Unless otherwise indicated or the context otherwise requires, references in this
section to "IronNet," "we," "us," "our", "the Company" and other similar terms
refer to IronNet, Inc. and its subsidiaries after giving effect to the Merger.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q ("Quarterly Report"), and the annual consolidated financial
statements for the year ended January 31, 2022 and related notes included in our
Annual Report on Form 10-K filed on May 2, 2022 (the "Annual Report"). The
interim condensed consolidated financial statements in this Quarterly Report are
presented in U.S. dollars rounded to the nearest thousand, with the amounts in
this Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") rounded to the nearest tenth of a million. Therefore,
differences in the tables between totals and sums of the amounts listed may
occur due to such rounding.

This Quarterly Report contains statements that may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), that involve substantial risks and
uncertainties. All statements contained in this Quarterly Report other than
statements of historical fact, including statements regarding our future results
of operations and financial position, our business strategy and plans, and our
objectives for future operations, are forward-looking statements. The words
"believes," "expects," "intends," "estimates," "projects," "anticipates,"
"will," "plan," "design," "may," "should," or similar language are intended to
identify forward-looking statements.

It is routine for our internal projections and expectations to change throughout
the year, and any forward-looking statements based upon these projections or
expectations may change prior to the end of the next quarter or year. Readers of
this Quarterly Report are cautioned not to place undue reliance on any such
forward-looking statements. As a result of a number of known and unknown risks
and uncertainties, our actual results or performance may be materially different
from those expressed or implied by these forward-looking statements. Factors
that could cause or contribute to these differences include those discussed
below and in the Annual Report under the captions "Cautionary Note Regarding
Forward-Looking Statements" and "Risk Factors." The impact of COVID-19 and its
variants, as well as geopolitical tensions, such as Russia's recent incursion
into Ukraine, may also exacerbate these risks, any of which could have a
material effect on us. All forward-looking statements included herein are made
only as of the date hereof. Our fiscal year end is January 31, and our fiscal
quarters end on April 30, July 31, October 31, and January 31. Our fiscal years
ending January 31, 2023 and ended January 31, 2022 are referred to herein as
"fiscal 2023" and "fiscal 2022," respectively.

Insight

GEN. Keith B. Alexander (Ret.) founded our company in 2014 to solve the major
cybersecurity problem he witnessed and defined during his tenure as former head
of the NSA and founding Commander of U.S. Cyber Command: You can't defend
against threats you can't see. Our innovative approach provides the ability for
groups of organizations-within an industry sector, supply chain, state or
country, for example-to see, detect and defend against sophisticated cyber
attacks earlier and faster than ever before.

IronNet has defined a new market category called Collective Defense. IronNet has
developed the Collective Defense platform, a solution that can identify
anomalous (potentially suspicious or malicious) behaviors on computer networks
and share this intelligence anonymously and in real time among Collective
Defense community members. Collective Defense communities comprise groups of
organizations that have common risks, such as a supply chain, a business
ecosystem, or across an industry sector, a state, or a country. This
cybersecurity model delivers timely, actionable, and contextual alerts and
threat intelligence on attacks targeting enterprise networks, and functions as
an early-warning detection system for all community members.

This new platform addresses a large and unwavering compound problem: limited
threat visibility for increasingly borderless enterprises across sectors and at
the national level, paired with ineffective threat knowledge sharing across
companies and sectors and a "go it alone" approach to cybersecurity. These
operational gaps, combined with market dynamics like the increased velocity of
sophisticated cyber attacks and the deepening scarcity of qualified human
capital, have set our mission to transform how cybersecurity is waged.

Our business

We have focused on the development and delivery of a suite of advanced
cybersecurity capabilities for detection, alerting, situational awareness and
hunt/remediation combined into a comprehensive Collective Defense platform. We
compliment these capabilities, delivered to both commercial and public sector
enterprises, with professional services.

Revenue from software, subscriptions and support

Our core business is the delivery of integrated software capabilities through our collective defense platform. The platform is made up of two flagship products:

IronDefense is an advanced Network Detection Response ("NDR") solution that uses
AI-driven behavioral analytics to detect and prioritize anomalous activity
inside individual enterprises. IronNet leverages advanced AI/ML algorithms to
detect previously unknown threats, which are those that have not been identified
and "fingerprinted" by industry researchers), in addition to screening known
threats, and applies its Expert System to prioritize the severity of the
behaviors-all at machine speed and cloud scale.

IronDome is a threat-sharing solution that facilitates a crowdsource-like
environment in which the IronDefense threat detections from an individual
company are shared among members of a Collective Defense community, consisting
of our customers who have elected to permit their information to be anonymously
shared and cross-correlated by our IronDome systems. IronDome analyzes threat
detections across the community to identify broad attack patterns and provides
anonymized intelligence back to all community members in real time, giving all
members early insight into potential incoming attacks. Automated sharing across
the Collective Defense community enables faster detection of attacks at earlier
stages.

Our Collective Defense platform is designed to deliver strong network effects.
Every customer contributing its threat data (anonymously) into the community is
able to reap benefits from the shared intelligence of the other organizations.
The collaborative aspect of Collective Defense, and the resulting prioritization
of alerts based on their potential severity, helps address the known problem of
"alert fatigue" that plagues overwhelmed security analysts.

Our Collective Defense platform is largely cloud-deployed (public or private),
though it is also available in on-premise and hybrid environments, and is
scalable to include small-to-medium businesses and public-sector agencies as
well as multinational corporations. We provide professional cybersecurity
services such as incident response and threat hunting, as well as programs to
help customers assess cybersecurity governance, maturity, and readiness. Our
cybersecurity services are designed to create shared long-term success measures
with our customers, differentiating us from other cybersecurity vendors by
working alongside customers as partners and offering consultative and service
capabilities beyond implementation.

Our Collective Defense platform is a subscription-based pricing and flexible
delivery model, with 80.9% of our revenue for the three months ended April 30,
2022 related to deployments involving our key public cloud providers Amazon Web
Services and Microsoft Azure. We also support private cloud, or HCI such as
Nutanix as well as on-premise environments through hardware and virtual options.
To make it as easy as possible for customers to add Collective Defense into

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their existing security stack, we’ve built a rich set of APIs that enable integrations with industry-standard security products, including SIEM, SOAR, EDR, NGFW tools, and cloud-native logs from leading public cloud providers.

Professional services

We sell professional services, including development of national cybersecurity
strategies, cyber operations monitoring, security, training, red team, incident
response and tailored maturity assessments. Revenue derived from these services
is recognized as the services are delivered.

Funding to date

Historically, we have funded our operations primarily through private placements of common shares, warrants and redeemable convertible preferred shares.

In connection with the execution of the Merger Agreement, a number of purchasers
(each, a "Subscriber") purchased an aggregate of 12,500,000 shares of our common
stock (the "PIPE Shares"), for a purchase price of $10.00 per share and an
aggregate purchase price of $125.0 million. As a result of the Merger, we also
received $13.3 million held in Legacy LGL's trust account from proceeds related
to public trust shares, net of stockholder redemptions. Transaction costs
related to the issuance of the trust shares were $9.0 million.

During the three months ended April 30, 2022, we incurred a net loss of $33.2
million, of which $11.4 million related to non-cash expense related to
stock-based compensation, and used $22.2 million in cash to fund our operations.
As of April 30, 2022, we had $31.4 million of cash on hand to continue to fund
our operations.

We expect our capital expenditures and operating expenditures to increase in our ongoing operations as we:

1.

continue to invest in research and development related to new technologies;

2.

increase our investments in marketing and advertising, as well as in the sales and distribution infrastructure of our products and services;

3.

maintain and improve operational, financial and management information systems;

4.
hire additional personnel;

5.

obtain, maintain, develop and protect our intellectual property portfolio; and

6.

improve internal functions to support our operations as a publicly traded company.

Key Factors Affecting Performance

Acquisition of new customers

Our future growth depends in large part on our ability to acquire new customers.
If our efforts to attract new customers are not successful, our revenue may
decline in the future. Our IronDefense and IronDome platforms are designed to be
used in conjunction with point solutions to capture and share critical data and
findings to enable our behavioral analytics to identify threats and for
defenders to respond more accurately and quickly. We believe that we have
significant room to capture additional market share and intend to continue to
invest in sales and marketing to engage prospective customers, increase brand
awareness, and drive adoption of our solution.

Loyalty of the clientele

Our ability to increase our revenues depends largely on our ability to retain our existing customers.

Investing in Business Growth

Since inception, we have invested significantly in the growth of our business.
While remaining judicious and targeted in our investments, we intend to continue
to invest in our research and development team to lead product improvements, our
sales team to broaden our brand awareness and our general and administrative
expenses to increase for the foreseeable future given the additional expenses
for finance, compliance and investor relations as we grow as a public company.
In addition to our internal growth, we may also consider acquisitions of
businesses, technologies, and assets that complement and bolster additional
capabilities to our product offerings.

Key business indicators

We monitor the following key indicators to measure our performance, identify trends, formulate business plans and make strategic decisions.

Recurring Software Clients

We believe that our ability to increase the number of subscription and other
recurring contract type customers on our platform is an indicator of our market
penetration, the growth of our business, and our potential future business
opportunities. We have a history of growing the number of customers who have
contracted for our platforms on a recurring basis, which does not include our
professional services customers. Our recurring software customers include
customers who have a recurring contract for either or both of our IronDefense
and IronDome platforms. These platforms are generally sold together, but they
also can be purchased on a standalone basis. We have consistently increased the
number of such customers period-over-period, and we expect this trend to
continue as we increase subscription offerings to small and medium-sized
businesses, in addition to increased subscription offerings for our larger
enterprise customers. The following table sets forth the number of recurring
software customers as of the dates presented:

                                  April 30,
                               2022      2021

Recurring Software Customers      91        44
Year-over-year growth            107 %     120 %



Annual Recurring Revenue (“ARR”)

ARR is calculated at a particular measurement date as the annualized value of
our then existing customer subscription contracts and the portions of other
software and product contracts that are to be recognized over the course of the
contracts and that are designed to renew, assuming any contract that expires
during the 12 months following the measurement date is renewed on its existing
terms. The following table sets forth our ARR as of the dates presented:


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                                April 30,
                             2022        2021
                            ($ in millions)
Annual recurring revenue    $  30.1     $ 25.6
Year-over-year growth            18 %       54 %



Because we have contracts from government entities whose back to back renewal
may be delayed due to availability of funding between budget and authorization
cycles, potential changes in contract vehicles and increased requirements, ARR
may temporarily decline over the periods where these interruptions are active
across reporting period ends. During the quarter ended April 30, 2022, $4.9
million of ARR from such temporarily interrupted adversely affected the ending
ARR of $30.1 million and the annual year over year increase of 18%. Had those
contracts renewed without interruption, the Company would have reported an ARR
of $35.0 million and an increase of 37%.

Average duration of contracts in dollars

Our dollar-based average contract length is calculated from a set of customers
against the same metric as of a prior period end. Because many of our customers
have similar buying patterns and the average term of our contracts is more than
12 months, this metric provides a means of assessing the degree of built-in
revenue repetition that exists across our customer base.

We calculate the average duration of our dollar contracts as follows:

a.

Numerator: We multiply the average total length of the contracts, measured in
years or fractions thereof, by the respective revenue recognized for the three
months ended April 30, 2022 and 2021, as applicable.

b.

Denominator: We use revenue attributable to software and product customers for the three months ended April 30, 2022 and 2021 in the numerator. This effectively represents the revenue base generated by these customers.


Dollar-based average contract length is obtained by dividing the Numerator by
the Denominator. Our dollar-based average contract length increased from 2.8 to
3.2 years, or 14%, as of the end of the three month period ended April 30, 2022
as compared to the end of the three month period ended April 30, 2021. The
re-emergence of longer term contracts in our average has led to the increase in
our average contract length as of the end of the most recent reporting period.
As a longer term trend, we continue to expect our average contract length to
trend downward over time as our overall revenue and customer base continues to
increase and broaden. Declines in average contract length are not reflective of
the average lifetime of a customer.

                                          Three Months Ended April 30,
                                           2022                  2021
                                                   (in years)
Dollar-based average contract length             3.2                   2.8




Calculated Billings

Calculated billings is a non-GAAP financial measure that we believe is a key
metric to measure our periodic performance. Calculated billings represent our
total revenue plus the change in deferred revenue in a period. Calculated
billings in any particular period aims to reflect amounts invoiced to customers
to access our software-based, cybersecurity analytics products, cloud platform
and professional services, together with related support services, for our new
and existing customers. We typically invoice our customers on multi-year or
annual contracts in advance, either annually or monthly.

Calculated billings increased by $3.0 million, or 35%, for the three months
ended April 30, 2022 as compared to the three months ended April 30, 2021. We
expect that calculated billings will be affected by timing of entering into
agreements with customers and the mix of billings in each reporting period as we
typically invoice customers multi-year or annually in advance and, to a lesser
extent, monthly in advance.

While we believe that calculated billings may be helpful to investors because it
provides insight into the cash that will be generated from sales of our
subscriptions, this metric may vary from period-to-period for a number of
reasons, and therefore has a number of limitations as a quarter-to-quarter or
year-over-year comparative measure. In addition, other companies, including
companies in our industry, may calculate similarly-titled non-GAAP measures
differently or may use other measures to evaluate their performance, all of
which could reduce the usefulness of our metric of calculated billings as a tool
for comparison. Because of these and other limitations, you should consider
calculated billings along with revenue and our other GAAP financial results.

The following table presents a reconciliation of revenue, the most directly
comparable financial measure calculated in accordance with GAAP, to calculated
billings:


                                              Three Months Ended April 30,
                                               2022                   2021                2022 vs 2021
                                                     ($ in millions)
Revenue                                   $          6.7         $          6.4     $      0.3             5 %
Add: Total Deferred revenue, end of
period                                              38.5                   36.2            2.3             6 %
Less: Total Deferred revenue, beginning
of period                                           33.6                   34.0           (0.4 )          (1 )%
Calculated billings                       $         11.6         $          8.6     $      3.0            35 %



Components of our operating results

Revenue

Our revenues are derived from sales of product, subscriptions, subscription-like
software products and software support contracts as well as from professional
services. Products, subscriptions and support revenues accounted for 96% our
revenue in each of the three months ended April 30, 2022 and 2021. Professional
services revenues accounted for 4% of our revenue in each of the three months
ended April 30, 2022 and 2021.

Our typical customer contracts and subscriptions range from one to five years. We generally invoice our clients annually, in advance. We combine intelligence

Dependent hardware and software licenses as well as subscription-style deliverables with associated threat information and support and maintenance in one

performance obligation, as it delivers the essential functionality of our
cybersecurity solution. Most companies also participate in the IronDome
collective defense software solution that provides them access to our collective
defense infrastructure linking participating stakeholders. As a result, we
recognize revenue for this single performance obligation ratably over the
expected term with the customer. Amounts that have been invoiced are recorded in
deferred revenue or

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they are recorded in revenue if the revenue recognition criteria have been met.
Judgment is required for the assessment of material rights relating to renewal
options associated with our contracts.

Professional services revenues are generally sold separately from our products
and include services such as development of national cyber security strategies,
cyber operations monitoring, security, training, red team, incident response and
tailored maturity assessments. Revenue derived from these services is recognized
as the services are delivered.

Revenue cost

Product cost, subscription and support revenue includes expenses related to our hosted security software, costs related to our customer support employees, such as salaries, bonuses and benefits, an allocated portion of costs administrative and amortization of deferred costs.

Professional services cost revenue primarily includes employee-related costs, such as salaries, bonuses and benefits, the cost of contractors and an allocated portion of administrative costs.

Gross profit

Gross profit, calculated as total revenue less total costs of revenue is
affected by various factors, including the timing of our acquisition of new
customers, renewals from existing customers, the data center and bandwidth costs
associated with operating our cloud platform, the extent to which we expand our
customer support organization, and the extent to which we can increase the
efficiency of our technology and infrastructure through technological
improvements. Also, we view our professional services in the context of our
larger business and as a significant lead generator for future product sales.
Because of these factors, our services revenue and gross profit may fluctuate
over time.

Operating Expenses

Research and development

Our research and development efforts are aimed at continuing to develop and refine our products, including adding new features and modules, increasing their functionality, and improving the usability of our platform. Research and development costs mainly include personnel costs and the costs of acquired software. Research and development costs are expensed as incurred.

Sales and Marketing

Sales and marketing expenses consist primarily of employee compensation and
related expenses, including salaries, bonuses and benefits for our sales and
marketing employees, sales commissions that are recognized as expenses over the
period of benefit, marketing programs, travel and entertainment expenses, and
allocated overhead costs. We capitalize our sales commissions and recognize them
as expenses over the estimated period of benefit.

We intend to continue to make significant investments in our sales and marketing
organization to drive additional revenue, further penetrate the market and
expand our global customer base. In particular, we will continue to invest in
growing and training our sales force, broadening our brand awareness and
expanding and deepening our channel partner relationships. We expect our sales
and marketing expenses to decrease as a percentage of our revenue over the long
term, although our sales and marketing expenses may fluctuate as a percentage of
our revenue from period to period due to the timing and extent of these
expenses.

general and administrative

General and administrative expenses include salaries, stock-based compensation expenses and employee benefits for personnel involved in our management, financial, legal, human and cultural and administrative functions, as well as third-party professional services and fees and overhead costs.

We expect that general and administrative expenses will increase in absolute
dollars as we hire additional personnel and enhance our systems, processes, and
controls to support the growth in our business as well as our increased
compliance and reporting requirements as a public company.

Other income

Other income consists mainly of interest income.

Other expenses

Other expenses mainly include interest expenses and foreign exchange losses.

Provision for income taxes

Provision for income taxes includes federal and state income taxes United States and income taxes and withholding taxes in certain foreign jurisdictions in which we do business. We maintain a full valuation allowance on our WE federal and state deferred tax assets.

Operating results

Comparison of the three months ended April 30, 2022 and 2021

The following tables present our consolidated income statement for each period presented:


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                                           Three Months Ended April 30,
                                         Percentage of                    Percentage of
                             2022           Revenue           2021           Revenue         Change $      Change %
                                        ($ in thousands)
Product, subscription
and support revenue        $   6,443                 96 %   $   6,137                 96 %   $     306             5 %
Professional services
revenue                          245                  4 %         240                  4 %           5             2 %
Total revenue                  6,688                100 %       6,377                100 %         311             5 %
Cost of product,
subscription and support
revenue                        2,330                 35 %       1,754                 28 %         576            33 %
Cost of professional
services revenue                 165                  2 %         184                  3 %         (19 )         (10 )%
Total cost of revenue          2,495                 37 %       1,938                 30 %         557            29 %
Gross profit                   4,193                 63 %       4,439                 70 %        (246 )          (6 )%
Operating expenses
Research and development      10,727                160 %       6,891                108 %       3,836            56 %
Sales and marketing           10,667                159 %       7,149                112 %       3,518            49 %
General and
administrative                15,586                233 %       5,720                 90 %       9,866           172 %
Total operating expenses      36,980                553 %      19,760                310 %      17,220            87 %
Operating loss               (32,787 )             -490 %     (15,321 )             -240 %     (17,466 )         114 %
Other income                      10                  -             8                  -             2            25 %
Other expense                   (380 )               -6 %        (129 )               -2 %        (251 )         195 %
Loss before income taxes     (33,157 )             -496 %     (15,442 )             -242 %     (17,715 )         115 %
Provision for income
taxes                            (11 )                -           (58 )               -1 %          47           (81 )%
Net loss                   $ (33,168 )             -496 %   $ (15,500 )             -243 %   $ (17,668 )         114 %




Revenue

Total revenue increased by $0.3 million or 5% during the three months ended April 30, 2022compared to the same period of fiscal year 2022.

Product, subscription and support revenue increased by $0.3 million or 5%
primarily due to the net effect of the Company's transition from contracts that
had material nonrecurring elements which would not renew in full, replaced by
revenues from contract forms that were designed to fully renew with legacy
customers and signing new customers.

Professional services revenue increased $0.01 million or 2% during the three months ended April 30, 2022compared to the same period of fiscal year 2022.

Revenue cost

Total cost of revenue increased by $0.6 million or 29%, in the three months
ended April 30, 2022, as compared to the same period in fiscal 2022. Cost of
product, subscription and support revenue increased by $0.6 million or 33%, in
the three months ended April 30, 2022, as compared to the same period in fiscal
2022. The increase was due primarily to an increase in customer count, costs
incurred to fully ramp cloud hosting environments related to a significant
revenue customer that was onboarded in fiscal year 2021, and an increase of $0.2
million in equipment warranty costs related to inventory on hand held in
readiness for large future contracts.

The cost of professional services decreased by $0.02 million within three months April 30, 2022.

Gross profit and gross margin

Mix changes in cost of revenue resulted in a decrease in software, subscription,
and support gross margin to 64% in the three months ended April 30, 2022, as
compared to 71% in the same period in fiscal 2022, and an increase in
professional services gross margin to 33% in the three months ended April 30,
2022 as compared to 23% in the same period in fiscal 2022. The period over
period decrease in margin for software was primarily the result of cloud costs
for a significant revenue customer that ramped up in the second half of fiscal
2022 and an increase in warranty costs related to inventory held in readiness
for large future contracts. Without the warranty costs related to inventory on
hand, software margins would have been 67%. Professional services margin will
continue to be volatile contract to contract as we scale our business.

We expect gross margins to improve in the near term. Margins may remain volatile relative to fiscal 2022 due to the continued presence of large contracts in our revenue mix.

The following tables show gross profit and gross margin, respectively, for software products and support revenue and professional services revenue for the three months ended April 30, 2022 and 2021.

                                            Three Months Ended April 30,
                                              2022                2021      

Change $ Change %

                                                  ($ in thousands)
Product, subscription and support gross
profit                                    $       4,113       $       4,383     $     (270 )            (6 )%
Professional services gross profit                   80                  56             24              43 %
Total gross profit                        $       4,193       $       4,439     $     (246 )            (6 )%



                                            2022       2021      Change
Product, subscription and support margin     63.8 %     71.4 %      (7.6 )%
Professional services margin                 32.7 %     23.3 %       9.4 %
Total gross margin                           62.7 %     69.6 %      (6.9 )%




Operating expenses

Research and development

Research and development expenses increased by $3.8 million or 56% in the three
months ended April 30, 2022, primarily due to non-cash stock compensation
expenses of $2.5 million and ramping resources to support product development.
The remaining increase of $1.3 million was driven by the ramping of external
costs to support product development and the increase in internal headcount,
with some increase driven by cloud computing costs. At 160% of total revenues in
the three months ended April 30, 2022, as compared to 108% in the same period in
fiscal 2022, we expect that our overall research and development expenditure
rate as a percentage of revenues will decline in the future.

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Sales and Marketing

Sales and marketing cost increased by $3.5 million or 49% in the three months
ended April 30, 2022, primarily due to non-cash stock compensation of $1.9
million. The remaining increase of $1.6 million is due to the expansion of our
sales and marketing efforts. At 159% of revenues in the three months ended April
30, 2022 as compared to 112% in the same period in fiscal 2022, we expect that
our overall sales and marketing expenditure rates as a percentage of revenues
will decline in the future.

General and administrative

General and administrative costs increased by $9.9 million or 172% in the three
months ended April 30, 2022, primarily due to non-cash stock compensation of
$7.0 million and an increase in costs related to becoming a publicly traded
company and the overall efforts to grow and support business operations,
including increased headcount, directors and officers insurance costs, and the
implementation of systems to support operations as a public company. General and
administrative expenses in the three months ended April 30, 2022 were at 233% of
total revenues as compared to 90% in the same period in fiscal 2022. We expect
that our overall general and administrative expenditure rates as a percentage of
revenues will decline in the future.

Other income

The net fluctuation in other income had no impact on operating results.

Other expenses

Other expense increased by $0.3 million or 195% in the three months ended April
30, 2022, primarily as the result of a settlement of a pre-Merger claim against
LGL.

Provision for income taxes

The change in the provision for income taxes did not impact operating results, primarily due to our continuing net loss position, the accumulation of net losses carried forward and the provision for loss – compensatory value.

Cash and capital resources

Sources of liquidity

We have incurred losses and negative cash flows from operations since inception.
Through April 30, 2022, we have funded our operations with proceeds from sales
of common stock and redeemable convertible preferred stock, proceeds related to
the public trust shares held by Legacy LGL that were received as part of the
Merger and recapitalization, loans, and receipts from sales of our products and
services to customers in the ordinary course of business. As of April 30, 2022,
we had cash and cash equivalents of $31.4 million, with no debt outstanding. Our
primary source of liquidity is cash flows from operating activities, which may
be supplemented by our equity line of credit facility described below.

Committed equity financing from Tumim Stone Capital

On February 11, 2022, we entered into the Purchase Agreement with Tumim,
pursuant to which Tumim has committed to purchase up to $175 million of common
stock (the "Total Commitment"), at our direction from time to time, subject to
the satisfaction of the conditions in the Purchase Agreement. Also on February
11, 2022, we entered into a registration rights agreement with Tumim (the
"Registration Rights Agreement"), pursuant to which we have filed with the SEC a
registration statement to register for resale under the Securities Act the
shares of common stock that may be issued to Tumim under the Purchase Agreement.
Pursuant to the terms of the Purchase Agreement, at the time we signed the
Purchase Agreement and the Registration Rights Agreement, we paid a cash fee of
$1.75 million, or 1% of the Total Commitment, to Tumim as consideration for its
commitment to purchase shares of our common stock under the Purchase Agreement.

The sales of common stock by us to Tumim under the Purchase Agreement, if any,
will be subject to certain limitations and may occur, from time to time at our
sole discretion, over the approximately 36-month period commencing upon the date
of initial satisfaction of all conditions to Tumim's purchase obligations set
forth in the Purchase Agreement (the "Commencement Date"). From and after the
Commencement Date, we will have the right, but not the obligation, from time to
time at our sole discretion, to direct Tumim to purchase certain amounts of our
common stock, subject to certain limitations in the Purchase Agreement, that we
specify in purchase notices that we deliver to Tumim under the Purchase
Agreement (each such purchase, a "Purchase"). Shares of common stock will be
issued to Tumim at either a (i) 3% discount to the average daily volume weighted
average price (the "VWAP") of the common stock during the three consecutive
trading days from the date that a purchase notice with respect to a particular
purchase (a "VWAP Purchase Notice") is delivered to Tumim (a "Forward VWAP
Purchase"), or (ii) 5% discount to the lowest daily VWAP during the three
consecutive trading days from the date that a VWAP Purchase Notice with respect
to a particular purchase is delivered to Tumim (an "Alternative VWAP Purchase").
Each VWAP Purchase Notice to Tumim will specify whether the applicable purchase
is a Forward VWAP Purchase or an Alternative VWAP Purchase, and will direct that
Tumim purchase the applicable number of shares of common stock at the applicable
purchase price. There is no upper limit on the price per share that Tumim could
be obligated to pay for the common stock under the Purchase Agreement. The
purchase price per share of common stock to be sold in a Purchase will be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split, reverse stock split or other similar transaction.

Based on the current price of our common stock as of the date of this report, we
estimate that we would be able to raise approximately $25 million in proceeds
under the Purchase Agreement due to the ownership limitations set forth in the
Purchase Agreement.

Liquidity outlook and requirements

As of April 30, 2022, we had cash and cash equivalents of $31.4 million and
collectable receivables of $14.6 million. We continue to benefit from being debt
free, having paid off previous balances on our PPP Loan and SVB Bridge facility,
as well as continuing to fund our operations from the proceeds of the business
combination with Legacy LGL that closed on August 26, 2021, pursuant to which we
secured gross funding of $138.25 million. We have also secured a $175 million
equity line with Tumim Capital, which remains available, subject to a number of
conditions and limitations on the amount we may draw at a particular point in
time and in the aggregate, to fund future operations in the absence of any
material adverse conditions. Based on our forecast and the proceeds from the
recent merger, as well as plans which could be executed to moderate internal and
external expenditures as needed, we believe we have sufficient liquidity to fund
operations for a period of at least 12 months from the issuance of these
financial statements.

This estimate does not take into account potential sales of our common stock to
Tumim under the Purchase Agreement, or payments under new contracts with
strategic customers that we currently expect to enter into prior to the end of
the fiscal year, each of which could extend this period. We also plan to
continue to maintain efficient operations and to reduce certain expenses over
the next several quarters in an effort to make the most effective use of our
cash on hand.

Our future capital requirements will depend on many factors, including, but not
limited to the rate of our growth, our ability to attract and retain customers
and their willingness and ability to pay for our products and services, and the
timing and extent of spending to support our efforts to market and develop our
products. Further, we may enter into future arrangements to acquire or invest in
businesses, products, services, strategic partnerships, and technologies. As
such, we may be required to seek additional equity or debt financing. In the
event that additional financing is required from outside sources, we may not be
able to

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increase it on terms acceptable to us or not at all. If additional funds are not available to us on acceptable terms, or at all, our business, financial condition and results of operations could be adversely affected.

Cash flow

For the three months ended April 30, 2022 and 2021

The following table summarizes our cash flows for the periods presented:

                                              Three Months Ended April 30,
                                                2022                2021
                                                      (in millions)
Net cash used in operating activities       $       (22.2 )     $       (12.1 )
Net cash used in investing activities       $        (0.9 )     $        (0.7 )
Net cash provided by financing activities   $         6.9       $         0.3




Operating Activities

Net cash used in operating activities during the three months ended April 30,
2022 was $22.2 million, which primarily resulted from a net loss of $33.2
million, of which $11.4 million was attributable to non-cash stock based
compensation. The remaining $21.8 million of the net loss accounted for much of
the net cash used in operating activities, with an increase in the receivables
balance of $4.8 million due to lower cash collections, largely being offset by
an increase in deferred revenue of $4.9 million from customer payments that had
not yet been recognized as revenue.

Net cash used in operating activities during the three months ended April 30,
2021 was $12.1 million, which resulted from a net loss of $15.5 million adjusted
for non-cash charges of $0.2 million for depreciation and amortization expense.
Cash used in operating activities during the three months ended April 30, 2021
benefited from the increased in deferred revenue of $2.2 million, offset by an
increase in deferred and prepaid expenses of $1.6 million.

The $10.1 million increase in net cash used in operating activities in the three
months ended April 30, 2022 as compared to the same period in fiscal 2022 was
driven by an increase in cash operating expenses of approximately $5.5 million,
primarily due to the new recurring costs of operating as a public company of
$2.6 million and increases in sales and marketing expense of $1.3 million and
research and development costs of $1.6 million, an increase in receivables of
$5.0 million, a decrease in other current assets of $0.2 million, and a decrease
in accounts payable of $2.0 million, offset by an increase in deferred revenue
of $2.8 million and other minor cash activity.

Investing activities

Net cash used in investing activities of $0.9 million and $0.7 million during
the three months ended April 30, 2022 and 2021, respectively, was due solely to
purchases of property and equipment.

Fundraising activities

Net cash provided by financing activities of $6.9 million during the three
months ended April 30, 2022 was primarily due to $8.8 million net cash proceeds
received to fund employees' tax withholding obligations associated with vested
RSUs, which is disbursed to the appropriate taxing authorities, offset by the
$1.8 million payment to Tumim for the commitment fee.

Net cash provided by financing activities of $0.3 million during the three
months ended April 30, 2021 was primarily due to net proceeds from our issuance
of common stock of $0.2 million and proceeds from stock subscriptions of $0.1
million.

Contractual Obligations

Our main commitments consist of office space rental obligations. For more information regarding our lease obligations, see Note 8 to the condensed interim consolidated financial statements.

We have made and expect to continue to make additional investments in our
product, scale our operations, and continue to enhance our security measures. We
will continue to expand the use of software systems to scale with our overall
growth.

Significant Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation
of these financial statements require us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses, as
well as related disclosures. We evaluate our estimates and assumptions on an
ongoing basis. Our estimates are based on historical experience and various
other assumptions that we believe to be reasonable under the circumstances. Our
actual results could differ from these estimates.

The critical accounting policies, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Revenue recognition

Our revenues are derived from sales of software, subscriptions, support and
maintenance, and other services. We satisfy performance obligations to recognize
revenue for a single performance obligation ratably over the expected term with
the customer.

Revenue is recognized when all of the following criteria are met:

1.

Identification of the contract, or contracts, with a customer-A contract with a
customer to account for exists when (i) we enter into an enforceable contract
with a customer that defines each party's rights regarding the goods or services
to be transferred and identifies the payment terms related to these goods or
services, (ii) the contract has commercial substance and the parties are
committed to perform, and (iii) we determine that collection of substantially
all consideration to which we will be entitled in exchange for goods or services
that will be transferred is probable based on the customer's intent and ability
to pay the promised consideration.

2.

Identification of the performance obligations in the contract-Performance
obligations promised in a contract are identified based on the goods or services
that will be transferred to the customer that are both capable of being
distinct, whereby the customer can benefit from the goods or service either on
its own or together with other resources that are readily available from third
parties or from us, and are distinct in the context of the contract, whereby the
transfer of the goods or services is separately identifiable from other promises
in the contract. To the extent a contract includes multiple promised goods or
services, we apply judgment to determine whether promised goods or services are
capable of being distinct and distinct in the context of the contract. If these
criteria are not met the promised goods or services are accounted for as a
combined performance obligation.

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3.

Determination of the transaction price-The transaction price is determined based
on the consideration to which we will be entitled in exchange for transferring
goods or services to the customer.

4.

Allocation of the transaction price to the performance obligations in the
contract-We allocate the transaction price to each performance obligation based
on the amount of consideration expected to be received in exchange for
transferring goods and services to the customer. If the contract contains a
single performance obligation, the entire transaction price is allocated to the
single performance obligation on a relative standalone selling price based on
the observable selling price of our products and services.

5.

Recognize revenue when or as we meet performance obligations – We meet performance obligations either over time or at a point in time. Revenue is recognized when or as the related performance obligation is satisfied by transferring a promised good or service to a customer.

Costs to obtain or perform a contract

We capitalize incremental costs of obtaining a non-cancelable subscription and
support revenue contract and on professional services revenue as contract
acquisition costs. The capitalized amounts consist primarily of sales
commissions paid to our direct sales force. The capitalized amounts are
recoverable through future revenue streams under all non-cancelable customer
contracts. Amortization of capitalized costs, which occurs on a straight line
basis, is included in sales and marketing expense in the accompanying condensed
consolidated statements of operations. Contract fulfillment costs include
appliance hardware and installation costs that are essential in providing the
future benefit of the solution, which are also capitalized. We amortize our
contract fulfillment costs ratably over the contract term in a manner consistent
with the related revenue recognition on that contract and are included in cost
of revenue.

Stock-Based Compensation

Stock compensation expense for stock options is recognized on a straight line
basis and with a provision for forfeitures matched to historical experience for
matured grant cohorts. Stock compensation expense for RSUs granted under the
2014 Plan, which contain both service and performance conditions, is recognized
on a graded-scale basis matched to the length and vesting tranches for each
grant. Stock compensation expense for RSUs granted under the 2021 Plan have only
service vesting conditions. Expense will be recognized on a straight-line basis
for all RSU awards with only service conditions. In the event that a RSU grant
holder is terminated before the award is fully vested for RSUs granted under
either Plan, the full amount of the unvested portion of the award will be
recognized as a forfeiture in the period of termination. The fair value of RSUs
is based on the fair value of our common stock on the date of the grant.

We use the Black-Scholes pricing model to estimate the fair value of options on
the date of grant. The use of a valuation model requires management to make
certain assumptions with respect to selected model inputs. We grant stock
options at exercise prices determined equal to the fair value of common stock on
the date of the grant. The fair value of our common stock at each measurement
date is based on a number of factors, including the results of third-party
valuations, our historical financial performance, and observable arms-length
sales of our capital stock including convertible preferred stock, and the
prospects of a liquidity event, among other inputs. We estimate an expected
forfeiture rate for stock options, which is factored into the determination of
stock-based compensation expense. The volatility assumption is based on the
historical and implied volatility of our peer group with similar business
models. The risk-free interest rate is based on U.S. Treasury zero-coupon issues
with a remaining term equal to the expected life assumed at the date of grant.
The dividend yield percentage is zero because we do not currently pay dividends
nor do we intend to do so in the future.

These estimates are subject to inherent uncertainties and the use of different assumptions may have resulted in stock-based compensation expense differing from the amounts recognized.

As of April 30, 2022, there was $57.2 million of unrecognized compensation cost
related to unvested RSUs without performance obligations. The weighted average
remaining vesting period was 3.38 years.

Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) Section A-
Leases: Amendments to the FASB Accounting Standards Codification. The standard
requires lessees to recognize the assets and liabilities arising from leases on
the balance sheet and retains a distinction between finance leases and operating
leases. The classification criteria for distinguishing between finance leases
and operating leases are substantially similar to the classification criteria
for distinguishing between capital leases and operating leases in the previous
lease guidance. We adopted this standard and related amendments in the first
quarter of fiscal 2023, using the modified retrospective approach.

The modified retrospective approach provides a method for recording existing
leases at adoption with a cumulative adjustment to retained earnings. We elected
the package of practical expedients which permits us to not reassess (1) whether
any expired or existing contracts are or contain leases, (2) the lease
classification for any expired or existing leases, and (3) any initial direct
costs for any expired or existing leases as of the effective date. We also
elected the practical expedient lease considerations to not allocate lease
considerations between lease and non-lease components for real estate leases. As
such, real estate lease considerations are treated as a single lease-component
and accounted for accordingly.

We have applied a portfolio approach to effectively account for lease liabilities and right-of-use lease assets. We exclude leases with an initial term of 12 months or less from the application of Topic 842.

Adoption of the new standard resulted in the recording of $1.1 million and $2.7
million of current lease liabilities and long-term lease liabilities,
respectively, and $2.9 million in corresponding right-of-use lease assets. The
difference between the approximate value of the right-of-use lease assets and
lease liabilities is attributable to deferred rent, which is comprised of tenant
improvement allowance and rent abatement. The cumulative change in the beginning
accumulated deficit was $0.02 million due to the adoption of Topic 842. There
was no material impact on the Company's condensed consolidated statement of
operations or consolidated statements cash flows. Comparative periods continue
to be presented in accordance with legacy guidance in Topic 840.

Recently issued accounting standards

Refer to Note 1 to our unaudited condensed consolidated financial statements
included in this Form 10-Q for our assessment of recently issued and adopted
accounting standards.

Commitments and contingencies

See Note 7, Commitments and Contingencies, in the Notes to our unaudited condensed consolidated financial statements included in this Form 10-Q.

Emerging Growth Company (“EGC”) Status

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards issued subsequent to the enactment of the JOBS Act until those
standards apply to private companies. We have elected to use this extended
transition period for complying with certain new or revised accounting standards
that have different effective dates for public and private companies until the
earlier of the date we (i) are no longer an EGC or (ii) affirmatively and
irrevocably opt out of the extended transition period provided in the JOBS Act.
As a result, our consolidated financial statements may or may not be comparable
to companies that comply with new or revised accounting pronouncements as of
public companies' effective dates.

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