ 3,554  

 

(1) The proprietary technology is currently presumed to have an indefinite useful life.

 

(2) The customer relationships are currently presumed to have an estimated useful life of 9.5 years.

 

(3) The non-compete agreements are currently presumed to have an estimated useful life of 2 years.

 

(4) The deferred tax liabilities relate to the acquired intangible assets.

 

(e) To recognize the impact of estimated merger expenses of $219 incurred subsequent to June 30, 2019 through the closing date of the transaction.

 

9

 

 

Unaudited Pro Forma Condensed Combined Statement of Operations

 

For The Six Months Ended June 30, 2019

 

  Note A

Derived from the unaudited condensed consolidated statement of operations of Inpixon for the six months ended June 30, 2019, as contained in its Quarterly Report on Form 10-Q filed on August 14, 2019 with the SEC.
     
  Note B Derived from the unaudited condensed U.S. GAAP statement of operations of Jibestream for the six months ended June 30, 2019 included on the next page and translated from CAD to USD. The average exchange rate used to translate CAD to USD for the six months ended June 30, 2019 was the rate of 0.7498 as set out in the table below.

 

CAD to USD Translation:

 

          EXCHANGE        
    Jibestream
GAAP		     RATE
0.7498		     Jibestream
GAAP		  
    (CAD)           (USD)  
                   
Revenues   $ 1,351                    $ 1,013  
                         
Cost of revenues     372               279  
Gross profit     980               735  
                         
Operating expenses                        
Salaries, wages and benefits     1,023               767  
Office and general     113               84  
Amortization     8               6  
Travel and entertainment     59               44  
Share-based compensation     15               11  
Professional fees     39               29  
Advertising and promotion     29               22  
Bank charges     4               3  
Occupancy     187               140  
Foreign exchange loss     15               11  
Bad debts     (6 )             (5 )
                         
Total operating expenses     1,483               1,112  
                         
Loss from operations     (503 )             (377 )
                         
Other (income)/expenses                        
Interest     150               112  
                         
Total other expense     150               112  
                         
Net loss   $ (652 )           $ (489 )

 

The Jibestream U.S. GAAP statement of operations were derived from the unaudited condensed statement of operations of Jibestream for the six months ended June 30, 2019, prepared in accordance with IFRS as issued by the IASB and adjusted to conform with U.S. GAAP as issued by the FASB. The table below provides a reconciliation between the unaudited condensed IFRS statement of operations and the unaudited condensed U.S. GAAP statement of operations.

 

10

 

 

IFRS to U.S. GAAP Adjustments:

 

    Jibestream
IFRS		     GAAP
Adjustments		     Jibestream
GAAP		  
    (CAD)     (CAD)     (CAD)  
                   
Revenues   $ 1,351     $ -     $ 1,351  
                         
Cost of revenues     -       372 (e)     372  
Gross profit     1,351       (372 )     980  
                         
Operating expenses                        
Salaries, wages and benefits     1,354       (332 )(e)     1,023  
Office and general     153       (40 )(e)     113  
Amortization     155       (148 )(a)     8  
Travel and entertainment     59       -       59  
Interest     150       (150 )(f)     -  
Share-based compensation     -       15 (d)     15  
Professional fees     39       -       39  
Advertising and promotion     29       -       29  
Bank charges     4       -       4  
Occupancy     -       187 (a)     187  
Foreign exchange loss     15       -       15  
Bad debts     (6 )     -       (6 )
                         
Total operating expenses     1,950       (467 )     1,483  
                         
Loss from operations     (598 )     96       (503 )
                         
Other (income)/expenses                        
Accretion expense     190       (190 )(a)     -  
Interest     -       150 (f)     150  
Gain on derivative liability- convertible debenture     (16 )     16 (b)     -  
Loss on derivative liability-convertible promissory notes     128       (128 )(c)     -  
Share-based compensation     15       (15 )(d)     -  
                         
Total other expense     318       (168 )     150  
                         
Net loss   $ (916 )   $ 264     $ (652 )

 

a) To reclassify amortization and accretion expense under IFRS 16 to lease expense under ASC 842.

 

b) To reverse gain on change in fair value of convertible debenture’s bifurcated embedded conversion options.

 

c) To reverse the loss on change in fair value of convertible promissory notes bifurcated embedded conversion options.

 

d) To reclassify share-based compensation from other expenses into operating expenses.

 

e) To reclassify certain operating expenses into cost of revenues.

 

f) To reclassify interest expense from operating expenses to other income (expense).

 

11

 

 

Note C - Pro Forma Adjustments:

 

  (a) To record the amortization of the fair value of customer relationships with a useful life of 9.5 years plus the non-compete agreements with a useful life of 2 years. An income tax benefit related to that amortization was also recorded.
     
  (b) To eliminate interest expense associated with certain debt and other promissory notes as they were repaid or converted as a result of the Transactions.
     
  (c)

To adjust weighted average shares outstanding used in earnings per share calculations for an additional 11,257,193 shares of Inpixon common stock issued as a result of the Transactions. The 11,257,193 shares is comprised of 6,497,410 shares issued in the equity offering, plus the 7,932,972 shares issued in the acquisition, less the 3,173,189 shares being withheld for potential indemnification claims. All potentially dilutive securities are anti-dilutive.
     
  (d) To remove the effect of one-time merger expenses totaling $82 related to the acquisition.

 

Unaudited Pro Forma Condensed Combined Statement of Operations

 

For The Year Ended December 31, 2018

 

  Note A

Derived from the audited consolidated statement of operations of Inpixon for the year ended December 31, 2018, as contained in its Annual Report on Form 10-K filed on March 28, 2019 with the SEC.
     
  Note B Derived from the unaudited condensed U.S. GAAP statement of operations of Jibestream for the year ended December 31, 2018 included on the next page and translated from CAD to USD. The average exchange rate used to translate CAD to USD for the year ended December 31, 2018 was the rate of 0.7717 as set out in the table below.

 

12

 

 

CAD to USD Translation:

 

          EXCHANGE        
    Jibestream
GAAP		     RATE
0.7717		     Jibestream
GAAP		  
    (CAD)           (USD)  
                   
Revenues   $ 3,163                  $ 2,441  
                         
Cost of revenues     870               671  
Gross profit   $ 2,293             $ 1,770  
                         
Operating expenses                        
Salaries, wages and benefits     2,355               1,817  
Office and general     337               260  
Occupancy     345               266  
Advertising and promotion     126               97  
Travel and entertainment     119               92  
Professional fees     111               86  
Bad debts     58               45  
Amortization     25               19  
Share-based compensation     39               30  
Sub-contracts     7               5  
Foreign exchange gain     (71 )             (54 )
                         
Total operating expenses     3,450               2,662  
                         
Loss from operations     (1,157 )             (893 )
                         
Other (income)/expenses                        
Interest     171               132  
                         
Total other expense     171               132  
                         
Net loss   $ (1,328 )           $ (1,025 )

 

The Jibestream U.S. GAAP statement of operations was derived from the unaudited condensed statement of operations of Jibestream for the year ended December 31, 2018, prepared in accordance with IFRS as issued by the IASB and adjusted to conform with U.S. GAAP as issued by the FASB. The table below provides a reconciliation between the unaudited condensed IFRS statement of operations and the unaudited condensed U.S. GAAP statement of operations.

 

13

 

 

IFRS to U.S. GAAP Adjustments:

 

    Jibestream
IFRS		     GAAP
Adjustments		     Jibestream
GAAP		  
    (CAD)     (CAD)     (CAD)  
Revenues   $ 3,163     $ -     $ 3,163  
                         
Cost of revenues     -       870 (g)     870  
Gross profit   $ 3,163     $ (870 )   $ 2,293  
                         
Operating expenses                        
Salaries, wages and benefits     3,145       (790 )(g)     2,355  
Office and general     417       (80 )(g)     337  
Occupancy     345       -       345  
Interest     171       (171 )(f)     -  
Advertising and promotion     126       -       126  
Travel and entertainment     119       -       119  
Professional fees     111       -       111  
Bad debts     58       -       58  
Amortization     25       -       25  
Share-based compensation     -       39 (e)     39  
Sub-contracts     7       -       7  
Foreign exchange gain     (71 )     -       (71 )
                         
Total operating expenses     4,452       (1,002 )     3,450  
                         
Loss from operations     (1,289 )     132       (1,157 )
                         
Other (income)/expenses                        
Accretion expense     216       (216 )(a)     -  
Interest     -       171 (f)     171  
Loss on derivative liability- convertible debenture     13       (13 )(b)     -  
Gain on extinguishment of convertible debentures     (287 )     287 (c)     -  
Loss on derivative liability-convertible promissory notes     332       (332 )(d)     -  
Share-based compensation     39       (39 )(e)     -  
                         
Total other expense     312       (140 )     171  
                         
Net loss   $ (1,601 )   $ 273     $ (1,328 )

 

a) To reverse accretion of debt discount recognized for convertible debentures’ bifurcated embedded conversion option

 

b) To reverse loss on change in fair value of convertible debentures’ bifurcated embedded conversion option.

 

c) To reverse gain on extinguishment of convertible debentures.

 

d) To reverse the loss on change in fair value of convertible promissory notes’ bifurcated embedded conversion option.

 

e) To reclassify share-based compensation from other expenses into operating expenses.

 

f) To reclassify interest expense from operating expenses into other expenses.

 

g) To reclassify certain operating expenses into cost of revenues.

 

14

 

 

Note C - Pro Forma Adjustments:

 

  (a) To record the amortization of the fair value of customer relationships with a useful life of 9.5 years plus the non-compete agreements with a useful life of 2 years.  An income tax benefit related to that amortization was also recorded.
     
  (b) To eliminate interest expense associated with certain debt, convertible, and other promissory notes as they were deemed to be repaid as a result of the Transactions.
     
  (c)

To adjust weighted average shares outstanding used in earnings per share calculations for an additional 11,257,193 shares of Inpixon common stock issued as a result of the Transactions. The 11,257,193 shares is comprised of 6,497,410 shares issued in the equity offering, plus the 7,932,972 shares issued in the acquisition, less the 3,173,189 shares being withheld for potential indemnification claims. All potentially dilutive securities are anti-dilutive.

 

 

15