CXAI Cxapp Inc. - 10-K

Item 1A. Risk Factors.

In addition to the other information contained in this Annual Report, the following risks have the potential to impact the business and operations of CXApp. An investment in our securities involves a high degree of risk. You should carefully consider all the risks described in this Annual Report, together with the other information contained in this Annual Report. These risk factors are not exhaustive, and all investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of CXApp. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe are immaterial could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

Risk Factor Summary

Risks Relating to our Operations.

We have a history of net losses, and future financings may be dilutive or difficult to obtain. Integrating acquisitions or new offerings strains our infrastructure and may not generate expected benefits. Contract disputes or litigation can be costly and time-consuming, and any failure to control our expenses or effectively manage growth could negatively affect profitability.

Risks Relating to our Growth

Our plans depend on scaling operations and expanding sales to new and existing customers. The rapidly evolving technology landscape requires us to anticipate and respond to shifts in customer needs and industry standards; if our solutions do not achieve broad adoption, our growth prospects and revenues may suffer.

Risks Relating to our Personnel

Our business depends on hiring, developing, and retaining highly skilled employees, including key executives and technical professionals. Competition for specialized talent is intense; any difficulty in recruiting or high turnover could disrupt operations and impede growth. If we lose critical personnel without adequate successors, fail to motivate our workforce, or incur excessive expenses to retain staff, our profitability and strategic objectives may be adversely affected.

Risks Relating to our Intellectual Property

Our success depends on protecting proprietary technologies, methodologies, and trade secrets. We rely on patents, copyrights, confidentiality agreements, and other intellectual property measures to maintain our competitive advantage. However, the rapidly evolving nature of technology and the potential for unauthorized use or misappropriation of our intellectual property expose us to infringement claims and legal disputes that may be expensive, divert management’s attention, or result in loss of proprietary rights.

Risks Related to Ownership of our Securities

Our stock price can be volatile, and we have no current plans to pay dividends. Future equity issuances could dilute existing stockholders. Failure to meet Nasdaq listing standards or changing market conditions could reduce market liquidity or cause delisting. New or evolving regulations may also affect stockholder rights and the value of our common stock.

Risks Related to our Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. GAAP, which is subject to interpretation and may change over time. Adjustments in standards or unexpected changes in accounting estimates, goodwill impairments, or restatements of prior-period financial statements could adversely affect our reported results. If our internal control over financial reporting proves ineffective, we may be unable to provide accurate or timely financial information, potentially harming our credibility with investors and regulators.

Risks Related to Cybersecurity Threats

We operate in an environment prone to security breaches, data corruption, hacking, and other cyber incidents. Our products, services, and corporate systems — along with those of our partners or suppliers — may be vulnerable to increasingly sophisticated cyber threats. A successful breach or service disruption could compromise customer data, impede operations, damage our reputation, result in legal and regulatory liability, and diminish market confidence in our solutions.

Risks Related to our Industry

We compete in a rapidly evolving sector with frequent technological advances, emerging business models, and the introduction of new or improved products by competitors. Developing market-leading innovations is capital-intensive and uncertain. Failure to anticipate and respond to industry changes, standardize new offerings, or gain market acceptance could erode our competitive position. In addition, macroeconomic pressures, regulatory complexities, and intensifying competition all contribute to heightened operational and financial risks.

Risks Related to External Factors and Third Parties

Fluctuations in global or regional economic conditions, political disruptions, pandemics, or conflicts can interrupt supply chains and dampen demand for our products. Compliance with diverse international regulations, including data privacy laws and trade restrictions, involves complexities and potential liabilities that can adversely affect our business.

Risks Relating to our Operations

We have a history of operating losses and there is no assurance that we will ever be able to earn sufficient revenue to achieve profitability or raise additional financing to successfully operate our business plan.

We have a history of operating losses and may not earn sufficient revenue to support our operations. We have incurred recurring net losses of approximately $13,473 thousand and $19,408 thousand for the fiscal years ended 2025 and 2024, respectively. Our continuation is dependent upon attaining and maintaining profitable operations and raising additional capital as needed, but there can be no assurance that we will be able to raise any further financing.

Our ability to generate positive cash flow from operations is dependent on implementing certain cost reductions and generating sufficient revenues. Based on our current business plan, we may need additional capital to support our operations, which may be satisfied by additional debt or equity financings. Future financings through equity offerings will be dilutive to existing stockholders. In addition, the terms of securities we may issue in future capital transactions may be more favorable to new investors than our current investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities. We may also issue incentive awards under our equity incentive plans, which may have additional dilutive effects. We may also be required to recognize non-cash expenses in connection with certain securities we may issue in the future such as convertible notes and warrants, which would adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by certain factors, including the condition of the economy and capital markets, both generally and specifically in our industry, and the fact that we are not profitable, which could affect the availability or cost of future financing. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may need to reduce our operations by, for example, selling certain assets or business segments.

Failure to manage or protect growth may be detrimental to our business because our infrastructure may not be adequate for expansion.

Our corporate strategy contemplates potential future acquisitions and to the extent we acquire other businesses, we will also need to integrate and assimilate new operations, technologies and personnel. The integration of new personnel will continue to result in some disruption to ongoing operations. The ability to successfully manage growth in a rapidly evolving market requires effective planning and management processes. We will need to continue to improve operational, financial, and managerial controls, reporting systems and procedures, and will need to continue to expand, train and manage our workforce. There can be no assurance that we would be able to accomplish such an expansion on a timely basis. If we are unable to affect any required expansion and are unable to perform our contracts on a timely and satisfactory basis, our reputation and eligibility to secure additional contracts in the future could be damaged. The failure to perform could also result in contract terminations and significant liability. Any such result would adversely affect our business and financial condition.

Insurance and contractual protections may not always cover lost revenue, increased expenses, or liquidated damages payments, which could adversely affect our financial results.

Although we maintain insurance and intend to obtain warranties from suppliers, obligate subcontractors to meet certain performance levels and attempt, where feasible, to pass risks we cannot control to our customers, the proceeds of such insurance or the warranties, performance guarantees or risk sharing arrangements may not be adequate to cover lost revenue, increased expenses or liquidated damages payments that may be required in the future.

Adverse judgments or settlements in legal proceedings could materially harm our business, financial condition, operating results, and cash flows.

We may be a party to claims that arise from time to time in the ordinary course of our business, which may include those related to, for example, contracts, sub-contracts, protection of confidential information or trade secrets, adversarial proceedings arising from customer bankruptcies, employment of our workforce and immigration requirements or compliance with any of a wide array of state and federal statutes, rules or regulations that pertain to different aspects of our business. We may also be required to initiate expensive litigation or other proceedings to protect our business interests. There is a risk that we will not be successful or otherwise be able to satisfactorily resolve any such claims or litigation. In addition, litigation and other legal claims are subject to inherent uncertainties. Those uncertainties include, but are not limited to, litigation costs and attorneys’ fees, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate. Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings (possibly resulting in changes in established reserves), could have a material adverse effect on our business, financial condition, results of operations and cash flows. Due to recurring losses and net capital deficiency, our current financial status may increase our default and litigation risks and may make us more financially vulnerable in the face of threatened litigation.

Any future acquisitions that we may make could disrupt our business, cause dilution to our stockholders and harm our business, financial condition or operating results.

If we are successful in consummating acquisitions, those acquisitions could subject us to a number of risks, including, but not limited to:

the purchase price we pay and/or unanticipated costs could significantly deplete our cash reserves or result in dilution to our existing stockholders;

we may find that the acquired company or technologies do not improve our market position as planned;

we may have difficulty integrating the operations and personnel of the acquired company, as the combined operations will place significant demands on our management, technical, financial and other resources;

key personnel and customers of the acquired company may terminate their relationships with the acquired company as a result of the acquisition;

we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting;

we may assume or be held liable for risks and liabilities (including environmental-related costs) as a result of our acquisitions, some of which we may not be able to discover during our due diligence investigation or adequately adjust for in our acquisition arrangements;

our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises;

we may incur one-time write-offs or restructuring charges in connection with the acquisition;

we may acquire goodwill and other intangible assets that are subject to amortization or impairment tests, which could result in future charges to earnings; and

we may not be able to realize the cost savings or other financial benefits we anticipated.

We cannot assure you that, following any acquisition, our continued business will achieve sales levels, profitability, efficiencies or synergies that justify the acquisition or that the acquisition will result in increased earnings for us in any future period. These factors could have a material adverse effect on our business, financial condition and operating results.

The growth of our business is dependent on increasing sales to our existing customers and obtaining new customers, which, if unsuccessful, could limit our financial performance.

Our ability to increase revenues from existing customers by identifying additional opportunities to sell more of our products and services and our ability to obtain new customers depends on a number of factors, including our ability to offer high quality products and services at competitive prices, the strength of our competitors and the capabilities of our sales and marketing departments. If we are not able to continue to increase sales of our products and services to existing customers or to obtain new customers in the future, we may not be able to increase our revenues and could suffer a decrease in revenues as well.

If we are unable to sell additional products and services to our customers and increase our overall customer base, our future revenue and operating results may suffer.

Our future success depends, in part, on our ability to expand the deployment of technologies with existing customers and finding new customers to sell our products and services to. This may require increasingly sophisticated and costly sales efforts and may not result in additional sales. In addition, the rate at which our customers purchase additional products and services, and our ability to attract new customers, depends on a number of factors, including the perceived need for indoor mapping products and services, as well as general economic conditions. If our efforts to sell additional products and services are not successful, our business may suffer.

We may need additional cash financing and any failure to obtain cash financing, could limit our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges.

While we believe that we have sufficient cash funds to satisfy our working capital needs for the next 12 months, we expect that we may need to raise funds to continue our operations and implement our plans to grow our business. However, if we decide to seek additional capital, we may be unable to obtain financing on terms that are acceptable to us or at all. If we are unable to raise the required cash, our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges could be limited.

If we cannot collect our receivables or if payment is delayed, our business may be adversely affected by our inability to generate cash flow, provide working capital, or continue our business operations.

Our business depends on our ability to successfully obtain payment from our customers of the amounts they owe us for products received from us and any work performed by us. The timely collection of our receivables allows us to generate cash flow, provide working capital and continue our business operations. Our customers may fail to pay or delay the payment of invoices for several reasons, including financial difficulties resulting from macroeconomic conditions or lack of an approved budget. An extended delay or default in payment relating to a significant account will have a material and adverse effect on the aging schedule and turnover days of our accounts receivable. If we are unable to timely collect our receivables from our customers for any reason, our business and financial condition could be adversely affected.

Defects, errors, or vulnerabilities in our products or services or the failure of such products or services to prevent a security breach, could harm our reputation and adversely affect our results of operations.

Because our location-based products and services are complex, they have contained and may contain design or manufacturing defects or errors that are not detected until after their commercial release and deployment by customers. Defects may cause such products to be vulnerable to advanced persistent threats (“APTs”) or security attacks, cause them to fail to help secure information or temporarily interrupt customers’ networking traffic. Because the techniques used by hackers to access sensitive information change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques and provide a solution in time to protect customers’ data. In addition, defects or errors in our subscription updates or products could result in a failure to effectively update customers’ hardware products and thereby leave customers vulnerable to APTs or security attacks.

Any defects, errors or vulnerabilities in our products could result in:

expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or work-around errors or defects or to address and eliminate vulnerabilities;

delayed or lost revenue;

loss of existing or potential customers or partners;

increased warranty claims compared with historical experience, or increased cost of servicing warranty claims, either of which would adversely affect gross margins; and

litigation, regulatory inquiries, or investigations that may be costly and harm our reputation

Our current research and development efforts may not produce successful products or features that result in significant revenue, cost savings or other benefits in the near future. If we do not realize significant revenue from our research and development efforts, our business and results of operations may be adversely affected.

Developing products and related enhancements in our field is expensive. Investments in research and development may not result in significant design improvements, marketable products or features or may result in products that are more expensive than anticipated. We may not achieve the cost savings or the anticipated performance improvements expected, and we may take longer to generate revenue from products in development or generate less revenue than expected.

Our future plans include significant investments in research and development and related product opportunities. Our management believes that we must continue to dedicate a significant amount of resources to research and development efforts to maintain a competitive position. However, we may not receive significant revenue from these investments in the near future, or these investments may not yield the expected benefits, either of which could adversely affect our business and operating results.

Risks Relating to our Growth

We will need to increase the size of our organization, and we may experience difficulties in managing growth, which could hurt our financial performance.

In order to manage our future growth, we will need to continue to improve our management, operational and financial controls and our reporting systems and procedures. All of these measures will require significant expenditures and will demand the attention of management. If we do not continue to enhance our management personnel and our operational and financial systems and controls in response to growth in our business, we could experience operating inefficiencies that could impair our competitive position and could increase our costs more than we had planned. If we are unable to manage growth effectively, our business, financial condition and operating results could be adversely affected.

Risks Relating to our Personnel

Our business depends on experienced and skilled personnel, and if we are unable to attract and integrate skilled personnel, it will be more difficult for us to manage our business and complete contracts.

The success of our business depends on the skill of our personnel. Accordingly, it is critical that we maintain, and continue to build, a highly experienced management team and specialized workforce, including those who create software programs and sales professionals. Competition for personnel with skill sets specific to our industry is high, and identifying candidates with the appropriate qualifications can be costly and difficult. We may not be able to hire the necessary personnel to implement our business strategy given our anticipated hiring needs, or we may need to provide higher compensation or more training to our personnel than we currently anticipate.

Our business is labor intensive, and our success depends on our ability to attract, retain, train and motivate highly skilled employees, including employees who may become part of our organization in connection with our acquisitions. The increase in demand for consulting, technology integration and managed services has further increased the need for employees with specialized skills or significant experience in these areas. Our ability to expand our operations will be highly dependent on our ability to attract a sufficient number of highly skilled employees and to retain our employees and the employees of companies that we have acquired. We may not be successful in attracting and retaining enough employees to achieve our desired expansion or staffing plans. Furthermore, the industry turnover rates for these types of employees are high and we may not be successful in retaining, training or motivating our employees. Any inability to attract, retain, train and motivate employees could impair our ability to adequately manage and complete existing projects and to accept new customer engagements. Such inability may also force us to increase our hiring of independent contractors, which may increase our costs and reduce our profitability on customer engagements. We must also devote substantial managerial and financial resources to monitoring and managing our workforce. Our future success will depend on our ability to manage the levels and related costs of our workforce.

In the event we are unable to attract, hire and retain the requisite personnel and subcontractors, we may experience delays in completing contracts in accordance with project schedules and budgets, which may have an adverse effect on our financial results, harm our reputation and cause us to curtail our pursuit of new contracts. Further, any increase in demand for personnel may result in higher costs, causing us to exceed the budget on a contract, which in turn may have an adverse effect on our business, financial condition and operating results and harm our relationships with our customers.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We may be subject to claims that we and our employees may have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers or competitors. Litigation may be necessary to defend against these claims. We may be subject to unexpected claims of infringement of third-party intellectual property rights, either for intellectual property rights of which we are not aware, or for which we believe are invalid or narrower in scope than the accusing party. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money damages, we may lose valuable intellectual property rights or personnel or be enjoined from selling certain products or providing certain services. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain products, which could severely harm our business.

The loss of key personnel may adversely affect our operations.

Our success depends to a significant extent upon the operation, experience, and continued services of certain of our officers, and other key personnel. While our key personnel are employed under employment contracts, there is no assurance we will be able to retain their services. The loss of our key personnel could have an adverse effect on us. If certain of our executive officers were to leave, we would face substantial difficulty in hiring a qualified successor and could experience a loss in productivity while any successor obtains the necessary training and experience. Furthermore, we do not maintain “key person” life insurance on the lives of any executive officer and their death or incapacity would have a material adverse effect on us. The competition for qualified personnel is intense, and the loss of services of certain key personnel could adversely affect our business.

Risks Relating to our Intellectual Property

If we do not adequately protect our intellectual property rights, we may experience a loss of revenue, and our operations and growth prospects may be materially harmed.

We have not registered copyrights on any of the software we have developed, and while we may register copyrights in the software if needed before bringing suit for copyright infringement, such registration can introduce delays before suit of over three years and can constrain damages for infringement. We rely upon confidentiality agreements signed by our employees, consultants and third parties to protect our intellectual property. We cannot assure you that we can adequately protect our intellectual property or successfully prosecute actual or potential infringement of our intellectual property rights. In addition, we cannot assure you that others will not assert rights in, or ownership of, trademarks and other proprietary rights of ours or that we will be able to successfully resolve these types of conflicts to our satisfaction. Our failure to protect our intellectual property rights may result in a loss of revenue and could materially adversely affect our operations and financial condition.

In addition, any patents issued in the future may not provide us with any competitive advantages, and our patent applications may never be granted. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are complex and often uncertain and are subject to change that can affect validity of patents issued under previous legal standards, particularly with respect to the law of subject matter eligibility. Our inability to protect our property rights could adversely affect our financial condition, operating results and growth prospects.

Our proprietary software is protected by common law copyright laws, as opposed to registration under copyright statutes. We have not registered copyrights on any of the proprietary software we have developed. Our performance and ability to compete are dependent to a significant degree on our proprietary technology. Common law protection may be narrower than that which we could obtain under registered copyrights. As a result, we may experience difficulty in enforcing our copyrights against certain third-party infringements. As part of our confidentiality-protection procedures, we generally enter into agreements with our employees and consultants and limit access to, and distribution of, our software, documentation and other proprietary information. There can be no assurance that the steps we have taken will prevent misappropriation of our technology or that agreements entered into for that purpose will be enforceable. The laws of other countries may afford us little or no protection of our intellectual property. We also rely on a variety of technology that we license from third parties. There can be no assurance that these third-party technology licenses will continue to be available to us on commercially reasonable terms, if at all. The loss of or inability to maintain or obtain upgrades to any of these technology licenses could result in delays in completing software enhancements and new developments until equivalent technology can be identified, licensed or developed and integrated. Any such delays would materially and adversely affect our business.

We could incur substantial cost in protecting our proprietary software technology and if we fail to protect our technology, we could incur material harm to our business.

We rely principally on a combination of contract provisions and copyright, trademark, patent and trade secret laws to protect our proprietary technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. This litigation could result in substantial costs and diversion of resources, whether or not we ultimately prevail on the merits. The steps we take to protect our proprietary rights may be inadequate to prevent misappropriation of our technology; moreover, others could independently develop similar technology.

We could be subject to claims that we infringe intellectual property rights of others, which could harm our business, financial condition, results of operations or cash flows.

Third parties could assert infringement claims in the future with respect to our products and technology, and such claims might be successful. Litigation relating to any such claims could result in substantial costs and diversion of resources, whether or not we ultimately prevail on the merits. Any such litigation could also result in our being prohibited from selling one or more of our products, unanticipated royalty payments, reluctance by potential customers to purchase our products, or liability to our customers and could have a material adverse effect on our business, financial condition, operating results and cash flows.

Risks Relating to Ownership of our Securities

The market price of our common stock may be volatile and fluctuate substantially, which could cause the value of your investment to decline.

The trading price of our common stock, as well as our warrants, is likely to be volatile. The stock market has experienced extreme volatility in the past and may experience similar volatility moving forward. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares at an attractive price due to a number of factors including the following:

results of operations that vary from the expectations of securities analysts and investors;

results of operations that vary from those of our competitors;

changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors;

price and volume fluctuations in the market prices of stocks generally;

strategic actions by us or our competitors;

changes in how enterprises perceive the benefits of our platform and products;

announcements by us or our competitors of new products, solutions or technologies or significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments;

any significant change in our management or departures of key personnel;

changes in general economic or market conditions or trends in our industry or markets;

changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

future sales of our common stock or other securities;

investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives;

the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;

guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;

the development and sustainability of an active trading market for our common stock;

actions by institutional or activist stockholders;

changes in accounting standards, policies, guidelines, interpretations or principles;

general economic and political conditions such as economic downturns, recessions, interest rates, fuel prices, trade wars, tariffs, pandemics, currency fluctuations and acts of war or terrorism; and

the effects of natural disasters, terrorist attacks and the spread and/or abatement of infectious diseases, including with respect to potential operational disruptions, labor disruptions, increased costs, and impacts to demand related thereto.

These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

We do not intend to pay dividends on our common stock, so any returns will be substantially limited to the value of our common stock.

We have no current plans to pay any cash dividends on our common stock. The declaration, amount and payment of any future dividends on shares of our common stock will be at the sole discretion of our board. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends from future earnings for the foreseeable future. Our board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on our or our subsidiaries’ payment of dividends to our stockholders and such other factors as our board may deem relevant. In addition, our ability to pay dividends is limited by our indebtedness and may be limited by covenants of any future indebtedness we incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

If securities analysts do not publish research or reports about our business or if they publish inaccurate or unfavorable research about our common stock, the stock price and trading volume of our common stock could decline.

The trading market for our common stock will rely, in part, on the research and reports that industry or financial analysts publish about us or our business. In addition, some financial analysts may have limited expertise with our model and operations. Furthermore, if one or more of the analysts who do cover us downgrade their evaluations of our common stock, the price of our common stock could decline. If one or more of these analysts ceases to cover us, we could lose visibility in the market for our common stock, which in turn could cause our stock price or trading volume to decline.

Any future sales or offerings of our common stock may cause substantial dilution to stockholders and could cause the price of our common stock to decline.

The sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate.

Pursuant to the Insider Letter (as defined in the Sponsor Support Agreement), during the Founder Shares Lock-Up Period (as defined in the Insider Letter), KINS’ directors and executive officers will not, subject to the exceptions noted therein, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of any shares of our common stock, or any stock options, restricted stock units, or other equity awards outstanding as of immediately following the Closing in respect of our awards outstanding immediately following the Closing. Following the expiration or waiver of the Lockup Period, such shares will be eligible for resale, subject to volume, manner of sale and other limitations under Rule 144. Sales of substantial amounts of our common stock in the public market, or the perception that such sales will occur, could adversely affect the market price of our common stock and make it difficult for us to raise funds through securities offerings in the future.

If the stockholders to the Registration Rights Agreement, dated as of December 14, 2020, that was entered into by KINS, the Sponsor and the other parties thereto in connection with the KINS initial public offering, exercise their registration rights, the market price of shares of our common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our common stock or other securities.

In addition, the shares of our common stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.

In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.

A sustained depression in the market price of our common stock has happened (from October to December 2023) and could in the future happen, which could also reduce our market capitalization below the book value of net assets, which could increase the likelihood of recognizing goodwill or indefinite-lived intangible asset impairment losses that could negatively affect our financial condition and results of operations.

Anti-takeover provisions in our organizational documents could delay or prevent a change of control.

Certain provisions of our Charter and Bylaws have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in their best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.

These provisions provide for, among other things:

a classified board of directors whose members serve staggered three-year terms;

the ability of our board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

certain limitations on convening special stockholder meetings;

limiting the ability of stockholders to act by written consent;

the limitation of the liability of, and the indemnification of, our directors and officers;

providing that our board is expressly authorized to make, alter or repeal our bylaws; and

the removal of directors only for cause and only upon the affirmative vote of holders of the majority of the voting power of all of the then outstanding shares of our voting stock entitled to vote at an election of directors.

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third-party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Our Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our Charter provides that, subject to limited exceptions, any (1) derivative action, suit or proceeding brought on behalf of us, (2) action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or stockholders to us or our stockholders, (3) action, suit or proceeding arising pursuant to any provision of the DGCL or the Charter or the Bylaws (as either may be amended from time to time), (4) action, suit or proceeding as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (5) action, suit or proceeding asserting a claim against us or any current or former director, officer or stockholder governed by the internal affairs doctrine of the State of Delaware shall, to the fullest extent permitted by applicable law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction thereof, another state or federal court located within the State of Delaware; provided that, (i) unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and (ii) such exclusive forum provision shall not apply to claims or causes of action brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to consent to the provisions of the Charter. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of the Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the Nasdaq stock exchange, require significant resources, increase our costs and distract our management, and we may be unable to comply with these requirements in a timely or cost-effective manner. We have incurred increased costs as a result of operating as a public company and our management has devoted substantial time to compliance initiatives.

Legacy CXApp has previously operated as a privately-owned company and we expect to incur additional legal, regulatory, finance, accounting, investor relations and other administrative expenses as a result of having publicly traded common stock. In addition, we are required under the Sarbanes-Oxley Act, as well as rules adopted by the SEC and Nasdaq to implement specified corporate governance practices that previously did not apply to Legacy CXApp as a private company.

As a public company with equity securities listed on Nasdaq, we must comply with rules and regulations of the SEC and the requirements of Nasdaq. Complying with these rules, regulations and requirements occupies a significant amount of the time of our board of directors and management and significantly increases our costs and expenses. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it. In addition, as a public company we incur substantial costs to obtain director and officer liability insurance policies. These factors could make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee.

We are required to ensure that we have the ability to prepare financial statements on a timely basis that fully comply with all SEC reporting requirements and maintain effective internal controls over financial reporting. The additional demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities to management and administrative oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing our businesses. In addition, failure to comply with any laws or regulations applicable to us as a public company may result in legal proceedings and/or regulatory investigations and may cause reputational damage. Any of these effects could harm our business, financial condition and results of operations.

If we fail to meet the continued listing standards of Nasdaq, our common stock may be delisted, which could have a material adverse effect on the liquidity and market price of our common stock and expose the Company to litigation.

Our common stock is currently traded on the Nasdaq Capital Market. The Nasdaq Stock Market LLC (“Nasdaq”) has requirements that a company must meet in order to remain listed. For example, on September 11, 2025, the Company received a letter from Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock has been below the minimum $1.00 per share required for continued listing on Nasdaq, the Company no longer complied with Nasdaq Listing Rule 5550(a)(2) (the “Nasdaq Minimum Bid Price Requirement”), which requires that the closing bid price of the Company’s common stock meet or exceed $1.00 per share for a minimum of ten consecutive trading days. The Company initially had 180 calendar days, or until March 10, 2026, to regain compliance with the Nasdaq Minimum Bid Price Requirement. The Company was unable to regain compliance with the Nasdaq Minimum Bid Price Requirement by March 10, 2026.

On March 11, 2026, the Company received a letter (the “Extension Notice”) from Nasdaq notifying the Company that it has been provided an additional compliance period of 180 calendar days, or until September 7, 2026, to regain compliance with the Nasdaq Minimum Bid Price Requirement. The Extension Notice has no immediate effect on the listing of the Common Stock, and the Common Stock will continue to trade on The Nasdaq Capital Market.

If at any time before September 7, 2026, the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will notify the Company that it is in compliance with the Nasdaq Minimum Bid Price Requirement. However, if compliance with the Nasdaq Minimum Bid Price Requirement cannot be demonstrated by September 7, 2026, Nasdaq will notify the Company that its Common Stock will be delisted from Nasdaq, at which time, the Company may appeal Nasdaq’s determination to a Hearings Panel.

The Company will continue to monitor the bid price of the Common Stock and consider its available options to regain compliance with the Nasdaq Minimum Bid Price Requirement. However, there can be no assurance that the Company will be able to regain compliance with the Nasdaq Minimum Bid Price Requirement.

If our common stock were to be delisted, the liquidity of our common stock would be adversely affected, and the market price of our common stock could decrease. In addition, the failure to meet the Nasdaq Minimum Bid Price Requirement could expose the Company to risk of litigation concerning any impact upon the Company’s price of the Company’s common stock. Any such litigation could distract management from day-to-day operations and further adversely affect the market price of our common stock.

Risks Relating to our Accounting Policies

Changes in accounting principles and guidance, or their interpretation or implementation, may materially adversely affect our reported results of operations or financial position.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) These principles are subject to interpretation by the SEC and various bodies formed to create and interpret appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a significant effect on our reported results, as well as our processes and related controls.

Revenue forecasting is uncertain, and the failure to meet our forecasts could result in a decline in our stock price.

Our revenues, particularly new software license revenues or economic impacts from M&A activities, are difficult to forecast. We use a pipeline system to forecast revenues and trends in our business. Our pipeline estimates may prove to be unreliable either in a particular quarter or over a longer period of time, in part because the conversion rate of the pipeline into contracts can be difficult to estimate and requires management judgment. A variation in the conversion rate could cause us to plan or budget incorrectly and result in a material adverse impact on our business or our planned results of operations. Furthermore, most of our expenses are relatively fixed, including costs of personnel and facilities. Thus, an unexpected reduction in our revenue, or failure to achieve the anticipated rate of growth or realize synergies from M&A activity, would have a material adverse effect on our profitability. If our operating results do not meet our publicly stated guidance or the expectations of investors or analysts, our stock price may decline.

If our goodwill or amortizable intangible assets become impaired, we have been and may be required to record a significant charge to earnings.

We review our goodwill for impairment at least annually and when events or changes in circumstances indicate that the carrying value may not be recoverable. As discussed in Note 5 – “Goodwill and Intangible Assets, net” in the Notes to the Consolidated Financial Statements under Item 15 of this Annual Report, we incurred a goodwill impairment loss of $2,148 thousand, resulting in a negative impact on our results of operations for the year ended December 31, 2025.

As required by current accounting standards, we review intangible assets for impairment either annually or whenever changes in circumstances indicate that the carrying value may not be recoverable. The risk of impairment to goodwill is higher during the early years following an acquisition. This is because the fair values of these assets align very closely with what we paid to acquire the reporting units to which these assets are assigned. When impairment charges are triggered, they tend to be material due to the size of the assets involved. Our business could be adversely affected, and impairment of goodwill could be triggered, if any of the following were to occur: higher attrition rates than planned as a result of the competitive environment or our inability to provide products and services that are competitive in the marketplace, lower-than-planned adoption rates by customers, higher-than-expected expense levels to provide services to customers, sustained declines in our stock price and related market capitalization and changes in our business model that may impact one or more of these variables.

If we fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect the Company’s business and share price.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

During the year ended December 31, 2025, management implemented enhanced controls and processes to address each of these material weaknesses, including the engagement of external consultants to support the tax provision process, the implementation of a formalized month-end close checklist, and the development of a revised process for identifying and evaluating new and amended contracts for derivative features and fair value considerations. Based on the steps taken and the testing performed as of December 31, 2025, management has concluded that each of these previously reported material weaknesses has been fully remediated and no longer exists as of December  31, 2025

Although we have undertaken remediation efforts to address the material weaknesses previously identified, we cannot provide assurance that such measures will be sufficient to avoid potential future material weaknesses. Remediation measures are time-consuming on the Company’s financial and operational resources. In order to improve the effectiveness of its internal control over financial reporting, the Company will need to continue to expend resources, including accounting-related costs and management oversight. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. If we are unable to remediate the material weaknesses or identify additional material weakness in the future, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods required by the SEC, could be adversely affected which, in turn, may adversely affect our reputation and business and the market price of the Company’s Class A Common Stock. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.

Risks Relating to Cybersecurity Threats

Internal system or service failures could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.

Any system or service disruptions, on our hosted cloud infrastructure or those caused by ongoing projects to improve our information technology systems and the delivery of services, if not anticipated and appropriately mitigated, could have a material adverse effect on our business including, among other things, an adverse effect on our ability to bill our customers for work performed on our contracts, collect the amounts that have been billed and produce accurate financial statements in a timely manner. We are also subject to systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, cyber security threats, natural disasters, power shortages, terrorist attacks or other events, which could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business. Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption and, as a result, our future results could be adversely affected.

Any failures or interruptions in our services or systems could damage our reputation and substantially harm our business and results of operations.

Our success depends in part on our ability to provide reliable remote services, technology integration and managed services to our customers. The operations of our cloud-based applications and analytics are susceptible to damage or interruption from human error, fire, flood, power loss, telecommunications failure, terrorist attacks and similar events. We could also experience failures or interruptions of our systems and services, or other problems in connection with our operations, as a result of:

damage to or failure of our computer software or hardware or our connections;

errors in the processing of data by our systems;

computer viruses or software defects;

physical or electronic break-ins, sabotage, intentional acts of vandalism and similar events;

increased capacity demands or changes in systems requirements of our customers; and

errors by our employees or third-party service providers.

Any production interruptions for any reason, such as a natural disaster, epidemic, capacity shortages, or quality problems, at one of our manufacturing partners would negatively affect sales of product lines manufactured by that manufacturing partner and adversely affect our business and operating results.

Any interruptions in our systems or services could damage our reputation and substantially harm our business and results of operations. While we maintain disaster recovery plans and insurance with coverage we believe to be adequate, claims may exceed insurance coverage limits, may not be covered by insurance or insurance may not continue to be available on commercially reasonable terms.

Digital threats such as cyber-attacks, data protection breaches, computer viruses or malware may disrupt our operations, harm our operating results and damage our reputation, and cyber-attacks or data protection breaches on our customers’ networks, or in cloud-based services provided by or enabled by us, could result in liability for us, damage our reputation or otherwise harm our business.

Despite our implementation of network security measures, the products and services we sell to customers, and our servers, data centers and the cloud-based solutions on which our data, and data of our customers, suppliers and business partners are stored, are vulnerable to cyber-attacks, data protection breaches, computer viruses, and similar disruptions from unauthorized tampering or human error, any of which could be enhanced or facilitated by artificial intelligence. Any such event could compromise our networks or those of our customers, and the information stored on our networks or those of our customers could be accessed, publicly disclosed, lost or stolen, which could subject us to liability to our customers, business partners and others, and could have a material adverse effect on our business, operating results, and financial condition and may cause damage to our reputation. Efforts to limit the ability of malicious third parties to disrupt the operations of the Internet or undermine our own security efforts may be costly to implement and met with resistance and may not be successful. Breaches of network security in our customers’ networks, or in cloud-based services provided by or enabled by us, regardless of whether the breach is attributable to a vulnerability in our products or services, could result in liability for us, damage our reputation or otherwise harm our business.

Integration of artificial intelligence into our product offerings and our use of artificial intelligence in our operations could result in reputational or competitive harm, legal liability, and other adverse effects on our business.

We have integrated, and plan to further integrate, AI capabilities into components of our product offerings, and we expect to use AI in our operations. Such integration and use of AI may become more important in our product offerings and operations over time. These AI-related initiatives, whether successful or not, could cause us to incur substantial costs and could result in delays in our software release cadence. Our competitors or other third parties may incorporate AI into their products or operations more quickly or more successfully than we do, which could impair our ability to compete effectively. Additionally, AI algorithms may be flawed and datasets underlying AI algorithms may be insufficient or contain biased information. If the AI tools integrated into our products or those we use in our operations produce analyses or recommendations that are or are alleged to be deficient, inaccurate, or biased, our reputation, business, financial condition, and results of operations may be adversely affected. Other companies have experienced cybersecurity incidents that implicate confidential and proprietary company data and/or the personal data of end users of AI applications integrated into their software offerings or used in their operations. If we were to experience a cybersecurity incident, whether related to the integration of AI capabilities into our product offerings or our use of AI applications in our operations, our business and results of operations could be adversely affected. AI also presents various emerging legal, regulatory and ethical issues, and the incorporation of AI into our product offerings and our use of AI applications in our operations could require us to expend significant resources in developing, testing and maintaining our product offerings and may cause us to experience brand, reputational, or competitive harm, or incur legal liability. Jurisdictions that we operate in may decide to establish extensive new standards for AI safety and security or adopt similar or more restrictive legislation that may render the use of such technologies challenging. These restrictions may make it harder for us to conduct our business using AI, lead to regulatory fines or penalties, require us to change our product offerings or business practices, or prevent or limit our use of AI.

We intend to use and leverage open-source technology which may create risks of security weaknesses.

Some parts of our technology may be based on open-source technology. There is a risk that the development team or other third parties may intentionally or unintentionally introduce weaknesses or bugs into the core infrastructure elements of our technology solutions interfering with the use of such technology or causing loss to us.

Risks Relating to our Customers

A delay in the completion of our customers’ budget processes could delay purchases of our products and services and have an adverse effect on our business, operating results and financial condition.

We rely on our customers to purchase products and services from us to maintain and increase our earnings, and customer purchases are frequently subject to budget constraints, multiple approvals and unplanned administrative, processing and other delays. If sales expected from a specific customer are not realized when anticipated or at all, our results could fall short of public expectations and our business, operating results and financial condition could be materially adversely affected.

We rely on a limited number of key customers, the importance of which may vary dramatically from year to year, and a loss of one or more of these key customers may adversely affect our operating results.

Our top three customers accounted for approximately 40% and 24% of our gross revenue during the year ended December 31, 2025 and the year ended December 31, 2024, respectively. One customer accounted for 16% of our gross revenue in 2025, and a separate customer accounted for 10% of our gross revenue in 2024; however, each of these customers may or may not continue to be a significant contributor to revenue in 2026. The loss of a significant amount of business from one of our major customers would materially and adversely affect our results of operations until such time, if ever, as we are able to replace the lost business. Significant customers or projects in any one period may not continue to be significant customers or projects in other periods. To the extent that we are dependent on any single customer, we are subject to the risks faced by that customer to the extent that such risks impede the customer’s ability to stay in business and make timely payments to us.

Risks Relating to our Industry

Our competitiveness depends significantly on our ability to keep pace with the rapid changes in our industry. Failure to anticipate and meet our customers’ technological needs could adversely affect our competitiveness and growth prospects.

We operate and compete in an industry characterized by rapid technological innovation, changing customer needs, evolving industry standards and frequent introductions of new products, product enhancements, services and distribution methods. Our success depends on our ability to develop expertise with these new products, product enhancements, services and distribution methods and to implement solutions that anticipate and respond to rapid changes in technology, the industry, and customer needs. The introduction of new products, product enhancements and distribution methods could decrease demand for current products or render them obsolete. Sales of products and services can be dependent on demand for specific product categories, and any change in demand for or supply of such products could have a material adverse effect on our net sales if we fail to adapt to such changes in a timely manner.

There can be no assurances that consumer or commercial demand for our future products will meet, or even approach, our expectations. In addition, our pricing and marketing strategies may not be successful. Lack of customer demand, a change in marketing strategy and changes to our pricing models could dramatically alter our financial results. Unless we are able to release location-based products that meet a significant market demand, we will not be able to improve our financial condition or the results of our future operations.

We operate in a highly competitive market, and we may be required to reduce the prices for some of our products and services to remain competitive, which could adversely affect our results of operations.

Our industry is developing rapidly, and related technology trends are constantly evolving. In this environment, we face, among other things, significant price competition from our competitors. As a result, we may be forced to reduce the prices of the products and services we sell in response to offerings made by our competitors and may not be able to maintain the level of bargaining power that we have enjoyed in the past when negotiating the prices of our products and services.

Our profitability is dependent on the prices we are able to charge for our products and services. The prices we are able to charge for our products and services are affected by a number of factors, including:

our customers’ perceptions of our ability to add value through our products and services;

introduction of new products or services by us or our competitors;

our competitors’ pricing policies;

our ability to charge higher prices where market demand or the value of our products or services justifies it;

procurement practices of our customers; and

general economic and political conditions.

If we are not able to maintain favorable pricing for our products and services, our results of operations could be adversely affected.

If our products fail to satisfy customer demands or to achieve increased market acceptance our results of operations, financial condition and growth prospects could be materially adversely affected.

The market acceptance of our products is critical to our continued success. Demand for our products is affected by a number of factors beyond our control, including continued market acceptance, the timing of development and release of new products by competitors, technological change, and growth or decline in the mobile device management market. We expect the proliferation of mobile devices to lead to an increase in the data security demands of our customers, and our products may not be able to scale and perform to meet those demands. If we are unable to continue to meet customer demands or to achieve more widespread market acceptance of these products, our business operations, financial results and growth prospects will be materially and adversely affected.

There is also a possibility of future tariffs, trade protection measures, import or export regulations or other restrictions imposed on our products or on our customers by the United States, China or other countries that could have a material adverse effect on our business. A significant trade disruption or the establishment or increase of any tariffs, trade protection measures or restrictions could result in lost sales adversely impacting our reputation and business. A trade war, other governmental action related to tariffs or international trade agreements, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently do business or any resulting negative sentiments towards the United States could adversely affect our supply chain economics, consolidated revenue, earnings and cash flow.

We may not be able to develop new products or enhance our product to keep pace with our industry’s rapidly changing technology and customer requirements.

The industry in which we operate is characterized by rapid technological changes, new product introductions, enhancements, and evolving industry standards. Our business prospects depend on our ability to develop new products and applications for our technology in new markets that develop as a result of technological and scientific advances, while improving performance and cost-effectiveness. New technologies, techniques or products could emerge that might offer better combinations of price and performance than the artificial intelligence technology solutions that are being developed by us. It is important that we anticipate changes in technology and market demand. If we do not successfully innovate and introduce new technology into our anticipated technology solutions or effectively manage the transitions of our technology to new product offerings, our business, financial condition and results of operations could be harmed.

Risks Relating to External Factors and Third Parties

We may enter into joint ventures, teaming and other arrangements, and these activities involve risks and uncertainties. A failure of any such relationship could have material adverse results on our business and results of operations.

We may enter into joint ventures, teaming and other arrangements. These activities involve risks and uncertainties, including the risk of the joint venture or applicable entity failing to satisfy its obligations, which may result in certain liabilities to us for guarantees and other commitments, the challenges in achieving strategic objectives and expected benefits of the business arrangement, the risk of conflicts arising between us and our partners and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such business arrangements. A failure of our business relationships could have a material adverse effect on our business and results of operations.

Our business and operations expose us to numerous legal and regulatory requirements and any violation of these requirements could harm our business.

We are subject to numerous federal, state and foreign legal requirements on matters as diverse as data privacy and protection, employment and labor relations, immigration, taxation, anticorruption, import/export controls, trade restrictions, internal control and disclosure control obligations, securities regulation and anti-competition. Compliance with diverse and changing legal requirements is costly, time-consuming and requires significant resources. We are also focused on expanding our business in certain identified growth areas, such as health information technology, energy and environment, which are highly regulated and may expose us to increased compliance risk. Violations of one or more of these diverse legal requirements in the conduct of our business could result in significant fines and other damages, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations or contractual obligations related to regulatory compliance in connection with the performance of customer contracts could also result in liability for significant monetary damages, fines and/or criminal prosecution, unfavorable publicity and other reputational damage, restrictions on our ability to compete for certain work and allegations by our customers that we have not performed our contractual obligations.

Global events and other general economic factors may impact our results of operations.

Global events and other general economic factors that are beyond our control may impact our results of operations. These factors can include interest rates; economic downturn; recession; inflation; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; and other matters that influence our customers spending. Increasing volatility in financial markets and changes in the economic climate could adversely affect our results of operation. The impact that these global events will have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain. There are no assurances that we will be able to experience growth or not be materially adversely affected.

Our businesses, results of operations and financial condition could be adversely affected by ongoing international conflicts and related disruptions in the global economy.

The global economy has been negatively impacted by the military conflict between Russia and Ukraine, and the ongoing conflicts in the Middle East (including the conflict between Iran and Israel and the United States’ military actions against Iran ) has caused political, economic, and military instability in Israel and surrounding regions. While we have no operations in Russia, Ukraine, Iran, Israel, Palestine, or surrounding areas, our business may be indirectly adversely affected by this conflict and its effects, including as a result of financial and economic sanctions imposed by governments in the U.S., United Kingdom and European Union, among others, on certain industry sectors and parties in Russia.

We are unable to predict the impact of either the ongoing conflicts in the Middle East (including the conflict between Iran and Israel and the United States’ military actions against Iran ) or the Russia-Ukraine conflict on our business or the global economy. The impact of further escalation of geopolitical tensions related to these conflicts, including increased trade barriers or restrictions on global trade, is unknown and could result in, among other things, heightened cybersecurity threats, protracted or further increased inflation, lower consumer demand, fluctuations in interest and foreign exchange rates and increased volatility in financial markets, any of which could adversely affect our businesses, results of operations and financial condition.

Our international business exposes us to geo-political and economic factors, legal and regulatory requirements, public health and other risks associated with doing business in foreign countries.

We provide our products and services to customers worldwide. These risks differ from and potentially may be greater than those associated with our domestic business.

Our international business is sensitive to changes in the priorities and budgets of international customers and geo-political uncertainties, which may be driven by changes in threat environments and potentially volatile worldwide economic conditions, various regional and local economic and political factors, risks and uncertainties, as well as U.S. foreign policy.

Our international sales are also subject to local government laws, regulations and procurement policies and practices, which may differ from U.S. Government regulations, including regulations relating to import-export control, investments, exchange controls and repatriation of earnings, as well as to varying currency, geo-political and economic risks. Our international contracts may include industrial cooperation agreements requiring specific in-country purchases, manufacturing agreements or financial support obligations, known as offset obligations, and provide for penalties if we fail to meet such requirements. Our international contracts may also be subject to termination at the customer’s convenience or for default based on performance and may be subject to funding risks. We also are exposed to risks associated with using foreign representatives and consultants for international sales and operations and teaming with international subcontractors, partners and suppliers in connection with international programs. As a result of these factors, we could experience award and funding delays on international programs and could incur losses on such programs, which could negatively affect our results of operations and financial condition.

We are also subject to a number of other risks including:

the absence in some jurisdictions of effective laws to protect our intellectual property rights;

multiple and possibly overlapping and conflicting tax laws;

restrictions on movement of cash;

the burdens of complying with a variety of national and local laws;

political instability;

currency fluctuations;

longer payment cycles;

restrictions on the import and export of certain technologies;

price controls or restrictions on exchange of foreign currencies; and

trade barriers.

In addition, our international operations (or those of our business partners) could be subject to natural disasters such as earthquakes, tsunamis, flooding, typhoons, and volcanic eruptions that disrupt manufacturing or other operations. There may be conflict or uncertainty in the countries in which we operate, including public health issues, avian influenza, measles or Ebola), safety issues, natural disasters, fire, disruptions of service from utilities, nuclear power plant accidents or general economic or political factors. With respect to political factors, the United Kingdom’s 2016 referendum, commonly referred to as “Brexit,” has created economic and political uncertainty in the European Union. Also, the European Union’s General Data Protection Regulation imposes significant new requirements on how we collect, process and transfer personal data, as well as significant fines for non-compliance. Any of the above risks, should they occur, could result in an increase in the cost of components, production delays, general business interruptions, delays from difficulties in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, longer payment cycles, increased taxes, restrictions on the repatriation of funds and the burdens of complying with a variety of foreign laws, any of which could ultimately have a material adverse effect on our business.

Difficult conditions in the global capital markets and the economy generally may materially adversely affect our business and results of operations, and we do not expect these conditions to improve in the near future.

Our results of operations are materially affected by conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere around the world. Weak economic conditions generally, sustained uncertainty about global economic conditions, or a prolonged or further tightening of credit markets could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations or cash flows. Concerns over inflation, energy costs, geopolitical issues and the availability of credit in the U.S. have contributed to increased volatility and diminished expectations for the economy and the markets going forward. These factors, combined with volatile oil prices and wavering business and consumer confidence, have precipitated an economic slowdown and uncertain global outlook. Domestic and international equity markets have been experiencing heightened volatility and turmoil. These events and the continuing market upheavals may have an adverse effect on our business. In the event of extreme prolonged market events, such as the global economic recovery, we could incur significant losses.

Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international relations, could adversely affect our financial performance and supply chain economics.

As a result of changes to U.S. administrative policy, among other possible changes, there may be (i) changes to existing trade agreements; (ii) greater restrictions on free trade generally; and (iii) significant increases in tariffs on goods imported into the United States, particularly those manufactured in China. China is currently a leading global source of hardware products, including the hardware products that we use. Since 2018, the United States and China have been engaged in a prolonged trade dispute that has resulted in several rounds of escalating tariffs imposed by both countries. While the U.S. and China entered into Phase One of the Economic and Trade Agreement Between the United States of America and the People’s Republic of China (the “Phase One Trade Agreement”) in January 2020, which took steps to ease certain trade tensions, including tensions involving intellectual property theft and forced intellectual property transfers by China, the broader trade relationship has since deteriorated significantly. In 2025, the U.S. administration imposed substantial new tariffs on a wide range of Chinese goods, and China has responded with retaliatory tariffs and other countermeasures. These actions have contributed to heightened uncertainty regarding the future of U.S.-China trade relations, and the risk of further escalation remains. The imposition of additional tariffs, export controls, or other trade restrictions by either country could adversely affect our ability to source our hardware products and therefore our ability to manufacture our products. Our ability to manufacture our products could also be affected by economic uncertainty in China or by our failure to establish a positive reputation and relationships in China. The occurrence of any of these events could have an adverse effect on our ability to source the components necessary to manufacture our products, which, in turn, could cause our long-term business, financial condition and operating results to be materially adversely affected.

Domestic and foreign government regulation and enforcement of data practices and data tracking technologies is expansive, broadly defined and rapidly evolving. Such regulation could directly restrict portions of our business or indirectly affect our business by constraining our customers’ use of our technology and services or limiting the growth of our markets.

Federal, state, municipal and/or foreign governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, and regulations covering user privacy, data security, technologies that are used to collect, store and/or process data, and/or the collection, use, processing, transfer, storage and/or disclosure of data associated with individuals. The categories of data regulated under these laws vary widely, are often broadly defined, and subject to new applications or interpretation by regulators. The uncertainty and inconsistency among these laws, coupled with a lack of guidance as to how these laws will be applied to current and emerging indoor positioning analytics technologies, creates a risk that regulators, lawmakers or other third parties, such as potential plaintiffs, may assert claims, pursue investigations or audits, or engage in civil or criminal enforcement. These actions could limit the market for our services and technologies or impose burdensome requirements on our services and/or customers’ use of our services, thereby rendering our business unprofitable.

Some features of our services may trigger the data protection requirements of certain foreign jurisdictions, such as the EU General Data Protection Regulation (the “GDPR”), and the EU ePrivacy Directive. In addition, our services may be subject to regulation under current or future laws or regulations. For instance, the EU ePrivacy Directive is soon to be replaced in its entirety by the ePrivacy Regulation, which will bring with it an updated set of rules relevant to many aspects of our business. If our treatment of data, privacy practices or data security measures fail to comply with these current or future laws and regulations in any of the jurisdictions in which we collect and/or process information, we may be subject to litigation, regulatory investigations, civil or criminal enforcement, financial penalties, audits or other liabilities in such jurisdictions, or our customers may terminate their relationships with us. In addition, data protection laws, such as the GDPR, foreign court judgments or regulatory actions could affect our ability to transfer, process and/or receive transnational data that is critical to our operations, including data relating to users, customers, or partners outside the United States. For instance, the GDPR restricts transfers of personal data outside of the European Economic Area, including to the United States, subject to certain requirements. Such data protection laws, judgments or actions could affect the manner in which we provide our services or adversely affect our financial results if foreign customers and partners are not able to lawfully transfer data to us.

This area of the law is currently under intense government scrutiny and many governments, including the U.S. government, are considering a variety of proposed regulations that would restrict or impact the conditions under which data obtained from individuals could be collected, processed, stored, transferred, sold or shared with third parties. In addition, regulators such as the Federal Trade Commission and the California Attorney General are continually proposing new regulations and interpreting and applying existing regulations in new ways. For example, in June 2018, California passed the California Consumer Privacy Act (the “CCPA”), which provides new data privacy rights for consumers and new informational, disclosure and operational requirements for companies, effective January 2020. Fines for noncompliance may be up to $7,500 per violation. The burdens imposed by the GDPR and CCPA, and changes to existing laws or new laws regulating the solicitation, collection, processing, or sharing of personal and consumer information, and consumer protection could affect our customers’ utilization of our services and technology and could potentially reduce demand or impose restrictions that make it more difficult or expensive for us to provide our services.

In addition, ongoing legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the European Economic Area to the United States could result in further limitations on the ability to transfer data across borders, particularly if governments are unable or unwilling to reach new or maintain existing agreements that support cross-border data transfers, such as the EU-U.S. and Swiss-U.S. Privacy Shield frameworks and the European Commission’s Model Contractual Clauses, each of which are currently under particular scrutiny. Additionally, certain countries have passed or are considering passing laws requiring local data residency. The costs of compliance with, and other burdens imposed by, privacy laws, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, make it more difficult to meet expectations from or commitments to customers, lead to significant fines, penalties or liabilities for noncompliance, impact our reputation, or slow the pace at which we close sales transactions, any of which could harm our business.

Furthermore, the uncertain and shifting regulatory environment and trust climate may cause concerns regarding data privacy and may cause our customers or our customers’ customers to resist providing the data necessary to allow our customers to use our services effectively. Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services and could limit adoption of our cloud-based solutions.

If our customers fail to abide by applicable privacy laws or to provide adequate notice and/or obtain any required consent from end users, we could be subject to litigation or enforcement action or reduced demand for our services.

Our customers utilize our services and technologies to track connected devices anonymously and we must rely on our customers to implement and administer notice and choice mechanisms required under applicable laws. If we or our customers fail to abide by these laws, it could result in litigation or regulatory or enforcement action against our customers or against us directly.

Any actual or perceived failure to comply with our privacy policy or legal or regulatory requirements in one or multiple jurisdictions could result in proceedings, actions or penalties against us.

Any failure or perceived failure to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal data or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.

Changes in U.S. and foreign government administrative policy, including the imposition of or increases in tariffs and changes to existing trade agreements could have a material adverse effect on us.

As a result of changes to U.S. and foreign government administrative policy, there may be changes to existing trade agreements, greater restrictions on free trade generally, the imposition of or significant increases in tariffs on goods imported into the U.S., including tariffs on products manufactured in China, Canada, or Mexico, and adverse responses by foreign governments to U.S. trade policies, among other possible changes. During 2025, the U.S. administration imposed significant new tariffs on imports from a number of countries, including China, Canada, and Mexico, and has signaled its intent to further expand or increase tariffs on additional goods and trading partners. Foreign governments, including China, Canada, and Mexico, have responded with retaliatory tariffs and other countermeasures targeting U.S. goods and businesses. These developments have contributed to increased trade tensions and economic uncertainty globally. A continued or escalating trade war, additional governmental action related to tariffs or trade agreements, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell products, and any resulting negative sentiments towards the U.S. as a result of such changes, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Evolving and changing definitions of what constitutes “Personal Information” and “Personal Data” within the EU, the United States and elsewhere, may limit or inhibit our ability to operate or expand our business, including limiting technology alliance partners that may involve the sharing of data.

If we are perceived to cause, or are otherwise unfavorably associated with, violations of privacy or data security requirements, it may subject us or our customers to public criticism, financial penalties and potential legal liability. Existing and potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers to unauthorized processing of personal data may create negative public reactions to technologies, products and services such as ours. Public concerns regarding personal data processing, privacy and security may cause some of our customers’ end users to be less likely to visit their venues or otherwise interact with them. If enough end users choose not to visit our customers’ venues or otherwise interact with them, our customers could stop using our platform. This, in turn, may reduce the value of our service, and slow or eliminate the growth of our business, or cause our business to contract.

Around the world, there are numerous lawsuits in process against various technology companies that process personal information and personal data. If those lawsuits are successful, it could increase the likelihood that our company may be exposed to liability for our own policies and practices concerning the processing of personal data and could hurt our business. Furthermore, the costs of compliance with, and other burdens imposed by laws, regulations and policies concerning privacy and data security that are applicable to the businesses of our customers may limit the use and adoption of our technologies and reduce overall demand for it. Privacy concerns, whether or not valid, may inhibit market adoption of our technologies. Additionally, concerns about security or privacy may result in the adoption of new legislation that restricts the implementation of technologies like ours or require us to make modifications to our existing services and technology, which could significantly limit the adoption and deployment of our technologies or result in significant expense.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References in this report (the “Annual Report”) to “we”, “us” or the “Company” refer to CXApp Inc. References to our “management” or our “management team” refer to our officers and directors. The following management’s discussion and analysis of financial condition and results of operations describes the principal factors affecting the results of our operations, financial condition, and changes in financial condition for the years ended December 31, 2025, and December 2024.

Overview of Our Business

Executive Overview

At CXApp, we are at the forefront of transforming the modern workplace through AI-powered solutions that enhance employee experience, operational efficiency, and workplace intelligence. As a leader in this evolving market, our strategic focus is to drive sustainable growth, scale our enterprise customer base, and deliver innovative solutions that leverage data and artificial intelligence to optimize workplace experiences.

In fiscal year 2025, we focused on three key priorities:

AI-First Product Innovation:  During the year, we continued to strengthen our competitive differentiation through the development of AI-native workplace intelligence tools. Enhancements to our Generative AI analytics platform enabled improved data ingestion, real-time behavioral insights, and predictive modeling capabilities. These innovations support enterprise decision-makers in optimizing space utilization, workforce engagement, and operational agility. Our investment in state-of-the-art AI infrastructure in partnership with Google Cloud (GCP) is enabling intelligent and scalable solutions that will transform the modern workplace.

Subscription Revenue Quality Expansion:  Our customer expansion strategy remained focused on high-value enterprise accounts, particularly across the financial services, healthcare, and technology sectors with subscription based recurring revenue model. We deepened relationships with existing Fortune 1000 clients through expanded deployments and multi-site activations As a result, recurring SaaS revenue accounted for 98% of total revenue in 2025, underscoring the effectiveness of our recurring business model.

Margin Expansion through Cost Discipline:  In 2025, we reduced operating costs by streamlining SG&A and rationalizing our services delivery model. Gross profit totaled $4,005 thousand for the year ended December 31, 2025, compared to $5,857 thousand in the same periods of 2024, respectively. While total revenue declined due to the deliberate de-emphasis of non-recurring professional services, gross margin improved to 87% as we scaled our high-margin SaaS offerings. These actions demonstrate our ability to manage spend responsibly while building a more predictable, capital-efficient business model.

Looking forward, our leadership team remains committed to balancing innovation with financial discipline, ensuring that CXApp is positioned for long-term profitability and strategic growth. By leveraging our AI-driven platform and expanding our enterprise footprint, we aim to deliver scalable, data-driven solutions that address the evolving needs of hybrid workplaces.

Financial Performance Summary

Revenue Growth and Customer Expansion

Fiscal year 2025 recurring revenue increased to 98% from 87%, driven by moving the company to a SaaS based model focused on AI-enabled services.

Customer base remained stable and diversified, with continued presence across financial services, healthcare, and technology sectors, supporting our focus on high-value, recurring revenue clients.

The transition to a recurring revenue model has improved revenue predictability and supports our long-term growth objectives.

Operational Efficiencies and Cost Management

Total operating expenses increased to $21,582 thousand for the year ended December 31, 2025, compared to $19,598 thousand for the year ended December 31, 2024. The increase was primarily attributable to the $2,148 thousand goodwill impairment charge recorded during 2025, which was included in operating expenses. Excluding the impact of goodwill impairment, operating expenses declined year over year, reflecting the Company’s cost optimization initiatives and continued focus on margin improvement.

Strategic workforce realignments have ensured resources are allocated to high-impact growth areas.

We remain focused on optimizing resource allocation, ensuring that investments are targeted toward high-impact areas such as AI development and customer acquisition.

Cash Flow and Liquidity Position

As of year-end, cash and cash equivalents was $11,101 thousand with access to an additional $3,520 thousand from Streeterville Securities Purchase Agreement the Company entered into on May 22, 2024, and $3,200 thousand from Avondale Securities Purchase Agreement the company entered into on March 26, 2025, ensuring flexibility to support future growth.

Strategic Growth Initiatives

Product Innovation: We are expanding our AI-native capabilities, integrating agentic AI for desk booking, advanced analytics, and developing seamless integrations with key enterprise platforms to position CXApp as the go-to solution for hybrid workplace management.

Market Expansion: By targeting new verticals and strengthening partnerships with cloud providers and key technology platforms, we aim to increase market share and drive cross-selling opportunities.

Operational Excellence: Ongoing cost optimization, customer retention strategies, and sales efficiency initiatives remain key focus areas as we strive to enhance profitability and maintain financial discipline.

Competitive Positioning and Market Outlook

According to industry research, the global employee experience and workplace technology market is expected to grow at a compound annual growth rate (CAGR) exceeding 20% over the coming years. This trend reflects ongoing enterprise investment in hybrid workplace enablement, data-driven decision-making, and employee-centric technology platforms.

CXApp believes its AI-driven platform offers differentiated capabilities compared to traditional workplace management systems by integrating real-time analytics, behavioral insights, and predictive modeling. These features may support more agile decision-making for customers managing distributed workforces and dynamic office environments.

While macroeconomic uncertainty persists, the Company continues to observe strong interest from enterprise clients for intelligent, flexible workplace infrastructure. Management believes this demand aligns with the Company’s strategy to scale AI-enabled solutions that address evolving operational needs.

Conclusion

As we advance our strategic roadmap, CXApp remains focused on executing with discipline and precision. Our AI-first approach, financial discipline, and emphasis on customer-centric innovation are key drivers of our long-term vision to redefine employee experiences in the hybrid workplace. By leveraging our strong foundation and expanding our enterprise footprint, we are well-positioned to deliver sustained growth and value for our stakeholders.

Business Description

Company Overview

CXApp Inc. (“CXAI”), is a provider of enterprise software designed to support employee experience, workplace operations, and organizational decision-making. CXAI delivers a cloud-based platform that integrates digital workplace applications, analytics, and artificial intelligence capabilities intended to improve how employees, administrators, and organizations interact with workplace environments.

CXAI is headquartered in the San Francisco Bay Area, with additional operating locations in Toronto, Canada and Manila, Philippines. The Company serves customers across more than 50 countries, including organizations in regulated industries such as financial services, healthcare, and technology, as well as media and entertainment and consumer sectors.

CXAI’s platform is designed to operate within customers’ existing enterprise technology environments and is deployed across physical, hybrid, and digital workplace settings.

Market Context and Opportunity

Organizations continue to adapt to distributed and hybrid work models, increasing demand for software that supports employee engagement, workplace utilization, and operational efficiency. At the same time, organizations are evaluating the use of artificial intelligence, including agentic AI, to automate tasks, coordinate workflows, and enable more responsive workplace services.

Many organizations, particularly in regulated and complex operating environments, require workplace software that supports configurable policies, governance, and compliance requirements. CXAI’s platform is designed to support these requirements through administrative controls and configurable automation.

In addition to serving large enterprises, CXAI is expanding its product offerings and go-to-market approach to address midmarket customers. The Company also identifies opportunities to apply its platform beyond traditional office environments to additional use cases, including retail locations, sports and entertainment venues, healthcare facilities, and other public or shared spaces. These environments present opportunities for agentic, AI-enabled solutions that support workforce coordination, service delivery, and operational visibility.

CXAI competes in the employee experience and workplace technology markets, which include providers of digital workplace applications, analytics platforms, and enterprise software focused on employee engagement and workplace operations.

Products and Services

CXAI’s primary offering is the CXAI Platform, a modular, cloud-based software platform designed for enterprise and midmarket deployment. The platform includes the following core components:

CXAI Applications : Mobile and web-based applications that provide employees and other users with access to workplace information, communications, and workflows across iOS, Android, kiosk and web environments.

CXAI BTS (Behind the Scenes) : The platform’s core infrastructure layer that supports content management, workflow automation, integrations with enterprise systems, and security and compliance controls. CXAI BTS includes a configurable rules engine designed to support complex customer requirements, including policy-based workflows, role-based access controls, and administrative governance.

CXAI-VU : An analytics and AI-enabled insights module that aggregates and analyzes workplace and experience-related data to provide visibility into usage patterns, engagement metrics, and operational trends. CXAI-VU includes natural language processing capabilities that allow administrators to query data and retrieve insights using voice or text-based commands.

Agentic AI Capabilities : AI-enabled functionality designed to support task execution, workflow orchestration, and self-service interactions across workplace, employee, and venue-related use cases.

The CXAI Platform is offered through subscription-based licensing arrangements and is available for deployment through major cloud service providers, including Amazon Web Services, Google Cloud Platform, and Microsoft Azure. The Company also provides implementation, configuration, and ongoing support services in connection with customer deployments.

Revenue Model

CXAI generates revenue through a mix of:

SaaS Subscriptions: Recurring revenue streams from our cloud-based application offerings.

Professional Services: Implementation, customization, and support services tailored to client needs for deployment of the application.

Hardware: Pass through beacons delivered to the customers.

Revenue Breakdown by Product Category

Year ended

December 31,

Year ended

December 31,

Software

Professional services

Hardware

Total revenue

With 98% of our revenue derived from recurring subscriptions, CXAI enjoys stable and predictable cash flow, further supported by strong net retention rates and customer upsell opportunities.

Strategic Partnerships

We have established strategic relationships with leading cloud providers, including Google Cloud, Microsoft Azure, and Amazon Web Services. These partnerships allow us to scale our solutions rapidly, access new markets, and leverage cutting-edge cloud technologies to enhance our offerings.

Technology and Innovation

CXAI differentiates itself through proprietary AI technology and a commitment to innovation. Our intellectual property portfolio includes 37 filed patents, with 17 already issued, positioning us as a leader in employee experience software. Our platform leverages generative AI and autonomous agents to automate workflows, drive employee engagement, and optimize resource utilization.

Competition, Strengths, and Differentiation

For our employee experience app products, we compete with companies such as Petur, Modo Labs, HqO, Robin Powered, and Comfy. For our mapping product, our competitors include MappedIn, Mapwize, and Esri.

We differentiate ourselves by offering a comprehensive and unified employee experience platform that addresses the evolving needs of modern enterprises.

One App, Comprehensive Experience. Today’s workplace is a dynamic mix of spaces, people, hybrid work, and technology. CXApp consolidates these elements into a single mobile command center, empowering enterprises to foster culture, drive innovation, and enhance employee engagement across distributed workforces.

Seamless Employee Experience. CXApp serves as the central connection point for employees, helping organizations attract and retain top talent by delivering an intuitive, engaging, and equitable employee experience — whether in-office, remote, or hybrid.

Versatile and Scalable Functionality. Our platform supports a wide range of use cases, including employee experience, mapping, meeting room reservations, desk booking, campus navigation, facility management, analytics, and security across multiple industries in both the private and public sectors.

Expansive Ecosystem and Integrations. With over 90 partner integrations (including Slack, Zoom, Office365, Okta, and ServiceNow), CXApp acts as a centralized gateway to an enterprise’s communication and productivity tools — streamlining tech stacks and reducing app fatigue.

Enterprise-Grade Scalability. Our solution grows with our customers, making it easy to onboard employees, expand to new locations globally, and adapt to evolving workplace needs.

Technology-Agnostic & Open Architecture. Our platform is designed to seamlessly integrate with third-party data, applications, and hardware. Our APIs facilitate data exchange, while our SDKs enable developers to build new applications or integrate location data into existing mobile apps, websites, or kiosks — designed to ensure long-term adaptability and investment protection.

Competitive Positioning

CXAI stands out in the competitive landscape through its deep AI integration, employee-first approach, and enterprise-grade security and compliance. Unlike traditional workplace management solutions, our platform offers:

AI-driven automation to streamline workflows and reduce manual processes.

Advanced analytics for actionable insights into workplace utilization and engagement.

Seamless integration with enterprise systems and cloud environments, ensuring efficiency and scalability.

By combining AI-powered intelligence, user-centric design, and enterprise-ready capabilities, CXApp delivers a truly next-generation employee experience platform that sets us apart from the competition.

Corporate Strategy

The modern office is no longer confined to a single location. We believe that empowering employees and teams to manage diverse workplace scenarios from their personal devices is the future of work. Enterprise organizations are increasingly recognizing the pivotal role of AI-driven mobile applications in managing distributed workforces and optimizing office environments.

Over the next five years, we anticipate that artificial intelligence (AI) will become a cornerstone of employee experience initiatives. CXApp is uniquely positioned as the central intelligence layer for hybrid workplace models. Our AI-powered employee experience platform integrates advanced analytics, automation, and machine learning to enhance employee engagement, streamline operations, and optimize resource utilization.

Our strategic approach focuses on transforming workplace efficiency through:

Smart Workplace Automation : AI-driven management of desk and meeting room bookings, space allocation, and resource management.

Predictive Analytics : Real-time data analysis to drive informed decision-making regarding space utilization and employee engagement.

Contextual Employee Experiences : AI-powered personalization delivering tailored notifications, workspace suggestions, and relevant content.

Proactive Facility Management : Intelligent mapping and occupancy tracking to prevent operational bottlenecks.

Through an AI-first strategic model, CXApp aims to provide a seamless, intelligent employee experience that adapts to evolving work styles. Our commitment to innovation and enterprise-grade AI solutions ensures that organizations can thrive in an increasingly digital and dynamic work environment.

Growth Strategy

Since the launch of our core workplace product in 2017, CXApp has followed a direct-to-customer go-to-market strategy, targeting Fortune 1000 enterprises. This approach has allowed us to establish strong relationships with Fortune 500 companies in the financial services, media, and software industries, solidifying our leadership in enterprise workplace technology.

In addition, our technology partner program has played a crucial role in our expansion. With over 90 partnerships, including integrations with digital lockers, sensors, and single sign-on (SSO) platforms, we offer seamless workflows that enhance the employee experience.

Our future growth strategy focuses on the following key initiatives:

Advancing AI-Driven Product Development : Expanding our platform with AI-powered automation, predictive analytics, and intelligent workplace recommendations to support digital transformation and hybrid workforce evolution.

Expanding into New Vertical Markets : Scaling into industries such as corporate real estate, healthcare, financial services, and technology enterprises to capitalize on growing demand for AI-driven workplace solutions.

Strengthening Our Channel Partner Ecosystem : Enhancing partnerships with Google Cloud and Amazon, while fostering relationships with workplace technology providers, resellers, and enterprise IT integrators.

Building AI-Enabled Sales and Marketing Strategies : Leveraging AI-driven insights to increase brand awareness, expand industry collaborations, and drive thought leadership in workplace technology.

By combining innovation, strategic partnerships, and customer-centric solutions, we are committed to achieving sustainable growth and reinforcing our position as a market leader in employee experience technology.

Risk Management and Compliance

We take a proactive approach to risk management by monitoring regulatory changes and implementing robust internal controls. Our compliance programs include adherence to global data privacy standards and security frameworks such as GDPR and SOC 2. By integrating these elements into our business strategy, CXAI is well-positioned to continue driving innovation and delivering value to stakeholders.

Recent Events

Convertible Debt Conversion

On March 26, 2025, the Company entered into a Securities Purchase Agreement (the “SPA”), pursuant to which Avondale Capital, LLC may issue and sell up to $20,000 thousand shares of the Company’s Common Stock and the Company issued an unsecured convertible Pre-Paid Purchase #1 to the Lender. The convertible Pre-Paid Purchase #1 has the original principal amount of $4,200 thousand and Lender gave consideration of $3,990 thousand, reflecting original issue discount of $200 thousand and Lender’s transaction cost of $10 thousand. A second tranche was received on August 7, 2025, with a principal amount of $3,150 thousand and net proceeds of approximately $3,000 thousand. The third tranche of the SPA was issued on October 17, 2025, with the principal amount of $5,250 thousand, the company received net proceeds of $5,000 thousand which was received on October 17, 2025. The fourth tranche of the SPA was issued on December 30, 2025, with the principal amount of $4,200 thousand, the company received net proceeds of $4,000 thousand which was received on December 30, 2025. As of December 31, 2025, approximately $3,200 thousand remained available under this agreement.

During the year 2025, the Company converted all outstanding convertible debt in accordance with the agreement with Streeterville Capital LLC, were converted into class A Common Stock equity.

During the year ended December 31, 2025, the Company has issued 13,071,408 shares of the Company’s Class A Common Stock pursuant to multiple purchase notices for an exchange amount of $8,102 thousand.

Shelf Registration Statement (Form S-3)

On August 11, 2025, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”), authorizing the future offering and sale of up to $150,000 thousand of various securities. Concurrently, the Company filed a prospectus supplement allowing for the issuance of up to $7,959 thousand of common stock under this registration statement. This amount is included within the total aggregate offering authorized.

Subsequently, the Company commenced sales of its common stock pursuant to the shelf registration. These sales were facilitated through a third-party arrangement with Maxim Group LLC, acting as the Company’s agent under an equity distribution agreement. The Company received $648 thousand and issued 782,102 shares of class A common stock, which are intended to be used for general working capital and other general corporate purposes.

Key Factors Affecting CXApp’s Results of Operations

Our financial position and results of operations depend to a significant extent on the following factors:

Customer Base

CXApp serves a diverse range of industries, providing intelligent employee experience solutions to enterprise customers across key sectors such as technology, financial services, consumer goods, healthcare, and media & entertainment. As of December 31, 2025, our customer base spans approximately across 51 countries, with the majority of our customers headquartered in the United States. Our customers include Fortune 1000 companies that rely on our AI-powered CXAI platform to enhance employee engagement, workplace productivity, and operational efficiency. Our strong security and compliance credentials make us a preferred choice for enterprises in highly regulated industries. We focus on delivering value to our customers through innovative solutions, ongoing product enhancements, and dedicated customer success initiatives.

We monitor key performance indicators such as revenue growth, customer expansion, recurring revenue rates, and customer retention to measure our market penetration and growth trajectory. In 2025, approximately 98% of our revenue was recurring, reflecting a significant increase from 87% in 2024.

CXApp’s ability to drive revenue growth depends on expanding relationships with existing customers and acquiring new customers by offering high-quality, scalable solutions that address the evolving needs of enterprises. Our direct sales efforts, strategic partnerships, and continuous innovation efforts play a crucial role in customer acquisition and retention. We maintain a diversified customer base, with our top three customers accounting for approximately 40% of our gross revenue in 2025, compared to 24% in 2024.

Research and Development

During the year 2025 , the Company added resources dedicated to developing the Artificial Intelligence (AI) based Augmented Reality (AR), AI based analytics and our CXAI Agentic AI offerings on the CXAI platform. Management believes that this investment in research and development will maintain a competitive position and create opportunities for the Company.

RESULTS OF OPERATIONS

Comparison of the results of operation for the year ended December 31, 2025 and December 31, 2024

The following table sets forth our results of operations. This data should be read together with our audited financial statements and related notes.

(in thousands)

December 31,

December 31,

Consolidated Statements of Operations Data

Revenues

Cost of revenues

Gross profit

Operating expenses

Loss from operations

Other income (expense), net

Income tax benefit, provision (expense)

Net loss

Revenues

Revenue decreased $2.6 million, or 36%, to $4.6 million for the year ended December 31, 2025, compared to $7.1 million for the year ended December 31, 2024. The decrease was attributable to the following:

Subscription Revenue

Subscription revenue (software licenses and maintenance contracts) decreased $1.7 million, or 28%, to $4.5 million for the year ended December 31, 2025, from $6.2 million for the year ended December 31, 2024. The decrease represents 67% of the total revenue decline and was primarily driven by customer churn. Customers who did not renew their contracts during 2025 were concentrated in the healthcare and retail verticals, where budget constraints and delayed IT spending impacted renewal rates, particularly among mid-market customers. These decreases were partially offset by revenue from new customer engagements and continued expansion within select enterprise accounts.

The Company's recurring subscription revenue as a percentage of total revenue increased to 98% in 2025 from 87% in 2024, reflecting the Company's successful strategic transition toward a more scalable and capital-efficient SaaS business model with higher-quality recurring revenue streams.

Professional Services Revenue

Professional services revenue decreased $0.7 million, or 91%, to $73 thousand for the year ended December 31, 2025, from $798 thousand for the year ended December 31, 2024. This decline represents 28% of the total revenue decline and reflects significantly lower implementation and deployment services activity. The prior year included substantial professional services engagements associated with onboarding several large enterprise customers, with these implementation projects substantially completed in 2024 and not recurring at similar levels in 2025.

The near elimination of professional services revenue also reflects the Company's strategic shift toward a pure SaaS model with enhanced platform maturity and improved customer self-service capabilities, reducing the need for extensive implementation services and improving overall gross margins.

Hardware Revenue

Hardware revenue decreased $0.1 million, or 79%, to $30 thousand for the year ended December 31, 2025, from $142 thousand for the year ended December 31, 2024. This decline represents 5% of the total revenue decline and reflects lower hardware sales associated with new customer deployments, as hardware sales typically correlate with new customer onboarding and expansion activities. The reduction in hardware revenue is consistent with the Company's transition to a software-focused business model.

Strategic Focus

The Company is focused on improving customer retention through enhanced customer success programs and proactive engagement initiatives, increasing enterprise adoption of its AI-powered workplace experience platform, and expanding recurring subscription revenue to drive sustainable long-term growth. The Company's successful transition to 98% recurring revenue provides a more predictable revenue base and positions the business for improved unit economics and operational leverage.

Gross Margin

Cost of Revenue

Cost of revenue decreased $0.7 million, or 55%, to $0.6 million for the year ended December 31, 2025, compared to $1.3 million for the year ended December 31, 2024. The decrease was primarily attributable to:

Infrastructure and hosting costs  ($411 thousand in 2025): Reduced cloud infrastructure spending driven by lower usage volumes from decreased active users, coupled with infrastructure optimization initiatives and vendor contract renegotiations that reduced per-unit costs. Infrastructure and storage costs represent the largest component of cost of revenue at 71% of total COGS.

Third-party software licenses  ($106 thousand in 2025): Reduced usage-based licensing costs for integrated third-party services that scale with active user counts, representing 18% of total COGS.

Customer support labor  ($35 thousand in 2025): Costs associated with the Company's Philippines-based customer support operations, representing 6% of total COGS.

Hardware costs  ($26 thousand in 2025): Lower cost of goods sold for hardware, correlating with the 79% decrease in hardware revenue and representing 5% of total COGS.

The 55% decline in cost of revenue significantly exceeded the 36% revenue decrease, reflecting the shift in revenue mix toward higher-margin subscription revenue (98% of total revenue in 2025 compared to 87% in 2024), the near elimination of lower-margin professional services and hardware revenue, and the Company's successful cost optimization initiatives.

Gross Profit and Gross Margin

Gross profit decreased $1.9 million to $4.0 million for the year ended December 31, 2025, from $5.9 million for the year ended December 31, 2024. Gross margin improved 500 basis points from 82.0% to 87.4%. The significant margin improvement was driven by:

Revenue mix optimization : The increase in subscription revenue as a percentage of total revenue from 87% to 98% drove substantial margin improvement, as subscription revenue carries significantly higher gross margins than professional services (which declined 91%) and hardware revenue (which declined 79%). Professional services and hardware historically carried lower gross margins due to associated delivery costs and cost of goods sold.

Cost efficiency and optimization : Infrastructure optimization initiatives and improved operational efficiency reduced per-unit costs across cloud hosting and third-party software licensing categories. The Company implemented resource right-sizing and vendor contract renegotiations during 2025 that drove cost savings independent of volume declines.

Operating leverage : The Company successfully reduced absolute COGS dollars by 55% while revenue declined only 36%, demonstrating improved cost discipline and scalability of the platform infrastructure.

The Company expects to maintain or further improve gross margins as it continues to focus on subscription-based recurring revenue, platform scalability, and ongoing infrastructure optimization. The 87.4% gross margin achieved in 2025 reflects the Company's positioning as a high-margin SaaS business and provides a strong foundation for achieving profitability as the Company returns to revenue growth.

Operating Expenses

Operating expenses consist primarily of research and development (“R&D”), sales and marketing (“S&M”), and general and administrative (“G&A”) costs. For the year ended December 31, 2025, total operating expenses were $21,582 thousand, compared to $19,598 thousand for the same period in 2024, representing an increase of $1,984 thousand.

The increase was driven by a $2.1 million goodwill impairment charge and increases in G&A and R&D expenses, partially offset by a decrease in S&M expenses. Each operating expense category is discussed in detail below.

Research and Development

R&D expenses increased $0.3 million, or 4%, to $6.7 million for the year ended December 31, 2025, from $6.4 million for the year ended December 31, 2024. The increase was primarily attributable to a $400 thousand one-time billing adjustment related to the Company's Google Cloud Platform committed use discount agreement, which required reconciliation of actual usage against the Company's three-year commitment in Q4 2025. This increase was partially offset by lower headcount costs of approximately $100 thousand resulting from delayed backfill timing, as two senior engineers departed in Q2 2025 with replacement hires starting in Q4 2025.

During 2025, the Company continued to invest in developing its Artificial Intelligence (AI)-powered Augmented Reality (AR) capabilities, AI-based analytics, and the CXAI Agentic AI offerings on the Company's platform. Management believes that these investments in research and development will maintain the Company's competitive position and create opportunities for long-term growth.

Sales and Marketing

S&M expenses decreased $1.2 million, or 36%, to $2.1 million for the year ended December 31, 2025, from $3.2 million for the year ended December 31, 2024. The decrease was primarily attributable to:

Reduced payroll and severance costs : Lower ongoing sales headcount costs in 2025 following organizational restructuring in early 2024, combined with the elimination of one-time severance expenses that were incurred in 2024 when certain sales positions were eliminated.

Lower marketing program spending : Reduced expenditures on events, conferences, and demand generation campaigns as the Company focused resources on higher return-on-investment enterprise accounts.

Decreased sales commissions : Lower variable compensation correlating with reduced new bookings and customer acquisition activity.

The Company strategically reallocated its go-to-market resources toward high-ROI enterprise accounts and strategic channel partnerships, resulting in a more cost-efficient sales and marketing model.

General and Administrative

G&A expenses increased $0.7 million, or 10%, to $8.0 million for the year ended December 31, 2025, from $7.2 million for the year ended December 31, 2024. The increase was primarily attributable to:

Stock-based compensation : $259 thousand increase resulting from vested RSUs in Q3 2025, with the Company recording a catch-up in expense attribution.

CFO compensation : $175 thousand increase due to a full twelve months of expense in 2025 compared to four months in 2024, following the CFO hire in August 2024.

Investment advisor consulting : $150 thousand increase reflecting a full year of engagement fees in 2025 compared to two quarters in 2024, as the engagement commenced in June 2024.

Professional fees : $597 thousand increase driven by CFO advisory services, fair valuation of convertible notes, material weakness remediation support, and expanded audit services from Withum.

These increases were partially offset by:

Recruitment fees : $168 thousand decrease as there were no new hires in 2025 compared to search fees incurred in 2024.

Legal fees : $373 thousand decrease primarily resulting from management's successful negotiation of a financing and patents with the Company's legal counsel.

Goodwill Impairment

During the year ended December 31, 2025, the Company recognized a goodwill impairment charge of $2.1 million.

Amortization of Intangibles

Amortization of intangible assets remained consistent at $2.7 million for both the years ended December 31, 2025 and 2024, representing the ongoing amortization of intangible assets acquired in the Business Combination completed on March 14, 2023.

Management believes that the Company's focused investments in R&D innovation, combined with its disciplined approach to sales and marketing efficiency and operational management, position the Company to scale its AI-native offerings while driving long-term operating leverage and improved unit economics.

Loss From Operations

Loss from operations for the year ended December 31, 2025, was $17,577 thousand compared to the loss from operations of $13,741 thousand for the year ended December 31, 2024. This increase in loss of $3,836 thousand is primarily attributable to a decrease in gross profit margin and an increase of goodwill impairment.

Other Income (Expense)

Other income (expense) for the year ended December 31, 2025, was $4,058 thousand income compared to $6,302 thousand expense for the year ended December 31, 2024. The increase in other income of $10,360 thousand is primarily attributable to $7,700 thousand reduction in the change in fair value of derivative liabilities, plus the decrease in interest expense of $1,055 thousand, loss on debt extinguishment of $1,004 thousand and other expenses of $601 thousand.

Provision for Income Taxes

For the year ended December 31, 2025, the Company recorded an income tax benefits of approximately $46 thousand, compared to an income tax benefit of $635 thousand for the year ended December 31, 2024.

Net Loss

Net loss for the year ended December 31, 2025, was $13,473 thousand, compared to a net loss of $19,408 thousand for the year ended December 31, 2024, representing an improvement of approximately $5,935 thousand. The year‑over‑year decrease in net loss was primarily driven by a $7,700 thousand reduction in the change in fair value of derivative liabilities, lower interest expense of $1,055 thousand, a $1,004 thousand decrease in loss on debt extinguishment, and other income of $601 thousand. These improvements were partially offset by a $1,984 thousand increase in operating expenses, a $1,852 thousand decrease in gross margin, and a $589 thousand reduction in income tax benefit.

Non-GAAP Financial information

EBITDA

This Report includes a non-GAAP measure that we use to supplement our results presented in accordance with U.S. GAAP. EBITDA is defined as earnings before interest and other income, tax 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 is a performance measure that we believe is useful to investors and analysts because it illustrates the underlying financial and business trends relating to our core, recurring results of operations and enhances comparability between periods.

Adjusted EBITDA is not a recognized measure under U.S. GAAP and is not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Investors should exercise caution in comparing our non-GAAP measure to any similarly titled measure used by other companies.

This non-GAAP measure excludes certain items required by U.S. GAAP and should not be considered as an alternative to information reported in accordance with U.S. GAAP. The table below presents our adjusted EBITDA reconciled to net income, the most comparative GAAP measure, for the periods indicated (in thousands).

Year Ended

December 31,

Year Ended

December 31,

Net loss

Interest expense and other income

Income tax (benefit)/provision

Depreciation and amortization

EBITDA

Adjusted for:

Changes in fair value of derivative liabilities

Loss on debt extinguishment

Impairment of Goodwill

Unrealized (gain) loss

Loss on contract to issue common stock

Loss on asset disposal

Stock-based compensation - compensation and related benefits

Adjusted EBITDA

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

To 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 evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions; and

To evaluate internally the performance of our personnel.

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:

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 financing costs, changes in fair value of warrant liabilities, loss on debt extinguishment unrealized (gains) losses, goodwill impairment, stock-based compensation;

We believe that it is useful to provide investors with a standard operating metric used by management to evaluate our operating performance; and

We believe that the use of Adjusted EBITDA is helpful to compare our results to 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 expenditures or future requirements for capital expenditures or contractual commitments;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

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

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

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

Other companies in our industry may calculate Adjusted EBITDA differently than we do, thereby 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.

Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities.

As of December 31, 2025, the Company has a working capital surplus of approximately $7,075 thousand and cash of approximately $11,101 thousand. For the period ended December 31, 2025, the Company incurred net loss of approximately $13,473 thousand and used approximately $10,381 thousand of cash for operating activities. For the year ended December 31, 2024, the Company incurred net loss of approximately $19,408 and used approximately $7,325 thousand cash for operating activities.

Management believes that the Companies current liquidity position is sufficient for the next twelve months, including under the SPA with the Streeterville Capital, LLC, pursuant to which the Lender desires to purchase up to $10,000 thousand in shares of the Company’s Common Stock, par value $0.0001, with $3,520 thousand still available to withdraw. On March 26, 2025, the Company entered into a SPA with Avondale Capital, LLC, pursuant to which the Lender desires to purchase up to $20,000 thousand in shares of the Company’s Common Stock, par value $0.0001, with $3,200 thousand still available to withdraw.

Liquidity and Capital Resources as of December 31, 2025, Compared with December 31, 2024

The Company’s net cash flows used in operating, investing and financing activities and certain balances are as follows (in thousands):

Year Ended

December 31,

Year Ended

December 31,

Cash flows (used in) provided by

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Effect of exchange rates on cash

Net increase (decrease) in cash and cash equivalents

Year ended

December 31,

Year ended

December 31,

Cash and cash equivalents

Working capital surplus (deficit)

Operating Activities for the years ended December 31, 2025, and 2024

Net cash used in operating activities during the period consisted of the following (in thousands):

Year ended

December 31,

Year ended

December 31,

Net loss

Non-cash income and expense

Net change in operating assets and liabilities

Net cash used in operating activities

The non-cash incomes were approximately $4,202 thousand, and $11,802 thousand for the years ended December 31, 2025 and December 31, 2024, respectively:

Year ended

December 31,

Year ended

December 31,

Depreciation and amortization

Amortization of right of use asset

Amortization of debt discount and deferred financing cost

Accrued interest expense on promissory note and convertible debt

Accrued monitoring fee on promissory note

Stock-based compensation expense

(Gain) loss on change in fair value of derivative liability

Impairment of goodwill

Deferred income taxes

Loss on debt extinguishment

Loss on asset disposal

(Gain) loss on foreign currency transactions

(Gain) loss on contract to issue common stock

Gain on debt settlement

Total non-cash expenses

The net cash used in the change in operating assets and liabilities were approximately $1,110 thousand, for the year ended December 31, 2025 and net cash provided in the change in operating assets and liabilities were approximately $281 thousand for the year ended December 31, 2024, respectively:

Changes in Operating Assets and Liabilities

Year ended

December 31,

Year ended

December 31,

Accounts receivable and other receivables

Prepaid expenses and other current assets and other assets

Other assets

Accounts payable

Accrued liabilities and other liabilities

Operating lease liabilities

Deferred revenue

Net cash used in the changes in operating assets and liabilities

Cash Flows from Investing Activities for the years ended December 31, 2025, and December 31, 2024

Net cash flows used in investing activities during the year ended December 31, 2025 was approximately $23 thousand compared to net cash flows provided by investing activities for the year ended December 31, 2024 was approximately $30 thousand. Cash flows related to investing activities during the years ended December 31, 2025 and December 31, 2024 is attributable to the purchases of property and equipment.

Cash Flows from Financing Activities for the years ended December 31, 2025, and December 31, 2024

Net cash flows provided by financing activities during the year ended December 31, 2025 was approximately $16,638 thousand compared to net cash flows provided by financing activities for the year ended December 31, 2024 was approximately $5,980 thousand.

On March 26, 2025, the Company entered into a Securities Purchase Agreement with Avondale Capital, LLC, under which the Company may issue and sell one or more Pre-Paid Purchase Agreements for up to an aggregate of $20,000 thousand in exchange for shares of its common stock. The initial Pre-Paid Purchase, in the principal amount of $4,200 thousand, was structured with a $200 thousand original issue discount (“OID”) and $10 thousand in transaction-related fees, resulting in net proceeds of approximately $3,990 thousand, which were received on April 8, 2025. The second tranche of the SPA was issued on August 7, 2025, with the principal amount of $3,150 thousand, was structured with $150 thousand of OID, net proceeds of $3,000 thousand which was received on August 7, 2025. The third tranche of the SPA was issued on October 17, 2025 with the principal amount of $5,250 thousand structured with $250 thousand, net proceeds of $5,000 thousand which was received on October 17, 2025. The fourth tranche of the SPA was issued on December 30, 2025 with the principal amount of $4,200 thousand was structured with $200 thousand, net proceeds of $4,000 thousand which was received on December 30, 2025.

On August 11, 2025, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”), authorizing the future offering and sale of up to $150.0 million of various securities. Concurrently, the Company filed a prospectus supplement allowing for the issuance of up to $7.959 million of common stock under this registration statement. This amount is included within the total aggregate offering authorized.

Subsequently, the Company commenced sales of its common stock pursuant to the shelf registration. These sales were facilitated through a third-party arrangement with Maxim Group LLC, acting as the Company’s agent under an equity distribution agreement. The Company received $648 thousand and issued 782,102 shares of class A Common Stock, which are intended to be used for general working capital and other general corporate purposes.

On May 22, 2024, the Company entered into the “SPA with the Lender, pursuant to which the Lender desires to purchase up to $10,000 thousand in shares of the Company’s Common Stock, par value $0.0001. Pursuant to SPA, the Company issued three unsecured convertible Pre-Paid Purchases to Lender. The convertible Pre-Paid Purchases have original principal amount of $6,825 thousand. For the year ended December 31, 2024, the Company received net proceeds of $6,480 thousand, reflecting original issue discount of $325 thousand and Lender’s transaction cost of $20 thousand. During the year ended December 31, 2024, the Company paid $500 thousand in cash outflows for a repayment of the promissory note.

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.

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 consist of operating lease liabilities that are included in our balance sheet. As of December 31, 2025, the total obligation for operating leases is approximately $226 thousand, of which approximately $204 thousand is expected to be paid in the next twelve months.

Financing Obligations and Requirements

Net cash used in operating activities for the year ended December 31, 2025 was $10,381 thousand, reflecting a net loss of $13,473 thousand adjusted for non-cash items and changes in working capital. During the year, the Company raised net proceeds of approximately $15,990 thousand under the SPA entered into on March 26, 2025, and also maintained access to additional liquidity sources, including remaining capacity under its financing arrangements and its at-the-market equity program, subject to market conditions such as stock price, trading volume, and issuance limitations. Management continues to implement expense-management initiatives and working-capital optimization measures and expects to use financing sources that are reasonably accessible to support operations. Based on current cash balances, expected collections, and management’s cost-management actions, the Company believes it has sufficient liquidity to meet its working capital needs and other operating requirements for at least the next 12 months from the issuance date of the financial statements and thereafter for the reasonably foreseeable future.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). In connection with the preparation of our 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 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 consolidated financial statements that are included elsewhere in this filing. 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, in accordance with ASC 606 “Revenue from Contracts with Customers” (“ASC 606”), when control of the promised products or services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company derives revenue from its software as a service for cloud-based software, as well as design, implementation, other professional services for work performed in conjunction with its cloud-based software, and sale of hardware. The Company enters into contracts with its customers whereby it grants a non-exclusive cloud-based license for the use of its proprietary software and for professional services. The contracts may also provide for on-going services for a specified price, which may include maintenance services, designated support, and enhancements, upgrades and improvements to the software, depending on the contract. Licenses for cloud software provide the customer with a right to use the software as it exists when made available to the customer. All software provides customers with the same functionality and differs mainly in the duration over which the customer benefits from the software.

License Subscription Revenue Recognition (Software As A Service)

The timing of the Company’s revenue recognition related to the licensing revenue stream is dependent on whether the software licensing agreement entered into represents a service. Software that relies on an entity’s IP and is delivered only through a hosting arrangement, where the customer cannot take possession of the software, is a service. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software.

The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service. The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice.

Professional Services Revenue Recognition

Professional services under milestone contracts are 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 statement of operations in proportion to the stage of completion of the contract. Contract costs are expensed as incurred. Contract costs include all amounts that relate directly to the specific contract, are attributable to contract activity, and are specifically chargeable to the customer under the terms of the contract.

Hardware Revenue Recognition

For sales of hardware, the Company’s performance obligation is fulfilled when the products are shipped to the customer, transferring title and ownership risks. Deliveries occur via drop-shipment by a third-party vendor and the Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. The Company negotiates sale prices, pays suppliers directly, manages credit risk, and ensures product acceptability, acting as the principal in the transaction and recording revenue on a gross basis. Customers typically pay within 30 to 60 days of invoice receipt. The Company has elected the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the asset that otherwise would have been recognized is less than a year.

Goodwill, Acquired 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 related to long-lived assets for the years ended December 31, 2025 and December 31, 2024.

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, 2025 and December 31, 2024, 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 the Business Combination. 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.

The Company tests goodwill for impairment at least annually, or more frequently if events or circumstances indicate that the carrying amount of the reporting unit may not be recoverable. The Company has determined that it operates as a single reporting unit due to the integration of all of the Company’s activities. In evaluating goodwill for impairment, the Company may first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company performs a quantitative impairment test by comparing the estimated fair value of the reporting unit with its carrying amount.

The Company estimates the fair value of the reporting unit using a combination of the income and market approaches. For the income approach, the Company uses internally developed discounted cash flow models that include assumptions such as projected revenues, expenses, and related cash flows based on long-term growth rates and demand trends; expected future investments to support operations; and estimated discount rates. For the market approach, the Company relies on analyses based primarily on market comparables, including the guideline public company method, guideline transaction method, and market price method.

Based on its assessments, the Company has recorded impairment of goodwill of $2,148 thousand for the years ended December 31, 2025 and December 31, 2024, 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, 2025, based upon certain economic conditions and historical losses through December 31, 2025. After consideration of these factors, management deemed it appropriate to establish a full valuation allowance with respect to the deferred tax assets for the Company as of December 31, 2025 and December 31, 2024, and 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, 2025 and December 31, 2024.