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20	20	Inpixon has two operating subsidiaries: (1) Inpixon Canada, Inc. (100% ownership) based in Coquitlam, British Columbia (“Inpixon Canada”); and (2) Inpixon India Limited (82.5% ownership) based in Hyderabad, India.
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24	24	= Product and Technology =
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92	92	Effective August 31, 2018, the Company completed a spin-off of its then wholly owned subsidiary Sysorex, Inc. and the associated infrastructure business and it is no longer a part of its reporting in the current year. For prior years’ the consolidated financial data, revenue and expense of Sysorex’s infrastructure business are shown as discontinued operations. The company's Indoor Intelligence products secure, digitize and optimize the interior of any premises with indoor positioning and data analytics that provide rich positional information, similar to a global positioning system, and browserlike intelligence for the indoors.{{footnote}}https://ir.inpixon.com/sec-filings/all-sec-filings/content/0001213900-20-005326/0001213900-20-005326.pdf{{/footnote}}
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94		-Revenues increased in the year ended December 31, 2019 over the same period in 2018 by approximately 68% because of an increase in its Indoor Intelligence revenues resulting from an increased focus on the Indoor Intelligence product line following the spin-off, the completion of certain acquisitions in 2019 and the addition of a new customer that accounted for approximately 42% of its revenues for the year ended December 31, 2019. The company expect to continue to grow its Indoor Intelligence product line in 2020. 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. The company anticipate sales cycles to improve in 2020 as its 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. The company's other digital solutions are also delivered on a SaaS model and allow it to generate industry analytics that complement its indoor-positioning solutions
	92	+Revenues increased in the year ended December 31, 2020 over the same period in 2019 by approximately 48% due to revenue earned of approximately $1.2 million from the Systat licensing agreement, approximately $0.9 million from the Nanotron acquisition and approximately $0.9 million from existing product lines over the prior comparable period. The company expect to continue to grow its Indoor Intelligence product line in 2021. 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. The company anticipate sales cycles to improve in 2021 as its 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. The company's other digital solutions are also delivered on a SaaS model and allow it to generate industry analytics that complement its indoor-positioning solutions.
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96		-The company experienced a net loss of approximately $34.0 million and $24.6 million for the years ended December 31, 2019 and 2018, respectively. The company cannot assure that the company will ever earn revenues sufficient to support its operations, or that the company will ever be profitable. In order to continue its operations, Inpixon has supplemented the revenues the company earned with proceeds from the sale of its equity and debt securities and proceeds from loans and bank credit lines. Furthermore, except for its Payplant facility, Inpixon has no committed source of financing and the company cannot assure that the company will be able to raise money as and when the company need it to continue its operations. If the company cannot raise funds as and when the company need them, the company may be required to scale back its business operations by reducing expenditures for employees, consultants, business development and marketing efforts, selling assets or one or more products in its business, or otherwise severely curtailing its operations.
	94	+The company experienced a net loss of approximately $29.2 million and $34.0 million for the years ended December 31, 2020 and 2019, respectively. The company cannot assure that the company will ever earn revenues sufficient to support its operations, or that the company will ever be profitable. In order to continue its operations, Inpixon has supplemented the revenues the company earned with proceeds from the sale of its equity and debt securities and proceeds from loans and bank credit lines.
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99	99	== Reverse Stock Split ==
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118	118	On August 15, 2019, Inpixon, through its wholly owned subsidiary, Inpixon Canada as purchaser (the “Purchaser”), completed its acquisition of Jibestream for consideration consisting of: (i) CAD $5,000,000, plus an amount equal to all cash and cash equivalents held by Jibestream at the closing, minus, if a negative number, the absolute value of the Estimated Working Capital Adjustment (as defined in the acquisition agreement), minus any amounts loaned by the Purchaser to Jibestream to settle any Indebtedness (as defined in the Purchase Agreement) or other fees, minus any cash payments to the holders of outstanding options to settle any in-the-money options, minus the deferred revenue costs of CAD $150,000, and minus the costs associated with the audit and review of the financial statements of Jibestream required by the Purchase Agreement (collectively, the “Estimated Cash Closing Amount”); plus (ii) 176,289 shares of the Company’s common stock which was equal to CAD $3,000,000 converted to U.S. dollars based on the exchange rate at the time of the closing, divided by $12.4875 which was the price per share at which shares of the Company’s common stock were issued in the Company’s public offering on August 12, 2019 (“Inpixon Shares”).
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	119	+== Nanotron Acquisition ==
	120	+
	121	+On October 6, 2020, the company acquired, through its wholly-owned subsidiary Inpixon GmbH, a limited liability company incorporated under the laws of Germany (the “Purchaser), all of the outstanding capital stock (the “Nanotron Shares”) of Nanotron Technologies GmbH, a limited liability company incorporated under the laws of Germany (“Nanotron”), pursuant to the terms and conditions of that certain Share Sale and Purchase Agreement, dated as of October 5, 2020 (the “Purchase Agreement”), among the Purchaser, Nanotron and Sensera Limited, a stock corporation incorporated under the laws of Australia and the sole shareholder of Nanotron (the “Seller”).
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	123	+As a result of the acquisition, the company now own 100% of Nanotron. Nanotron’s business consists of developing and manufacturing location-aware IoT systems and solutions.
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	125	+At the closing, the Purchaser paid to the Seller an aggregate purchase price of $8,700,000 (less the Holdback Funds (as defined below) and certain other closing adjustments) for the Nanotron Shares (“Purchase Price”). The Purchase Price may be subject to certain post-Closing adjustments based on actual working capital as of the closing as described in the Purchase Agreement. The Purchaser retained $750,000 (the “Holdback Funds”) from the Purchase Price to secure the Seller’s obligations under the Purchase Agreement, with any unused portion of the Holdback Funds to be released to the Seller on the date that is 18 months after the closing date. The Purchaser paid the Purchase Price from funds received in connection with a capital contribution from it, and a portion of the Purchase Price was used by the Seller to satisfy outstanding loans payable by the Seller to obtain the release of certain existing security interests on Nanotron’s assets. On February 24, 2021, the company agreed to the early release of the Holdback Funds, in exchange for a reduction in the total amount payable to the Seller by $225,000. In addition, the amount payable was further reduced by $59,156.74 in connection with a post closing working capital adjustment and the satisfaction of a claim related to a customer dispute. A balance of $465,843.26 was paid to the Seller in full satisfaction of the Holdback Funds payable by the Purchaser to the Seller pursuant to the Purchase Agreement.
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	127	+
	128	+== Systat License Acquisition ==
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	130	+On June 19, 2020, the company entered into an exclusive license to market, distribute, and develop the SYSTAT and SigmaPlot software suite of products (the “License Grant”) pursuant to the terms and conditions of that certain Exclusive Software License and Distribution Agreement, as amended on June 30, 2020 (as amended, the “License Agreement”), with Cranes Software International Ltd. (“Cranes”) and Systat Software, Inc. (“Systat,” and together with Cranes, the “Systat Parties”). In accordance with the terms of the License Agreement, on June 30, 2020 (the “License Closing Date”), the company acquired the License Grant, effective as of June 1, 2020, and the company partitioned a portion of the outstanding balance under that certain secured promissory note (the “Sysorex Note”) issued to it by Sysorex, Inc. (“Sysorex”), into a new note in an amount equal to $3 million in principal plus accrued interest (the “Closing Note”) and assigned the Closing Note and all rights and obligations thereunder to Systat in accordance with the terms and conditions of that certain Promissory Note Assignment and Assumption Agreement. An aggregate of an additional $3.3 million of the principal balance underlying the Sysorex Note was partitioned and assigned to Systat as consideration payable for the rights granted under the license, including $1.3 million on the three month anniversary of the License Closing Date, $1.0 million on the six month anniversary of the License Closing Date and $1.0 million on March 19, 2021. Each assignment under the Sysorex Note was represented by a new secured promissory note and its right to any repayment under the Sysorex Note is subordinate and junior to Sysorex’s obligation to make any payment to Systat unless Inpixon has exercised its right to offset any losses against such assigned notes as permitted in the License Agreement. In addition, the company paid the remaining cash consideration of $2.2 million for the License Grant on July 8, 2020.
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121	121	= Financial Highlights =
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123		-Revenues for the year ended December 31, 2019 were $6.3 million compared to $3.8 million for the comparable period in the prior year for an increase of $2.5 million, or approximately 68%. Revenues increased from the comparable period due to an increase in its IPA product and services revenues and by approximately $750,000 of mapping product revenue.
	134	+Revenues for the year ended December 31, 2020 were $9.3 million compared to $6.3 million for the comparable period in the prior year for an increase of approximately $3.0 million, or approximately 48%. Revenues increased approximately $1.2 million from the Systat License Agreement, approximately $0.9 million from the Nanotron acquisition and approximately $0.9 million from existing product lines over the prior comparable period.
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125		-Cost of revenues for the year ended December 31, 2019 were $1.6 million compared to $1.1 million for the comparable period in the prior year. This increase of $533,000, or approximately 50%, was primarily attributable the increase in IPA revenue and revenues from the Jibestream acquisition during the year ended December 31, 2019.
	136	+Cost of revenues for the year ended December 31, 2020 were $2.6 million compared to $1.6 million for the comparable period in the prior year. This increase in cost of revenues of approximately $1.0 million, or approximately 62%, was primarily attributable to the increase in revenues from the Systat License Agreement, Nantoron acquisition and the existing product lines.
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127		-The gross profit margin for the year ended December 31, 2019 was 74% compared to 71% for the year ended December 31, 2018. This increase in margin is primarily due to the sales mix of products and services sold during the year ended December 31, 2019.
	138	+The gross profit margin for the year ended December 31, 2020 was 72% compared to 74% for the year ended December 31, 2019. This decrease in margin is primarily due to to lower gross profit margins from the Nanotron acquisition.
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129		-Operating expenses for the year ended December 31, 2019 were $25.5 million and $21.1 million for the comparable period ended December 31, 2018. This increase of $4.4 million is primarily attributable to $1.2 million of higher acquisition costs, approximately $1.2 million of Jibestream’s operating expenses, approximately $2.0 million of higher stock based compensation expense offset by $690,000 of deconsolidation costs of the Sysorex entities that was incurred in the year ended December 31, 2018.
	140	+Operating expenses for the year ended December 31, 2020 were $30.5 million and $25.5 million for the comparable period ended December 31, 2019. This increase of $5.0 million is primarily attributable to increased operating expenses of the Systat licensing product line, Nanotron acquisition, increased operating expense of the Jibestream division as it was included for a full twelve months during 2020, increased professional fees and marketing expenses offset by a decrease in travel expenses, stock based compensation and amortization of intangibles.
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131		-Other income/expense for the year ended December 31, 2019 was a loss of $13.8 million compared to a loss of $1.4 million for the comparable period in the prior year. This increase in loss of $12.4 million is primarily attributable to a $10.6 million fair value adjustment related to the uncertainty of being repaid in connection with that certain note receivable from Sysorex, which has been classified as “held for sale” and for which the Company has established a full valuation allowance, the interest income from a related party note offset by an increase in interest expense and debt discount on promissory notes in the year ended December 31, 2019. The need for future fair value adjustments in connection with its note receivable from Sysorex will be dependent on Sysorex’s performance vis-à-vis its current financial projections.
	142	+Loss from operations for the year ended December 31, 2020 was $23.8 million as compared to $20.8 million for the comparable period in the prior year. This increase in loss of approximately $3.0 million was primarily attributable to higher operating expenses offset by the increase in gross profit for the year ended December 31, 2020.
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133		-There was an income tax benefit of $584,000 for the year ended December 31, 2019 related to the acquisition of intangibles and net operating losses of Locality and Jibestream. There was no provision for income taxes for the year ended December 31, 2018 as the Company was in a net taxable loss position. Deferred tax assets resulting from such losses are fully reserved as of December 31, 2019 and 2018 for Inpixon and Inpixon Canada since, at present, the Company has no history of taxable income and it is more likely than not that such assets will not be realized.
	144	+Other income/expense for the year ended December 31, 2020 was a loss of $5.5 million compared to a loss of $13.8 million for the comparable period in the prior year. This decrease in loss of approximately $8.3 million is primarily attributable to a decrease in the valuation allowance adjustment in connection with a Note Receivable from Sysorex.
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135		-Net gain attributable to non-controlling interest for the years ended December 31, 2019 and 2018 was $9,000 and $11,000, respectively.
	146	+There was an income tax benefit of $56,000 for the year ended December 31, 2020 related to the acquisition of intangibles and net operating losses of Locality and Jibestream. There was no provision for income taxes for the year ended December 31, 2019 as the Company was in a net taxable loss position. Deferred tax assets resulting from such losses are fully reserved as of December 31, 2020 and 2019 for Inpixon and Inpixon Canada since, at present, the Company has no history of taxable income and it is more likely than not that such assets will not be realized.
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137		-Net loss attributable to stockholders for the year ended December 31, 2019 was $34.0 million compared to $24.6 million for the comparable period in the prior year. This increase in loss of $9.4 million was primarily attributable to the $10.6 million fair value adjustment related to the uncertainty of being repaid in connection with that certain note receivable from Sysorex, which has been classified as “held for sale” and for which the Company has established a full valuation allowance, higher operating and interest expense offset by higher margin IPA revenue during the year ended December 31, 2019.
	148	+Net loss attributable to stockholders for the year ended December 31, 2020 was $29.2 million compared to $34.0 million for the comparable period in the prior year. This decrease in loss of approximately $4.8 million was primarily attributable to the increase in operating expenses offset by the increase in gross margin and the decrease in the valuation allowance adjustment.
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140	140	= Recent developments =