May 16, 2023 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2023

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

For the transition period from ______________ to _______________

Commission File Number 001-36404

INPIXON

(Exact name of registrant as specified in its charter)


Nevada						88-0434915
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2479 E. Bayshore Road

Suite 195

Palo Alto, CA 94303

(Address of principal executive offices)

(Zip Code)

(408) 702-2167

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on
which each is registered

Common Stock, par value $0.001

INPX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

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


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	¨

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

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

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


Common Stock, Par Value $0.001						26,665,373
(Class)						Outstanding at May 15, 2023

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INPIXON

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Page No.

Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report

PART I - FINANCIAL INFORMATION

iii

Item 1.

Financial Statements

iii

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022

Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders' Equity for the three months ended March 31, 2023 and 2022

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signatures

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

CONTAINED IN THIS REPORT

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

•our history of losses;

•our ability to achieve profitability;

•our limited operating history with recent acquisitions;

•the possibility that anticipated tax treatment and benefits of the spin-off of our enterprise apps business and subsequent Business Combination (defined below) may not be achieved;

•risks related to our recent acquisitions, the spin-off of our enterprise apps business and subsequent Business Combination that recently closed or any other strategic transactions that we may undertake;

•our ability to successfully integrate companies or technologies we acquire;

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

•customer demand for the products and services we develop;

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

•our ability to manufacture or deliver any products we develop;

•general economic conditions and events and the impact they may have on us and our potential customers, including, but not limited to increases in inflation rates and rates of interest, supply chain challenges, increased costs for materials and labor, cybersecurity attacks, other lingering impacts resulting from COVID-19, and the Russia/Ukraine conflicts;

•our ability to obtain adequate financing in the future as needed;

•our ability to consummate strategic transactions which may include acquisitions, mergers, dispositions involving us and any of our business units or other strategic investments;

•our ability to attract, retain and manage existing customers;

•our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market;

•lawsuits and other claims by third parties or investigations by various regulatory agencies that we may be subjected to and are required to report, including but not limited to, the U.S. Securities and Exchange Commission;

•our success at managing the risks involved in the foregoing items;

•impact of any changes in existing or future tax regimes; and

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•other factors discussed in this Form 10-Q.

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

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

Unless otherwise stated or the context otherwise requires, the terms “Inpixon” “we,” “us,” “our” and the “Company” refer collectively to Inpixon and, where appropriate, its subsidiaries.

Note Regarding Reverse Stock Split

The Company effected a reverse stock split of its authorized and issued and outstanding common stock, par value $0.001, at a ratio of 1-for-75, effective as of October 7, 2022 (the "Reverse Stock Split"), for the purpose of complying with Nasdaq Listing Rule 5550(a)(2). We have reflected the Reverse Stock Split herein, unless otherwise indicated.

PART I — FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

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

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

The results for the period ended March 31, 2023 are not necessarily indicative of the results of operations for the full year. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited consolidated financial statements for the fiscal years ended December 31, 2022 and 2021 included in the annual report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 17, 2023.

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	As of March 31, 2023		As of December 31, 2022
	(Unaudited)		(Audited)
Assets

Current Assets
Cash and cash equivalents	$	15,254	$	10,235
Accounts receivable, net of allowances of $268 and $272, respectively	2,999		1,889
Notes and other receivables	430		86
Inventory	2,179		2,442
Note receivable	—		150
Prepaid expenses and other current assets	2,797		2,803
Current assets of discontinued operations	—		12,261

Total Current Assets	23,659		29,866

Property and equipment, net	1,052		1,064
Operating lease right-of-use asset, net	484		531
Software development costs, net	1,313		1,265
Investments in equity securities	364		330
Long-term investments	50		716
Intangible assets, net	2,810		2,994
Other assets	175		158
Non-current assets of discontinued operations	—		20,711

Total Assets	$	29,907	$	57,635

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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


	As of March 31, 2023		As of December 31, 2022
	(Unaudited)		(Audited)
Liabilities and Stockholders’ Equity

Current Liabilities
Accounts payable	$	1,767	$	1,503
Accrued liabilities	5,112		2,619
Operating lease obligation, current	199		211
Deferred revenue	1,382		1,323
Short-term debt	14,971		13,643
Acquisition liability	—		197
Current liabilities of discontinued operations	—		5,218

Total Current Liabilities	23,431		24,714

Long Term Liabilities
Operating lease obligation, noncurrent	297		334
Non-current liabilities of discontinued operations	—		472

Total Liabilities	23,728		25,520

Commitments and Contingencies	—		—





Stockholders’ Equity
Preferred Stock -$0.001 par value; 5,000,000 shares authorized
Series 4 Convertible Preferred Stock - 10,415 shares authorized; 1 issued and 1 outstanding as of March 31, 2023 and December 31, 2022	—		—
Series 5 Convertible Preferred Stock - 12,000 shares authorized; 126 issued and 126 outstanding as of March 31, 2023 and December 31, 2022	—		—
Common Stock - $0.001 par value; 500,000,000 shares authorized; 16,478,253 and 3,570,894 issued and 16,478,252 and 3,570,893 outstanding as of March 31, 2023 and December 31, 2022, respectively.	16		4
Additional paid-in capital	339,148		346,668
Treasury stock, at cost, 1 share	(695)		(695)
Accumulated other comprehensive (loss) income	(198)		1,061
Accumulated deficit	(330,586)		(313,739)

Stockholders’ Equity Attributable to Inpixon	7,685		33,299

Non-controlling Interest	(1,506)		(1,184)

Total Stockholders’ Equity	6,179		32,115

Total Liabilities and Stockholders’ Equity	$	29,907	$	57,635

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)


	For the Three Months Ended March 31,
		2023		2022
		(Unaudited)
Revenues		$	3,104	$	2,649

Cost of Revenues		791		797

Gross Profit		2,313		1,852

Operating Expenses
Research and development		1,983		2,124
Sales and marketing		1,115		1,169
General and administrative		5,613		7,334
Acquisition-related costs		164		115
Transaction costs		1,400		—

Amortization of intangibles		220		347

Total Operating Expenses		10,495		11,089

Loss from Operations		(8,182)		(9,237)

Other (Expense)/Income
Interest (expense)/income, net		(1,725)		1


Other income/(expense), net		29		(44)
Unrealized gain/(loss) on equity securities		34		(1,503)
Total Other Expense		(1,662)		(1,546)

Net Loss from Continuing Operations, before tax		(9,844)		(10,783)
Income tax provision		(2,478)		—
Net Loss from Continuing Operations		(12,322)		(10,783)

Loss from Discontinued Operations, Net of Tax		(4,856)		(774)

Net Loss		(17,178)		(11,557)

Net Loss Attributable to Non-controlling Interest		(305)		(346)

Net Loss Attributable to Stockholders of Inpixon		(16,873)		(11,211)
Accretion of Series 7 Preferred Stock		—		(4,555)
Accretion of Series 8 Preferred Stock		—		(548)
Deemed dividend for the modification related to Series 8 Preferred Stock		—		(2,627)
Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock		—		1,469
Amortization premium- modification related to Series 8 Preferred Stock		—		110
Net Loss Attributable to Common Stockholders		$	(16,873)	$	(17,362)

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)


Net Loss Per Share - Basic and Diluted	$	(1.38)	$	(9.05)


Weighted Average Shares Outstanding
Basic and Diluted	12,238,684		1,917,629

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)


	For the Three Months Ended March 31,
		2023		2022
		(Unaudited)
Net Loss		$	(17,178)	$	(11,557)
Unrealized foreign exchange loss from cumulative translation adjustments		(1,259)		(102)

Comprehensive Loss		$	(18,437)	$	(11,659)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands, except share and per share data)


	Series 4 Convertible Preferred Stock	Series 5 Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Treasury Stock						Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Non-Controlling Interest			Total Stockholders’ (Deficit) Equity
		Shares	Amount		Shares	Amount			Shares			Amount					Shares					Amount
Balance - January 1, 2023		1	$	—	126	$	—	3,570,894		$	4		$	346,668		(1)		$	(695)	$	1,061		$	(313,739)	$	(1,184)	$	32,115
Common shares issued for extinguishment of debt		—	—		—	—		1,547,234		1			1,425			—		—		—			—		—		1,426
Common shares issued for net cash proceeds of a public offering								9,655,207		10			14,956			—		—		—			—		—		14,966
Stock options and restricted stock awards granted to employees for services		—	—		—	—		—		—			329			—		—		—			—		—		329
Deconsolidation of CXApp business as result of spin off		—	—		—	—		—		—			(24,230)		1	—		—		—			—		—		(24,230)
Common shares issued for net proceeds from warrants exercised		—	—		—	—		1,380,000		1			—			—		—		—			—		—		1
Common shares issued for exchange of warrants		—	—		—	—		324,918		—			—			—		—		—			—		—		—
Cumulative translation adjustment		—	—		—	—		—		—			—			—		—		(1,259)			26		(17)		(1,250)
Net loss		—	—		—	—		—		—			—			—		—		—			(16,873)		(305)		(17,178)
Balance - March 31, 2023		1	$	—	126	$	—	16,478,253		$	16		$	339,148		(1)		$	(695)	$	(198)		$	(330,586)	$	(1,506)	$	6,179

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands, except share and per share data)


	Series 7 Preferred Stock			Series 8 Preferred Stock				Series 4 Convertible Preferred Stock			Series 5 Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Non-Controlling Interest		Total Stockholders’ (Deficit) Equity
	Shares	Amount		Shares	Amount		Amount	Shares	Amount		Shares	Amount		Shares	Amount				Shares	Amount
Balance - January 1, 2022	49,250	44,695		—	—			1	$	—	126	$	—	1,730,140	$	2	$	332,761	(1)	$	(695)	44		$	(250,309)	$	1,688	$	83,491
Common shares issued for extinguishment of debt	—	—		—	—			—	—		—	—		57,472	—		1,500		—	—		—		—		—		1,500
Stock options and restricted stock awards granted to employees for services	—	—		—	—			—	—		—	—		—	—		1,533		—	—		—		—		—		1,533
Series 7 Preferred redeemed for cash	(49,250)	(49,250)		—	—			—	—		—	—		—	—		—		—	—		—		—		—		—
Series 8 Preferred stock issued for cash	—	—		53,198	41,577			—	—		—	—		—	—		5,329		—	—		—		—		—		5,329
Accretion Discount- Series 7 Preferred Shares	—	4,555		—	—			—	—		—	—		—	—		(4,555)		—	—		—		—		—		(4,555)
Accretion Discount- Series 8 Preferred Shares	—	—		—	548			—	—		—	—		—	—		(548)		—	—		—		—		—		(548)
Deemed dividend for the modification related to Series 8 Preferred Stock	—	—		—	2,627			—	—		—	—		—	—		(2,627)		—	—		—		—		—		(2,627)
Deemed contribution for the modification related to Warrants issued in connection with Series 8 Preferred Stock	—	—		—	(1,469)			—	—		—	—		—	—		1,469		—	—		—		—		—		1,469
Amortization Premium- modification related to Series 8 Preferred Stock	—	—		—	(110)			—	—		—	—		—	—		110		—	—		—		—		—		110
Restricted stock grants withheld for taxes	—	—		—	—			—	—		—	—		(12,802)	—		(336)		—	—		—		—		—		(336)
Common shares issued for CXApp earnout	—	—		—	—			—	—		—	—		144,986	—		3,697		—	—		—		—		—		3,697
Common shares issued for exchange of warrants	—	—		—	—			—	—		—	—		184,153	—		—		—	—		—		—		—		—
Cumulative translation adjustment	—	—		—	—			—	—		—	—		—	—		—		—	—		(102)		(15)		15		(102)
Net loss	—	—		—	—			—	—		—	—		—	—		—		—	—		—		(11,211)		(346)		(11,557)

Balance - March 31, 2022	—	$	—	53,198	$	43,173		1	$	—	126	$	—	2,103,949	$	2	$	338,333	(1)	$	(695)	$	(58)	$	(261,535)	$	1,357	$	77,404

——

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	For the Three Months Ended March 31,
	2023		2022
Cash Flows Used in Operating Activities	(Unaudited)

Net loss	$	(17,178)	$	(11,557)

Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	429		317
Amortization of intangible assets	1,025		1,489
Amortization of right of use asset	110		169
Stock based compensation	329		1,533
Earnout expense valuation benefit	—		(2,827)


Amortization of debt discount	834		—



Unrealized loss on foreign currency transactions	(205)		(167)


Distribution of equity method investment shares to employees as compensation	666		—
Deferred income tax	2,478		—

Unrealized loss on equity securities	(34)		1,503



Other	—		146

Changes in operating assets and liabilities:
Accounts receivable and other receivables	(1,994)		(239)
Inventory	283		181
Prepaid expenses and other current assets	274		(3,607)
Other assets	(4)		41
Accounts payable	(534)		(1,345)
Accrued liabilities	3,545		(109)
Income tax liabilities	(2)		(40)
Deferred revenue	584		(666)
Operating lease obligation	(109)		(141)

Net Cash Used in Operating Activities	(9,503)		(15,319)

Cash Flows Used in Investing Activities
Purchase of property and equipment	(6)		(81)
Investment in capitalized software	(220)		(107)





Sales of treasury bills	—		28,001

Proceeds from repayment of note receivable	150		—
Issuance of note receivable	(300)		—
Net Cash (Used in) Provided By Investing Activities	(376)		27,813

Cash From Financing Activities
Net proceeds from issuance of preferred stock and warrants	—		46,906

Net proceeds from promissory note	125		364
Net proceeds for registered direct offering	14,966		—
Cash paid for redemption of preferred stock series 7	—		(49,250)

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INPIXON AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)


Taxes paid related to net share settlement of restricted stock units	—		(336)



Repayment of CXApp acquisition liability	(197)		(1,787)
Common shares issued for net proceeds from warrants	1		—
Distribution to shareholders related to spin-off of CXApp	(10,003)		—


Net Cash Provided By (Used In) Financing Activities	4,892		(4,103)

Effect of Foreign Exchange Rate on Changes on Cash	6		(19)

Net (Decrease)/Increase in Cash and Cash Equivalents	(4,981)		8,372

Cash and Cash Equivalents - Beginning of period	20,235		52,480

Cash and Cash Equivalents - End of period	$	15,254	$	60,852

Supplemental Disclosure of cash flow information:
Cash paid for:
Interest	$	—	$	1
Income Taxes	$	—	$	100

Non-cash investing and financing activities
Common shares issued for extinguishment of debt	$	1,426	$	1,500
Common shares issued for CXApp Earnout Payment	$	—	$	3,697
Common shares issued in exchange for warrants	$	—	$	14



Noncash net assets distribution to shareholders related to spin-off of CXApp	$	14,227	$	—

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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INPIXON AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 1 - Organization and Nature of 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 organization to create and utilize the digital twin of a physical location and to deliver enhanced experiences in their current environment and in the metaverse.

Inpixon 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 organizations'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 cloud-based 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.

Enterprise Apps Spin-off and Business Combination

On March 14, 2023, we completed the Enterprise Apps Spin-off and subsequent Business Combination (the "Closing") In connection with the Closing, KINS was renamed CXApp Inc. (“New CXApp”). Pursuant to the Transaction Agreements, Inpixon contributed to CXApp cash and certain 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

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FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

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

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

Reverse Stock Split

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

Note 2 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results for the three months ended March 31, 2023 are not necessarily indicative of the results for the full year ending December 31, 2023. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the years ended December 31, 2022 and 2021 included in the annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC on April 17, 2023.

Note 3 - Summary of Significant Accounting Policies

The Company's complete accounting policies are described in Note 2 to the Company's audited consolidated financial statements and notes for the year ended December 31, 2022.

Liquidity

As of March 31, 2023, the Company has a working capital surplus of approximately $0.2 million, and cash of approximately $15.3 million. For the three months ended March 31, 2023, the Company had a net loss of approximately $17.2 million. During the three months ended March 31, 2023, the Company used approximately $9.5 million of cash for operating activities.

Risks and Uncertainties

The Company cannot assure you 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. While the impact of the COVID-19 pandemic is generally subsiding, the lasting impact on our business and results of operations continues to remain uncertain. While we were able to continue operations remotely throughout the pandemic, we have experienced supply chain cost increases and constraints and delays in the receipt of certain components of our hardware products impacting delivery times for our products. In addition, to the extent that certain customers continue to be challenged by the lasting effects of the pandemic, including delays in returning employees to the office, we have and may continue to see an impact in the demand of certain products and delays in certain projects and customer orders.

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Note 3 - Summary of Significant Accounting Policies (continued)

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

The Company's recurring losses and utilization of cash in its operations are indicators of going concern however with the Company's current liquidity position, including $15.3 million cash on hand plus the $4.1 million raised under the ATM Offering since April 1, 2023, approximately $3.8 million in additional funds available under the ATM Offering, and additional financing available to the Company, we believe we have the ability to mitigate such concerns for a period of at least one year from the date these financial statements are issued.

Consolidations

The consolidated financial statements have been prepared using the accounting records of Inpixon, Inpixon GmbH, Inpixon Limited, Nanotron Technologies, GmBh, Intranav GmbH, Inpixon India Limited and Game Your Game, Inc. The consolidated financial statements also include financial data of Inpixon Canada, Inc., Design Reactor, Inc. and Inpixon Philippines, Inc. through March 14, 2023, which is the date those entities were spun off in the Enterprise Apps Spin-off and Business Combination transaction discussed above. All material inter-company balances and transactions have been eliminated.

Use of Estimates

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

•the valuation of stock-based compensation;

•the valuation of the Company’s common stock issued in transactions, including acquisitions;

•the allowance for credit losses;

•the valuation of equity securities;

•the valuation allowance for deferred tax assets; and

•impairment of long-lived assets and goodwill.

Business Combinations

The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date.

Investment in equity securities- fair value

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

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Note 3 - Summary of Significant Accounting Policies (continued)

Revenue Recognition

The Company recognizes revenue when control is transferred of the promised products or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company derives revenue from software as a service, design and implementation services for its Indoor Intelligence systems, and professional services for work performed in conjunction with its systems.

Hardware and Software Revenue Recognition

For sales of hardware and software products, the Company’s performance obligation is satisfied at a point in time when they are shipped to the customer. This is when the customer has title to the product and the risks and rewards of ownership. The delivery of products to Inpixon's customers occurs in a variety of ways, including (i) as a physical product shipped from the Company’s warehouse, (ii) via drop-shipment by a third-party vendor, or (iii) via electronic delivery with respect to software licenses. The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer. Accordingly, the Company is the principal in the transaction with the customer and records revenue on a gross basis. The Company receives fixed consideration for sales of hardware and software products. The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice. The Company has elected the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the asset that otherwise would have been recognized is less than a year.

Software As A Service Revenue Recognition

With respect to sales of the Company’s maintenance, consulting and other service agreements including the Company’s digital advertising and electronic services, customers pay fixed monthly fees in exchange for the Company’s service. The Company’s performance obligation is satisfied over time as the digital advertising and electronic services are provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service.

Professional Services Revenue Recognition

The Company’s professional services include milestone, fixed fee and time and materials contracts.

Professional services under milestone contracts are accounted for using the percentage of completion method. As soon as the outcome of a contract can be estimated reliably, contract revenue is recognized in the consolidated statement of operations in proportion to the stage of completion of the contract. Contract costs are expensed as incurred. Contract costs include all amounts that relate directly to the specific contract, are attributable to contract activity, and are specifically chargeable to the customer under the terms of the contract.

Professional services are also contracted on the fixed fee and time and materials basis. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company’s time and materials contracts are paid weekly or monthly based on hours worked. Revenue on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended. Materials, or other specified direct costs, are reimbursed as actual costs and may include markup. The Company has elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date. For fixed fee contracts including maintenance service provided by in house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous service. Because the Company’s contracts have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations. Anticipated losses are recognized as soon as they become known. For the three months ended March 31, 2023 and 2022, the Company did not incur any such losses. These amounts are based on known and estimated factors.

License Revenue Recognition

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Note 3 - Summary of Significant Accounting Policies (continued)

The Company enters into contracts with its customers whereby it grants a non-exclusive on-premise license for the use of its proprietary software. The contracts provide for either (i) a one year stated term with a one year renewal option, (ii) a perpetual term or (iii) a two year term with the option to upgrade to a perpetual license at the end of the term. The contracts may also provide for yearly on-going maintenance services for a specified price, which includes maintenance services, designated support, and enhancements, upgrades and improvements to the software (the “Maintenance Services”), depending on the contract. Licenses for on-premises software provide the customer with a right to use the software as it exists when made available to the customer. All software provides customers with the same functionality and differ mainly in the duration over which the customer benefits from the software.

The timing of the Company's revenue recognition related to the licensing revenue stream is dependent on whether the software licensing agreement entered into represents a good or service. Software that relies on an entity’s IP and is delivered only through a hosting arrangement, where the customer cannot take possession of the software, is a service. A software arrangement that is provided through an access code or key represents the transfer of a good. Licenses for on-premises software represents a good and provide the customer with a right to use the software as it exists when made available to the customer. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer.

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

The Company recognizes revenue related to Maintenance Services evenly over the service period using a time-based measure because the Company is providing continuous service and the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the services are performed.

Contract Balances

The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The Company had deferred revenue of approximately $1.4 million and $1.3 million as of March 31, 2023 and December 31, 2022, respectively, related to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff. The Company expects to satisfy its remaining performance obligations for these maintenance services and professional services, and recognize the deferred revenue and related contract costs over the next twelve months.

Stock-Based Compensation

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 3 - Summary of Significant Accounting Policies (continued)

The Company incurred stock-based compensation charges of approximately $0.3 million and $1.5 million for the three months ended March 31, 2023 and 2022, respectively, which are included in general and administrative expenses. Stock-based compensation charges are related to employee compensation and related benefits.

Net Income (Loss) Per Share

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

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the three months ended March 31, 2023 and 2022:


	For the Three Months Ended March 31,
	2023	2022
Options	341,034

Form: 10-Q

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