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 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.
