Related Party Transactions

9 Months Ended

Sep. 30, 2024

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Refer to Note 9 for disclosures on related party debt transactions.

David Brody, board member and founder of Legacy XTI, provided legal and strategic consulting services for the Company. During the nine months ended September 30, 2024 and 2023, amounts paid by the Company to Mr. Brody were not significant. The Company had no payables to Mr. Brody at September 30, 2024 and had accrued $0.3 million of fees as of December 31, 2023 which is included in Related Party Payables within the accompanying condensed consolidated balance sheets. Pursuant to an amendment to the consulting agreement, the outstanding payable was waived by Mr. Brody, which was accounted for as a capital contribution, and the consulting agreement terminated in connection with the XTI Merger closing.

Scott Pomeroy, the Company's CEO and Chairman, who was the CFO and board member of Legacy XTI up until the XTI Merger closing, provided consulting services to the Company during the nine months ended September 30, 2024 and 2023. Amounts paid to Mr. Pomeroy were not significant. As of September 30, 2024 and December 31, 2023, the Company owed Mr. Pomeroy accrued consulting compensation of $0.1 million, which is included in Related Party Payables within the accompanying condensed consolidated balance sheets. In addition and as disclosed in Note 12, Mr. Pomeroy was issued shares of Legacy XTI as transaction compensation immediately prior to the XTI Merger.

Transactions with AVX Aircraft Company

On March 25, 2024, the Company entered into a letter agreement, as amended on June 17, 2024, with AVX Aircraft Company ("AVX") whereas AVX is to provide consulting and advisory services relating to the development and design of the TriFan 600 aircraft. The Company's Chairman and CEO, Scott Pomeroy, and board member, David Brody, also sit on the Board of AVX. Additionally, as of the date of this report, David Brody owns approximately 26% of the issued and outstanding shares of AVX. During the three and nine months ended September 30, 2024, the Company paid AVX $0.8 million and $0.9 million in consulting fees, respectively, which included advance deposits for future services. As of September 30, 2024, the deposit balance for future services was approximately $0.5 million, and is included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

Agreements with Prior "Legacy Inpixon" CEO

On March 12, 2024, the Company entered into a consulting agreement with Mr. Nadir Ali (the “Ali Consulting Agreement”), the Company's former Chief Executive Officer. Mr. Ali, through a company of which he is a controlling member, currently holds shares of the Company's Series 9 Preferred Stock as disclosed in Note 11. Pursuant to the Ali Consulting Agreement, following the closing of the XTI Merger, Mr. Ali will provide consulting services to the Company for 15 months ("Ali Consulting Period") or until earlier termination in accordance with its terms. During the Ali Consulting Period, the Company will pay him an aggregate of $0.3 million.

In addition, the Company shall pay Mr. Ali (a) the amount of $1.5 million due three months following the Closing, and (b) the aggregate amount of $4.5 million, payable in 12 equal monthly installments, starting four months after the closing date of the XTI Merger (the payments described in (a) and (b), each an “Equity Payment”). Each Equity Payment may be made, in Company’s discretion, in (i) cash, (ii) fully vested shares of common stock under the Company’s equity incentive plan, or a combination of cash and registered shares. As of the date of this report, the Company repaid the initial $1.5 million owed to Mr. Ali under the Ali Consulting Agreement. During the three and nine months ended September 30, 2024, the Company recognized compensation expense of $1.0 million and $2.6 million, respectively, which is included in general and administrative expenses on the condensed consolidated statements of operations, relating to the Ali Consulting Agreement. As of September 30, 2024, the Company owed Mr. Ali accrued consulting fees of approximately $1.0 million, which is included in accounts payable on the accompanying condensed consolidated balance sheets.

On July 24, 2023, the compensation committee of the Board (the “Compensation Committee”) adopted a Transaction Bonus Plan, which was amended on March 11, 2024, and was intended to provide incentives to certain employees, including Mr. Ali, and other service providers to remain with the Company through the consummation of a qualifying transaction. As of September 30, 2024, the Company had an transaction bonus obligation of approximately $2.7 million payable to Mr. Ali, which is included in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets.

Grafiti Group Divesiture

On February 21, 2024, Inpixon completed the disposition of the remaining portion of the Shoom, SAVES, and GYG business lines and assets ("Grafiti Group Divestiture") in accordance with the terms and conditions of an Equity Purchase Agreement, dated February 16, 2024, by and among Inpixon (“Seller”), Grafiti LLC, and Grafiti Group LLC (an entity controlled by Nadir Ali, the Company's former CEO) (“Buyer”). Pursuant to the terms, Buyer acquired from 100% of the equity interest in Grafiti LLC, including the assets and liabilities primarily relating to Inpixon’s Saves, Shoom and Game Your Game business, including 100% of the equity interests of Inpixon India, Grafiti GmbH (previously Inpixon Gmbh) and Game Your Game, Inc. from the Company for a minimum purchase price of $1.0 million paid in two annual cash installments of $0.5 million due within 60 days after December 31, 2024 and 2025. The purchase price and annual cash installment payments will be (i) increased for 50% of net income after taxes, if any, from the operations of Grafiti LLC for the years ended December 31, 2024 and 2025; (ii) decreased for the amount of transaction expenses assumed; (iii) increased or decreased by the amount working capital of Grafiti LLC on the closing balance sheet is greater or less than $1.0 million. The Company notes that $0.5 million of the receivable is included in current assets as other receivables in the Company's condensed consolidated balance sheet as of September 30, 2024, and the remaining $0.5 million of the receivable is included in long term assets as other assets in the Company's condensed consolidated balance sheet as of September 30, 2024.