INPIXON: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the audited financial statements
and related notes included elsewhere in this Annual Report on Form 10-K. In
addition to historical information, this discussion and analysis here and
throughout this Annual Report on Form 10-K contains forward-looking statements
that involve risks, uncertainties and assumptions. Our actual results may differ
materially from those anticipated in these forward-looking statements, due to a
number of factors, including but not limited to, risks described in the section
entitled "Risk Factors."


Overview of Our Business

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

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

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

• Digital solutions (eTearsheets; eInvoice, adDelivery) or cloud-based applications and analytics for the advertising, media and publishing industries y advertising management platform called Shoom by InPixon; and

• A complete set of data analysis and statistical visualization solutions for engineers and scientists, called 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.

Revenues increased in the year ended December 31, 2021 over the same period in
2020 by approximately $6.7 million which is primarily attributable to an
approximate $5.0 million increase in Indoor Intelligence sales, including our
smart office app and real time location based technologies, and an increase of
approximately $1.7 million of SAVES sales. We expect to continue to grow our
Indoor Intelligence product line in 2022. The Indoor Intelligence product line
does have long sales cycles, which result from customer-related issues such as
budget and procurement processes but also because of the early stages of
indoor-positioning technology and the learning curve required for customers to
implement such solutions. Customers also often engage in a pilot program first
which prolongs sales cycles and is typical of most emerging technology adoption
curves. We anticipate sales cycles to improve in 2022 as our customer base moves
from early adopters to mainstream customers. The sales cycle is also improving
with the increased presence and awareness of beacon and Wi-Fi locationing
technologies in the market. Indoor Intelligence sales can be licensed-based with
government customers but commercial customers typically prefer a SaaS or
subscription model. Our other digital solutions are also delivered on a SaaS
model and allow us to generate industry analytics that complement our
indoor-positioning solutions.

We experienced a net loss of approximately $70.1 million and $29.2 million for
the years ended December 31, 2021 and 2020, respectively. This increase in loss
of approximately $40.9 million was primarily attributable to the increase in
operating expenses of $53.8 million primarily as a result of increased operating
expenses related to the acquisitions completed in 2021, stock based compensation
and a goodwill impairment offset by the higher gross margin of $4.9 million and
reduced other loss of $6.6 million. 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.

Recent Events

2021 funding

On January 24, 2021, we entered into a Securities Purchase Agreement with an
institutional investor, pursuant to which we sold and issued in a registered
direct offering, 5,800,000 shares of our common stock, and warrants to purchase
up to 19,354,838 shares of common stock at an exercise price of $1.55 per share
(the "January 2021 Purchase Warrants") for a combined purchase price of $1.55
per share and pre-funded warrants to purchase up to 13,554,838 shares of common
stock ("January 2021 Pre-funded Warrants") at an exercise price of $0.001 per
share, at a purchase price of $1.549 per share. At closing, the Company received
$27.8 million in net proceeds after deducting placement agent commissions and
offering expenses. The January 2021 Purchase Warrant and January 2021 Pre-funded
Warrant is or was immediately exercisable for
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one share of common stock for a period until the five year anniversary of the
issuance date. The January 2021 Pre-funded Warrants were exercised in full as of
February 8th, 2021. In addition, the investor exercised its purchase rights for
3 million shares of common stock pursuant to the the January 2021 Purchase
Warrant on February 11, 2021.

On February 12, 2021, we entered into a Securities Purchase Agreement with an
institutional investor, pursuant to which we sold and issued in a registered
direct offering, 7,000,000 shares of our common stock, and warrants to purchase
up to 15,000,000 shares of common stock at an exercise price of $2.00 per share
(the "First February 2021 Purchase Warrants") for a combined purchase price of
$2.00 per share and pre-funded warrants to purchase up to 8,000,000 shares of
common stock ("First February 2021 Pre-funded Warrants") at an exercise price of
$0.001 per share, at a purchase price of $1.999 per share. At closing the
Company received net proceeds of $27.8 million after deducting placement agent
commissions and offering expenses. Each First February 2021 Purchase Warrant and
First February 2021 Pre-funded Warrant is or was immediately exercisable for one
share of common stock until the five year anniversary of the issue date. The
First February 2021 Pre-funded warrants were exercised in full as of February
18, 2021.

On February 16, 2021, we entered into a Securities Purchase Agreement with an
institutional investor, pursuant to which we sold and issued in a registered
direct offering, 3,000,000 shares of our common stock, and warrants to purchase
up to 9,950,250 shares of common stock at an exercise price of $2.01 per share
(the "Second February 2021 Purchase Warrants") for a combined purchase price of
$2.01 per share and pre-funded warrants to purchase up to 6,950,250 shares of
common stock ("Second February 2021 Pre-funded Warrants") at an exercise price
of $0.001 per share, at a purchase price of $2.009 per share. At clsoing the
Company received net proceeds of $18.5 million after deducting placement agent
commissions and offering expenses. Each Second February 2021 Purchase Warrant
and Second February 2021 Pre-funded Warrant is or was immediately exercisable
for one share of common stock until the five year anniversary of the issuance
date. The Second February 2021 Pre-funded warrants were exercised in full as of
March 1, 2021.

On September 13, 2021, the Company entered into a Securities Purchase Agreement
with certain institutional investors named therein, pursuant to which the
Company agreed to issue and sell in a registered direct offering (i) up to
58,750 shares of its newly designated Series 7 Convertible Preferred Stock at a
stated value of $1,000 per shares ("Stated Value") convertible into 47,000,000
million shares of common stock at a conversion price of $1.25 (ii) related 5
year warrants to purchase up to an aggregate of 47,000,000 shares of common
stock (the "Warrants") at an exercise price of $1.25 per share beginning as of
November 18, 2021 (the date on which the we effected a "capital event" resulting
in sufficient authorized shares to issue the warrant shares. Each share of
Series 7 Convertible Preferred Stock and the related Warrants were sold at a
subscription amount of $920, representing an original issue discount of 8% of
the Stated Value for an aggregate subscription amount of $54.1 million. The
aggregate net proceeds from the offering, after deducting the placement agent
fees and other estimated offering expenses, was approximately $50.6 million. If
anytime after the effective date of the capital event (i) the volume weighted
average price for each of any 10 consecutive trading day period following such
event, exceeds $2.00 per share (subject to adjustments for splits, dividends,
and the like); (ii) the volume for each trading day during any such period
exceeds $2,000,000 of shares of common stock per trading day; and (iii) we
satisfy certain Equity Conditions (as defined in the Certificate of
Designation), we may elect to mandatorily convert all or a portion of the
outstanding shares of Series 7 Preferred Stock (any such portion to be pro-rated
across all holders thereof) at the then prevailing conversion price.

In addition, at any time beginning on the 6-month anniversary of the date the
Series 7 Preferred Stock was issued (the "Redemption Triggering Date") and
ending ninety (90) days thereafter, each holder of such shares may require us to
redeem all or part of the shares then held by such holder in cash for a
redemption price per share equal to the Stated Value plus all accrued but unpaid
dividends thereon and all liquidated damages and other costs, expenses, or
amounts due in respect of such shares (the "Redemption Amount"), provided that
in connection with certain events of default described in the Certificate of
Designation, the Redemption Amount is increased to 110% of the Stated Value plus
all accrued but unpaid dividends thereon and all liquidated damages and other
costs, expenses, or amounts due in respect of such shares. If we fail to pay the
full Redemption Amount timely, we will be obligated to pay interest thereon at a
rate equal to the lesser of 18% per annum or the maximum rate permitted by
applicable law, accruing daily from the due date until the redemption amount and
all interest thereon are paid in full. Correspondingly, beginning on the
Redemption Triggering Date for so long as the Shares remain outstanding the
Company has the right to redeem all or part of the Shares then held by a holder
for the Redemption Amount, subject to Equity Conditions. In the event, the
Company elects to exercise its redemption right, the holder will have an option
to convert such shares subject to redemption into the common stock within thirty
(30) days following a written notice sent to the holder. Upon the receipt of the
pertinent Redemption Amount, the holder of the Shares will forfeit 75% of the
Warrants issued.
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Until the earlier of the conversion or redemption of all Shares and June 14,
2022, the Company is also required to maintain a cash balance (in the form of
cash and cash equivalents equal to the sum of (i) the Stated Value of all of the
Series 7 Preferred Stock then outstanding, (ii) the aggregate amount of any debt
(including trade payables) and other securities that are issued that are senior
to, or pari passu with, the Shares, and (iii) the aggregate amount of monetary
judgments with respect to the Company and its subsidiaries or any of their
respective property or assets.

Strategic Operations 2021

Game Your Game Acquisition of a majority stake

On April 9, 2021 we acquired 522,000 shares of common stock of Game Your Game,
Inc., a Delaware corporation ("GYG"), which represent 55.4% of the outstanding
shares of common stock of GYG, pursuant to that certain Stock Purchase
Agreement, dated as of March 25, 2021 (the "Purchase Agreement"), with GYG and
certain selling stockholders. At the closing, Nadir Ali, the Company's Chief
Executive Officer and member of the Company's board of directors, was appointed
as the sole member of GYG's board of directors. In connection with the closing
of the transaction, we entered into a Stockholders' Agreement (the
"Stockholders' Agreement"), with GYG and certain other minority stockholders of
GYG, pursuant to which the minority stockholders agreed to vote their shares to
(i) ensure that GYG's board of directors is comprised of one director and (ii)
elect the person the Company designates from time to time to serve as GYG's sole
director.

In addition, we were granted a right of first refusal in the event a minority
stockholder wants to transfer shares to a third party, as well as customary
drag-along rights in the event a third party offers to purchase all of GYG's
outstanding capital stock, in addition to an option to purchase all of the
remaining outstanding capital stock of GYG,. The purchase pption is exercisable
by the Company at any time prior to the 3rd anniversary of the transaction
closing date at a capped purchase price, subject to a downward adjustment if GYG
is unable to achieve certain financial-based performance targets during a
specified period of time.

GYG’s business is to develop and deliver solutions using sports data and analytics.

Systat Call Option Exercise

On February 22, 2021, we entered into a Second Amendment to the Exclusive
Software License and Distribution Agreement, as amended on June 30, 2020 (as
amended, the "License Agreement"), with Cranes Software International Ltd. and
Systat Software, Inc. ("Systat") to allow for the exercise of the option to
purchase software and other assets underlying the License Agreement, in whole or
in part, any time during the purchase option period and to provide for cash
consideration in lieu of an assignment of the Sysorex Note at our option. In
addition, we exercised our option to purchase a portion of the underlying
assets, including certain software, trademarks, solutions, domain names and
websites from Systat in exchange for consideration in an amount equal to
$900,000.

Sysorex Securities Settlement Agreement

On April 14, 2021, we entered into a Securities Settlement Agreement (the "SSA")
and a Rights Letter Agreement (the "RLA"), each with Sysorex, whereby Sysorex
agreed to satisfy in full its outstanding debt, in the aggregate amount of
$9,088,175.97 as of March 31, 2021, owed to us under that certain secured
promissory note, originally dated December 31, 2018, as amended from time to
time, and in connection with that certain settlement agreement, dated February
20, 2019, by and among us, Sysorex and Atlas Technology Group, LLC (the "Debt
Settlement"). To effect the Debt Settlement, Sysorex agreed to issue to us (i)
pursuant to the terms of the SSA, 12,972,189 shares of its common stock,
$0.00001 par value per share, and (ii) rights to acquire 3,000,000 additional
shares of its common stock pursuant to the terms of the RLA. The Debt Settlement
was entered into in connection with Sysorex's closing of a reverse triangular
merger with TTM Digital Assets & Technologies, Inc.

  Nadir Ali, our Chief Executive Officer and a member of our board of directors,
resigned as a director of Sysorex, as of May 14, 2021. Nadir Ali entered into a
consulting agreement with Sysorex, pursuant to which he agreed to provide
certain business services specified in the agreement for the benefit of Sysorex
in exchange for shares of Sysorex's common stock.
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Visualix Asset Purchase Agreement

  On April 23, 2021, we entered into an asset purchase agreement (the "Asset
Purchase Agreement") by and among the Company, Visualix GmbH i.L. (the
"Visualix"), Darius Vahdat-Pajouh and Michal Bucko (each, a "Founder," and
collectively, the "Founders"), and Future Energy Ventures Management GmbH
("FEVM") pursuant to which we acquired certain computer vision, robust
localization, large-scale navigation, mapping, and 3D reconstruction software
technologies and intellectual property (collectively, the "Visualix Assets"). In
accordance with the terms of the Asset Purchase Agreement, we purchased the
Visualix Assets and certain patent applications related to the Visualix Assets
from FEVM.

In light of the transactions contemplated by the Asset Purchase Agreement, we:

(i) delivered a cash payment in the amount of fifty thousand euros (€50,000) to Visualix;

(ii) issued 316,768 common shares to Visualix; and

(iii) issued 52,795 common shares to FEVM.

The Asset Purchase Agreement includes customary representations and warranties,
as well as certain covenants, including, inter alia, that the Founders are hired
as employees of Inpixon GmbH and Visualix and the Founders shall not, for a
period of two (2) years following the closing date, directly or indirectly,
compete with us in the sectors of Mapping and Localization Technology (as
defined in the Asset Purchase Agreement).

Acquired CXApp

  On April 30, 2021, we completed the acquisition of over 99.9% of the
outstanding capital stock of Design Reactor, Inc., dba The CXApp, a California
corporation ("The CXApp"), pursuant to the terms of that certain Stock Purchase
Agreement, dated as of the Closing Date (the "Stock Purchase Agreement"), by and
among us, The CXApp, the sellers set forth on the signature page thereto and
each other person who owns outstanding capital stock of The CXApp ("CXApp
Shares") and executes a Joinder to Stock Purchase Agreement (collectively, the
"Sellers"), and Leon Papkoff, as Sellers' Representative (the "Sellers'
Representative"). The CXApp is a leading SaaS app platform that enables
corporate enterprise organizations to provide a custom-branded, location-aware
employee app focused on enhancing the workplace experience and hosting virtual
and hybrid events.

On the closing date, the Sellers sold all of their CXApp Shares to us in
exchange for consideration of (i) approximately $22,500,000 in cash, minus The
CXApp's transaction expenses, plus The CXApp's closing cash, minus stock option
payouts, minus the amount that equals 70% of deferred revenue as of the Closing
Date, subject to such other adjustments set forth in the Stock Purchase
Agreement, including a post-closing working capital adjustment (such amount, the
"Cash Purchase Price"), of which $4,875,000 (the "Holdback Amount") was retained
from the Cash Purchase Price to secure the Sellers' indemnification obligations
under the Purchase Agreement, for a period of 18 months from the closing date
and (ii) 8,820,239 shares of our common stock, which were valued at
approximately $10,000,000 based on a share price of $1.13 (the "Per Share
Price"), which was the closing price of our common stock immediately prior to
executing the Stock Purchase Agreement (such shares, the "Purchaser Shares" and
together with the Cash Purchase Price, the "Consideration"). In addition, we
agreed to pay up to $12,500,000 in contingent earnout payments, subject to
certain adjustments (the "Earnout Payment" and together with the Cash Purchase
Price and the Purchaser Shares, the "Aggregate Purchase Price"), payable in
shares of Common Stock at the Per Share Price (the "Earnout Shares").

On May 10, 2021, we, The CXApp and the non-signing Seller executed a Joinder to
Stock Purchase Agreement pursuant to which we purchased such Non-Signing
Seller's CXApp Shares in exchange for approximately $50,000 in cash and 29,299
shares of our Common Stock. As of such time, the Company now owns 100% of The
CXApp.

On December 30, 2021, we entered into an Amendment to the Stock Purchase
Agreement (the "Amendment"), with the Sellers' Representative, pursuant to which
the parties to the Stock Purchase Agreement agreed to: (i) amend the amount of
the earnout target (as defined in the Stock Purchase Agreement) from $8,270,000
to $4,200,000 in revenue; (ii) amend the
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duration of the earnout period from the period from the closing date through the
twelve (12) month anniversary of the closing date to the period from the closing
date through December 31, 2021; and (iii) eliminate the Sellers'
Representative's right to accelerate the Earnout Payment upon a sale or change
of control of the Company. The amendments are anticipated to result in certain
tax advantageous benefits for the Company in addition to aiding in facilitating
the integration of business operations.

On March 3, 2022, we entered into a Second Amendment to the Stock Purchase
Agreement with the Sellers' Representative, pursuant to which the parties agreed
that withholding taxes payable by the Sellers, as applicable, in connection with
the issuance of the Earnout Shares would be offset up to the aggregate amount
payable to such Seller by the Company from the Holdback Amount and the Holdback
Amount would be reduced by an equal amount. On March 3, 2022, the Company issued
10,873,886 shares of Common Stock to the Sellers in connection with the
satisfaction of the Earnout Payment.

Share increase authorized

On November 18, 2021, the Company filed a certificate of amendment to the
Company's articles of incorporation, as amended, with the Secretary of State of
the State of Nevada to increase the number of authorized shares of Common Stock
from 250,000,000 to 2,000,000,000 shares effective as of November 18, 2021.


Warrant and Note Exchanges

On January 28, 2022, we entered into an exchange agreement with the holder (the
"Warrant Holder") of certain existing warrants to purchase up to an aggregate of
49,305,088 shares of our common stock (the "Existing Warrants"), pursuant to
which we agreed to issue an aggregate of 13,811,407 shares of common stock
(collectively, the "Exchange Common Shares") and rights (the "Rights") to
receive an aggregate of 3,938,424 shares of common stock (collectively, the
"Reserved Shares" and together with the Exchange Common Shares, the "Exchange
Shares") to such warrant holder in exchange for the cancellation of the Existing
Warrants (the "Warrant Exchange"). Subject to the terms of the Exchange
Agreement, the Rights may be exercised by the Warrant Holder for the Reserved
Shares, in whole or in part, at any time or times on or after the date of the
Exchange Agreement, subject to certain beneficial ownership limitations. On any
Trading Day (as defined in the Existing Warrants) during the period commencing
on the date of of the exchange agreement and ending on March 29, 2022 (such
period, the "Restricted Period"), the warrant holder will not sell on such
Trading Day, in the aggregate, any Exchange Shares in an aggregate amount
representing more than 10% of the daily composite trading volume of common stock
as reported by Bloomberg, LP on such applicable Trading Day.

On February 1, 2022, we entered into an exchange agreement with the holder of
that certain outstanding unsecured promissory note, issued on March 18, 2020 in
an aggregate initial principal amount of $6,465,000 (the "Original Note"),
pursuant to which we and the holder agreed to: (i) partition a new promissory
note in the form of the Original Note equal to $500,000 and then cause the
outstanding balance of the Original Note to be reduced by $500,000; and (ii)
exchange the partitioned note for the delivery of 1,191,611 shares of the
Company's Common Stock, at an effective price per share equal to $0.4196, which
was equal to Nasdaq's "minimum price" as defined by Nasdaq Listing Rule 5635(d).

On February 18, 2022, the Company entered into an exchange agreement with the
holder of the Original Note, pursuant to which the Company and the holder agreed
to: (i) partition a new promissory note in the form of the Original Note equal
to $350,000 and then cause the outstanding balance of the Original Note to be
reduced by $350,000; and (ii) exchange the partitioned note for the delivery of
966,317 shares of the Company's Common Stock, at an effective price per share
equal to $0.3622, which was equal to Nasdaq's "minimum price" as defined by
Nasdaq Listing Rule 5635(d).

On March 15, 2022, the Company entered into an exchange agreement with the
holder of the Original Note, pursuant to which the Company and the holder agreed
to: (i) partition a new promissory note in the form of the Original Note equal
to $650,000 and then cause the outstanding balance of the Original Note to be
reduced by $650,000; and (ii) exchange the partitioned note for the delivery of
2,152,317 shares of the Company's Common Stock, at an effective price per share
equal to $0.3020, was equal to to Nasdaq's "minimum price" as defined by Nasdaq
Listing Rule 5635(d).


Significant Accounting Policies and Estimates

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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 2 of the audited
consolidated financial statements for the years ended December 31, 2021 and 2020
which are included elsewhere in this Annual Report on Form 10-K. We believe that
the following accounting estimates are the most critical to aid in fully
understanding and evaluating our reported financial results, and they require
our most difficult, subjective or complex judgments, resulting from the need to
make estimates about the effect of matters that are inherently uncertain. There
have been no changes to estimates during the periods presented in the filing.
Historically changes in management estimates have not been material.

Revenue recognition

The Company recognizes revenue when control of promised products or services is transferred to its customers, for an amount that reflects the consideration to which the Company expects to be entitled 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.

Our contracts with customers often include promises to transfer multiple
distinct products and services. Our licenses are sold as perpetual or term
licenses and the arrangements typically contain various combinations of
maintenance and professional services, which are accounted for as separate
performance obligations. In determining how revenue should be recognized, a
five-step process is used, which requires judgment and estimates within the
revenue recognition process. The most critical judgements required in applying
ASC 606 Revenue Recognition from Customers, and our revenue recognition policy
relate to the determination of distinct performance obligations.

• We receive fixed consideration for sales of hardware and software products. Revenue is recognized when the customer holds title to the product and the risks and rewards of ownership have been transferred.

•Software as a service contract revenue is recognized over time using the release method (days of software delivered) as we provide continued access to its service.

•Design and implementation revenue is 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. Accounting
for these contracts involves the use of estimates to determine total contract
costs to be incurred.

•Professional services revenue under fixed fee contracts is recognized over time
using the input method (direct labor hours) to recognize revenue over the term
of the contract. We have elected the practical expedient to recognize revenue
for the right to invoice because our right to consideration corresponds directly
with the value to the customer of the performance completed to date.

•We recognize revenue related to Maintenance Services evenly over time using the
output method (days of software provided) because we provide continuous service,
and the customer simultaneously receives and consumes the benefits provided by
our performance as the services are performed.

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We also consider whether an arrangement has any discounts, material rights, or
specified future upgrades that may represent additional performance obligations.
We offer discounts in the form of prompt payment discounts and rebates for a
decrease in service level percentages. We have determined that the most likely
amount method is most useful for contracts that provides these discounts and
rebates as the contracts have two potential outcomes and a significant reversal
in the amount of cumulative revenue recognized is not expected to occur.
Discounts have not historically been significant, but we continue to monitor and
evaluate these estimates based on historical experience, anticipated
performance, and our best judgment. 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. If any of these judgments were to change it could cause a material
increase or decrease in the amount of revenue we report in a particular period.

Good willAcquired Intangible Assets and Other Long Lived Assets – Impairment Assessments


Long-lived assets are grouped for recognition and measurement of impairment at
the lowest level for which identifiable cash flows are largely independent of
the cash flows of other assets. The impairment test for long-lived assets
requires us to assess the recoverability of our long-lived assets by comparing
their net carrying value to the sum of undiscounted estimated future cash flows
directly associated with and arising from our use and eventual disposition of
the assets. If the net carrying value of a group of long-lived assets exceeds
the sum of related undiscounted estimated future cash flows, we would be
required to record an impairment charge equal to the excess, if any, of net
carrying value over fair value.

When assessing the recoverability of our long-lived assets, which include
property and equipment and finite-lived intangible assets, we make assumptions
regarding estimated future cash flows and other factors. Some of these
assumptions involve a high degree of judgment and bear a significant impact on
the assessment conclusions. Included among these assumptions are estimating
undiscounted future cash flows, including the projection of comparable sales,
operating expenses, capital requirements for maintaining property and equipment
and residual value of asset groups. We formulate estimates from historical
experience and assumptions of future performance, based on business plans and
forecasts, recent economic and business trends, and competitive conditions. In
the event that our estimates or related assumptions change in the future, we may
be required to record an impairment charge. Based on our evaluation we did not
record a charge for impairment for the years ended December 31, 2021 and 2020.

We evaluate the remaining useful lives of long-lived assets and identifiable
intangible assets whenever events or circumstances indicate that a revision to
the remaining period of amortization is warranted. Such events or circumstances
may include (but are not limited to): the effects of obsolescence, demand,
competition, and/or other economic factors including the stability of the
industry in which we operate, known technological advances, legislative actions,
or changes in the regulatory environment. If the estimated remaining useful
lives change, the remaining carrying amount of the long-lived assets and
identifiable intangible assets would be amortized prospectively over that
revised remaining useful life. We have determined that there were no events or
circumstances during the years ended December 31, 2021 and 2020, which would
indicate a revision to the remaining amortization period related to any of our
long-lived assets. Accordingly, we believe that the current estimated useful
lives of long-lived assets reflect the period over which they are expected to
contribute to future cash flows and are therefore deemed appropriate.

We have recorded goodwill and other indefinite-lived assets in connection with
our acquisitions of Shoom, Locality, Jibestream, GTX, the Systat Parties,
Nanotron, CXApp, Game Your Game and IntraNav. 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. We have determined that it operates and reports in three
reporting units: Indoor Intelligence, Saves, and Shoom.

We analyzed goodwill first to assess qualitative factors, such as macroeconomic
conditions, changes in the business environment and reporting unit specific
events, to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount as a basis for determining
whether it is necessary to perform a detailed goodwill impairment test as
required. The more-likely-than-not threshold is defined as having a likelihood
of more than 50%.

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If we bypass the qualitative assessment or conclude that it is more likely than
not that the fair value of a reporting unit is less than its carrying value,
then we perform a quantitative impairment test by comparing the fair value of a
reporting unit with its carrying amount. We calculate the estimated fair value
of a reporting unit using a weighting of the income and market approaches. For
the income approach, we use internally developed discounted cash flow models
that include the following assumptions, among others made by management:
projections of revenues, expenses, and related cash flows based on assumed
long-term growth rates and demand trends; expected future investments to grow
new units; and estimated discount rates. For the market approach, we use
internal analyses based primarily on market comparables. We base these
assumptions on its historical data and experience, third party appraisals,
industry projections, micro and macro general economic condition projections,
and its expectations. Due to the variables inherent in our estimates of fair
value, differences in assumptions may have a material effect on the result of
our impairment analysis. For example, a 100 basis points increase or decrease in
only the discount rate utilized as part of the discounted cash flow method
(income approach) related to the Indoor Intelligence reporting unit could impact
the overall fair value of the reporting unit, on a weighted average, by
approximately $2.0 million (decrease) and $2.5 million (increase), respectively.

We performed the annual impairment test and has recorded impairment of goodwill
of $14.8 million and zero during the years ended December 31, 2021 and 2020,
respectively.

Deferred Income Taxes

In accordance with ASC 740 "Income Taxes" ("ASC 740"), management routinely
evaluates the likelihood of the realization of its income tax benefits and the
recognition of its deferred tax assets. In evaluating the need for any valuation
allowance, management will assess whether it is more likely than not that some
portion, or all, of the deferred tax asset may not be realized on a
jurisdictional basis. Ultimately, the realization of deferred tax assets is
dependent upon the generation of future taxable income during those periods in
which temporary differences become deductible and/or tax credits and tax loss
carry-forwards can be utilized. In performing its analyses, management considers
both positive and negative evidence including historical financial performance,
previous earnings patterns, future earnings forecasts, tax planning strategies,
economic and business trends and the potential realization of net operating loss
carry-forwards within a reasonable timeframe. To this end, management considered
(i) that we have had historical losses in the prior years and cannot anticipate
generating a sufficient level of future profits in order to realize the benefits
of our deferred tax asset; (ii) tax planning strategies; and (iii) the adequacy
of future income as of and for the year ended December 31, 2021, based upon
certain economic conditions and historical losses through December 31, 2021.
After consideration of these factors, management deemed it appropriate to
establish a full valuation allowance with respect to the deferred tax assets for
Inpixon, Inpixon Canada, Nanotron GmbH, Intranav GmbH and Active Mind Technology
LTD.

A liability for "unrecognized tax benefits" is recorded for any tax benefits
claimed in the Company's tax filings that do not meet these recognition and
measurement standards. As of December 31, 2021 and 2020, no liability for
unrecognized tax benefits was required to be reported. The guidance also
discusses the classification of related interest and penalties on income taxes.
The Company's policy is to record interest and penalties on uncertain tax
positions as a component of income tax expense. No interest or penalties were
recorded during the years ended December 31, 2021 and 2020.

Business combinations

We account for 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. Any
changes in the estimated fair values of the net assets recorded for acquisitions
prior to the finalization of more detailed analysis, but not to exceed one year
from the date of acquisition, will change the amount of the purchase price
allocable to goodwill. Any subsequent changes to any purchase price allocations
that are material to our consolidated financial results will be adjusted. All
acquisition costs are expensed as incurred and in-process research and
development costs are recorded at fair value as an indefinite-lived intangible
asset and assessed for impairment thereafter until completion, at which point
the asset is amortized over its expected useful life. Separately recognized
transactions associated with business combinations are generally expensed
subsequent to the acquisition date. The application of business combination and
impairment accounting requires the use of significant estimates and assumptions.

Upon acquisition, the accounts and results of operations are consolidated from the date of acquisition and are included in our consolidated financial statements from the date of acquisition.

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RESULTS OF OPERATIONS

Year ended December 31, 2021 compared to the year ended December 31, 2020

The following table presents certain consolidated financial data as a percentage of our revenues and the percentage change from period to period:

                                                                      For the Years Ended
                                                         2021                                     2020
                                                                  % of                                     % of                                      %
(in thousands, except percentages)           Amount             Revenues              Amount             Revenues             $ Change            Change*
Revenues                                  $  15,995                   100  %       $   9,297                   100  %       $   6,698                   72  %
Cost of revenues                          $   4,374                    27  %       $   2,613                    28  %       $   1,761                   67  %
Gross profit                              $  11,621                    73  %       $   6,684                    72  %       $   4,937                   74  %
Operating expenses                        $  84,238                   527  %       $  30,478                   328  %       $  53,760                  176  %
Loss from operations                      $ (72,617)                 (454) %       $ (23,794)                 (256) %       $ (48,823)                (205) %
Net loss                                  $ (70,130)                 (438) %       $ (29,214)                 (314) %       $ (40,916)                (140) %
Net loss attributable to
stockholders of Inpixon                   $ (69,155)                 (432) %       $ (29,229)                 (314) %       $ (39,926)                (137) %


*  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.

Revenue

Revenues for the year ended December 31, 2021 were $16.0 million compared to
$9.3 million for the comparable period in the prior year for an increase of
approximately $6.7 million, or approximately 72%. This increase is primarily
attributable to an approximate $5.0 million increase in Indoor Intelligence
sales, including our smart office app and real time location based technologies,
and an increase of approximately $1.7 million of SAVES sales. The increase in
Indoor Intelligence sales of $5.0 million was driven by a $4.4 million increase
in revenue due to the acquisitions of CXApp, Game Your Game, and IntraNav.

Gross margin

Cost of revenues for the year ended December 31, 2021 were $4.4 million compared
to $2.6 million for the comparable period in the prior year. This increase in
cost of revenues of approximately $1.8 million, or approximately 67%, was
primarily attributable to the increased sales during the year.

The gross profit margin for the year ended December 31, 2021 was 73% compared to
72% for the year ended December 31, 2020. This increased margin is primarily due
to the sales mix during the year.

Functionnary costs

Operating expenses for the year ended December 31, 2021 were $84.2 million and
$30.5 million for the comparable period ended December 31, 2020. This increase
of $53.8 million is primarily attributable to increased operating expenses of
the Indoor Intelligence segment by approximately $6.2 million due to the CXApp,
Game Your Game, SAVES and, Nanotron acquisitions, approximately $6.5 million of
accrued earnout compensation expense, $9.7 million of additional stock based
compensation, $14.8 million impairment of goodwill and increases in other
expenses including amortization of intangibles due to the acquisitions,
professional fees and compensation costs as we are scaling for growth.

Operating loss

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Loss from operations for the year ended December 31, 2021 was $72.6 million as
compared to $23.8 million for the comparable period in the prior year. This
increase in loss of $48.8 million is primarily attributable to increased
operating expenses of $53.8 million as detailed above offset by the increased
gross profit margin of approximately $4.9 million.

Other income/(expenses)

Other income/expense for the year ended December 31, 2021 was income of
$1.1 million compared to a loss of $5.5 million for the comparable period in the
prior year. This increase in other income of approximately $6.6 million is
primarily attributable to a discounted net gain of approximately $49.8 million
on the Sysorex note, a $7.3 million benefit from the release of the valuation
allowance on the Sysorex note and approximately $1.6 million of interest
received on the Sysorex note offset by the $57.1 million unrealized loss on the
Sysorex note.

Provision for Income Taxes

There was an income tax benefit of approximately $1.4 million for the year ended
December 31, 2021 compared to a income tax benefit of $0.1 million for the
comparable period in the prior year. The net income tax benefit for the current
year is related to a current income tax expense of $1.2 million primarily from
the gain on the Sysorex note offset by a $2.6 million deferred tax benefit
primarily related to the release of a valuation allowance following the
acquisition of intangibles of Design Reactor. The income tax benefit of $0.1
million for the year ended December 31, 2020 related to intangibles and net
operating losses of Jibestream amalgamated with Inpixon Canada during the
period.

Net income (loss) attributable to non-controlling interest

Net income or loss attributable to non-controlling interest for the years ended
December 31, 2021 and 2020 was a loss of $1.0 million and a income of $0.02
million, respectively. The increase in loss of approximately $1.0 million was
mainly attributable to the loss of the Game Your Game entity.

Net loss attributable to shareholders of InPixon

Net loss attributable to stockholders for the year ended December 31, 2021 was
$69.2 million compared to $29.2 million for the comparable period in the prior
year. This increase in loss of approximately $39.9 million was primarily
attributable to the increase in operating expenses of $53.8 million offset by
the higher gross margin of $4.9 million and reduced other loss of $6.6 million.

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 year ended December 31, 2021 was a waste of $29.6 million
compared to a loss of $17.1 million for the period of the previous year.

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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 years ended December 31, 2021 and 2020 (in thousands):

                                                                           

For the years ended the 31st of December,

                                                                               2021                2020
Net loss attributable to common stockholders                               $  (77,316)         $ (29,229)
Adjustments:
Non-recurring one-time charges:
Loss on exchange of debt for equity                                                   30             210

(Reversal) Valuation allowance on loan held for sale

    (7,345)             2,370

Provision for impairment on related receivables

         -                648
Gain on related party loan held for sale                                      (49,817)                 -
Unrealized loss on equity securities                                           57,067                  -
Acquisition transaction/financing costs                                         1,248              1,057
Earnout compensation expense                                                    6,524                  -
Professional service fees                                                       1,366                  -
Accretion of series 7 preferred stock                                           8,161                  -
 Impairment of goodwill                                                        14,789                  -
Unrealized gains on notes, loans, investments                                     241                  -
Bad debts expense/provision                                                       121                956
Reserve for inventory obsolescense                                                300                  -
Stock-based compensation - compensation and related benefits                   10,879              1,194
Severance costs                                                                   294                  -
Interest expense, net                                                          (1,183)             2,426
Income tax benefit                                                             (1,412)               (87)
Depreciation and amortization                                                   6,451              3,371
Adjusted EBITDA                                                            $  (29,602)         $ (17,084)



We rely on Adjusted EBITDA, which is a non-GAAP financial measure for the following:

• Review and evaluate our company’s operational performance, as permitted by ASC Topic 280, Segment Reporting;

• 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 assess the potential economic results of acquisitions, operational alternatives and strategic decisions; and

• Internally evaluate the performance of our staff.

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:
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•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 it is useful to provide investors with a standard operational measure used by management to assess our operational performance; and

•We believe the use of Adjusted EBITDA is useful in comparing our results to those of 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 outlays or future capital expenditure requirements or contractual commitments;

•Adjusted EBITDA does not reflect changes or cash requirements for our working capital requirements;

•Adjusted EBITDA does not reflect significant interest expense or cash requirements to service interest or principal payments on our debt;

•Although depreciation and amortization are non-cash charges, depreciated assets will often need to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirement for such replacements;

• Adjusted EBITDA does not reflect income or other taxes or cash requirements to make tax payments; and

• Other companies in our industry may calculate Adjusted EBITDA differently from us, 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.

Pro forma non-GAAP net loss per share

Basic and diluted net loss per share for the year ended December 31, 2021 was
($0.72) compared to ($1.01) for the prior year period. The decreased loss per
share in 2021 was attributable to the changes discussed in our results of
operations.

Proforma non-GAAP net income (loss) per share is used by our Company's
management as an evaluation tool as it manages the business and is defined as
net income (loss) per basic and diluted share adjusted for non-cash items
including stock based compensation, amortization of intangibles and one time
charges including gain on the settlement of obligations, severance costs,
provision for doubtful accounts, change in the fair value of shares to be
issued, acquisition costs and the costs associated with the public offering.

Proforma non-GAAP net loss per basic and diluted common share for the year ended
December 31, 2021 was ($0.26) compared to a loss of ($0.71) per share for the
prior year period.
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The following table presents a reconciliation of net loss per basic and diluted
share, which is our GAAP operating performance measure, to proforma non-GAAP net
loss per share for the periods reflected (in thousands, except per share data):

                                                                                    For the Years Ended December 31,
(thousands, except per share data)                                                     2021                    2020
Net loss attributable to common stockholders                                   $         (77,316)         $    (29,229)
Adjustments:
Non-recurring one-time charges:
Loss on the exchange of debt for equity                                                       30                   210

(Reversal) Valuation allowance on loan held for sale

               (7,345)                2,370

Provision for impairment on related receivables

                    -                   648
Gain on related party loan held for sale                                                 (49,817)                    -
Unrealized loss on equity securities                                                      57,067                     -
Acquisition transaction/financing costs                                                    1,248                 1,057
Earnout compensation expense                                                               6,524                     -
Professional service fees                                                                  1,366                     -
Accretion of series 7 preferred stock                                                      8,161                     -
  Impairment of goodwill                                                                  14,789                     -
Unrealized gains on notes, loans, investments                                                241                     -
Bad debts expense/provision                                                                  121                   956
Reserve for inventory obsolescense                                                           300                     -
Stock-based compensation - compensation and related benefits                              10,879                 1,194
Severance costs                                                                              294                     -
Amortization of intangibles                                                                5,107                 2,306
Proforma non-GAAP net loss                                                     $         (28,351)         $    (20,488)
Proforma non-GAAP net loss per basic and diluted common share                  $           (0.26)         $      (0.71)
Weighted average basic and diluted common shares outstanding                         107,981,441            28,800,493


We rely on pro forma non-GAAP net loss per share, which is a non-GAAP financial measure:

• Review and evaluate our company’s operational performance, as permitted by ASC Topic 280, Segment Reporting;

• Compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

•As a measure to assess the potential economic results of acquisitions, operational alternatives and strategic decisions; and

• Internally evaluate the performance of our staff.

We have presented proforma non-GAAP net 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 loss per share as supplemental disclosure because:
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•We believe proforma non-GAAP net loss per share is a useful tool for investors
to assess the operating performance of our business without the effect of
non-cash items including stock based compensation, amortization of intangibles
and one time charges including 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 it is useful to provide investors with a standard operational measure used by management to assess our operational performance; and

•We believe that the use of non-GAAP pro forma net loss per share is useful in comparing our results to those of other companies.

Cash and capital resources at December 31, 2021

Our current capital resources and results of operations as of
December 31, 2021consist of:

1) an overall working capital surplus of approximately $78.8 million;

2) species of about $52.5 million and short-term investments of approximately $43.1 million;

3) net cash used by operating activities for the year ended December 31, 2021 of
$37.1 million.

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

Working Capital                                      Assets        Liabilities         Net
Cash and cash equivalents                          $  52,480      $          -      $ 52,480
Accounts receivable, net / accounts payable            3,218             2,414           804
Inventory                                              1,976                 -         1,976
Short-term investments                                43,125                 -        43,125
Accrued liabilities                                        -            10,665       (10,665)
Operating lease obligation                                 -               643          (643)
Deferred revenue                                           -             4,805        (4,805)
Notes and other receivables / Short-term debt            321             3,490        (3,169)
Other                                                  4,842             5,114          (272)
Total                                              $ 105,962      $     27,131      $ 78,831

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 December 31, 2021,
the total obligation for operating leases is approximately $1.9 million, of
which approximately $0.7 million is expected to be paid in the next twelve
months. Our vendor commitments are approximately $0.5 million all of which is
expected in the next twelve months. As of December 31, 2021, our obligation for
acquisition liabilities is approximately $5.3 million of which approximately
$5.1 million is expected to be paid in the next twelve months. In addition, at
any time beginning on the Redemption Triggering Date and ending ninety (90) days
thereafter, each holder of our Series 7 Preferred Stock may require us to redeem
all or part of the shares then held by such holder in cash for a redemption
price per share equal to the Redemption Amount (which may be increased in the
event of certain events of default). Any holder that elects to redeem its shares
of Series 7 Preferred Stock will be required to forfeit 75% of the corresponding
warrants held by such holder. The aggregate Redemption Amount that we may be
required to pay is equal to $49.25 million. As of March 15, 2022, we received
redemption notices in an aggregate amount equal to $33.0 million and as of the
date of this filing have redeemed 33,000 shares of Preferred Stock and
19,800,000 corresponding warrants have been forfeited.


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promissory notes

As of March 16, 2022, the Company owed approximately $2.1 million in principal
under promissory notes with approximately $3.5 million payable within the next
twelve months inclusive of interest owed. The interest rate charged under the
notes range from 8% to 10%. See Note 20 of the Notes to Consolidated Financial
Statements included elsewhere in this Annual Report.

Net cash used in operating activities during the year ended December 31, 2021 of
$37.1 million consists of net loss of $70.1 million offset by non-cash
adjustments of approximately $35.8 million less net cash changes in operating
assets and liabilities of approximately $2.8 million. Although the Company has
sustained significant losses during the 2021 year, during the twelve months
ended December 31, 2021 we raised net proceeds of approximately $128 million
from the sale of our securities in connection with registered direct offerings
and the exercise of warrants. Given our current cash balances 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. 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.

Despite these challenges, including a decline in revenue for certain existing
product lines, we were able to realize growth in total revenue for the year
ended December 31, 2021 when compared to the year ended 2020, as a result of the
addition of new product lines including a full year of sales associated with our
SAVES and RTLS product lines, the addition of the CXApp and Game Your Game
product lines during the second quarter of 2021 and the addition of the IIoT
product line in the fourth quarter of 2021. The total impact that COVID-19 will
have on general economic conditions is continuously evolving and the impact it
may continue to have on our results of operations continues to remain uncertain
and there are no assurances that we will be able to continue to experience the
same growth or not be materially adversely 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 acquisition.



Cash and capital resources at December 31, 2021 Compared to
December 31, 2020

The Company’s net cash flows used in operating, investing and financing activities for the years ended December 31, 2021 and 2020 and certain balances at the end of these periods are as follows (in thousands):

                                                                  For the 

Completed exercises the 31st of December,

                                                                      2021                2020
Net cash used in operating activities                             $  (37,131)         $ (20,601)
Net cash used in investing activities                                (53,508)           (23,507)
Net cash provided by financing activities                            125,037             57,259
Effect of foreign exchange rate changes on cash                           86                 (4)
Net increase in cash and cash equivalents                         $   

34,484 $13,147

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                               As of December 31,       As of December 31,
                                      2021                     2020
Cash and cash equivalents     $            52,480      $            17,996
Working capital surplus       $            78,831      $            18,208

Operating activities for the year ended December 31, 2021

Net cash used in operating activities during the year ended December 31, 2021
was approximately $37.1 million. Cash flows for the year ended
December 31, 2021 was broken down as follows (in thousands): Net loss

                                           $ (70,130)
Non-cash income and expenses                          35,847

Net change in operating assets and liabilities (2,848) Net cash used in operating activities

              $ (37,131)


Non-monetary income and expenses of approximately $35.8 million consisted mainly of the following items (in thousands):

                   Depreciation and amortization expenses (including 

amortization of intangible assets)

                   primarily attributable to the Shoom, AirPatrol, 

LightMiner, Locality, GTX,

                   Jibestream, Systat, Ten Degrees, Nanotron, Game Your 

Game, Visualix, CXApp and

                   IntraNav, which were acquired effective August 31, 2013, 

April 16, 2014,

                   November 21, 2016, May 21, 2019, June 27, 2019, August 

15, 2019, June 30th,

                   2020, August 19, 2020, October 6, 2020, April 9, 2021, April 23, 2021, April
$   6,451          30, 2021, and December 9, 2021, respectively.

677 Amortization of right of use

(1,627) Accrued interest income, related party

                   Stock-based compensation expense attributable to 

warrants and options issued

   10,879          as part of Company operations
       30          Loss on exchange of debt for equity
      224          Amortization of debt discount
      300          Provision for inventory obsolescence
  (49,817)         Gain on settlement of related party promissory note
      121          Provision for doubtful accounts
      (92)         Unrealized gain/loss on note
   (7,345)         Recovery for valuation allowance for held for sale loan
   (2,593)         Deferred income tax
   57,067          Unrealized loss on equity securities
   14,789          Impairment of goodwill
    6,524          Earnout payment expense
       24          Loss on disposal of property and equipment
      235          Other
$  35,847          Total non-cash expenses

Net cash used in changes in operating assets and liabilities totaled approximately $2.8 million and mainly consisted of the following items (in thousands):

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$   (313)     Increase in accounts receivable and other receivables
  (3,919)     Increase in inventory, other current assets and other assets
     391      Increase in accounts payable
     834      Increase in accrued liabilities and other liabilities
    (658)     Decrease in operating lease liabilities
     817      Increase in deferred revenue
$ (2,848)     Net cash used in the changes in operating assets and liabilities


Operating activities for the year ended December 31, 2020

Net cash used in operating activities during the years ended December 31, 2020
was approximately $20.6 million. Cash flows for the year ended
December 31, 2020 consisted of the following (in thousands):

Net loss                                           $ (29,214)
Non-cash income and expenses                          11,846

Net change in operating assets and liabilities (3,233) Net cash used in operating activities

              $ (20,601)


Non-monetary income and expenses of approximately $11.8 million consisted mainly of the following items (in thousands):

                   Depreciation and amortization expenses (including 

amortization of intangible assets)

                   primarily attributable to the Shoom, AirPatrol, 

LightMiner, Locality, GTX,

                   Jibestream, Systat, Ten Degrees and Nanotron, which were 

effective acquisition

                   August 31, 2013, April 16, 2014, November 21, 2016, May 

21, 2019, June 27,

                   2019, August 15, 2019, June 30, 2020, August 19, 2020 and October 6, 2020,
$   3,371          respectively.

490 Amortization of right of use

(32) Amortization of technology

                   Stock-based compensation expense attributable to 

warrants and options issued

    1,194          as part of Company operations and for the Jibestream acquisition
      210          Loss on exchange of debt for equity
    2,594          Amortization of debt discount
    2,370          Provision for the valuation allowance held for sale loan
      (87)         Income tax benefit
      956          Provision for doubtful accounts
      138          Provision for inventory obsolescence
      648          Provision for the valuation allowance related party receivable
       (6)         Other
$  11,846          Total non-cash expenses


The net use of cash in the change in operating assets and liabilities aggregated
approximately $3.2 million and consisted primarily of the following (in
thousands):

$   (964)     Increase in accounts receivable and other receivables
    (928)     Increase in inventory, other current assets and other assets
  (1,815)     Decrease in accounts payable
     722      Increase in accrued liabilities and other liabilities
    (490)     Decrease in operating lease liabilities
     242      Increase in deferred revenue
$ (3,233)     Net use of cash in the changes in operating assets and liabilities


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Contents

Cash flow from investing activities at December 31, 2021 and 2020

Net cash flows used in investing activities during 2021 was approximately $53.5
million compared to net cash flows used in investing activities during 2020 of
approximately $23.5 million. Cash flows related to investing activities during
the year ended December 31, 2021 include $0.3 million for the purchase of
property and equipment, $1.0 million for investment in capitalized software,
$63.4 million for the purchase of treasury bills, $2.0 million for the purchase
of short term investments, $28.0 million sales of treasury bills, $2.0 million
sale of short term investments, $0.9 million for the purchase of the Systat
licensing agreement, $0.2 million received from the acquisition of Game Your
Game, $15.0 million paid for the acquisition of CXApp, $61,000 paid for
acquisition of Visualix, and $1.0 million paid for acquisition of IntraNav. Cash
flows related to investing activities during the year ended December 31, 2020
include $1.0 million for the purchase of property and equipment, $0.9 million
for investment in capitalized software, $8.0 million for a short term
investments, $2.2 million for cash paid the in Systat License Agreement, $1.5
million for cash paid for the Ten Degrees acquisition, $7.8 million for cash
paid for the Nanotron acquisition, $0.3 million of cash acquired in the Nanotron
acquisition, and $2.5 million for a long term investment.

Cash flow from financing activities at December 31, 2021 and 2020

Net cash flows provided by financing activities during the year ended
December 31, 2021 was $125.0 million. Net cash flows provided by financing
activities during the year ended December 31, 2020 was $57.3 million. During the
year ended December 31, 2021, the Company received incoming cash flows of $128.4
million for the issuance of common stock, preferred stock and warrants, loaned
$0.1 million to related parties, paid $1.9 million of taxes related to the net
share settlement of restricted stock units, paid a $0.5 million liability
related to the CXApp acquisition, paid a $0.5 million acquisition liability to
the pre-acquisition shareholders of Nanotron and paid a $0.5 million acquisition
liability to the pre-acquisition shareholders of Locality. During the year ended
December 31, 2020, the Company received incoming cash flows of $55.4 million for
the issuance of common stock, preferred stock and warrants, repaid $0.1 million
of notes payable, loaned $2.6 million to related parties, received $0.2 million
of repayments from related parties, received $5.0 million of net proceeds from
promissory notes, paid a $0.5 million acquisition liability to the
pre-acquisition shareholders of Locality, and made $0.2 million of repayments to
a bank facility.

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 refer to Note 2 of our financial statements, which are included in this report beginning on page F-1.

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