Note 5 – Business Combinations

XTI Merger (March 2024)

The XTI Merger was accounted for as a reverse merger in accordance with GAAP. Under this method of accounting, Legacy Inpixon was treated as the “acquired” company for financial reporting purposes. This determination is primarily based on the fact that subsequent to the XTI Merger, Legacy XTI maintains control of the Board of Directors and management of the Company, and the preexisting shareholders of Legacy XTI have majority voting rights of the Company. For accounting purposes, the acquirer is the entity that has obtained control of another entity and, thus, consummated a business combination. Accordingly, Legacy XTI’s assets and liabilities are recorded at carrying value and the assets and liabilities associated with Legacy Inpixon are recorded at estimated fair value as of the acquisition date. The excess of the purchase price over the estimated fair value of the net assets acquired, if applicable, is recognized as goodwill. A significant portion of the acquired operations (the Inpixon Business) was subsequently classified as held for sale and is presented as discontinued operations. See Note 19 – Discontinued Operations for additional information.

The below summarizes the total consideration transferred in the business combination (in thousands):

The Company determined the estimated fair value of common stock included in consideration to be calculated based on Legacy Inpixon’s common stock outstanding of 2,075,743 multiplied by the price of Legacy Inpixon’s common stock on March 12, 2024 of $5.27 (which reflects the 1-for-100 reverse stock split of the Company’s outstanding common stock that became effective before the closing of the XTI Merger). The Company utilized Legacy Inpixon’s common stock price in determining fair value as it is more reliably measurable than the value of Legacy XTI’s (accounting acquirer) equity interests given it is not a publicly traded entity.

The aggregate fair value of warrants was approximately $3.3 million was included in the total equity consideration. A portion of this total represents 918,689 warrants outstanding by the Company with a fair value of $1.00 per warrant, which is the warrant’s redemption value. The warrant fair value was determined to be the redemption value as the warrants include protective covenants for the Company that prevent the holder from exercising the warrants. The remainder of this total represents 491,310 warrants with a fair value of $4.75 per warrant, which was determined by using level 3 inputs and utilizing a Black-Scholes valuation. Significant inputs related to these warrants are as follows:

The fair value of preferred stock of approximately $11.3 million included in the total equity consideration represents 11,302 shares of Series 9 Preferred Stock that were issued and outstanding by the Company upon the consummation of the XTI Merger at a stated value and fair value of $1,000 per share.

The following table summarizes the purchase price allocations relating to the XTI Merger (in thousands):

The assets were valued using a combination of a multi-period excess earnings methodologies, a relief from royalty approach, a discounted cash flow approach and present value of cash flows approach. The goodwill represents the excess fair value after the allocation of intangibles. As a nontaxable transaction, the historical tax bases of the acquired assets, liabilities and tax attributes have carried over. Although no new tax goodwill has been created in the transaction, the Company has approximately $5.8 million of tax deductible goodwill that arose in previous transactions that carries over.

During 2025, the Company finalized the purchase price allocation related to the XTI Merger. No material measurement period adjustments were recorded.

For the year ended December 31, 2024, the Company incurred merger related transaction costs of approximately $6.5 million.

Drone Nerds Acquisition (November 2025)

On November 10, 2025 (the “Closing Date”), XTI Drones Holdings, LLC (“XTI Drones Holdings”), a subsidiary of the Company’s wholly owned subsidiary, XTI Drones, LLC, acquired 100% of the issued and outstanding equity interests of Drone Nerds, LLC, a Florida limited liability company, and Anzu Robotics, LLC (“Anzu” and, collectively with Drone Nerds, LLC, “Drone Nerds”), a Delaware limited liability company (collectively, the “Acquisition”). The Acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations. The Company holds an approximately 83.4% controlling interest in XTI Drones Holdings, with the remaining interest held by noncontrolling unitholders.

Total purchase consideration for the Acquisition was approximately $40.4 million, consisting of approximately $18.8 million in cash, approximately $11.9 million in promissory notes, and approximately $9.7 million in equity consideration in the form of an aggregate of 6,524,576 Class B Units of XTI Drones Holdings (the “Class B Units”).

Drone Nerds, LLC is a drone distributor and enterprise drone solutions provider in the United States, specializing in the wholesale and retail sale of advanced drone systems and related technologies serving commercial, governmental, and consumer markets. Anzu operates in complementary markets and enhances the Company’s drone platform capabilities. The Acquisition expands the Company’s footprint in enterprise drone distribution and strengthens its position in high-growth commercial and public sector markets. The purpose of the Acquisition was to establish and scale the Company’s enterprise UAS solutions platform, including hardware distribution, training, compliance support, and lifecycle services, and to accelerate the Company’s transition toward a revenue-generating UAS business, while strengthening its position in high-growth commercial and public sector markets.

Estimated purchase price of approximately $40.4 million related to the Acquisition is comprised of the following components (in thousands):

The Class B Units are exchangeable for shares of the Company’s common stock on a one-for-one basis, subject to customary equitable adjustments. The fair value of the Class B Units was determined based on the Company’s five-day volume-weighted average share price of $1.492 ending November 7, 2025.

The promissory notes bear interest at 7.25% per annum and mature on the one-year anniversary of the Closing Date, subject to scheduled principal repayments and acceleration provisions upon certain capital raising events.

The Company has performed a preliminary allocation of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the Closing Date. The allocation is preliminary and subject to change as the Company finalizes its valuation analyses, including assessments of identifiable intangible assets, working capital adjustments, and other contingencies.

The following table summarizes the preliminary allocation of purchase consideration as of November 10, 2025 (in thousands):

The goodwill recognized of approximately $11.5 million represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired. The goodwill is primarily attributable to expected synergies from integrating Drone Nerds into the Company’s drone platform, expanded customer relationships, workforce expertise, and future growth opportunities. The goodwill is expected to be deductible for tax purposes to the extent permitted under applicable law.

For the year ended December 31, 2025, the Company incurred acquisition related transaction costs of approximately $3.9 million.